Jim Cramer Blog

It wasn't the strongest advance in recent sessions, but stocks recovered from a meandering start to push higher again today, helped by more upbeat economic news and the generally positive corporate profit picture for the first quarter. As has been the pattern in recent days, crude oil prices and the 10-year Treasury note moved in the opposite direction from stocks, closing lower.
Investors today were encouraged by a good report on inflation and another that showed growth in the services sector. The Labor Department's report on unit labor costs, an indicator of wage growth, rose at a scant 0.6% rate in Q1. The Institute of Supply Management, meanwhile, said its index of non-manufacturing business rose to 56.0 in April from 52.4 in March. Any reading above 50 is considered to show expansion. The Dow Jones Industrial Average marked another record close. The Dow has now risen in 22 of the last 25 sessions, making it one of the index's lengthiest bull runs in years.
The Dow's gain might have been stronger if not for longtime component General Motors (NYSE: GM - News), which reported a whopping -90% drop in Q1 profit. While its domestic auto business continues to suffer in the face of rising gas prices, profit was also hurt by weak results at its 49%-owned finance arm, GMAC, which has been hurt by the weak housing market. GM reported net income of $62 million, or 11 cents a share, compared with $602 million, or $1.06 a share, a year earlier. Excluding assorted charges related to its restructuring efforts, the car company would have earned 17 cents a share, still well short of the 87 cents a share analysts expected. Its shares declined -5.4%.
In the tech sector, increased profits reported by digital audio/video services provider RealNetworks (Nasdaq: RNWK - News) helped boost its stock 8.8%. RealNetworks reported a 60% increase in Q1 profit, driven by strong sales in its music and gaming units and the final payment from a settlement deal with Microsoft (Nasdaq: MSFT - News). The company said it would significantly increase its share repurchase program. Security software maker Symantec (Nasdaq: SYMC - News), meanwhile, rose 4.8%. Its fiscal Q4 profit fell almost -50%, but that result was nonetheless above expectations. The company was upgraded to "buy" from "hold" at Jefferies.
The sale of ABN Amro (NYSE: ABN - News) got murkier after a Dutch court blocked the bank's plan to sell is Chicago-based LaSalle National Bank subsidiary to Bank of America (NYSE: BAC - News). That transaction was to occur so that ABN could sell itself to Barclay's (NYSE: BCS - News). The court said ABN management must seek shareholder approval to sell LaSalle, making it more likely that the higher competing bid from a group led by Royal Bank of Scotland might win out.
Subprime lending woes led to a -7% profit decline at UBS (NYSE: UBS - News). The Swiss-based bank said it would shutter its Dillon Read Capital Management division, a hedge fund the bank set up in 2006 that ran up a -150 million Swiss franc loss from trading in the U.S. mortgage market.
By the BullMarket.com Staff

Labels: ABN, BAC, BCS, GM, MSFT, RNWK, SYMC, UBS

The stock market managed a modest positive follow-up on Wednesday's rally, fueled by well received comments on the economy from Federal Reserve Chairman Ben Bernanke. Bernanke testified before Congress again today, but his reiteration of comments made yesterday had much less impact. Traders instead shifted some of their focus to digesting new reports on the state of housing and manufacturing output today. Oil prices dropped sharply early in the day on a forecast of warmer weather returning to the Northeast next week, but crude futures recovered to close essentially unchanged. The 10-year Treasury note rose, trimming the yield to 4.71%.

A report from the National Association of Realtors confirmed what most observers of the housing industry believed: the housing market slump accelerated in the final three months of last year, with formerly booming regions of the country recording the sharpest declines. According to the realty industry trade group, sales in Nevada dropped -36%, -31% in Florida, -27% in Arizona, and -21% in California. Nationwide, home sales fell in 40 states and median home prices declined in nearly half of the metropolitan areas surveyed by the realtors. The trade group's chief economist said he believes the housing slump is bottoming out.
In other economic news, industrial production dropped -0.5% in January, the sharpest decline since Hurricanes Katrina and Rita disrupted manufacturing activity in the summer of 2005, the Federal Reserve reported. Almost half of the manufacturing decline was due to a sharp -6.0% drop in automobile production. Energy production was also off -1.2%.
In earnings news today, biotechnology company Biogen Idec (Nasdaq: BIIB - News) reported Q4 profits that were nearly double its year-ago results. Biogen earned $109 million, or 32 cents a share, up from $56 million, or 16 cents, a year earlier. Revenue rose 12% to $708 million. Excluding one-time charges, Biogen earned 53 cents a share, which was 2 cents shy of estimates. The stock finished down -5%. The company also offered an upbeat assessment of Tysabri, its new treatment for multiple sclerosis. The drug produced only $30 million in revenue in Q4 but is expected to become a top seller for the company. Regulators in the U.S. and Europe approved reintroducing Tsyabri last June. The drug was pulled from the market shortly after its 2005 introduction following the deaths of two patients from a rare brain disorder. Doctors are now warned to monitor patients for the disorder known as PML.
Anheuser-Busch (NYSE: BUD - News) gained 3% on reports that it was in possible merger talks with the Belgium-based brewer InBev. Neither company would confirm whether talks were going on. Bud's domestic rival, Molson Coors Brewing (NYSE: TAP - News), meanwhile, rose to a record high after the company posted a sharp increase in its Q4 profit. The beer maker said it earned $99 million, or $1.14 a share, up from $22.4 million, or 26 cents, a year earlier. Revenue rose 11% to $2.1 billion.
In the technology sector, Real Networks (Nasdaq: RNWK - News) sank -16% on a sharp earnings decline and a weak outlook. The stock was immediately downgraded to "sell" by Oppenheimer. The company's net income fell to $39 million from $296 million a year ago. Revenue rose 50% to $126 million. Last year's results included a lawsuit payment from Microsoft (Nasdaq: MSFT - News).

Published By BullMarket.com Staff

Labels: BIIB, BUD, MSFT, RNWK, TAP

RealNetworks (RNWK 9.30 -1.05) posted a lower fourth quarter profit versus year-ago results, helped by a large gain from an antitrust lawsuit, and offered an outlook for the first quarter below analysts' expectations. Oppenheimer subsequently downgraded the stock to Sell from Neutral following the report, based on sluggish growth in new music subscribers. RealNetworks shares were off more than 10% in early-market activity.
The lower than expected guidance further supports our cautious view on the stock, which has been under pressure since December. Despite continued strength in its games division with recent acquisitions, the company is seeing slower growth in new music subscribers. Amid intense competition from Apple (AAPL) and Microsoft (MSFT), we believe shares are fully valued at the current level and would not be buying shares at this time.
Fourth quarter earnings were $39.3 million, or $0.22 per share, compared with $295.6 million, or $1.61 per share, in the previous year, which included greater proceeds from a legal settlement with Microsoft. Sales grew 50% year/year to $125.6 million, boosted by the recent acquisition of WiderThan, a provider of wireless entertainment services. Analysts on average were expecting earnings of $0.21 per share on revenue of $120.4 million.
In the Consumer Products and Services segments, revenue from games increased 52% to $23.9 million and music revenue increased 21% to $33.6 million. Media Software and Services revenue rose a modest 2% to $30.5 million, while Technology Products and Solutions increased 270% to $37.6 million, due to the addition of WiderThan. Meanwhile, gross margin for the period slipped to 66% from 71%.
For the first quarter, RealNetworks expects earnings between $0.16 and $0.18 per share on sales of $122 to $126 million. That compares with analysts' forecast for higher earnings of $0.25 per share and sales of $133.93 million. The company expects full-year earnings to be in a range of $0.18 to $0.23 per share, with sales between $540 and $560 million, which represents about 37% to 42% growth over 2006. Analysts on average are looking for full-year earnings of $0.40 per share on sales of $572.82 million.
--Richard Jahnke, Briefing.com

Labels: AAPL, MSFT, RealNetworks Inc., RNWK