Futures have been up all morning but were little changed by the morning's economic news, as January Housing Startswere a tad stronger than expected, Building Permits a tad weaker. Both January Producer Price Index and Core PPI were stronger than expected; the dollar rallied on that news.
Two strong earnings reports this morning, one from machinery, the other first major retailer to report.
1) Sales are good down on the old farm: Deere up 5 percent pre-open, reporting outstanding Q1 earnings of $1.20 (consensus was $0.99) and raised its full-year profit estimate to $2.5 billion, well above consensus of $2.1 billion.
The two main divisions of the company are all expected to see healthy gains in 2011: Agriculture & Turf, their main division with nearly 80 percent of sales, expected to be up 16 percent, Construction & Forestry, about 12 percent of sales, expected to be up 35 percent
2) Abercrombie & Fitch is the first large retailer to report earnings (most have a January-ending calendar), up 4 percent pre-open with a nice beat on Q4 earnings...$1.38 vs. $1.32 consensus.
3) Family Dollar soars 28 percent after its biggest shareholder, Nelson Peltz's Trian investment firm, disclosed it has offered to purchase the discounter for as much as $7.6 billion. Already holding an 8 percent stake, Trian has offered to buy shares at $55-$60, a 25 percent-36 percent premium to yesterday's close. The offer will now be reviewed by the retailer's Board.
Other discounters (Dollar Tree and Dollar General ) are rallying 5 percent-6 percent on the news.
4) After raising its bid, Sanofi-Aventis came to an agreement to buy Genzyme for $20.1 billion in cash. Genzyme shareholders will get $74/share, up from Sanofi's offer from months ago of $69. The deal is expected to close in the second quarter. Genzyme shares rise 2 percent to over $75 while Sanofi's shares rise 1 percent.
5) Despite beating estimates by a penny, Dean Foods (think Borden) drops 8 percent as the dairy producer warned of disappointing earnings ahead due to weak volumes that will limit its future price increases. At the same time, it now predicts higher commodity prices for the remainder of the first half of 2011 will put a squeeze on margins. Full-year earnings outlook of $0.55-$0.65 falls significantly below Street estimates of $0.79.
6) OfficeMax falls 6 percent on further sales declines and a weak outlook for the year. Revenues in the latest quarter fell 2.4 percent—more than expected—but the office supplies retailer beat on the bottom line ($0.14 vs. $0.10 consensus) thanks to an 11 percent drop in operating expenses.
The company expects "challenges may persist" and sales will continue to drop in the first quarter (below expectations for slight growth).
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