Pisani: Surprises from China and Regional (!) Bank Offering
China reported better than expected February export data, up 45.7 percent (!) from a year ago. Imports were also strong, but the trade surplus still grew. This will put more pressure on China to let its currency rise, or perhaps raise interest rates.
Banks continue to raise capital. Still waiting for Citigroup to announce details of their trust preferred offering. I reported last night that the size would be roughly $2 billion at a yield of 8.875 percent. One trader said it was "multiple times oversubscribed."
Citi has already traded north of 75 million shares this morning, and is up about 4 percent, after rising 7 percent yesterday.
Elsewhere, Northeast regional bank Susquehanna Bancshares announced a pricing of common and trust preferred securities: 37.5 million shares at $8.00 per share, and $50 million of an 11 percent trust preferred securities.
2) No dividend raising for you. The Financial Times says today that U.S. regulators have told banks not to increase dividends or buy back shares "until political and economic uncertainty surrounding the industry dissipates."
If true, this is a shocking interference in bank management. While non-financial corporations have been busy raising dividends this quarter, banks have not. But many investors have been expecting banks — led by JP Morgan and Goldman Sachs — to begin raising dividends by the second half of the year.
3) Improvements in sales and margins have clearly been helping retailers' bottom line in the past quarter:
a) American Eagle jumps 7 percent. Q4 same-store sales grew 5 percent, but earnings were inline with expectations. The teen retailer benefited from a notable increase in merchandise margins due to fewer markdowns, but that was tempered by a 10 percent rise in general expenses. Q1 guidance of $0.15-$0.17 falls mostly above Street estimates of $0.17.
b) J.Crew falls 1.5 percent despite significantly beating Q4 earnings estimates ($0.61 vs. $0.46 consensus). Bear in mind, the stock is just off a 2.5-year high and has risen over 400 percent in the past year.
Boosting its bottom-line were comps that were nearly double Street expectations (up 17 percent) and soaring merchandise margins (up 16 percentage points) as a result of reduced discounting.
Guidance for the current quarter and for the full-year is generally above estimates.
c) Collective Brands, which owns Payless Shoes and Stride Rite, reported a narrower-than-expected Q4 loss (loss of $0.19 vs. loss of $0.26 consensus). Results were helped by better-than-expected revenues and a rise in margins from better inventory controls, lower product costs and fewer markdowns.
Retail sales for February will be out Friday.
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