We're Waiting For the Locusts to Arrive
We're waiting for the locusts to arrive: the financial district was a sheet of ice as I arrived at 7 AM. Halfway around the world, there is a Category 5 cyclone approaching Queensland, Australia. It may be the strongest cyclone to hit Queensland since 1899. Just what they need. This is why commodity stocks like Rito Tinto and BHP Billiton are rallying in Europe.
Sugar prices are up because Queensland is the center of the country's sugarcane production. Sugar prices have been rising for months over lower than expected production in India and Brazil.
This is a major problem for a sugar consumer like Hershey Their earnings came in below expectations: $0.59 vs. $0.61 consensus partly on higher costs for sugar. The company said it could maintain margins, implying pricing power and cost control. EPS guidance of $2.67-$2.79, consensus of $2.77
Stop me if you've heard this: Whirlpool down 5 percent pre-open, earnings of $2.11 is well below consensus of $2.26, even though revenues were above expectations...the problem: higher costs for steel, paint and plastics. Sound familiar?
Like UPS, they are hiking prices to combat the rising material costs. How much? "we expect to expand our operating margins despite signficant global inflation," CEO Jeff M Fettig said. Rival Electrolux also announced they would be raising prices 8 to 10 percent to offset rising costs.
2011 guidance of $12 to $13 includes $4 from an energy tax credit as well as the assumption that they will be able to raise prices (consensus is $9).
Elsewhere:
1) Ann Taylor boosted its Q4 outlook on the heels of strong performance at its Ann Taylor stores and a 51 percent surge in margins. Earnings and sales are now seen ahead of Street expectations. Comps rose 11 percent in the quarter, led by a 21 percent jump at its Ann Taylor stores.
That's certainly welcomed news to shareholders after a slew of disappointing outlooks from other women's apparel retailers, including Talbot's and Liz Claiborne last month.
Retailers will be announcing their January sales tomorrow and will be reporting Q4 earnings in 2-3 weeks.
2) Borders drops 15 percent to $0.40 after on reports that the media retailer will likely file for bankruptcy later this month. The book, music, and DVD seller could close 30 to 40 percent of its 500 stores as part of a bankruptcy plan. The company has been struggling to find a way to complete a debt restructuring in recent weeks.
3) Time Warner rises 3 percent after beating estimates ($0.67 vs. $0.62 consensus). The media giant saw a 21 percent rise in ad sales at its cable networks. However ad and subscription sales continued to struggle at its print publications, where revenues fell 4 percent. The company also upped its quarterly dividend by 11 percent and intends to buyback $5 billion in stock.
Earnings growth in 2011 is seen in the "low teens"—essentially inline with the Street's expectation of 12 percent growth this year.
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