Futures eased slightly this morning as the market sought to catch its breath after sprinting higher Wednesday. All indices had strong gains after better-than-expected first-quarter earnings reports from JPMorgan Chase, Coca-Cola Co., and Intel Corp. The Dow industrials finished up 257 points, or 2.08%, the S&P 500 rose 30 points or 2.27% and the Nasdaq Composite closed up 64 points or 2.8%.
IBM (NYSE: IBM) reported very strong Q1 figures after the close Wednesday. The company had income from continuing operations of $2.3 billion, or $1.65 a share, up from $1.8 billion, or $1.21 a share, a year ago. IBM was aided by the weakness of the U.S. dollar, with some 65% of revenue coming from overseas. eBay also had a good quarter, with profit climbing 22%.
However, there was a disappointing earnings report from Merrill Lynch (NYSE: MER) this morning. The company lost $1.96 billion, or $2.19 a share, compared with net income of $2.16 billion, or $2.26 a share, a year ago, after billions of dollars of writedowns related to the subprime crisis. Merrill plans to cut about 4,000 jobs, or 10% of its workforce. Nokia (NYSE: NOK)'s quarterly income rose 25% to 1.22 billion euros, up from 979 million euros a year earlier, but missing analysts expectations of 1.38 billion euros, according to Bloomberg News. Pfizer (NYSE: PFE) also missed analysts' estimates for the quarter, with profit falling 18%.
The U.S. dollar hit another all-time low against the euro, while oil prices hit an all-time high of more than $115 a barrel. According to the U.S. Energy Department, inventories of gasoline fell 5.5 million barrels last week. Related to the ongoing increase in oil prices, Continental Airlines reported a loss for the first quarter, while Southwest Airlines earnings declined. However, American Airlines yesterday posted a smaller-than-expected loss.
In the news today, Yahoo! moves closer to deal with Google on outsourcing search advertising, according to the Wall Street Journal.Google (NASDAQ: GOOG) is expected to release earnings this afternoon.
In economic data, unemployment claims for the week ending April 5 will be released at 8:30 a.m. EST; the Philadelphia Fed report will be out at 10:00 a.m.
Analysts surveyed by Thomson Financial expect Southwest Airlines Co. (NYSE: LUV) and Pfizer Inc. (NYSE: PFE) to post smaller profits in the first quarter. Both companies are scheduled to report results on Wednesday.
Southwest is expected to essentially break even as far as earnings are concerned, which is down from the same period in 2007 when it earned four cents per share. The company has beat quarterly estimates recently. It only just beat the consensus third-quarter 2007 estimate, but beat the fourth-quarter estimate by 21.2%.
Dallas-based Southwest's low-cost, no-frills approach has made it one of the leading U.S. airlines. In the past year, the company's revenues were $9.8 billion and its net income totaled $645 million. Its EPS growth forecast for the year is -28.7%, worse than the industry average but better than that of rival JetBlue Airways (NASDAQ: JBLU). The consensus recommendation of analysts remains to buy Southwest.
The stock has fallen 18.5% in the past year and trades at a P/E of 14.7. Shares closed Tuesday at $12.35.
Those were the two airlines that came out on top of a national survey of airline quality released today that underscored the sorry state of the industry. Anyone who has flown since 9-11 knows that getting your teeth pulled is more fun. Planes are filled to the brim and are often late. Luggage often goes on magical mystery tours that bypass your destination.
Last year was more of the same, according the Associated Press "There were more lost bags, more bumped passengers, more consumer complaints and fewer on-time flights than in the previous year," the story says. "The rate of consumer complaints was up 60 percent. US Airways (NYSE: LCC) had the most complaints last year. Southwest (NYSE: LUV) had the fewest."
Bad airlines are bad for the environment because it encourages more casual fliers to drive to their destinations. Even with soaring gas prices, flying isn't worth the trouble. I may have to fly this summer and I'm already dreading it. --Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.
Two years after coming out of bankruptcy, ATA airlines has once again been forced to file for chapter 11. The airline canceled all flights, and has advised travelers to start to look for alternative travel arrangements.
The airline operated roughly 50 flights a day, and had more than 2,200 employees working. On its website, ATA has issued a formal statement and blamed the final straw for its collapse on the loss of a key military contract. In 2006, the company had won a $335 million dollar contract from the U.S. Air Force for international airlift services.
In its statement, ATA has advised passengers to contact their credit card company, or travel agent to discuss the options to get refunded for their unused tickets.
National City (NYSE: NCC) was upgraded to Equal Weight from Underweight at Morgan Stanley due to valuation and the possibility the bank could be bought. The broker reiterated its $10 price target.
After Research in Motion (NASDAQ: RIMM) reported such strong earnings and sales Wednesday, many believe it was Apple Inc. (NASDAQ: AAPL)'s iPhone that was partly responsible for that. Some say that the introduction of the iPhone in June brought attention to smartphones. Meanwhile, there are reports that there is a shortage of iPhones in Apple's stores in the U.S. Many speculate Apple may be phasing out the existing models in preparation for new ones to work on 3G netwroks.
General Motors (NYSE: GM) - According to The Wall Street Journal, GM may take on more of parts maker Delphi's pension liabilities as it tries to help it emerge from Chapter 11 bankruptcy protection. It's interesting to hear this especially two days after GM posted 19% decline in sales in March compared to a year ago period. How can the already struggling automaker, seeing its sales drop that much, take on such a liability?
General Motors Corporation (NYSE: GM) part supplier Delphi Corporation (OTC: DPHIQ), under bankruptcy court protection and having difficulty raising the $6.1B it needs to leave Chapter 11, may get more help from GM, which is reviewing taking more of Delphi's pension liabilities, the Wall Street Journal reported.
The Wall Street Journal also reported that the FAA recently found that 46 Southwest Airlines Co (NYSE: LUV) jets failed to complete mandatory inspections and that six planes needed repairs. The FAA also found, and alleged, that the airline attempted to pick and choose the agency's inspectors to review their fleet of planes.
The Financial Times reported that a planned merger between Brasil Telecom SA (NYSE: BTM) and Oi, two of Brazil's largest telecom companies, may be threatened by a battle between Citigroup Incorporated (NYSE: C) and Brasil Telecom's controlling shareholders.
OTHER PAPERS:
Motorola Inc (NYSE: MOT) will stop making mobile phones in Singapore by the end of this year, according to the Straits Times, which is expected to result in the loss of at least 700 jobs.
I have had some clients ask me, what industry I think will benefit from the $600 rebate checks that are due to be sent out as part of the U.S. economic stimulus package. I think airlines will benefit, especially lower cost carriers like Southwest (NYSE: LUV) and Jet Blue (NASDAQ: JBLU).
The USA Today has an article about the kind of vacation you can have for $600. The article says: "With most Americans expecting to receive a tax rebate of up to $600 ($1,200 for married couples), there are plenty of ways to get the most vacation for your buck, say travel experts. Whether it's a cruise, a tropical paradise, or family travel, these trips can all be done for under $600 a person."
Because we aren't talking about flying around the world or across the Atlantic for that measure, trips to Las Vegas or Orlando, for example, will fit the family, and of course people need a way to get to these destinations, so that's how the airlines become interesting. Throw into the mix potentially stable or even lower fuel costs, and for investors looking for a way to play the "Rebate check" game, you may want to take a look at the airlines.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 4/2/08
United Airlines of UAL Corp. (NASDAQ: UAUA) also announced Wednesday it was grounding planes, saying it won't fly 52 Boeing 777s until safety tests are completed, after discovering that a routine pre-flight safety check was not performed. United joins Southwest Airlines (NYSE: LUV), American Airlines (NYSE: AMR) and Delta Air Lines (NYSE: DAL) in having to ground aircraft to perform safety tests.
Amazon.com, Inc. (NASDAQ: AMZN) launched a new service, Amazon TextBuyIt, that lets shoppers compare prices and buy things by texting on their cell phones. Meaning, that while we now shop at a brick-and-mortar store but want to compare prices at Amazon, all that is needed is texting the ISBN or UPC of the product to a preset number. If we then want to buy it from Amazon, we can immediately do so by texting the appropriate numbers/letters. Amazing!
Could it be that Sprint Nextel (NYSE: S) is gearing up to take on Apple Inc. (NASDAQ: AAPL)'s iPhone? Apparently, Sprint is counting on the new Samsung Instinct handset to do just that as it hopes the device will help it gain back market share and stop customer attrition. The Instinct, exclusive to Sprint, will offer full touch-screen functionality in addition to a virtual QWERTY keypad as well as a multitude of other features. Well, we'll have to wait and see ... who knows?
For anyone who has plans to fly on American Airlines, AMR Corp (NYSE: AMR) or Delta (NYSE: DAL) today, you may want to call ahead and verify that your flights are still taking off as planned, as both airlines are canceling hundreds of scheduled flights today.
Both carriers are grounding a large number of flights as they continue to hold inspections on wiring bundles on some of their planes. For American, the company is planning to ground 132 of its flights today, while Delta is canceling 275 flights.
The Federal Aviation Administration is in the middle of a massive inspection project, in which it stated that it will be inspecting 10 safety orders (also known as airworthiness directives) at every single major airline by March 28. This comes after a scandal broke out over missed inspections at Southwest Airlines (NYSE: LUV) earlier this year.
Sometimes in a period of uncertainty, a look back can provide some perspective. So here are a few highlights from BloggingStocks on March 16, 2007,a year ago today.
The stock market was up earlier today on hopes of a continue follow-on from yesterday's monster gains, but closed weak at the end of the day. The good news is that we didn't give back most of yesterday's gains. The bad news is that bears can claim there isn't enough positive mojo to keep the market surging a second day. That's what makes a ballgame. Seeing oil hit $110 per barrel probably didn't help matters for those hoping for an ease in gas prices and a break for retail. Below are the unofficial market closing levels:
Southwest Air (NYSE: LUV) was one of the standout stocks with a 7% price drop down to $11.49 after it grounded 41 planes and canceled flights. The airline will recover from this incident, but what is odd is that if you look it up and down it isn't rewarding shareholders even when it cheats.
Humana Inc. (NYSE: HUM) was the news disaster of the day for large cap stocks with a 13.7% drop to $40.88 after noting higher pharmacy charges were going to nearly chop first quarter earnings in half. The stock put in another 52-week low under the $42.85 prior low despite a Merrill Lynch upgrade late in the day defending the stock.
A biotech called Progenics Pharmaceuticals, Inc. (NASDAQ: PGNX) acted as the biotech implosion of the day with a monster drop of 63% to $5.31 (close to perceived cash balance) after its bowel drug failed in Phase II tests. It looks like the placebo was even better.
Thornburg Mortgage (NYSE: TMA) was the monster gainer today with shares up 82% to $2.86, after its coverage was raised to Peer Perform at Bear Stearns. KLA-Tencor (NASDAQ: KLAC) saw shares fall more than 9% to $37.80 on a downgrade today. (Top 10 pre-market calls).
Tomorrow we have the weekly jobless claims, and while weekly numbers are less watched they may be more front and center as everyone is hoping the job market doesn't head as far south as the economy. We also have February import prices, so we'll get to see more evidence of the inflation we know is there.
As you can tell from this post on my blog, I am no fan of value investing. While I believe investors, especially smaller investors, should partake in more aggressive strategies, I do respect its high priest, Warren Buffett. Since its release late Friday last week, his annual letter to Berkshire Hathaway (NYSE: BRK.A) shareholders has already been dissected here, here and here by those much smarter than me, but I offer my take on four important passages in his remarkable letter: "You only learn who has been swimming naked when the tides goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight."
In the airline industry, it seems that any deal will do. Northwest Airlines Corp. (NYSE: NWA) is already fairly far along in discussions about merging with Delta Air Lines Inc. (NYSE: DAL). Now UAL Corp.'s (NASDAQ: UAUA) United Airlines is talking with Continental Airlines Inc. (NYSE: CAL). But one set of negotiations in not enough for Continental. It is also talking to AMR Corp.'s (NYSE: AMR) American Airlines, according to The Wall Street Journal (subscription required). The paper reports "the talks were exploratory, and it isn't clear they will go further."
Airlines are seeking mergers under the premise that combining companies saves costs. While that is true to some extent, the marriages also hurt customer service -- badly. Putting together incompatible reservations and service operations can take years and be extremely complex, which can make it hell for consumers who just want to take an airplane ride from here to there. Bad customer service is a sure way to drive off fliers, and that is not good for revenue.
The savings in a merger also might not be as great as imagined. Fuel costs stay the same. The number of pilots and crews may drop some, but that can also cause labor disputes and strikes that interrupt service. The number of people needed to handle customer support and processing of reservations probably cannot be cut by much, especially if retaining revenue with unhappy fliers is important.
In an industry where mergers and Chapter 11 filings have been part of the landscape for decades, combining airlines may be no panacea. It is good to remember that the two most successful carriers in the United States, American and Southwest Airlines Corp. (NYSE: LUV) have never been much enamored of merging.
Douglas A. McIntyre is an editor at 247wallst.com.
Delta Air Lines and Northwest Airlines may reach a merger agreement within weeks after sharing details of the plan with pilot unions, people close to the talks said, Bloomberg News reported Monday.
The merger would create the world's biggest airline in terms of traffic, Delta served about 74 million passengers in 2007; Northwest, about 56 million. The combined entity would vault past no. 1 carrier American Airlines (NYSE: AMR), which served 129.5 million passengers.
Delta's (NYSE: DAL) shares were down 23 cents to $19.95, while Northwest (NYSE: NWS) declined 23 cents to $20.62 in Monday afternoon trading.
Analyst C. Leonard Bauer told BloggingStocks Monday a Delta / Northwest represents a good operational fit, for several reasons.
Futures eased slightly this morning as the market sought to catch its breath after sprinting higher Wednesday. All indices had strong gains after better-than-expected first-quarter earnings reports from JPMorgan Chase, Coca-Cola Co., and Intel Corp. The Dow industrials finished up 257 points, or 2.08%, the S&P 500 rose 30 points or 2.27% and the Nasdaq Composite closed up 64 points or 2.8%. 
Analysts surveyed by Thomson Financial expect 
Anyone planning a vacation this summer should remember two words: 
.gif){kind=logo}
As you can tell from 
Oil hits record $127.43 on supply concerns, raised Goldman forecast
Icahn's 'shock and awe' on Yahoo -- a gutsy play
Housing starts surprisingly rise in April on apartment construction
