February 9, 2010

Major Indices Jumped

After a down day to start the week, Tuesday’s trading session saw the major indices jump nearly 1% each, as investors shrugged off disappointing results from the only economic report released today. Tuesday’s trading was well needed after Monday’s trading saw the Dow Jones dip below the 10,000 mark for the first time in more than three months.

With pessimism running rampant throughout businesses, inventories at the wholesale level receded 0.8% in December, as companies remain conservative about restocking their depleted supplies. The unexpected decline came as a surprise for economists, who were anticipating wholesale inventories increasing by 0.5% during the month.

The one bright spot in the report showed a 0.8% advance in sales throughout December, while economists had projected a smaller increase of only 0.5%. The jump in sales follows an even bigger increase in November in which sales surged 3.6%.

Looking inside corporate earnings, the world's largest beverage company and is the leading producer and marketer of soft drinks, the Coca-Cola Co. (KO) announced before the opening bell that an increase in overseas sales propelled the company’s profits higher for the 4Q.

For the period, Coke reported a net profit of $1.54B, or $0.66 per share, compared to net earnings of $995M, or $0.43 per share, an increase in profits of nearly 55% year-over-year. Quarterly sales advanced as well, climbing from $7.13B to $7.51B, an increase in overall sales of more than 5%.

Analysts, on average, were looking for the beverage provider to post a quarterly profit of $0.67 per share based on total revenues of $7.21B.

Muhtar Kent, Chairman and CEO at Coca-Cola, said, "We ended this year on a high note, delivering global volume and value share gains, comparable currency neutral revenue growth, improved productivity and increased cash flows."

Kent later added, "Now, with our 2020 Vision as our roadmap, we look forward to entering our next decade of growth as we work closely together with our bottling partners to usher in a new era of winning for the Coca-Cola system."

For the year, Coke witnessed their annual earnings jump more than 17% year-over-year, advancing from $5.81B, or $2.49 per share, to $6.82B, or $2.93 per share. However, total revenues for the year decreased, falling from $31.94B to $31B, a decline in sales of nearly 3%.

With a solid earnings release, shares of Coca-Cola surged nearly 3% by the close of the February 9 session, adding $1.36 to conclude the day at $54.01 per share. Throughout the past year, the stock has managed to trade as high as $59.45 per share, while slipping to an annual low of $37.44 per share.

Also reporting quarterly results was Pulte Homes Inc. (PHM), a publicly held holding company whose subsidiaries engage in the homebuilding and financial services businesses. Announcing for the 4Q, Pulte confirmed that the company posted a net loss for the period of $116.9M, or $0.31 per share, much better than the $338.2M, or $1.33 per share loss incurred during last year’s 4Q.

During the period, Pulte sustained impairment charges totaling $925M, but was balanced out by an $800M tax gain, which could increase to $917M. Excluding these events, Pulte would have seen their quarterly earnings near break-even.

Revenues, meanwhile, advanced throughout the quarter, climbing from $1.64B to $1.73B, an increase of nearly 5.5%. On average, analysts within the industry were looking for the homebuilder to post a quarterly loss of $0.19 per share on $1.5B in total sales.

Richard Dugas, Jr., Chairman, President and CEO of Pulte, remarked, ''We remain on track to capture targeted synergies and savings of $440 million on an annualized basis by the end of 2010, while Centex's land assets are proving to be an important resource in a market facing a limited supply of well-positioned homebuilding lots. Finally, with $1.9 billion in cash on our balance sheet and a pending tax refund, we have ample liquidity to manage our operations."

For 2009, Pulte Homes reported a net loss of $1.18B, or $3.75 per share, in contrast to a net loss incurred in 2008 of $1.47B, or $5.81 per share. Yearly sales plunged as well, falling from $6.26B in 2008 to $4.08B, a drop in annual revenues of almost 35%.

Heading into the close of trading, shares of PHM were down 0.5%, giving up $0.05 to end the day at $11.08 per share. During the past 52 weeks, the company’s stock has traded within a relatively narrow range, with a high of $13.59 per share and a low of $7.71 per share.

Operating as a producer of aggregates for the construction industry, including highways, infrastructure, commercial and residential, Martin Marietta Materials Inc. (MLM) made it known before the opening bell that the company’s recent quarterly report showed a net loss for the period.

Announcing for the 4Q, Martin Marietta confirmed that the company slipped to a net loss of $3.2M, or $0.07 per share, in sharp contrast to last year’s 4Q net profit of $25.3M, or $0.60 per share. Overall results were greatly affected by legal charges that stripped the company’s net earnings by $0.18 per share.

The company’s downfall was acerbated by lack of sales, which slipped from $470.5M to $374.7M, a decrease in net revenues of more than 20%. Within the industry, analysts were looking for Martin Marietta to post a quarterly profit of $0.33 per share on total revenues of $383.01M.

Commenting on the company’s recent results was Ward Nye, President and CEO of Martin Marietta Materials, "In 2009, Martin Marietta Materials successfully navigated the most difficult economic environment we have seen in our industry since the Great Depression. However, because of our ability to achieve positive pricing growth and by maintaining our discipline and focusing on controlling the Corporation's costs, we were able to remain profitable and generate significant cash flows despite the 15th consecutive quarter of declining shipment volume."

For the year, MLM net earnings came in at $85.5M, or $1.91 per share, down from the previous year’s net tally of $176.3M, or $4.18 per share, a decrease in year-over-year earnings of nearly 52%. Revenues slipped as well, dropping from $2.12B to $1.7B, a decrease in sales of almost 20%.

By the sound of the closing bell on February 9, shares of MLM plunged more than 4%, losing $3.66 to conclude the day at $75.95 per share. Over the course of a year, Martin Marietta shares have traded as low as $67.25, while reaching a 52-week high of $103.44 per share.

After falling below $72 a barrel last week, energy prices reversed their downward trend on Tuesday, as investors took heed of economic data suggesting that demand for crude in the U.S. could be improving. By the close of trading, the price for a barrel of light, sweet crude for March delivery gained $0.40 to settle at $72.29. The current contract gained $0.70 to settle at $71.89 a barrel on Monday.

In additional NYMEX trading, heating oil added $0.0145 at $1.90 a gallon, while gasoline gained $0.0095 to $1.9035 a gallon. February natural gas futures advanced $0.025 to $5.426 per 1,000 cubic feet.

Despite a weakening Dollar, Treasury prices were lower Tuesday, as investors were uncertain as to where to place their capital. With the day’s trading complete, the benchmark 10-year note was down, falling 8/32 to 98 6/32, with a yield of 3.59%, up 0.03% from the day before.

Meanwhile, the longer maturing 30-year note was lower on the day as well, slipping 15/32 to 97 17/32, as its yield advanced to 4.52%. Lastly, the shorter maturing 2-year note was marginally lower, falling 1/32 to 100 5/32, while its yield increased 0.03% to 0.79%.

The Forex markets saw the Dollar trade lower versus the majority of the world’s currencies, as the 16-nation Euro advanced against the greenback, buying $1.3750, up from the previous session’s price of $1.3695. The British pound also increased versus the Dollar, as the Sterling climbed from $1.5611 late Monday to $1.5630.

The Dollar did manage to increase in value against the Japanese yen, buying 89.40, up from yesterday’s value of 89.24. In additional trading, the Dollar fell to 1.0672 Swiss francs from 1.0732 and slipped to 1.0686 Canadian dollars from 1.0761 Canadian dollars.

By the sound of the closing bell on February 9, the Dow Jones Industrial average gained 150.25 points, or 1.5%, to end the day at 10,068.64, while the broader market indicators concluded the session in the green as well.

The S&P 500 index was higher, adding 13.78 point, or 1.3%, to finish at 1,070.52, while the tech-heavy NASDAQ composite index advanced as well, climbing 24.82 points, or 1.2%, to 2,150.87.

2010 Better Trades Article

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BRIAN MULLIN