U.S. stock futures were mixed Wednesday morning after Tuesday's big rally. Bigger-than-expected losses at mortgage lender Freddie Mac, which caused it to cut dividends, as well as lower profit at Time Warner dampened mood on Wall Street. Meanwhile, oil held above $119 ahead of inventory report later today, but crude futures were slightly higher.Freddie Mac (NYSE: FRE), the second-largest U.S. mortgage-finance company, posted a larger fourth-quarter loss of $821 million, or $1.63 a share, than analysts estimated as delinquencies rose and cut its dividend to shore up capital. The common-share dividend will be reduced to 5 cents from 25 cents. Bloomberg writes that CEO Syron is "seeking to bolster capital and restore confidence after U.S. Treasury Secretary Henry Paulson was forced to step in with a rescue plan for Freddie and the larger Fannie Mae." So, first, I doubt investors have much confidence in Syron after reports surfaced he ignored warnings. Second, is Wall Street really surprised the mortgage buyer disappointed? That its credit-related expenses doubled from the previous quarter? Haven't we been there before? FRE shares are down 8.7% in premarket trading at last check.
Meanwhile, Time Warner Inc. (NYSE: TWX) also reported this morning, saying second-quarter earnings fell 26% to $792 million, or 22 cents per share (24 cents on adjusted basis), on declining subscriber fees at its AOL online unit and lower ad revenue at the Time publishing business. Revenue was 5% higher at $11.6 billion. Thomson Financial says analysts expected profit of 23 cents per share on revenue of $11.46 billion. TWX affirmed its full-year financial targets after revenue rose at its film, cable and networks segments.
Sprint Nextel (NYSE: S) posted a second-quarter loss of $344 million, or 12 cents a share, as revenue fell to $9.06 billion. But the No. 3 U.S. mobile service lost fewer subscribers than expected. The results beat earnings estimates but missed on revenue. Sprint shares are trading over 6% lower in premarket action.
The real surprise were Tuesday's late results at Cisco Systems (NASDAQ: CSCO). Not only did Cisco beat estimates: it earned $2.01 billion, or 33 cents per share (or 40 cents on an adjusted basis), while sales grew 10% to $10.4 billion. Analysts had expected Cisco to report earnings of 39 cents per share on $10.3 billion in revenue, according to a Thomson Financial poll. But it also projected an amazing 8% revenue growth in the current tough economic period and fiscal second-quarter growth of about 8.5%. And the company isn't changing its long-term forecast for growth in the range of 12% to 17%. Well, not only did the world's largest maker of computer networking gear manage to grow at a time most companies find it hard, it expects to continue. CSCO shares were up over 5% in premarket trading.
But from surprise to the upside to surprise to the downside. Whole Foods Market (NASDAQ: WFMI) also reported late Tuesday third quarter results that missed estimates as net income dropped more than 30% due largely to costs associated with its acquisition of Wild Oats and a tough economy that hurt consumer spending. None of this should have been a surprise, yet it was. The company also drastically lowered its outlook for 2009, suspended its dividend and said it would open fewer stores next year. WFMI shares were punished and trade nearly 18% lower in premarket action around $19, a stock that was over $50 less than a year ago. It's hard to see WFMI doing any better while the economic downturn continues and after that, who knows with the competition it faces from many grocers.
Priceline.com Inc. (NASDAQ: PCLN) shares are also dropping over 15% after the online travel company reported that second-quarter earnings jumped 56%, driven by international bookings and business. But as the travel agency gets more than two-thirds of its revenue from the U.S., and after saying bookings may suffer as high gas prices force consumers to cut back on travel, shares were dumped.
And the saga at Yahoo Inc. (NASDAQ: YHOO) continues. While Yahoo! released the corrected vote count for its re-elected board, the new count shows much more disapproval and questions also remain. According to another large shareholder, there were 200 million fewer votes this year than in the past two years. Had these votes been represented, would Yahoo! board had been elected in its entirety?
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