Morning Earnings and a Big Deal
Stock futures have been weak overnight, though they popped off their lows when June Personal Spending came in slightly higher than expected, though still at a very low level.
Europe is down fractionally, commodities are weaker, the dollar is slightly higher. UBS is down 7 percent after they reported a large second quarter loss, which follows the positive comments yesterday from HSBC and Barclays.
1) What's up at ADM? Archer Daniels Midland (ADM) down 8 percent pre-open on a surprisingly weak earnings report: $0.10, below expectations of $0.44, but revenues are well above expectations.
Surprisingly, ADM lost money in its largest segment, Agricultural Services (about half of sales--they operate one of the biggest crop origination and transportation networks), due to "less favorable risk management results" (sounds like they hedged wrong) and weak demand for global commodities.
Oilseed processing (about a third of sales) saw lower volumes and margins; biofuels (mostly ethanol) had a loss.
Analysts seem confused by the results, particularly since rival Bunge reported much better numbers. Credit Suisse called the ADM earnings "curiously bad," "bizarre" and described Agricultural Services as "inscrutable."
2) Construction materials producer Vulcan Materials is down 4 percent after reporting an 84-percent drop in Q2 earnings and cutting full-year guidance. Although the crushed stone, concrete, and asphalt producer realized a 3-percent rise in prices, volumes remained poor, with shipments plunging 31 percent.
Because the outlook for private construction remains very poor, so the firm is slashing full-year guidance to $0.40-$0.65 from $0.70-$1.00 (vs. $0.68 est.)., despite some positive effects from the government's stimulus plan.
3) Our David Faber is reporting that PepsiCo (PEP, up 2 percent) has reached an agreement to buy the remaining shares of its two biggest bottlers, Pepsi Bottling Group (PBG, up 6 percent) and Pepsi Americas (PAS, up 6 percent), for $7.8 billion in separate cash and stock deals.
The snack and beverage maker will acquire Pepsi Bottling Group for $36.50 per share, while it'll purchase PepsiAmericas for $28.50 per share. This is a much improved offer from Pepsi's $6 billion bid for the two bottlers submitted about 3 months ago, an offer which the bottlers felt undervalued their companies.
4) CVS Caremark is up 4 percent after beating estimates by a penny and boosting its full-year outlook. Revenues topped estimates too, as the pharmacy services firm saw strong pharmacy benefit network sales (up 27 percent) and higher retail pharmacy sales (up 17 percent).
Guidance for the full-year is raised to $2.59-$2.64 from $2.55-$2.63 vs. $2.60 est.
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