Fuel prices seem to be the number one concern on just about everyone's mind lately, and it seems like things are not going to be getting better any time soon. As prices have risen to record levels, many of us have decided to cut back on our driving, especially on long trips in order to save a little on our fuel prices. Well, the airlines are no different, and there's an interesting report today in The Wall Street Journal showing how airlines are cutting back on long flights in order to save a little on fuel consumption.
It is a pretty nasty cycle we are seeing with the airlines. The higher fuel costs have led to higher tickets prices and extra fees. These higher prices have led to less air traffic, and that has led to an even greater need to find more ways to cover rising costs. Definitely a tough situation.
The new way they are starting to combat the high costs of flying is by cutting back, or postponing long international flights, in particular flights that are in excess of 12 hours.
MOST NOTEWORTHY: Concur Tech, Groupe Danone and General Motors were today's noteworthy downgrades:
Piper downgraded shares of Concur Tech (NASDAQ: CNQR) to Neutral from Buy after transferring analyst coverage, as they believe potential upside to estimates is priced into shares while competitive concerns from American Express (NYSE: AXP) are not.
Morgan Stanley downgraded shares of Groupe Danone (OTC: GDNNY) to Equal Weight from Overweight to reflect reduced visibility in the company's core business.
Merrill downgraded General Motors (NYSE: GM) to Underperform from Buy citing the company's deteriorating US auto sales, resulting in a higher cash burn, which could result in a larger than expected capital raise. The firm believes GM capital raise could be in the range of $15 billion and notes that bankruptcy is "not impossible."
OTHER DOWNGRADES:
Progenics Pharma (NASDAQ: PGNX) was lowered to Underperform from Market Perform at Friedman Billings.
UAL Corp. (NASDAQ: UAUA) was cut to Neutral from Buy at Goldman.
NYSE Euronext (NYSE: NYX) will pay $250 million in Qatar's Doha stock exchange, the Doha Securities Market (DSM), in return for a 25% stake. It makes sense for NYX to expand into the Middle East as that region is becoming more financially influential.
Nokia (NYSE: NOK) is paying $410 million to buy out the rest of Symbian, a maker of operating systems for mobile phones. This move, announced just as Google (NASDAQ: GOOG) said its Android system will be delayed, could help Nokia as it becomes more entrenched in the marketplace. While Microsoft's (NASDAQ: MSFT) Windows Mobile operating system is Symbian's closest rivals, its still new kid Apple Inc. (NASDAQ: AAPL)'s iPhone that captures the interest of many.
United Airlines (NASDAQ: UAUA) said Monday it will cut about 950 pilot jobs out of its 6,600 pilots beginning this summer. The airline has already announced cutting 1,600 salaried positions and reduce its fleet. UAUA shares, already sliding nearly 15% Monday, continue to decline in premarket trading as airlines will likely stay in focus.
Stock futures were lower early Friday as investors seemed concerned about oil prices ahead of a weekend summit in Jeddah, Saudi Arabia. Meanwhile, financials kept the headlines this morning with Washington Mutual and airlines announcing jobs and cost cuts the main story there. It appears that the last day of this week might see some losses before heading into next week and the Federal Reserve meeting.
On Thrusday, stocks managed to finish the session higher after wobbly trading as oil prices dropped and Citigroup announced further writedowns. The Dow industrials ended 34 points, or 0.28%, higher, the S&P 500 added 5 points, or 0.38%, and the Nasdaq composite climbed 32 points, or 1.33%.
As there are no economic reports due today, investors will eye oil prices after crude-oil futures declined $5 a barrel Thursday following news that China is raising retail fuel prices starting Friday. As countries reduce subsidies for gas, many believe it could slow demand. This morning, oil prices traded a little higher at mid $132 per barrel.
MOST NOTEWORTHY: Cortex Pharma, Royal Bank of Scotland and Trex were today's noteworthy upgrades:
Rodman & Renshaw upgraded Cortex Pharma (AMEX:COR) to Market Perform from Underperform citing the company's progress towards renewing its pipeline and notes that results from two proof-of-concept studies assessing acute administration of COR's lead AMPAKINE molecule are expected in the coming months.
Citigroup upgraded shares of Royal Bank of Scotland (NYSE:RBS) to Buy from Hold on valuation following the recent weakness, as they believe the sell-off has been excessive.
Suntrust raised Trex (NYSE:TWP) to Buy from Neutral based on management's turnaround efforts, expectations for increased market share in composite decking, and valuation, among other reasons.
OTHER UPGRADES:
Friedman Billings upgraded Hot Topic (NASDAQ:HOTT) to Outperform from Market Perform.
Lehman raised UAL Corp (NASDAQ:UAUA) and Northwest Airlines (NWA) to Overweight from Equal Weight.
Goldman added Eli Lilly (NYSE:LLY) to its Conviction Buy List.
In a move to help cut expenses and save on fuel prices, UAL Corporation (NASDAQ: UAUA), parent of United Airlines, will reduce its 460 airplane fleet by 70 jets. Not yet known is how may jobs will be affected, the Wall Street Journal reported.
In an all stock deal, J.M. Smucker Co. (NYSE: SJM) is expected to buy Folgers coffee from The Proctor & Gamble Company (NYSE: PG) for an estimated $2B, according to the Wall Street Journal. Folgers, the best selling ground coffee in the U.S., has annual sales of about $1.6B.
The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) lost $500M-$700M on some of its hedging positions in Q2, which have contributed to a larger than expected loss that could result in the bank raising more capital by selling a stake to an outside investor. Lehman has begun negotiations with potential investors, including asset managers and Asian banks, sources said.
OTHER PAPERS:
According to sources, the Rocky Mountain News reported that troubled home builder Beazer Homes USA Inc (NYSE: BZH) is pulling out of Colorado. Beazer, which is being investigated for mortgage fraud by several government agencies, has built homes in the suburbs of Denver and in Colorado Springs.
The Charleston Gazette reported that Chesapeake Energy Corporation (NYSE: CHK) has decided not to build its Eastern Division headquarters in Charleston, West Virginia in the wake of a West Virginia Supreme Court ruling on May 22.
WEB SITES:
AppleInsider reported that Apple Inc (NASDAQ: AAPL) is expected to announce a back-to-school deal soon that will encourage students to buy new Macs by offering some of the largest incentives in the history of the company.
Stock futures were higher early Friday morning as oil futures continued to drop and Dell reported surprising strong earnings. (Read the full transcript of the conference call that followed the earnings announcement.)
Some upcoming economic readings about personal income might affect the Street's mood yet, but as long as oil prices remain at around $125 a barrel or go even lower, investors may feel more positive on the day.
If last week stocks witnessed one sharp-drop session after another, this week stocks have been more consistent on their way up and on Thursday U.S. stocks rose for the third session in a row due to a big drop in crude-oil futures. The Dow industrials rose 52 points, or 0.41%, the S&P 500 added 7 points, or 0.53%, and the Nasdaq Composite rose 21 points, or 0.87%.
On the economic calendar today several releases:
At 8:30 a.m. EDT April Personal Income and spending is due. While not perfect, personal income is a decent indicator of future consumer demand. Once personal income starts to stagnate, meaning inflation has caught up with income growth, this is another indication of a recession. A price index is included in the income report. The personal-consumption expenditures is often considered to be the Federal Reserve's preferred inflation gauge.
A little after the open, May Chicago PMI, a regional manufacturing survey, is due out.
Finally, at 10:00 a.m., a revised reading on consumer sentiment from the University of Michigan for May will also be released.
Bear Stearns (NYSE: BSC) shareholders are due to approve the buyout by JPMorgan Chase (NYSE: JPM) today, marking what many feel as an end of an era as the 85-year-old company collapsed due to the subprime mortgage crisis.
The chief executives of UAL Corp. (NASDAQ: UAUA) United Airlines and US Airways (NYSE: LCC) are set to meet today to discuss a possible deal despite concerns that threaten the deal, according to two people briefed on the discussions, the AP reported. Stocks of both airlines are up over 2% in premarket trading.
In other deal news, Yahoo (NASDAQ: YHOO) CEO Jerry Yang said that Yahoo is not a company under siege and that he is still waiting for a clearer proposal from Microsoft Corp. (NASDAQ: MSFT) about a possible partnership between the two firms. He said said that Yahoo "did not walk away from the proposal - Microsoft did. We were willing to do the deal on the right terms."
H.J. Heinz Co. (NYSE: HNZ) is today expected to increase its sales and profit projections for the next two years, as it reports results of its fiscal year ended April 30. The Wall Street Journal reported that sales are to grow 6% or higher from 4%, while earnings per share growth for the next two years is projected to grow between 8% and 11% from the earlier projection of 7% to 9%.
It appears that Vistaprint Limited (NASDAQ: VPRT), a graphic design services and printed products company, counts on referral fees from pop up rewards programs on it website for a certain amount of its revenue and profit and also relies on the referral of its customers to outside firms offering rewards programs, which turns out to be a monthly fee for services such as discounts on movies and amusement parks, according to the Wall Street Journal's "Heard on the Street". Some believe the stock, whose shares have plummeted over concerns of slowing revenue and slimmer gross margins, may be trading too high for its own good.
According to people familiar with their plans, the Financial Times reported that the CEOs of UAL Corporation's (NASDAQ: UAUA) United Airlines and US Airways Group (NYSE: LCC) will today meet to discuss the carriers' potential merger agreement.
OTHER PAPERS:
The Independent reported that for the second time this month, Barclays Plc (NYSE: BCS) revised lower its calculation of analysts' consensus for its full-year profit, cutting its 2008 figure by nearly 8% to GBP5.876B pre-tax; Barclays cut the calculation 15% two weeks ago.
Stock futures were higher early Wednesday morning as oil and other commodities declined, providing some relief.
U.S. stocks ended higher Tuesday, especially the tech heavy Nasdaq composite which rose 36 points, or a solid 1.5%. The Dow industrials and the broader measure S&P 500, rose 68 points, or 0.55%, and 9 points, or 0.68% respectively. A dramatic retreat in crude of more than $3 a barrel helped boost sentiment.
On the economic docket today is April durable goods order, which economists are expecting to show a further decline. The report is due to release at 8:30 a.m. EDT.
Weekly crude inventories, usually released Wednesdays, will be postponed due to the shortened week. Meanwhile, though, oil prices continued to decline, dropping below $127 a barrel Wednesday in Asia, extending the previous session's decline. It seems that the higher prices cut demand, which in turn, pressured prices back.
Airline mergers no longer look like a panacea for the industry. They do not solve the problem of higher fuel costs. They often drive the ire of unions which do not want to lose any more jobs. And, integration problems usually make customers mad, which can send them off to fly other carriers.
Perhaps because of some of these factors, United (NASDAQ: UAUA) and US Air (NYSE: LLC) are cooling talks about a tie-up. Or, it may be that each airline thinks it can find a better deal. "Even as its talks with US Airways were continuing, United had begun talks with Continental for a possible alliance," Reuters reports.
The most likely case is that managements at airlines are looking for ways to stay out of Chapter 11. Rising jet fuel prices and the potential of lower passenger traffic in a recession have executives working overtime to keep losses from piling up.
A merger does no good if neither party in the marriage is in good enough shape to add much to the deal.
Fuel prices seem to be the number one concern on just about everyone's mind lately, and it seems like things are not going to be getting better any time soon. As prices have risen to record levels, many of us have decided to cut back on our driving, especially on long trips in order to save a little on our fuel prices. Well, the airlines are no different, and there's an interesting report today in The Wall Street Journal showing how airlines are cutting back on long flights in order to save a little on fuel consumption..gif){kind=logo}
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Stock futures were higher early Friday morning as oil futures continued to drop and Dell reported surprising strong earnings. (
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