September 25, 2009

FHFA Report: Home Values Increase by 0.3%

With little economic news influencing investors’ sentiment on September 22, the markets moved tentatively higher throughout much of the day, posting modest gains by the close. The day’s advance was correlated with the increase in commodity prices and the continued weakness of the Dollar.

The lone economic report released on Tuesday came from the Federal Housing Finance Agency (FHFA), in which the government agency stated that, the value of homes throughout the U.S. increased by 0.3% in July. The recent reading comes in higher than the 0.1% gain in June’s prices.

Nevertheless, home prices have declined 4.2% over the past year, and are now more than 10% down from the industry’s peak in April 2007. The index is based solely on loans that are either owned or guaranteed by Fannie Mae and Freddie Mac.

The index has declined less than other housing reports as the FHFA’s data excludes the most expensive homes and other loans that have slipped into foreclosure.

In corporate news, one of the world’s largest multi-night cruise companies, Carnival Corporation (CCL) confirmed before the opening bell that the company’s profits during the 2Q retreated, yet managed to come in ahead of market expectations. Lower revenues, despite an increase in bookings, affected net earnings.

For the period, Carnival recorded net income of $1.07B, or $1.33, versus last year’s earnings of $1.33B, or $1.65 per share, a decrease in profits of nearly 20% year-over-year. Quarterly sales slipped as well, falling from $4.81B to $4.14B, a drop in revenues of almost 14%.

Analysts, on average, were looking for the cruise line operator to post a quarterly profit of $1.18 per share, on overall revenues of $4.05B. Carnival is now looking to record annual earnings between $2.16 and $2.20 per share, up from a previously stated range of $2.00 to $2.10 per share.

By the sound of the closing bell on September 22, shares of CCL were up nearly 5%, adding $1.52 to conclude the session at $33.52 per share. Over the past year, the company’s stock has reached a high of $40.15 and a low of $14.85 per share.

Engaged in supplying global economic and financial data to analysts, investment bankers and other financial professionals, FactSet Research Systems Inc. (FDS) made it known early Tuesday morning that the company’s 4Q profits advanced year-over-year, while meeting market projections.

For the final quarter in the company’s fiscal year, FDS booked net earnings of $36.3M, or $0.74 per share, in contrast to last year’s 4Q profit of $33.5M, or $0.67 per share, an increase in profits of more than 8%. Revenues, meanwhile, advanced marginally, climbing from $153.7M to $155.5M, a 1.1% gain.

Within the industry, analysts were looking for the economic and financial information provider to record a quarterly profit of $0.74 per share with total sales coming in at $154M.

For the upcoming first quarter in fiscal 2010, FactSet is looking to post a profit between $0.73 and $0.75 per share, with sales ranging between $152M and $157M. Analysts are currently looking for the company to record a 1Q profit of $0.71 per share on sales of $152.2M.

At the conclusion of trading, following the company’s earnings release, shares of FDS surged more than 8% by the close, gaining $5.31 to finish at $67.66 per share. During the past year, FactSet shares have traded as low as $31.15 per share, and reached a yearly high of $68.86 during Tuesday’s trading.

Rounding out today’s earnings reports is Progress Software Corporation (PRGS), a global supplier of application development, deployment and management technology, Internet and Intranet enabling technologies and support services. Prior to the commencement of trading, the company declared that profits during the 3Q plummeted more than 50%, as a 15% decline in revenues from software licensing was the catalyst.

For the quarter, PRGS earned $5.5M, or $0.13 per share, well below last year’s profits of $12.5M, or $0.30 per share, a decrease in net earnings year-over-year of 56%. Overall revenues during the period retreated as well, falling from $126.6M to $119.4M, a 5.7% drop.

Analysts within the industry were looking for Progress Software to book a quarterly profit of $0.39 per share based on total revenues of $120.1M.

In response to a dismal quarterly performance, along with the current economic constraints, PRGS lowered their 2009 earnings projection downward, from a previous range of $1.72 to $1.81 per share, to a range of $1.72 to $1.74 per share. Analysts are looking for $1.73 per share.

Despite the lowered projections and missing on their recent earnings report, shares of Progress Software managed to trade in the green by the closing bell, adding $0.78, or 3.4%, to finish at $23.49 per share.

After falling more than $2 a barrel on Monday, oil prices rebounded during the September 22 session. Investors were reassured that concerns regarding China’s crude consumption was waning and that the lack of demand was short-lived. From July to August, Chinese oil demand slipped 5.4%.

By the close of trading, the price for a barrel of light, sweet crude for October delivery advanced $1.84 to settle at $71.55. In additional NYMEX trading, gasoline added $0.0302 to $1.7816 a gallon, while heating oil for October delivery gained $0.0604 to $1.8121 a gallon. Natural gas, after tumbling more than 5% the day before, was up $0.033 to $3.576 per 1,000 cubic feet.

Within the Forex markets, the Euro surged to a price not seen since August 2008 versus the U.S. Dollar. By late afternoon, the Euro peaked at $1.4821, before settling back at $1.4796, up from the last night’s price of $1.4677. The greenback also lost ground trading against the British pound, as the Sterling traded at $1.6359, up from Monday’s value of $1.6194.

In additional currency trading, the Dollar slipped versus the Japanese yen, buying 91.15, down from the previous session’s price of 92.13.

Despite the overall advance within the equity markets, government-backed securities moved higher as well. With the day’s trading concluded, the benchmark 10-year note was up 8/32 to 101 14/32, while yielding 3.44%, down from Monday’s rate of 3.48%.

The longer maturing 30-year note increased as well, gaining 20/32 to 105 2/32, with a yield of 4.19%, down from 4.23% the previous session. Lastly, the shorter 2-year note was up 2/32 to 100 2/32 with a yield of 0.95%, down 0.03% from yesterday’s trading.

By the sound of the closing bell, the Dow Jones Industrial average was up 51.01 points, or 0.5%, to conclude the day at 9,829.87, while the broader market indicators ended in the green as well.

The S&P 500 index was higher by 7.00 points, or 0.7%, to finish at 1,071.65, while the tech-heavy NASDAQ composite index increased by 8.26 points, or 0.4%, to close the September 22 session at 2,146.30.

2009 Better Trades Article

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BRIAN MULLIN