Heinz sales miss; updates forecast assumptions

Heinz sales miss; updates forecast assumptions

Stock Market Predictions

(Global Markets) - H.J. Heinz Co (HNZ.N) is turning to smaller, less-expensive packages for its namesake ketchup and sauces and bringing baked beans back to the U.S. market as it tries to generate more sales in a tough economy.

The moves come as the foodmaker posted weaker-than-expected quarterly sales and lowered its expectation for its full-year gross margin. Its shares fell 3 percent.

The maker of Heinz ketchup, Ore-Ida frozen potatoes and other packaged foods cited sales weakness in Australia and its U.S. foodservice business, which it said hasn't recovered as quickly as expected.

In an effort to adapt to a more difficult operating environment, particularly in developed markets, Heinz said it will close three more factories around the world in addition to closings it already announced.

The closings will cost the company 15 cents more per share this year, on top of one-time charges of 35 cents per share already announced.

Heinz will also introduce a range of smaller-size, less expensive products in the United States that will give it a bigger presence in dollar stores, where cash-strapped consumers are doing more of their food shopping.

"Developed markets are experiencing low consumer confidence, high unemployment and economic uncertainty," said Heinz Chief Executive William Johnson.

Heinz's quarterly profit beat expectations by a penny, but it did not raise its full-year forecast. The earnings forecast also now relies on a lower tax rate than previously thought.

"Heinz trades at a premium to the group, and these are not premium results," said RBC Capital Markets analyst Edward Aaron.

The company's shares were down $1.68, or 3.2 percent, at $51.14 in late morning trading.

$1 KETCHUP, $2 FRIES

Heinz said net income fell to $237 million, or 73 cents per share, in its fiscal second quarter, ended on October 26, from $251.4 million, or 78 cents per share, a year earlier.

Excluding items, it earned 81 cents per share. On that basis, analysts on average were expecting 80 cents per share, according to Thomson Global Markets I/B/E/S.

Sales rose 8 percent to $2.83 billion, but fell short of analysts' average estimate of $2.91 billion.

Sales, excluding the effect of acquisitions and foreign exchange, rose 1.5 percent, as a 2.9 percent decline in volume partly offset a 4.4 percent benefit from higher prices.

To appeal to U.S. consumers with tight grocery budgets, Heinz is launching a 10-ounce pouch of ketchup for 99 cents, a nine-ounce package of mustard for 99 cents and a one-pound package of Ore-Ida French fries for $1.99.

CEO Johnson said the smaller packages are expected to boost sales since they should appeal to consumers who were not buying Heinz' products before, such as dollar store shoppers. They should also be largely neutral or beneficial to its profit margins, he said.

In addition, Heinz is bringing back its canned baked beans to the U.S. market after an absence of several decades.

"We believe this is the right time for the return of this convenient, nutritious, and value-oriented classic," Johnson said. "Consumers have been turning to comfort foods during the recession.

The company said it is on track to meet its goal for fiscal 2012 earnings of $3.24 to $3.32 per share, excluding items.

But compared with its assumptions in May, when it first gave the forecast, Heinz said it now expects a lower gross margin, due to higher commodity inflation and weak sales in Australia and U.S. Foodservice, offset by stronger results in emerging markets and Britain, reduced discretionary spending, lower interest expense and a lower tax rate.

In the latest quarter, sales from emerging markets rose nearly 16 percent organically and accounted for 20 percent of total sales.

Heinz said higher costs for ingredients like beans, sweeteners and packaging led to a 10 percent increase in costs in the second quarter, which it said was the "high water mark" for the year. It forecast a full-year commodity cost increase of 7.5 percent.

(Reporting by Martinne Geller; Editing by Derek Caney, Steve Orlofsky and Gunna Dickson)

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SBI, ICICI shares drop on worries over Kingfisher troubles

SBI, ICICI shares drop on worries over Kingfisher troubles

Stock Market Predictions

MUMBAI (Global Markets) - Shares of India's top two lenders State Bank of India (SBI.NS) and ICICI Bank (ICBK.NS), which hold more than 5 percent in troubled Kingfisher Airlines (KING.NS), fell over 4 percent on Friday on worries their loans to the carrier could turn sour.

Kingfisher, India's second-largest private airline, has canceled a large number of flights since Sunday in a bid to cut capacity and minimize costs, and media reports said leasing companies were planning to take planes back and pilots were leaving.

ICICI Bank shares fell as much as 5.3 percent on Wednesday to the day's low of 816.7 rupees -- its biggest fall in single day in more than a month -- while SBI fell as much as 4.3 percent.

Investors were concerned that the provisioning requirement for banks will increase, hitting profitability, if loans to Kingfisher turned bad, traders said.

A senior executive at SBI said Kingfisher was still a "standard asset," which meant there has not been any defaults yet. She declined to comment further. Other executives at the bank were not immediately available for a comment.

A source familiar with loans to Kingfisher at ICICI Bank, which has lent 4.3 billion rupees to the carrier, also said there has not been any payment default yet.

India's civil aviation minister Vayalar Ravi on Friday said he would talk to Finance Minister Pranab Mukherjee to get banks' assistance for Kingfisher.

The source at ICICI Bank said there was no proposal to provide any financial assistance to the carrier.

Kingfisher has already restructured part of its debt to forego about a quarter of its equity to a consortium of 13 banks led by SBI.

State-run IDBI Bank (IDBI.NS) holds 3.5 percent stake in Kingfisher, while Bank of India (BOI.NS), UCO Bank (UCBK.NS) and Punjab National Bank (PNBK.NS) hold more than 1 percent each, according to data on the Bombay Stock Exchange website.

Earlier this month Kingfisher said it had sought further cushion from banks to ease its debt burden but denied it was seeking another debt restructuring.

State Bank of India's shares took a beating when it announced quarterly earnings on Wednesday despite better-than-expected profits, because of its worsening asset quality.

India's dominant lenders, along with over 20 more banks, are also in talks with ailing state run carrier Air India AIN.UL to restructure $4 billion of working capital debt.

(Reporting by Swati Pandey and Abhishek Vishnoi; Editing by Rosemary Arackaparambil)

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Krispy Kreme jumps as strong doughnut sales drive profit

Krispy Kreme jumps as strong doughnut sales drive profit

Stock Market Predictions

(Global Markets) - Krispy Kreme Doughnuts Inc's (KKD.N) shares rose 13 percent on Friday, a day after the company posted a higher second-quarter profit on strong domestic demand for its doughnuts and sweet treats.

The company, known for its signature glazed doughnuts, has been tweaking its menu and opening new stores to drive sales. It is currently adding more coffee-based beverages and other savories to its menu.

The company will soon launch different types of revamped drip coffee later this month. "12 months from now, updates to coffee-based specialty drinks will roll out," Janney analyst Mark Kalinowski said in a note to clients.

"We believe that it would make a lot of sense for this to include something akin to Starbucks' (SBUX.O) Frappuccino lineup of blended beverages," analyst Kalinowski said.

The company, which competes with Dunkin' Donuts (DNKN.O), also posted better-than-expected quarterly sales.

Krispy Kreme shops can be found in over 660 locations in the U.S. and 20 countries around the world.

The company's shares touched a high of $8.86 on Friday morning on the New York Stock Exchange.

(Reporting by Meenakshi Iyer in Bangalore; Editing by Viraj Nair)

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SunTrust, Fifth Third net rises but paths diverge

SunTrust, Fifth Third net rises but paths diverge

Stock Market Predictions

(Global Markets) - A pair of regional U.S. banks reported double-digit gains in fourth-quarter earnings Friday on improving credit quality and higher loan demand, but shares of SunTrust Banks Inc (STI.N) soared while those of Fifth Third Bancorp (FITB.O) tumbled.

Atlanta-based SunTrust, the largest bank based in the southeastern United States, said a 3 percent rise in its business and corporate loan portfolio and a $60 million one-time benefit from freezing its company pension plan helped results.

SunTrust earned $152 million, or 28 cents a share, in the last quarter of 2011 compared with $114 million, or 23 cents a share, a year ago. It beat the 27 cent-per-share consensus estimate of analysts surveyed by Thomson Global Markets I/B/E/S, sending its stock price up 4.6 percent to $21.17 in afternoon trading.

The bank, which has been long battered by its Florida and Georgia home mortgage portfolios, set aside a much lower reserve for credit losses than a year ago and said net interest income rose 2 percent.

It set aside $215 million, however, to cover expected demands from government-sponsored mortgage companies Fannie Mae and Freddie Mac to repurchase loans whose credit quality the bank may have misrepresented. Such demands will continue at elevated levels in the first half of 2012, but should diminish as inventories of subprime loans related to the bottom-of-the-barrel 2006-2008 lending cycle are worked through, bank executives said.

SunTrust's backlog of underwater homes continues to hurt revenue due to insurance, maintenance and other foreclosure costs, and could escalate if the housing market recovery proves temporary, executives warned. "We don't know where this is going," SunTrust Chief Financial Officer Aleem Gillani said on a conference call with analysts. "We're leveraged to the economy."

Unlike larger rivals such as US Bancorp (USB.N) and PNC Financial Services Group (PNC.N), SunTrust did not set aside money to resolve claims of robo-signing and other mortgage-servicing abuses. Fourth-quarter losses related largely to servicing grew by $70 million from the prior year. The bank recently began discussions with state attorneys general on a settlement and said it will update shareholders on expected settlement charges in coming months.

SunTrust also spent $20 million to lay off employees in the quarter and reserved $27 million for additional severance costs. The bank said it is on target to meet its goal of cutting $300 million of annual expenses by the end of 2013, but analysts at Stifel Nicolaus said in a report that the company has a weak history of meeting its expense goals. They estimated that SunTrust earned only 17 cents a share in the quarter, excluding one-time items.

SunTrust Chief Executive William Rogers said the company's capital levels are strong enough to warrant more stock repurchases this year, pending approval of its stress-test scenario from banking regulators.

FIFTH THIRD's MISS

Fifth Third, a Cincinnati-based bank with operations in the Midwest and Southeast, said fourth-quarter net income rose 13 percent from a year earlier to $305 million, or 33 cents a share.

Analysts, who according to Thomson Global Markets I/B/E/S had an average forecast of 36 cents a share, said despite relatively strong loan growth the bank's expenses were high.

Shares of Fifth Third were trading down 4 percent at $13.02 on Friday afternoon.

In a conference call with analysts, Fifth Third Chief Executive Kevin Kabat attributed higher costs in part to seasonal factors such as higher federal unemployment insurance taxes and bonuses to mortgage bankers who have been increasing sales.

"We posted very strong loan growth for the quarter," Kabat said, noting that business, mortgage and auto lending is expected to continue growing this quarter.

Fifth Third said it hopes to use excess capital to expand within its current markets through mergers and acquisitions if prices sought by sellers fall by year-end. "We expect some M&A opportunity in 2012," Kabat said, "but don't expect it to happen in the near term."

Like many of their rivals, executives of SunTrust and Fifth Third said they may tweak consumer fees upward to mitigate the effects of low interest rates on loans and investments, and to offset new regulations that cap fees they can collect from merchants on debit card transactions.

"We are earning next to nothing on our deposits, which is a large source of value for a banking company," Fifth Third investor relations head Jeff Richardson said on the conference call.

(Reporting by Jed Horowitz and David Henry, editing by Matthew Lewis)

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Zillow now sees IPO at $16-$18/share

Zillow now sees IPO at $16-$18/share

Stock Market Predictions

Bangalore (Global Markets) - Zillow Inc, a real estate and housing data company, raised the price range of its initial public offering to $16-$18 per share from $12-$14 per share.

In April, Seattle-based Zillow had filed with U.S. securities regulators for an IPO of up to $51.8 million.

On Friday, the company in a filing with the Securities and Exchange Commission said it expects to raise about $56.8 million from the IPO, when calculated at the mid point of its price range and after deducting underwriting discounts and commissions.

Zillow offers rent and house price estimates as well as real estate data on millions of U.S. homes through its websites and mobile phone applications.

The company, which has applied to list on Nasdaq under the symbol "Z," said it plans to sell 3.46 million of its class A common stock and use the proceeds primarily for general corporate purposes.

Underwriters -- Citigroup, Allen & Co, Pacific Crest Securities, ThinkEquity and First Washington -- can purchase an additional 519,300 shares to cover over-allotments, the company said in the filing.

(Reporting by Aditi Sharma in Bangalore; Editing by Maju Samuel)

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Icahn reveals active stake in WebMD

Icahn reveals active stake in WebMD

Stock Market Predictions

(Global Markets) - Activist investor Carl C. Icahn revealed an active stake of 7.94 percent in WebMD Health Corp (WBMD.O) in a regulatory filing, pushing the company's shares up 7 percent after the bell.

The billionaire hedge-fund manager, who decided not to manage outside investors' money earlier this year, said he may seek to talk to the company management to discuss business and strategies from time to time.

WebMD Health Corp manages websites which provide healthcare info and help employees make healthcare decisions. The company's stock has lost about 38 percent of its value this year.

Icahn's investment in a company usually precedes a demand to either bring a change in the company's management or a proposal to consider strategic alternatives, including a sale or merger of the company.

WebMD shares rose 7 percent in extended trading. They closed at $32.39 Friday on Nasdaq.

(Reporting by Vidya L Nathan in Bangalore; Editing by Don Sebastian)

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Ambani brothers took a step toward reconciliation

Ambani brothers took a step toward reconciliation in their long-running feud ending non-compete agreements in a move they hoped would lead to cooperation between the two groups.

Both groups said they aim to reach a conclusion soon for a gas supply agreement between Mukesh Ambani's Reliance Industries (RIL) and younger brother Anil's Reliance Natural Resources that had been at the heart of their dispute. RIL and Reliance ADA Group are hopeful and confident that all these steps will create an overall environment of harmony, co-operation and collaboration between the two groups.

The statement comes two weeks after India's Supreme Court ruled in Mukesh Ambani's favor in a bitter public dispute over gas pricing that had riven India's richest family and raised questions about the role of big business in government policy. While the feud had captivated the attention of India it had been a major distraction for both groups and the government.

The two brothers are estimated to be worth a combined $43 billion and both live in Mumbai but had not been on speaking terms during their dispute. They split the business empire inherited from their father Dhirubhai Ambani in a 2005 deal brokered by their homemaker mother, Kokilaben.

Mukesh, 53, got the jewel -- Reliance Industries, which has interests in oil and gas exploration, petrochemicals, infrastructure and textiles. Anil, 50, got the telecoms, power and financial services businesses.

India's highest court on May 7 ordered the brothers to renegotiate within six weeks a private natural gas supply contract between Reliance Industries and Reliance Natural.

The new contract must abide by a government price of $4.2 per million metric British thermal unit (mmBtu), compared with $2.34 per mmBtu the brothers agreed on in 2005 for a 17-year period.

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