Pisani: Hot Fertilizer
Who said the IPO market was dead? Not if you have a hot product. Intrepid Potash (IPI) priced 30 million shares at $32 last night, and will be ringing the opening bell this morning. Was demand strong? You tell me: initial price talk was 24 million shares between $24-$26, then bumped up to 30 million shares between $27-$29, then finally priced at $32.
What's going on? You have a product -- potash -- a critical ingredient in fertilizer. Food supplies are getting scarcer, and fertilizer is one of the best ways to increase yield. So you have international demand, and somewhat constrained capacity. You can also thank demand for ethanol from corn and the need to increase yield there. (Read more about Intrepid here).
It's amazing it took this long for another major fertilizer company to come along. Look at CF Industries -- they went public in 2005 at $16. Closed yesterday at $156.
We'll be discussing the state of the IPO market this morning at 10:50 ET on Squawk on the Street.
1) Southeast bank SunTrust missed earnings by a wide margin ($0.81 vs. $1.03 estimates). The usual suspects -- losses in real estate -- were cited, which is no surprise--they have lots of southeast real estate exposure. There was a spike in problem loans, again associated with residential construction, home equity and residential mortgages.
Traders tell me that management seems optimistic on the conference call, saying things will be better in two quarters. Much of this now depends on your view of the real estate situation in the southeast.
Down 4 percent pre-open.
2) Oppenheimer's Meredith Whitney was right--she said yesterday Citigroup would need to raise more capital, and they did--right after the bell yesterday announced an offering of $6 billion in preferred shares. Carries a dividend of 8.4 percent for 10 years and a floating rate after that. That makes roughly $36 b in capital raising Citi has done since November.
This comes after JP Morgan also raised $6 billion last week.
Speaking of capital raising--CIT raised $1 billion, half in common stock, the other half in convertible preferreds.
3) Dupont beat estimates and reaffirmed their full year guidance. It's important to realize that Dupont now gets about 25 percent of its sales from its Agricultural & Nutrition division, which includes genetically modified seed. Of course, they are most famous for their Performance Materials (polymers, about 25 percent of sales), automotive finishings and coatings (about 20 percent of sales), and safety materials like Tyvek, Kevlar, and Corian (also about 20 percent of sales.
4) McDonald's beat estimates handily, $0.81 vs. $0.70. International sales again were strong: Europe up 11.1 percent in constant currency, Asia/Pacific Middle East and Africa up 16 percent in constant currency, U.S. up 2.9 percent. Menu items, expanded hours, and the dollar all were positive factors.
A few other consumer discretionary stocks beat--Coach and Brinker. Coach reported earnings for their third quarter, affirmed guidance for the rest of the year (one quarter remaining), but declined to give guidance after that.
5) UnitedHealth Group continued the trend of earnings warnings from HMOs; they reduced 2008 guidance by 10 percent, citing unusually high influenza costs, as well as declining membership gains because prices have gone up. Down 10 percent pre-open.
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