Amazon.com on Thursday beat Wall Street expectations for first-quarter earnings and sales as it drew more customers online and its Kindle electronic reader gained momentum.
Its shares rose 2% in after-hours trading.
The global online retailer, which sells everything from books to auto parts on the Internet, increased revenue an unexpectedly strong 18% in a sluggish global economy, which some analysts attributed to successful promotions.
It posted a 21% sales gain in North America.
Chief Executive Jeff Bezos said sales of the company’s Kindle electronic reader had "exceeded our most optimistic expectations."
The global online retailer said first-quarter net income rose 24% to $177 million, or 41 cents per share, from $143 million, or 34 cents per share, a year earlier.
Analysts, on average, had been expecting earnings of 31 cents, according to Reuters Estimates.
Revenue jumped 18% to $4.89 billion, the company said, but a stronger U.S. dollar tempered the boost from international sales. Wall Street had been expecting revenue of $4.75 billion.
"My first impression is it’s incredibly impressive," said Steve Weinstein at Pacific Crest Securities, noting that the company’s U.S. business was growing faster than the overall e-commerce market. "It’s an incredible feat."
"It tells you how well they’re executing and winning business with customers and increasing share of wallet with their consumers no teletrack payday loans."
Once criticized for spending on technology investments and putting sales ahead of profits, Amazon (AMZN, Fortune 500) is now praised by Wall Street analysts who laud its ability to attract consumers in the midst of a recession. But a run-up in shares has made its valuation soar, scaring off potential investors.
International sales in the quarter rose 15%, but on a currency neutral basis that figure rose 28%.
Operating margins as a percentage of sales were better than the year-ago quarter, and improved sequentially from the fourth quarter.
Amazon said it expects second-quarter revenue to range between $4.3 billion and $4.75 billion on operating profit of $110 million to $190 million, a decline between 12% and 49%. In the year-ago second quarter, results were boosted by a one-time gain.
The outlook includes some $90 million for stock-based compensation and amortization, and assumes no acquisitions.
Shares rose more than 2% in extended trade to $82.45 after closing at $80.61, up nearly 2%, on the Nasdaq.
Capital One Financial Corp., a leading issuer of MasterCard and Visa credit cards, reported a higher-than-expected first-quarter loss Tuesday, hurt by growing credit losses and higher provisions for bad loans, sending its shares down almost 10%.
The company posted a quarterly loss available to common shareholders of $176.1 million, or 45 cents per share, compared with profit of $548.5 million, or $1.47 per share, a year earlier.
Capital One (COF, Fortune 500) also reported losses from continuing operations of 39 cents per share. On that basis, analysts expected a loss 4 cents per share, according to Reuters Estimates.
In the U.S. credit card business, charge-offs — debts the company believes it will never collect — increased to 8.39% in the first-quarter from 7.08% in the fourth quarter.
"I was expecting a negative number, but not the number they posted. It reflects the economic climate that we are facing right now," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
"It suggests we should brace for more bad news as the year continues in those areas that are consumer sensitive," he added.
Capital One set aside $124.1 million for loan losses, anticipating a further deterioration of its credit portfolio that is under pressure as unemployment rises.
Capital One’s total managed revenue fell 18.6% to $3.7 billion.
"Our first quarter results reflected significant pressures from the worsening economy," Capital One’s Chairman and Chief Executive Richard Fairbank said in a statement no teletrack payday loans.
McLean, Virginia-based Capital One estimated that managed charge-off losses will be higher than the $8.6 billion estimated for 2009, but declined to give an specific outlook, "given significant uncertainty in the economy."
Last month, the bank cut its quarterly dividend by 87% to save $500 million annually — only one year after a 14-fold increase in the payout.
The company once specialized in credit cards but expanded into branch banking in recent years after acquiring Hibernia Corp. and North Fork Bancorp Inc. More recently, the February acquisition of Chevy Chase Bank expanded its presence in the affluent suburbs of Washington, D.C.
Capital One, which received $3.55 billion in U.S. taxpayer funds last year, was recently stress-tested to see whether it needed additional capital. The results have not been disclosed, but analysts have estimated the company may need more capital.
Capital One’s shares fell 9.4% to $13.63 in after-hours trading. The stock had closed up 12.48% to $15.05 on the New York Stock Exchange.
The company’s shares have dropped about 52% this year, more than the 25% decline in the KBW Bank Index.
Stocks inched higher Friday as better-than-expected earnings from Citigroup, General Electric and Google, helped stretch the recent advance to a sixth straight week.
The Dow Jones industrial average (INDU) added 6 points or less than 0.1%. The S&P 500 (SPX) index rose 4 points or 0.5%. Both ended at more than two-month highs.
The Nasdaq composite (COMP) gained 2 points or 0.2%, ending at a more than five-month high.
Stocks, as represented by the S&P 500, have gained 28.5% in the past six weeks, on bets that the economy is closer to stabilizing. The gains followed a selloff that left the S&P 500 at a 12 1/2 year low. A rash of better-than-expected profit reports has helped sentiment this week.
The six week run is the market’s best since May 2007, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.
"No matter what is thrown at the market, it seems to want to chug higher, which is a big change in psychology from last fall or even earlier this year," Detrick said.
However, he noted that even if the rally proves to be more than a bear market bounce, at six weeks old, it’s starting to look ripe for a pullback on a technical basis.
Quarterly results: Citigroup (C, Fortune 500) reported a quarterly profit Friday morning, due to strength in its investment banking division. But after paying out preferred dividends, results amounted to a per-share loss of 18 cents. Nonetheless, that was smaller than the 34-cent per share loss analysts expected. Shares of the Dow component fell 9%.
JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) both reported weaker quarterly profit that beat estimates earlier this week. Last week, Wells Fargo (WFC, Fortune 500) forecast that it would report a $3 billion profit.
Regional Bank BB&T (BBT, Fortune 500) reported a weaker quarterly profit that nonetheless handily topped analysts’ forecasts. The company also said loan losses are lessening instant cash advance no fax. Shares gained 11%.
Dow component General Electric (GE, Fortune 500) reported weaker quarterly earnings that beat estimates on weaker quarterly sales that missed forecasts. Weakness in the company’s finance unit countered mixed results at other divisions. Shares gained 1%.
After the close Thursday, Google (GOOG, Fortune 500) posted quarterly earnings that rose from a year ago and topped estimates on revenue that rose from a year ago but was shy of forecasts. Shares rose 1% Friday morning.
In other company news, General Motors (GM, Fortune 500) CEO Fritz Henderson said that the company will announce more job cuts and plant closings in the next few weeks. The company has until June 1 to reach agreements with its creditors and unions if it wants to avoid a government-mandated bankruptcy. Shares fell 4%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 1.95 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.43 billion shares.
Economy: The April consumer sentiment index from the University of Michigan rose to 61.9 from 57.3 in March. Economists surveyed by Briefing.com thought the index would rise to 58.5.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.94% from 2.83% Thursday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian and European markets ended higher.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for May delivery rose 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $11.90 to settle at $867.90 an ounce.
EBay Inc. said Tuesday it plans to split off Skype, the Internet telephone service, through an initial public offering to be completed in the first half of 2010.
Letting Skype operate independently will allow it to better compete in online voice and video-messaging, and let eBay focus on e-commerce, according to eBay chief John Donahoe.
"Skype is a great stand-alone business with strong fundamentals and accelerating momentum, but it’s clear that Skype has limited synergies with eBay and PayPal (eBay’s online payment service)," Donahoe said in a statement.
eBay had hoped to use Skype to facilitate communication between auction buyers and sellers when it purchased the business in 2005 for a current total of $3.1 billion, according to Colin Sebastian, analyst with Lazard Capital Markets guaranteed cash loans.
"The synergies they had hoped to achieve have not materialized," he said, and a spinoff makes sense since "eBay is fighting hard to turn around its core business."
Donahoe has been evaluating ways to integrate Skype services since taking the helm at eBay in 2008, the company said.
Skype had 405 million users by the end of 2008, and brought in $551 million last year, eBay (EBAY, Fortune 500) said. The business is on track to break $1 billion in revenue by 2011, the company estimated.
Wells Fargo’s numbers show how the big banks hope to muddle through the deepest economic downturn in decades - with some help from their friends in Washington.
San Francisco-based Wells (WFC, Fortune 500) surprised Wall Street Thursday by saying it expects to make $3 billion, or 55 cents a share, in the first quarter ended last month — almost double the analyst consensus estimate.
Shares of Wells surged 30% to their highest level since January on the news, and the beaten-down shares of rivals followed.
Thursday’s events don’t erase the worries about the big banks, which center on the scope of loan losses as real estate prices plunge.
Still, Wells’ numbers show that with competition having collapsed, plain vanilla banking - even mortgage banking - can be enormously profitable right now.
Wells said it posted a first-quarter net interest margin — reflecting the difference between the rate it pays on its own borrowings and the rate it collects on its loans — of 4.1%. That’s down from the 4.9% Wells reported in the fourth quarter, excluding its acquisition of Wachovia, but above the 3.9% Wall Street expectation for the combined company in the first quarter.
Mortgage magic
Wells, which has portrayed itself as an unwilling recipient of aid from Washington and has criticized government intervention in the financial sector, also was helped in the first quarter by federal efforts to contain the damage from the housing bust.
Wells is the nation’s biggest mortgage servicer and a big home loan originator, so it was a big beneficiary of a refinancing boom driven in part by ultra-low short-term interest rates and the government’s purchases of mortgage bonds.
Wells said mortgage originations doubled from fourth-quarter levels to $100 billion, with three-quarters of those covering refinancing transactions.
While the refinancing boom won’t last forever, it is clear that holding down mortgage rates has emerged as a top priority in Washington. The hope is that low rates can help the economy by reducing borrowers’ monthly payments and could also lead to a rebound in home sales.
The gains won’t be limited to the first quarter, either. Mortgage activity should remain strong in the second quarter, Wells said, judging by its own origination pipeline.
Though Wells took $25 billion in federal aid in October, it hasn’t been a happy relationship bad credit cash loan. Chairman Dick Kovacevich recently called the government’s stress tests "asinine" and blamed the changing terms of federal support for a steep dividend cut last month.
A penny saved?
Thursday’s news alone won’t quell investors’ fears about the pain that lies ahead for banks with big mortgage portfolios. Wells and rivals such as Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) remain perilously exposed to declining asset prices, particularly for commercial and residential real estate.
Indeed, some analysts questioned the quality of Wells’ first-quarter profit numbers, saying the bank should be saving more for the rainy days ahead.
"We believe that credit quality materially deteriorated in the first quarter and that Wells Fargo is under-reserving for expected future losses," FBR Capital Markets analyst Paul Miller wrote in a note to clients Thursday. "We remain cautious based on what we don’t know."
Wells said it added $1.3 billion to its loan loss reserve in the first quarter, bringing its total cushion against credit losses to $23 billion. Wells Fargo chief financial officer Howard Atkins called that "a very big number" in an interview on Bloomberg television Thursday, and called Wells’ provision against loan losses "adequate."
Still, Wells’ loan loss allowance as a percentage of total loans at the end of the first quarter was just 2.7%, going by FBR estimates — compared with 3.62% at the end of the fourth quarter at JPMorgan Chase, the best-reserved big bank.
Even analysts who like the stock say the road ahead may not be smooth. Andrew Marquardt, an analyst at Fox Pitt Kelton who rates Wells an "outperform", wrote in a note to clients Thursday that he remains "cautious" on the state of the bank’s commercial real estate, credit card and home equity loan portfolios, among others.
But given all the losses Wells has already recognized, Marquardt said he is "confident that [Wells Fargo] will continue to manage through this credit cycle better than most."
Genentech Inc., which was acquired by Roche Holding AG last month, announced Wednesday a phased voluntary withdrawal of psoriasis drug Raptiva from the U.S. market due to its link to a brain infection.
Raptiva has been associated with an increased risk of progressive multifocal leukoencephalopathy (PML), a rare and usually fatal disease of the central nervous system.
Sales of the drug, for which a royalty is paid to Xoma Ltd (XOMA) , totaled $108 million in the United States last year.
Roche said it expects to record a $125 million charge for the withdrawal, but its 2009 targets would not be affected.
Authorities in Europe, where Raptiva is sold by Merck KGaA , recommended in February that the drug be suspended in light of the PML risk.
The European Commission is expected to follow that advice.
There have been three cases of diagnosed PML in patients receiving Raptiva and one patient treated with Raptiva who developed progressive neurologic symptoms and died of unknown causes credit reports free.
Raptiva is approved for the treatment of chronic moderate-to-severe plaque psoriasis in adults 18 years or older who are candidates for systemic therapy or light therapy.
Genentech said that, effective immediately, physicians should not issue prescriptions for Raptiva for any new patients and should promptly contact patients currently receiving the drug to assess the most appropriate treatment alternatives.
The company said Raptiva will not be available after June 8 and estimated that around 2,000 U.S. patients may be receiving the drug for chronic plaque psoriasis.
German manufacturing orders fell more than economists forecast in February, extending their worst decline on record as the global recession eroded demand for exports and damped investment at home.
Orders, adjusted for seasonal swings and inflation, fell 3.5 percent from January, the sixth consecutive drop, the Economy Ministry in Berlin said today. Economists expected a 2.1 percent decline, the median of 30 forecasts in a Bloomberg survey showed. From a year earlier, orders plunged a record 38.2 percent.
Companies from carmaker Volkswagen AG to software maker SAP AG have reduced output and cut jobs as the global financial crisis curbs exports. The German government plans to spend about 82 billion euros ($109 billion) to stimulate growth, including tax breaks and investment in infrastructure.
“The outlook for orders in the immediate future remains bleak,” said Simon Junker, an economist at Commerzbank AG in Frankfurt, who expects the German economy to shrink as much as 7 percent this year. “The government’s stimulus measures and interest-rate cuts will show some effect, but it’ll take time for demand to increase.”
Domestic factory orders slumped 5.7 percent in the month, today’s report showed. Export sales fell 1.3 percent, with euro- region orders dropping 3.7 percent.
Deep Recession
German exports dropped 0.7 percent in February, the fifth decline in as many months, the Federal Statistics Office said today. Imports fell 4.2 percent in February from the previous month.
The German economy, Europe’s largest, will shrink 5 instant cash advance.3 percent this year, the Organization for Economic Cooperation and Development said last week. That’s more than six times as much as much as previously forecast. The OECD expects the euro-region economy to shrink 4.1 percent.
Group of 20 countries have announced stimulus packages worth more than 2 trillion dollars to boost investment and consumption.
“It is obvious that Germany will benefit more from foreign stimulus packages than from its own,” said Sylvain Broyer, an economist at Natixis in Frankfurt. “Any recovery in the coming quarters will be tied to these packages, but their effect will evaporate at the end of the year.”
Factory orders from outside the 16-nation euro region rose 0.5 percent in February from January, the ministry said. Export orders for investment goods rose 2 percent, driven mainly by stronger demand from within the euro area.
The European Central Bank has cut its benchmark interest rate by 3 percentage points to a record low of 1.25 percent since early October and policy makers have indicated they’ll cut the rate further to fight the region’s worst recession since World War II.
Governing Council member George Provopoulos said in a Bloomberg interview published yesterday he wouldn’t exclude taking the key rate below 1 percent if the economic environment deteriorates further.
South African manufacturing probably fell for a fifth consecutive month in February, possibly exceeding the previous month’s record decline, as the global recession slashed demand for exports, a survey showed.
Production tumbled 12.9 percent after dropping 11.1 percent in January, according to the median estimate of four economists surveyed by Bloomberg. The statistics office is scheduled to publish the data at 1 p.m. local time on April 8.
Manufacturers such as ArcelorMittal South Africa Ltd., Africa’s biggest steel producer, and Volkswagen AG, the country’s second-biggest automaker, have cut output and jobs as sales plunged. Factory output, which makes up 16 percent of the economy, may continue to contract as indicated by the Investec Purchasing Managers Index, which fell to a record low of 36 in March.
“It is virtually impossible to see a recovery in the manufacturing sector soon,” Danelee van Dyk, an economist at Standard Bank Group Ltd., Africa’s biggest lender, said in a note to clients. “Closure of many production facilities in April, for instance in the automotive and nonferrous steel sectors, will exacerbate production losses in the sector.”
Recessions in the U.S., Europe and Japan, which together take 60 percent of exports, have undermined manufacturing and contributed to the economy’s first contraction in a decade in the fourth quarter health insurance.
The Reserve Bank will publish foreign currency reserves data tomorrow. Gross reserves rebounded to $33.8 billion after the price of gold gained, the central bank said on March 6.
On April 8, the South African Chamber of Commerce and Industry will publish the business confidence index for March.
Market Rally
In political news, the National Prosecuting Authority is scheduled to announce its decision on whether to drop corruption charges against Jacob Zuma, leader of the ruling African National Congress, today. Zuma is the ANC’s presidential candidate for elections taking place on April 22.
Last week, the benchmark FTSE/JSE Africa All Share Index advanced 2.3 percent, with Investec Ltd. gaining 17.1 percent, the biggest increase of the top 40 companies in the index. Aspen Pharmacare Holdings Ltd. climbed 17 percent on speculation GlaxoSmithKline Plc is in talks with the largest maker of generic drugs in the southern hemisphere about buying a stake in the company.
Service industries in the U.S. unexpectedly contracted in March at a faster pace as unemployment climbed and consumer confidence held near a record low.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, fell to 40.8, the lowest level of the year, from 41.6 the prior month, according to the Tempe, Arizona-based group. Readings below 50 signal contraction.
Labor Department figures today showed the economy lost 663,000 jobs in March and unemployment jumped to the highest since 1983, a sign spending may once again falter and prevent the economy from stabilizing. Sales at service providers may stay subdued until policy steps to unclog credit gain traction.
“These are tell-tale signs that we’re not there yet” in terms of an end to the slump, Anthony Nieves, chairman of ISM’s non-manufacturing survey, said in a conference call with reporters. “It’ll take time for different things to kick in. It’s not going to happen overnight.”
Including the 663,000 cut in March payrolls, the economy has lost about 5.1 million jobs since the start of the recession in December 2007.
Increase Projected
The ISM services index was projected to increase to 42, according to the median forecast in a Bloomberg News survey of 67 economists. Estimates ranged from 38 to 45.
The ISM index of new orders industries fell to 38 free car insurance quotes.8 from 40.7 the prior month, and its gauge of employment dropped to 32.3 from 37.3.
A measure of prices paid decreased to 39.1 from 48.1, the ISM report showed.
Manufacturing, which makes up the other 12 percent of the economy, is shrinking at a slower pace. The ISM factory index rose to 36.3 in March, a third consecutive gain that brought it closer to the breakeven point of 50, figures showed on April 1.
Some segments of the service industry are steadying. Retail sales excluding cars and trucks unexpectedly gained in February, the Commerce Department said March 12, and consumer purchases increased for a second straight month.
New autos sold at an annual rate of 9.86 million units, according to sales tracker Autodata Corp. of Woodcliff Lake, New Jersey, after February’s 9.1 million pace that was the lowest since 1981.
Still, the contraction in services has led to failures at several store chains. More than a dozen retailers have filed for bankruptcy since last year, including Circuit City Stores Inc., once the second-largest consumer-electronics retailer, and house wares retailer Linens ‘n Things Inc. This week, Gottschalks Inc., a 105-year-old chain, won permission to shut its remaining department stores.
Some 400 acres of agricultural land could be carved out of southwestern Hillsborough County to make way for a new multi-modal facility that its developers say would add $624 million to the local economy and directly create 1,800 jobs over the next decade.
Inland Port Systems has chosen a site just north of the Manatee County line to build its Tampa Bay Multi-Modal Center, a facility near Port Manatee that would provide a distribution hub directly to consumers using rail and trucks, taking advantage of its proximity to shipping from the Panama Canal and busier Gulf of Mexico transportation traffic.
“When we were looking for the right site, two of the absolute keys we were looking for was its proximity to both rail and highways,” said Dick Ellison, a principal for Inland Port Systems, that is leading the project. “This land was just off [U.S.] 41, which is not heavily traveled at this point in time, but it may be. Interstates 275 and 75 were very close to the site, which means we have some direct points to Tampa, Miami, Jacksonville, Orlando, and Atlanta.”
Construction of the multi-modal center would take approximately 10 years and include 2.6 million square feet of warehouse space, enough to accommodate between 15 and 25 companies. It also is expected to generate some $89 million in total labor income once complete, representing an average annual salary of $49,400 business cards. It’s expected to contribute $6.7 million each year in gross ad valorem property tax income to Hillsborough County, according to projections by WilsonMiller.
But to become reality, it will need to clears some governmental hurdles over the next two to three years, including zoning changes and a necessary amendment to the county’s comprehensive plan, Inland Port Systems plans to spend $125 million in labor alone for construction of the facility. Ellison wouldn’t share how much build out for the Bay area center is expected to cost, but a typical multi-modal center sitting on 500 acres of land with 7 million square feet of structures – more than double of what’s planned near Port Manatee – would have a total value of $750 million, according to an investor presentation on the Inland Port Web site.
Inland Port is expected to present its project to the Hillsborough County City-County Planning Commission April 7. However, it will need approvals at both the county and state level before any work can begin.
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