Humana Inc. (NYSE: HUM): Q1 Earnings Preview 2011

Humana Inc. (NYSE: HUM) is scheduled to release its first-quarter earnings before the opening bell on Monday, May 2, 2011.  Analysts, on average, expect the company to report earnings of $1.36 a share on revenue of $9.14 billion. In the year ago quarter, the company reported earnings of $1.52 per share on revenue of $8.44 billion.

Humana Inc. provides various health and supplemental benefit plans for employer groups, government benefit programs, and individuals in the United States. It is one of the nation's largest Medicare providers and over the last several years, the majority of Humana's enrollees have been in state- or federal-government-sponsored programs.

In the preceding fourth-quarter, the Louisville, Kentucky-based company's net income was $107.33 million, or 63 cents per share, compared to $250.66 million, or $1.48 per share, in the year-ago quarter. The results included $1.02 per share of incremental expenses, reflecting reserves strengthening for closed block of long-term care business, incremental spending associated with the change in Medicare Advantage enrollment periods, and the launch of the Humana Walmart-Preferred Rx Plan among others.Revenue increased 9.2% to $8.42 billion from $7.72 billion. Analysts, on average, currently expected the company to report earnings of 81 cents a share on revenue of $8.36 billion.

The company recently announced that it has realigned its business segments and will start paying a quarterly dividend. The company raised its fiscal 2011 earnings outlook and said it now expects first-quarter earnings to exceed its previous guidance. It has also gotten authorization to increase share repurchases to $1 billion from $250 million. Effective immediately, the Louisville, Kentucky-based company will report its operating results under the following segments - Retail, Employer Group, Health and Well-Being Services and Other Businesses. The company's board of directors approved a quarterly cash dividend policy and declared a cash dividend to stockholders of $0.25 per share, payable on July 28, 2011 to stockholders of record on June 30, 2011. The board also replaced its previously approved share repurchase authorization of up to $250 million with a new authorization for repurchases of up to $1 billion by June 30, 2013. The previous share repurchase authorization had about $100 million outstanding as of April 25, 2011.

The company said that it now expects first earnings per share of $1.86, exceeding the company's previous guidance of $1.15 to $1.20 per share. Humana said that the better-than-expected results reflect a lower-than-expected benefit ratio for the quarter and include the impact of favorable prior-year development in medical claims reserves of $0.31 per share. Humana has also raised its outlook for fiscal year 2011 earnings per share to a range of $6.70 to $6.90 from the prior range of $5.95 to $6.15 per share.

Late in February, the U.S. Department of Defense awarded the South Region TRICARE contract to the company's wholly owned subsidiary, Humana Military Healthcare Services Inc.

Humana is positive about its Medicare Advantage program to grow over the longer-term due to the healthcare overhaul passed in March 2010. Over the long term also, Humana will be in a favorable position as demographic and reform-related trends expand Medicare and the individual market.

Recently, the health insurer said that is on target with enrollments and is on the look-out for further acquisitions that could increase vertical integration.

Full Disclosure: None.

Anadarko Petroleum Corp. (NYSE: APC): Q1 Earnings Preview 2011

Anadarko Petroleum Corporation (NYSE: APC) is scheduled to release its first-quarter earnings before the opening bell on Monday, May 2, 2011. Analysts, on average, expect the company to report earnings of 58 cents per share on revenue of $3.09 billion. In the year ago quarter, the company reported earnings of 83 cents per share on revenue of $3.14 billion.

Anadarko Petroleum Corporation engages in the exploration and production of oil and gas properties primarily in the United States,the deepwater of the Gulf of Mexico, and Algeria. Anadarko has focused largely on upstream activities like the exploration and production of oil & gas rather than the refining and marketing of end products like gasoline, distillates and fuel oil. The majority of the large oil companies in the world are vertically integrated, but Anadarko has kept focus on its core strengths of exploration and production which has yielded handsome returns for investors in recent years.

In the preceding fourth quarter, the Woodlands, Texas-based company's net income was $670 million, or $1.77 per share, compared to $582 million, or $1.72 per share,in the year-earlier quarter. On an adjusted basis, the company earned $2.19 a share in the fourth quarter. Revenue decreased to $3.43 billion from $2.56 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 22 cent per share on revenue of $2.75 billion.

Late in February, the company unveiled its 2011 capital program and guidance. The company expects total 2011 capital expenditures to be between $5.6 billion and $6.0 billion. This amount does not include expenditures by Western Gas Partners, LP, a separate publicly traded entity controlled by Anadarko and consolidated in its financial statements. Sales volumes for the first quarter are expected in a range of 60 - 62 million barrels of oil equivalent, or BOE. For the full year, the company sees sales volumes in a range of 244 - 248 million BOE.

Anadarko's valuation continues to suffer based on the after-effects of the oil spill incident at the Macondo exploration well in the Gulf of Mexico. The resultant suspension of deepwater drilling in the Gulf of Mexico has hurt production volumes in the region. Also, uncertainty on Anadarko's liability for the clean-up of the oil spill remains. Anadarko owns 25 percent of the ruptured Macondo well that BP operated.

On the bright side, discoveries from Mozambique to Brazil, along with takeover talk, have returned the explorer's shares to pre-accident levels. The company is known for its deep and diversified asset base, low-risk and predictable production profile, global business development approach and brilliant execution capability. Anadarko has a proven track record of identifying and executing high-impact projects. At its last earnings call in November, the company executives emphasized not only the growth in exploration in places such as Brazil who look to increase infrastructure and would need a great deal of energy to match its expansion rate, but they also noted that the drilling and other such activities have been a success in these areas. Anadarko is also focused on strengthening its balance sheet and enhancing its financial flexibility and liquidity.

The company has also benefited from  higher oil prices. The demand for fossil fuels continued to rebound in recent months on an increase in global economic activity. Crude-oil prices have also broken through $100-a-barrel on jitters tied to supply disruptions in Libya and political strife in the Middle East. Oil prices have advanced 23 percent in New York this year.

Full Disclosure: None.

Wall Street Gains On Upbeat Earnings, Sprint Nextel (NYSE: S) Climbs

US stocks finished higher on Friday as investors welcomed better-than-expected corporate earnings.

The Dow Jones Industrial Average rose 47.23 points, or 0.37%, to finish at 12,810.54. The S&P 500 added 3.13 points, or 0.23%, to close at 1,363.61. The Nasdaq Composite climbed 1.01 points, or 0.04%, to 2,873.54.

A release by Commerce Department showed that US consumer spending, which accounts for nearly two third of the economy, increased 0.6% in March. Personal income increased 0.5% in March. 

Caterpillar Inc. (NYSE: CAT) reported Friday that its first-quarter profit climbed to $1.23 billion, or $1.84 a share, from $233 million, or 36 cents a share, in the year-earlier quarter. Revenue grew to $12.95 billion from $8.24 billion. Analysts, on average, expected the company to report earnings of $1.30 a share on revenue of $11.4 billion. Caterpillar shares rallied $2.77, or 2.46%, to $115.41.

After Thursday's closing bell, Microsoft Corp. (NASDAQ: MSFT) reported that its fiscal third-quarter profit rose to $5.2 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the year-earlier quarter. Revenue climbed 13% to $16.43 billion from $14.5 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 56 cents per share on revenue of $16.19 billion. Microsoft shares dropped nearly1.90% in Friday's pre-market trading. Microsoft shares slumped 79 cents, or 2.96%, to $25.92.

Goodyear Tire & Rubber Co. (NYSE: GT) reported Friday that it swung to a first-quarter profit of $103 million, or 42 cents a share, from a year-ago loss of $47 million, or 19 cents a share. Revenue climbed to $5.4 billion from $4.27 billion. Analysts, on average, expected the company to report earnings of 12 cents per share on revenue of $4.77 billion. 

Shares of Sprint Nextel Corp. (NYSE: S) rose 7 cents, or 1.37%, to close at $5.18.

European stocks closed higher. The UK FTSE rose 1.74 points, or 0.03% to 6,069.90. The German DAX and French CAC increased 0.52% and 0.05% respectively.

Full Disclosure: None.

Chesapeake Energy Corp. (NYSE: CHK): Q1 Earnings Preview 2011

Chesapeake Energy Corporation (NYSE: CHK), the second-largest US natural gas producer, is scheduled to release its first-quarter earnings after the closing bell on Monday, May 2, 2011. Analysts, on average, expect the company to report earnings of 70 cents a share on revenue of $2.68 billion. In the year ago period, the company reported earnings of 82 cents per share on revenue of $2.80 billion.

Chesapeake Energy Corporation is a producer of natural gas in the United States. The company also owns the largest combined inventory of onshore leaseholds and 3-D seismic acreage in the U.S. 

Natural gas has been touted as the next big fuel, as it burns cleaner, more efficiently, and can be cheaper than oil. Natural gas is taking on a bigger energy role in the U.S., especially for electricity generation.

Early this year, the company outlined its 2011-12 strategic and financial plan, "the 25/25 Plan,". Chesapeake said that it plans to reduce long-term debt by 25% by substantially reducing leasehold spending and by reducing its two-year production growth rate to 25% from its previously planned growth rate of 30-40% through asset monetizations. 

In the preceding fourth-quarter, the Oklahoma City, Oklahoma-based company's net income was $180 million, or 28 cents per share, compared to a loss of $530 million, or 84 cents per share, in the prior year quarter. On an adjusted basis, the company earned 70 cents per share in the latest quarter. Revenue declined 11% to $1.98 billion from $2.22 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 63 cents a share on revenue of $2.38 billion.

Early in January, the company announced that daily production for the fourth quarter averaged around 2.9 billion cubic feet of natural gas equivalent, an increase of 11% over the 2.6 billion cubic feet of natural gas equivalent or bcfe last year. Excluding this sale of future production through a volumetric production payment covering a portion of its Barnett Shale assets, the company's fourth quarter production would have increased 25% year over year. Chesapeake's average daily production for the quarter consisted of around 2.6 billion cubic feet of natural gas and 59.5 thousand barrels of oil and natural gas liquids.

At its last earnings call in Februray, the company forecast full-year production growth of 9% and 17% for 2011 and 2012, respectively. Liquids production is expected to range between 32,000-36,000 thousand barrels (MBbls) and 51,000-57,000 MBbls for 2011 and the next year, respectively. Further, natural gas output is expected to be in bands of 900 to 930 Bcf for 2011 and 960 to1,000 Bcf for 2012.

The company has been aggressive in buying up properties in shale gas fields across the United States. But in response to persistent low natural gas prices, the company has vowed to shift its exploration focus away from drilling for gas in places and to instead look for oil.

The company recently sold 487,000 acres of leasehold and producing natural gas property in the Fayetteville Shale in Arkansas to BHP Billiton Ltd. of Australia for $4.75 billion. Chesapeake will use the money to pay down debt.

Chesapeake Chief Executive Officer Aubrey McClendon has told investors he plans to expand the company's oilfield services business as a way to control costs on that side of the exploration and production business. The company already has rig and trucking operations and is looking to expand its hydraulic fracturing business as it steps up drilling in oil and gas shale fields in the United States.  

Recently the company agreed to uy Bronco Drilling Company, Inc. for approximately $315 million, including debt, net working capital and outstanding warrants. The acquisition will enable Chesapeake to further its goal of owning approximately two-thirds of the rigs that it operates in its drilling program -- a key aspect of its vertical integration strategy -- at an attractive price per rig. Bronco currently owns 22 high-quality drilling rigs primarily operating in the Williston and Anadarko basins, including three that are under contract with Chesapeake. Chesapeake is currently Bronco's second largest customer. Chesapeake believes that the acquisition of Bronco should satisfy the vast majority of Chesapeake's anticipated rig investment needs through 2012.

Meanewhile, Chesapeake iscontinuing to deleverage after years of heavy borrowing with plans to repurchase several of its outstanding bonds using the proceeds from recent asset sales.The Oklahoma City-based natural gas giant had total debt outstanding of $12.5 billion at end of December. In February, Chesapeake Energy priced a $1 billion 10-year bullet senior notes issue at 6.125 percent, as part of a liability management program to extend and retire debt.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 10.21 and PEG ratio (5 yr expected) of 1.05. In terms of stock performance, Chesapeake shares have gained nearly 40 percent over the past year.

Full Disclosure: None.

Dendreon Corp. (NASDAQ: DNDN): Q1 Earnings Preview 2011

Dendreon Corp. (NASDAQ: DNDN) is scheduled to release its first-quarter earnings after the closing bell on Monday, May 2, 2011. Analysts, on average, expect the company to post a loss of 70 cents per share on revenue of $28.86 million. In the year ago quarter, the company posted a loss of 96 cents per share on revenue of $21,000.

Dendreon Corporation is a biotechnology company focused on the discovery, development and commercialization of therapeutics that may improve cancer treatment options for patients. The Company’s product portfolio includes active cellular immunotherapy and small molecule product candidates to treat a range of cancers. Dendreon's first product, sipuleucel-T (marketed in the U.S. as PROVENGE(R)), was approved by the U.S. Food and Drug Administration (FDA) in April 2010 and was subsequently launched by the company on May 3, 2010. Dendreon began the U.S. launch of Provenge through 50 infusion centers which were those which participated in the clinical trials. It forecast about 500 infusion centers around the country will be treating patients by the end of the year.

Provenge is the first product in the new therapeutic class known as active cellular immunotherapies. It is the first medicine that trains the body’s immune system to attack cancer cells as it would a virus. Provenge sales in 2010 totaled $48 million. Analysts predict that the product will reach blockbuster sales status - over $1 billion - by 2016. Prostate cancer is the second most common type of cancer among men in the U.S., after skin cancer. About 200,000 men are diagnosed with prostate cancer in the United States every year. The drug is also being tested for treatment of other types of cancer including bladder, colon, colorectal, and breast.

Provenge is currently manufactured for U.S. patients at a company-owned facility in New Jersey. Recently, Food and Drug Administration approved 36 additional workstations at its New Jersey facility, adding to the 12 production stations already in operation. Two additional U.S. Provenge plants are under construction, expected to be completed and operational in the middle of the year. The real effect of these additional work stations coming on line is going to reflect in Q2 and beyond.

In the preceding fourth-quarter, the Seattle, Washinton-based company's net loss was $91.8 million, or 64 cents per share, compared to a loss of $32.5 million, or 28 cents per share, in the year-earlier quarter. Revenue jumped to $25 million from $21,000. Analysts, on average, expected the company to report to report a loss of 49 cents per share on revenue of $23.83 million.

Last month, In its draft decision memo, Centers for Medicare and Medicaid Services or CMS proposed that the evidence is adequate to conclude that the use of autologous cellular immunotherapy with PROVENGE improves health outcomes for Medicare beneficiaries with asymptomatic or minimally symptomatic metastatic castrate resistant prostate cancer and thus is reasonable and necessary for that indication. A final decision is expected by June 30. Analysts have said they expect Medicare's decision to help streamline the reimbursement process for the vaccine, which right now varies region to region. A nationwide payment policy will offer the company and investors some certainty when it comes to reimbursement issues. Private health insurance companies also weigh Medicare payment decisions when setting their own coverage policies

Dendreon has guided for $350 million to $400 million in sales for 2011. Half of these sales are expected in the fourth quarter of 2011. By the last quarter of this calendar year, Dendreon will be producing product from all three of its US manufacturing sites. Cost of goods will come down and Dendreon will start being able to meet the significant demand for this product. Dendreon expects to spend $125m, split evenly between capital expenditure and operating expenses, to bolster capabilities in 2011. One-off start-up costs from US production facilities will continue throughout the first three quarters and total $90m in 2011. By then, Dendreon expects to have increased US production capacity 10-fold by making sites in New Jersey, Atlanta and Los Angeles fully operational. This will eliminate the capacity constraints Dendreon faced in 2010.

Dendreon is also building a Provenge production facility in Germany, due to be operational in 2013, and in the meantime is to outsource to a CMO. Construction of the Germany plant is due to begin this year with the aim of gaining regulatory approval in 2013. Dendreon expects to receive a European decision on the Provenge marketing authorisation application (MAA) around the same time as the Germany plant gains approval. To accelerate the timeline for approval in the European Union (EU) Dendreon is to outsource to a contract manufacturing organisation (CMO). Qualifying a CMO can be done faster than plant construction and Dendreon expects to save 12 to 18 months by outsourcing to support filing. The Germany plant will support the first phase of the European expansion, with other sites possibly being constructed in the future. Output from the Germany plant is expected to be similar to Dendreon’s 160,000 sq ft site in Atlanta and 184,000 sq ft premises in Los Angeles. As demand in Europe increases Dendreon may add more facilities to support operations in Germany. Dendreon will make decisions on the capacity and location of facilities when reimbursement negotiations have progressed. It is believed that Europe has the largest number of metastatic castrate-resistant prostate cancer patients in the world, about 1.5 to 2 times the size of the US patient population. There is also a significant unmet clinical need for these patients.

Dendreon, which is often mentioned as a takeover target, holds full worldwide rights to the drug -- a rarity for small biotechnology companies -- and has no plans to seek a partner to help market Provenge.

Few skeptics however point out that the $93,000 price for the three-treatment regimen is a big hurdle despite the company’s argument that when overall costs of care are accounted for, Provenge’s price is comparable to that of other available treatment options.

Full Disclosure: None.

Analyst Actions: VZ, DAL, BA, DOW, CL, RCL

Verizon Communications Inc. (NYSE: VZ): Citigroup this morning downgraded its rating on the company to Hold from Buy.

Delta Air Lines (DAL): Capstone Investments downgraded its rating on the company to Sell from Hold.

Boeing (NYSE: BA): HSBC on Friday upgraded Boeing to Neutral from Underweight.

Dow Chemical (NYSE: DOW): JP Morgan has upgraded the stock to Overweight from Neutral. The firm also raised its price target to $47 from $36.

Colgate-Palmolive (NYSE: CL): Deutsche Bank on Friday upgraded its rating on the company to Buy from Hold.

Royal Caribbean Cruises (NYSE: RCL): Raymond James on Friday downgraded the company to Outperform from Strong Buy.

Full Disclosure: None.

US Stock Futures Rise After Spending Data, Microsoft (NASDAQ: MSFT) Eyed

US stock-index futures advanced on Friday afte strong quarterly results from Caterpillar and Merck lifted investor sentiment. 

At 8:31 am ET, the S&P 500 futures rose 2.70 points to 1,357.60. The Dow Jones Industrial average futures increased 23 points to 12,731. The Nasdaq Composite futures climbed 2.25 points to 2,404.

A release by Commerce Department showed that US consumer spending, which accounts for nearly two third of the economy, increased 0.6% in March. Personal income increased 0.5% in March. 

After Thursday's closing bell, Microsoft Corp. (NASDAQ: MSFT) reported that its fiscal third-quarter profit rose to $5.2 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the year-earlier quarter. Revenue climbed 13% to $16.43 billion from $14.5 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 56 cents per share on revenue of $16.19 billion. Microsoft shares dropped nearly1.90% in Friday's pre-market trading. 

Chevron Corp. (NYSE: CVX) said Friday that its first-quarter profit rose to $6.2 billion, or $3.09 per share, from $4.6 billion, or $2.27 per share, in the prior-year quarter. Revenue rose to $58 billion from $47 billion. Analysts, on average, expected the company to report earnings of $3.04 per share on revenue of $66.62 billion.

Caterpillar Inc. (NYSE: CAT) reported Friday that its first-quarter profit climbed to $1.23 billion, or $1.84 a share, from $233 million, or 36 cents a share, in the year-earlier quarter. Revenue grew to $12.95 billion from $8.24 billion. Analysts, on average, expected the company to report earnings of $1.30 a share on revenue of $11.4 billion.

Merck & Co. (NYSE: MRK) said Friday that its first-quarter net income more than tripled to $1.04 billion, or 34 cents a share, from $299 million, or 9 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 92 cents a share in the latest quarter. Revenue grew 1% to $11.58 billion from $11.42 billion. Analysts, on average, expected the company to report earnings of 84 cents per share on revenue of $11.37 billion.  

European stocks were little changed in afternoon trade. At 13:42 pm London Time, the UK FTSE rose 1.74 points, or 0.03%, to 6,069.90. The German DAX increased 0.35% while French CAC slipped 0.05%.

Full Disclosure: None.

Chevron Corp. (NYSE: CVX),: Q1 2011 Earnings Roundup

Chevron Corp. (NYSE: CVX) said Friday that its first-quarter profit rose to $6.2 billion, or $3.09 per share, from $4.6 billion, or $2.27 per share, in the prior-year quarter. Revenue rose to $58 billion from $47 billion. Analysts, on average, expected the company to report earnings of $3.04 per share on revenue of $66.62 billion.

Net charges in the first quarter 2011 were $388 million, compared with $368 million in the year-ago period. Foreign currency effects increased net charges by $10 million in the 2011 quarter, compared with a $2 million reduction in net charges last year.

"Our first quarter financial performance was strong," said Chairman and CEO John Watson. "Current quarter earnings from upstream operations benefited from higher prices for crude oil, while downstream operations benefited from improved margins on refined petroleum products. We continue to operate safely, advance our major capital projects and restructure our downstream portfolio."

Full Disclosure: None.

Goodyear Tire & Rubber Co. (NYSE: GT): Q1 2011 Earnings Roundup

Goodyear Tire & Rubber Co. (NYSE: GT) reported Friday that it swung to a first-quarter profit of $103 million, or 42 cents a share, from a year-ago loss of $47 million, or 19 cents a share. Revenue climbed to $5.4 billion from $4.27 billion. Analysts, on average, expected the company to report earnings of 12 cents per share on revenue of $4.77 billion. 

"I'm very pleased with our outstanding first quarter results, they're an excellent first step on our path to our 2013 targets," said Richard J. Kramer, chairman and chief executive officer. "Improvement in North American Tire is a critical element to achieving our targets. North American Tire's first quarter performance strengthens my confidence in our future," he added. "All of our businesses made great progress in offsetting higher raw material costs through improved price/mix and in driving sales of new, innovative products."

Shares of the company soared more than 10% in Friday's pre-market trading. 

Full Disclosure: None.

Merck & Co. (NYSE: MRK): Q1 2011 Earnings Roundup

Merck & Co. (NYSE: MRK) said Friday that its first-quarter net income more than tripled to $1.04 billion, or 34 cents a share, from $299 million, or 9 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 92 cents a share in the latest quarter. Revenue grew 1% to $11.58 billion from $11.42 billion. Analysts, on average, expected the company to report earnings of 84 cents per share on revenue of $11.37 billion.  

"Merck's first quarter performance underscores that we are successfully delivering on our intent to grow both the top line and the bottom line," said Kenneth C. Frazier, president and chief executive officer. "Our strong results were largely driven by double-digit growth of key products combined with deliberate cost control measures across all areas of the company as we continue to create a more effective and efficient operating model.

Looking ahead to the fiscal 2011, Merck raised the lower end of its profit forecast to a range of $3.66 to $3.76 a share, from a previous forecast of $3.64 to $3.76 a share.

Full Disclosure: None.

Caterpillar Inc. (NYSE: CAT): Q1 2011 Earnings Roundup

Caterpillar Inc. (NYSE: CAT) reported Friday that its first-quarter profit climbed to $1.23 billion, or $1.84 a share, from $233 million, or 36 cents a share, in the year-earlier quarter. Revenue grew to $12.95 billion from $8.24 billion. Analysts, on average, expected the company to report earnings of $1.30 a share on revenue of $11.4 billion.

"I am very pleased with our first-quarter results--demand continued to improve, we increased production, cost control was excellent, and our operating profit margin improved. We generated more than $1.6 billion of operating cash flow from our Machinery and Power Systems (M&PS) businesses, an increase of more than 50 percent, and our debt-to-capital ratio dropped more than 4 percentage points from year-end 2010," said Chairman and Chief Executive Officer Doug Oberhelman. "We have the right strategy, and it's squarely focused on helping our customers win. Our new organization is in place, is focused on execution and is getting the job done. Given the scale of the volume ramp-up over the past year we also need to recognize the tremendous job that our suppliers and dealers have done to support us and our customers," added Oberhelman.

Looking ahead, the company lifted its 2011 profit target to $6.25 to $6.75 a share, from near $6 a share, compared to the analyst target of $6.25 a share.

Caterpillar shares rallied more than 3% in Friday's pre-market trading.

Full Disclosure: None.

Stocks In Focus: SPWRA, RIMM, GBLI

Shares of SunPower Corp. (NASDAQ: SPWRA) surged more than 35% in Frday's pre-market trading after Total SA, Europe’s third-biggest oil producer, agreed to buy as much as 60 percent of the second-largest U.S. solar panel maker. Total Group will launch a tender offer for up to 60 percent of San Jose-based SunPower's outstanding shares for $23.25 a share. The companies said the deal values SunPower's total equity at $2.3 billion, which would mean that buying a 60 percent stake would cost $1.38 billion.

After Thursday's closing bell, Research In Motion Ltd. (NASDAQ: RIMM) lowered its earnings forecast for the first quarter, citing weaker-than-expected shipment volumes of BlackBerry smartphones and a shift in the expected mix of devices shipped towards handsets with lower average selling prices. For the first quarter of fiscal year 2012, the company now expects earnings of $1.30 to $1.37 per share, down from its previous forecast of $1.47 to $1.55 per share. RIM also warned that revenue for the first quarter would be slightly below the previously provided guidance range of US$5.2 billion to US$5.6 billion. Analysts, on average, currently expect the company to report earnings of $1.48 per share on revenue of US$5.44 billion for the quarter. Shares of the Blackberry maker slumped more than 12% in Friday's pre-market trading. 

Global Indemnity plc (NASDAQ: GBLI) announced late Thursday that it is evaluating potential strategic alternatives, which will include discussions with potential acquirors, and has retained Morgan Stanley & Co. Incorporated to assist with its evaluation. 

Full Disclosure: None.

Wall Street Ends Higher As Dollar Drops, Citigroup (NYSE: C) Gains

US stocks finished higher on Thursday as as investors shrugged of a series of mixed earnings reports as well as disappointing economic news.

The Dow Jones Industrial Average rose 72.35 points, or 0.57%, to finish at 12,763.31. The S&P 500 added 4.82 points, or 0.36%, to close at 1,360.48. The Nasdaq Composite climbed 2.65 points, or 0.09%, to 2,872.3.

The Commerce Department reported Thursday that real gross domestic product rose at a 1.8% annualized rate in the first quarter, down from a 3.1% increase in the fourth quarter. 

A release by Department of Labor on Thursday showed that number of Americans filing first- time claims for unemployment benefits rose 25,000 to 429,000 in the week ending April 23. Economists expected jobless claims to drop to 395,000. The four-week average of seasonally adjusted initial jobless claims, a less volatile gauge, increased 9,250 to 408,500. Continuing claims for the week ending April 16 fell 68,000 to 3.64 million.

Exxon Mobil Corp. (NYSE: XOM) said Thursday that its first-quarter profit jumped 69% to  $10.65 billion, or $2.14 a share, from $6.3 billion, or $1.33 a share, in the year-earlier quarter. Revenue climbed to $114 billion from $90.3 billion. Analysts, on average, expected the company to report earnings of $2.04 a share on revenue of $112.6 billion. Shares of Exxon-Mobil fell 44 cents, or 0.50%, to close at $87.34.

Procter & Gamble Co. (NYSE: PG) said Thursday that its third-quarter profit climbed to $2.87 billion, or 96 cents a share, from $2.59 billion, or 83 cents a share, in the year-ago quarter.The company said its core earnings rose 8% to 96 cents a share. Revenue grew 5% to $20.23 billion. Analysts, on average, expected the company to report earnings of 97 cents a share on revenue of $20.24 billion. Shares of the consumer products giant rose 48 cents, or 0.75%, to $64.50.

Sprint Nextel (NYSE: S) reported Thursday that its first-quarter loss narrowed to $439 million, or 15 cents a share, from $865 million, or 29 cents, in the year-ago quarter. Revenue climbed to $8.31 billion from $8.09 billion. Analysts, on average, expected the company to report a loss of 22 cents a share on revenue of $8.2 billion. Shares of Sprint Nextel soared 32 cents, or 6.68%, to $5.11. 

Shares of Citigroup (NYSE: C) rallied 6 cents, or 1.77%, to close at $4.59.

European stocks closed up. The UK FTSE rose 1.74 points, or 0.03% to 6,069.60. The German DAX and French CAC increased 0.95% and 0.91% respectively.

Asian stocks finished mixed. The Nikkei 225 rose 157.90 points, or 1.63%, to 9,849.74. The Hang Seng index of Hong Kong declined 87.21 points, or 0.36%, to 23,805.63.

Full Disclosure: None.

Motorola Mobility Holdings (NYSE: MMI): Q1 2011 Earnings Roundup

Motorola Mobility Holdings Inc (NYSE: MMI) reported late Thursday that its first quarter loss was $81 million, or 27 cents a share, compared with a net loss of $212 million, or 72 cents a share, in the same quarter last year. On an adjusted basis, the company said it would have lost $25 million, or 8 cents a share for the recent quarter. Revenue increased 22% to $3.03 billion. Analysts, on average, expected the company to report a loss of 11 cents a share on revenue of $2.84 billion.

"In the first quarter, we reached a major milestone in our history by becoming a new independent, public company. We enhanced our product portfolio by delivering compelling experiences with the launch of Motorola ATRIX(TM) and Motorola XOOM(TM), as well as offering unique end-to-end video solutions for the home," said Sanjay Jha, chairman and chief executive officer, Motorola Mobility. "With a well-recognized brand, a strong balance sheet and industry leading intellectual property, we have the right assets to deliver an exciting pipeline of products, continue to grow our business and further improve our financial results."

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Expedia Inc. (NASDAQ: EXPE): Q1 2011 Earnings Roundup

Expedia Inc. (NASDAQ: EXPE) reported late Thursday that its first quarter net income declined to $52 million, or 19 cents a share, from $59.4 million, or 20 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 25 cents per share in the latest quarter. Revenue rose 15% to $822.2 million from $717.9 million. Analysts, on average, expected the company to report earnings of 26 cents per share on revenue of $795.40 million. 

Gross bookings increased 10% (9% excluding the estimated impact from year on year changes in foreign exchange rates) for the first quarter of 2011 compared with the first quarter of 2010, driven primarily by a 13% increase in average airfares, 8% growth in transactions and a 3% increase in hotel average daily rates. Domestic bookings increased 4% and international bookings increased 20% (19% excluding foreign exchange). International bookings totaled $2.9 billion, accounting for 39% of worldwide bookings.

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Microsoft Corp. (NASDAQ: MSFT): Q3 2011 Earnings Roundup

Microsoft Corp. (NASDAQ: MSFT) reported late Thrsday that its fiscal third-quarter profit rose to $5.2 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the year-earlier quarter. Revenue climbed 13% to $16.43 billion from $14.5 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 56 cents per share on revenue of $16.19 billion. 

"We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses," said Peter Klein, CFO of Microsoft, in a prepared statement. "Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications."

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Merck & Co. (NYSE: MRK): Q1 Earnings Preview 2011

Merck & Co. (NYSE: MRK), the world's second-biggest drugmaker by revenue, is scheduled to release its first-quarter earnings before the opening bell on Friday, April 29, 2011. Analysts, on average, expect the company to report earnings of 84 cents per share on revenue of $11.37 billion. In the year ago quarter, the company reported earnings of 83 per share on revenue of $11.42 billion.

Merck & Co., Inc., a global health care company, discovers, develops, manufactures, and markets medicines, vaccines, biologic therapies, and consumer and animal products.

In the preceding fourth quarter, the Whitehouse Station, New Jersey-based company's netloss was $531 million, or 17 cents per share, compared to a profit of $6.49 billion, or $2.35 per share, in the year-earlier quarter. On an adjusted basis, the company earned 88 cents a share in the fourth quarter. Revenue surged to $12.09 billion from $10.09 billion. Analysts, on average, expected the company to report earnings of 83 cents per share on revenue of $11.52 billion. 

Recently, the company reaafirmed that it expects 2011 non-GAAP earnings per share to be in the range of $3.64 to $3.76, excluding certain items. The company noted that the 2011 non-GAAP EPS target range excludes the $500 million one-time payment to Centocor as well as related tax impacts of the arbitration resolution, purchase accounting adjustments, restructuring costs and merger-related expenses. The 2011 GAAP EPS target range includes the entire impact of the arbitration settlement and is now expected to be in the range of $1.89 to $2.17. Merck also continues to expect full year 2011 revenue to grow in the low to mid-single digit percent range from the base of $46.0 billion in the full year of 2010.

Merck is currently faced by issues like patent expirations of key drugs and European pricing pressure. However, the company has a deep pipeline that should act as a cushion when its key products lose patent protection in the next few years. Meanwhile, a dispute with Johnson & Johnson (NYSE: JNJ) over the shared marketing of anti-inflammatory drug Remicade also continues to be an overhang on Merck’s stock.

On the bright side, Merck now has several drugs in late-stage trials which could prove to be the compelling buy catalyst for the stock in the second half of 2011. Merck's new CEO Kenneth Frazier, who took over on January 1, has vowed not to throw drug exploration money around loosely but rather, focusing on innovative drugs.

Early in April, U.S. Food and Drug Administration (FDA) approved Merck's skin cancer drug, Sylatron for injection, for subcutaneous use. Merck says it's the first additional, or adjuvant, therapy for melanoma approved in this country in 15 years. 

Recently, Merck's investigational drug VICTRELIS was unanimously recommended for approval by an FDA Advisory Committee for treatment of chronic HCV genotype 1 infection in combination with current standard therapy.  FDA usually follows its panels' recommendation. The FDA action on VICTRELIS is expected by mid-May.

Merck is seeking to expand through acquisitions and partnerships. Early this month, Merck announced the formation of a joint venture with Indian pharmaceutical firm Sun Pharmaceutical Industries Ltd. to develop, manufacture and commercialize new combinations and formulations of branded generics in the emerging markets. Also in April, the company agreed to acquire specialty pharmaceutical company Inspire Pharmaceuticals, Inc. in a cash transaction valued at about $430 million. The deal will strengthen Merck's ophthalmology business and position it for future growth with an expanded portfolio. Merck said it continues to build upon its long-term commitment to improving therapeutic options for the treatment of eye diseases.

Merck removed one big cloud with an April 15 agreement with Johnson & Johnson to end two years of arbitration over billions in annual revenue from two biotech drugs for immune disorders, Remicade and Simponi. Under the settlement, Merck will give J&J a one-time $500 million payment and more of the revenue, but it averted the possibility arbitrators would give it all to J&J. Merck kept rights to sell the drugs in Europe, Russia and Turkey, splitting those profits 50-50 with J&J.

Among other developments, the company's board of directors recently approved the additional repurchase of up to $5 billion of the company's common stock, bringing its total current share repurchase program to $6.4 billion. The company still has a $1.4 billion share repurchase authorization remaining under the program announced on November 24, 2009.

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American Axle (NYSE: AXL): Q1 Earnings Preview 2011

American Axle & Manufacturing Holdings Inc. (NYSE: AXL) is scheduled to release its first-quarter earnings before the opening bell on Friday, April 29, 2011. Analysts, on average, expect the company to report earnings of 38 cents per share on revenue of $593.91 million. In the year-ago period, the company reported earnings of 22 cents per share on revenue of $521.90 million.

American Axle & Manufacturing Holdings, Inc., together with its subsidiaries, engages in the manufacture, engineering, design, and validation of driveline and drivetrain systems, and related components and chassis modules for automotive industry in the United States.

In the preceding fourth quarter, the Detroit, Michigan-based company's net income was $34.9 million, or 47 cents per share, compared to $48.6 million, or 80 cents per share, in the prior-year period. Revenue rose 26% to $583.3 million from $464.0 million last year. Analysts, on average, expected the company to report earnings of 38 cents per share on revenue of $558.91 million. Analysts, on average, expected the company to report earnings of 39 cents per share on revenue of $587.70 million. 

Companies in the auto parts industry are benefiting from rising demand for vehicles. People postponed upgrading and replacing their cars during the recession; however, now the economy is looking up and both people and businesses have more disposable income. As a result car sales and repairs are increasing which is good news for the auto supply industry.

At its last earnings call in October,  Richard Dauch, co-founder, chairman and chief executive officer, said, "We are outperforming AAM's business plan for 2010 due to a recovery in market demand for full-size pickups and SUVs, as well as the impact of our ongoing actions to control operating expenses and sustain reductions in AAM's fixed cost structure."

Companies in the auto parts industry are benefiting from rising demand for vehicles. People postponed upgrading and replacing their cars during the recession; however, now the economy is looking up and both people and businesses have more disposable income. As a result car sales and repairs are increasing which is good news for the auto supply industry.

At its last earnings call in February, the auto component maker said that a recovering market bodes well for its future growth.

Late last year, American Axle & Manufacturing Holdings provided its estimate for new and incremental business backlog for the three-year period from 2011 to 2013 and said that this estimate supports its goal of achieving a sales target of $3 billion in 2013. The company also expects a compound annual sales growth rate of about 10% for the next three calendar years.From 2011 through 2013, the company's backlog of new and incremental business is estimated at $850 million in future annual sales, which represents an increase of over 20% from the company's previous three-year backlog for 2010 - 2012. AAM also said that the new and incremental business backlog estimate reflects its successful efforts to diversify the business by increasing its exposure to global growth markets, advancing its product portfolio, and growing its customer base. According to the company, over 50% of the estimated backlog is for customers other than GM. This includes new and expanded orders from multiple global premium vehicle manufacturers, including Audi, Chrysler, Daimler Truck, Mack Truck, Mercedes, Nissan, Saab, Scania, Volkswagen and others. The estimate also supports the company's goal of achieving an updated target of 40% non-GM sales by 2013. Further, AAM said that more than two-thirds of the estimated new and incremental business is for passenger car, crossover vehicle and commercial vehicle programs. Of the estimated backlog, over 60% is for programs sourced outside of North America, which supports the company's expansion in Brazil, China, India and Thailand, AAM noted.

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Chevron Corp. (NYSE: CVX): Q1 Earnings Preview 2011

Chevron Corp. (NYSE: CVX), the second biggest U.S. oil company by market capitalization, is scheduled to release its first quarter earnings before the opening bell on Friday, April 29, 2010. Analysts, on average, expect the company to report earnings of $3.04 per share on revenue of $66.62 billion. In the year ago period, the company reported earnings of $2.36 per share on revenue of $46.74 billion. 

Chevron Corporation operates as an integrated energy company worldwide. The company's Petroleum operations include the exploration, development, production, and marketing of crude oil and natural gas; refining, marketing, and transportation operations comprise refining crude oil into finished petroleum products; marketing crude oil and products derived from petroleum; and transporting crude oil, natural gas, and petroleum products by pipeline, marine vessel, motor equipment, and rail car. 

In preceding fourth quarter, the San Ramon, California-based company's net income was  $5.30 billion, or $2.64 per share, compared to $3.07 billion, or $1.53 per share, in the prior-year quarter. Revenue rose to $54.03 billion from last year's $48.68 billion. Analysts, on average, expected the company to report earnings of $2.40 per share on revenue of $55.97 billion.

The company has benefited from  higher oil prices and better refining margins. The demand for fossil fuels continued to rebound in recent months on an increase in global economic activity. Crude-oil prices have also broken through $100-a-barrel on jitters tied to supply disruptions in Libya and political strife in the Middle East. Oil prices have advanced 23 percent in New York this year.

Recently, the company said that it expects profit for the first quarter to be higher than the previous quarter, due to higher crude oil prices. Further, the company said that it expects its upstream earnings to increase sequentially in the first quarter, reflecting higher crude oil prices, offset in part by lower liftings. According to Chevron, Downstream earnings in the first quarter are expected to be slightly lower sequentially, largely due to reduced asset sales gains, largely offset by higher U.S. margins. U.S. net oil-equivalent production during the first two months of the first quarter dropped 12,000 barrels per day, compared to the average production for the fourth quarter, reflecting small declines across multiple assets. International net oil-equivalent production during February and March declined 26,000 barrels per day compared to the previous quarter as the increase in crude oil prices reduced the company's production under cost-recovery and variable-royalty provisions on certain international production contracts.

Average U.S. crude oil realizations for the first two months of the first quarter increased $8.67 per barrel or 10.90 percent from the prior quarter to $88.23 a barrel, and up $14.91 per barrel or 20.34 percent from the year-ago quarter. International liquids realizations also increased $12.24 per barrel or 15.48 percent from the previous quarter to $91.33 a barrel, and surged $21.28 per barrel or 30.38 percent from last year.

Last month, the company said that in the next few years it would focus on completing its major natural gas development projects in Australia, which is expected to deliver "Chevron's next wave of significant growth." The company plans to increase oil and natural-gas production by about 20 percent by 2017. The company said its Upstream business continues to advance its major capital projects and are on track to meet key project milestones. The company intends to increase output to 3.3 million barrels of crude per day in 2017 from 2.76 million barrels of crude per day in 2010. Pointing out that Asia Pacific has an important place in Chevron's growth story, the company said the center of growth will be Asia, and Chevron is the best positioned international oil company to supply that growing demand. The Downstream business is steadily progressing on its restructuring and asset rationalization plans. "We have made significant strides in the first year of our three-year plan," said Mike Wirth, executive vice president, Downstream and Chemicals.

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Cliffs Natural Resources (NYSE: CLF): Q1 Earnings Preview 2011

Cliffs Natural Resources (NYSE: CLF), the largest iron ore producer in North America, is scheduled to release its first-quarter earnings after the closing bell on Thursday, April 28, 2011. Analysts, on average, expect the company to report earnings of $2.25 per share on revenue of $1.40 billion. In the year ago period, the company reported earnings of 55 cents per share on revenue of $727.70 million.

Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal.

One of Cliffs’ biggest competitive advantage in the iron ore business is its long-standing relationships with some of the largest steel manufacturers in the world. Iron ore pellets produced by Cliffs are almost entirely used as raw material for the production of steel.

The price of iron ore, a key ingredient for steelmaking, has ralied in recent times due to tight Indian supplies and firm demand from top importer China. Cliffs has been following a strategy of geographical diversification while also diversifying its mineral portfolio. The recent acquisition of Consolidated would give Cliffs a foot in the door with Chinese buyers as it looks to boost its Asian business.

In the preceding fourth quarter, the Cleveland, Ohio-based company's net income was $384 million, or $2.82 a share, from $108.2 million, or 82 cents a share in the prior year quarter. Revenue jumped 74% to $1.42 billion from $820.5 million. Analysts, on average, expected the company to report earnings of $2.16 per share on revenue of $1.43 billion

At its last earnings call in January, , Cliffs raised its 2011 outlook for North American Iron Ore, with sales volume expected at about 28 million tons, with revenue of $140 to $145 per ton. Cliffs maintained its forecast for the company’s North American coal business with 2011 sales of about 6.5 million tons

Cliffs Natural Resources has seen growth in revenue from each ton of iron ore sold in North America. The revenue growth can be attributed to increased Chinese demand for iron ore and a continued rise of international sea freight that has pushed iron ore prices upwards. The increase in iron ore prices is also caused by rising global demand for steel sparked by economic growth.

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Expedia Inc. (NASDAQ: EXPE): Q1 Earnings Preview 2011

Expedia Inc. (NASDAQ: EXPE) is scheduled to release its first-quarter earnings after the closing bell on Thursday, April 28, 2011. Analysts, on average, expect the company to report earnings of 26 cents per share on revenue of $795.40 million. In the year ago period, the company reported earnings of 26 cents per share on revenue of $717.92 million.

Expedia, Inc., together with its subsidiaries, operates as an online travel company in the United States and internationally. The Company makes available on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies.

In the preceding fourth-quarter, the Bellevue, Washington-based company's net income was  $71.3 million, or 25 cents per share, compared to $102.2 million, or 35 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned $191.3 million, or 32 cents a share in the fourth quarter. Total revenues for the quarter rose 16 percent to $808.4 million from $697.5 million a year ago. Analysts, on average, expected the company to report earnings of 36 cents per share on revenue of $802.32 million. 

The company, which operates its namesake website, as well as Hotels.com and Hotwire.com, aims to improve its competitive position by investing in its Expedia platform and expanding its presence in the Asia-Pacific and Latin American regions. It also is considering new platforms such as social media and mobile, as well as new products such as loyalty programs.

Early in April, Expedia's Board of Directors approved a plan to separate the company into two publicly traded entities - Expedia, Inc. and TripAdvisor. Expedia, Inc. will continue to include the domestic and international operations of the company's travel transaction brands including Expedia.com, Hotels.com, eLong, Hotwire and others. On other hand, TripAdvisor will include the domestic and international operations associated with the TripAdvisor Media Group, which includes its flagship brand as well as 18 other travel media and advertising brands. The proposed spin-off is expected to be completed in the third quarter of 2011.

Recently, Expedia enetred into a new ticket distribution agreement with American Airlines, a unit of AMR Corp. (NYSE: AMR) following which, it restored latter's fares and schedules on its websites. Expedia website stopped displaying and selling American Airlines' tickets on its website from the beginning of this year after the escalation of a commercial dispute between the airline and travel websites.

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