Ultimate Market Recap: Toyota Recall, Yummy Quarter for Yum

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Early Movers: Alcoa Kicks Off Earnings Season, Cummins to Cut Over 1,000 Jobs

Alcoa (NYSE:AA) unofficially kicked off earnings season after Tuesday’s closing bell. Alcoa reported a loss of $143 million (13 cents per share), compared to $172 million (15 cents per share) a year earlier. Excluding special items, earnings per share came in at 3 cents, above analyst estimates.

Yum! Brands (NYSE:YUM) shares jumped more than 4 percent in early trading. The quick-service food company said net income in the third quarter rose 23 percent to $471 million ($1 per share), compared to $383 million (80 cents per share) a year earlier. David C. Novak, chief executive officer, said, “Very strong sales and profit at all of our divisions, including China, Yum! Restaurants International, India and the U.S., drove 19 percent third quarter EPS growth. Given the strength of our year-to-date results, I’m pleased to report we are raising our full-year EPS growth forecast to at least 13 percent, excluding special Items.” McDonald’s (NYSE:MCD) shares also increased on the results.

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Chevron (NYSE:CVX) shares are trading lower this morning. The oil giant announced that third quarter earnings will be “substantially lower” than in the previous quarter. The lowered outlook is the result of unfavorable foreign currency rates and refining operations. Chevron is set to report its quarterly earnings on November 2.

Shares of Cummins (NYSE:CMI) dropped more than 5 percent in pre-market trading. The heavy-equipment manufacturer lowered its full-year 2012 revenue outlook to approximately $17 billion, compared to its previous guidance of $18 billion. “We continued to see weak economic data in a number of regions during the third quarter increasing the level of uncertainty regarding the direction of the global economy,” explains Tom Linebarger, chief executive officer. The company also expects to cut between 1,000 and 1,500 employees by the end of the year.

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Wall Street Brief: Alcoa’s Losses Soften, Toyota Issues Massive Recall

Toyota (NYSE:TM) is recalling worldwide 7.43 million cars from a potential fire risk in its power window switches; they could potentially melt if lubricants are misapplied. This affects 2.47 million cars sold in the U.S. and encompasses Toyota’s Camry, Corolla and RAV4 SUV models. This is the largest auto recall since 1996 with the 8 million Ford (NYSE:F) vehicles.

Alcoa (NYSE:AA) reported a $143 million net loss in the third quarter, down from a $172 million profit from the previous year. This comes from $175 million charges from a legal settlement with a Bahraini smelter over bribery allegations and other special items. Alcoa’s adjusted $0.03 earnings per share fell from $0.15 a in the previous year but exceeded forecasts. Its $5.83 billion revenue fell 9 percent but also exceeded estimates. Alcoa slashed its 2012 global aluminum demand forecast to 6 percent from 7 percent.

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Yum Brands’s (NYSE:YUM) third quarter net profit jumped 23 percent to $471 million thanks to continuous improvements at its U.S. Taco Bell, Pizza Hut and KFC chains while China’s growth was affected by the economy. Adjusted earnings per share of $0.99 exceeded estimates while revenue increased 9 percent to $3.57 billion, missing forecasts. Yum raised its guidance for fiscal year earnings per share growth to 13 percent from the previous 12 percent estimate.

The EU may issue a “statement of objections” to UPS’s (NYSE:UPS) proposed EUR 5.2 billion acquisition of TNT Express by next week unless the U.S. company gives concessions that would temper antitrust worries, reported the Financial Times. The EU is concerned the deal will result in three “global integrators” that could offer a broad range of delivery services by ground and air.

FedEx (NYSE:FDX) is trying to raise its profitability by $1.7 billion over the next three years via cost cuts at its U.S. Express air operation. The measures include modernizing the company’s aircraft fleet and a voluntary buyout plan for some employees. Details will come on Wednesday at second day of the company’s annual meeting.

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Edwards Lifesciences Acquires BMEYE and 4 Hot Stocks Attracting Investor Attention

Facebook, Inc. (NASDAQ:FB) filed its proposal to go public in February, and many believe that it exaggerated the effectiveness of ads linked to customers’ friends, citing research from Nielsen, the SEC continued to doubt and vetted the filing to make sure that Facebook revealed all material information to investors. Then, Facebook had to drop the reference. There have been two and a half months of communications between the company and the agency making it appear as it a management team is hesitant to reveal information and was still making guesses at even basic aspects of its business only weeks prior to its IPO, according to Bloomberg.

FedEx Corporation (NYSE:FDX) announced programs targeting annual profitability improvement of $1.7 billion during the next three years, as a significant portion of the benefits should be gained by FY15. These initiatives don’t take into consideration the continuing base profit improvements at FedEx Ground and FedEx Freight. Also, FedEx announced that David F. Rebholz, president and CEO of FedEx Ground, intends to retire beginning on May 31, 2013. Rebholz led the company’s FedEx Ground operating unit since 2007 along with serving on the Strategic Management Committee of FedEx Corp. His replacement has not been discussed. In a keynote speech to FedEx.’s 2012 Investors and Lenders Meeting, Frederick W. Smith, FedEx chairman, president and CEO, stated that the company has plans to raise its dividends in coming years. Smith said a large portion of the profitability improvement is to be achieved via cost reductions at FedEx Express and FedEx Services. Smith stated that the profit improvement initiatives, along with the combined strength of FedEx Ground and FedEx Freight, would place FedEx on the right path to succeeding in its financial goals.

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Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer indicated that the company would go into a new direction for the software company, suggesting hardware and online services as the company’s future, Reuters reports.

Edwards Lifesciences Corp. (NYSE:EW) has completed its acquisition of BMEYE B.V., which is a privately held Dutch company specializing in developing non-invasive technology intended for advanced hemodynamic monitoring. BMEYE’s technology provides continuous, real-time information to clinicians and is able to be used in the surgical, intensive care, emergency room, and cardiology settings. The purchase price was EUR32.5 million, or about $42 million. Edwards believes that the net earnings impact resulting from the transaction will be immaterial in 2012, and slightly dilutive during 2013. There will be more details when the company reports its 2013 financial guidance in December.

Tesoro Corporation (NYSE:TSO) acquisition proposal of Arco and its Carson refinery for a total of $2.5 billion must deal with growing opposition and scrutiny, according to the Los Angeles Times. Activists claim that the deal has the ability to lower competition and increase prices for motorists.

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Bank of America (NYSE:BAC): In pre-market trading on the NYSE, the three most active funds and stocks were Alcoa (NYSE:AA), Bank of America (NYSE:BAC), and SPDR S&P 500 ETF (NYSEARCA:SPY) as of 9:10 a.m. Investors exchanged 1.14 million shares of Bank of America, which saw a rise of $0.07, or 2.61 percent. Bank of America hired Loh Boon Chye as the leader of its global markets in the Asia-Pacific region. Previously, Loh worked for Deutsche Bank AG.

Apple Inc. (NASDAQ:AAPL): The iPhone 5 supply shortfall has been worsened as a result of a quality-control crackdown at Foxconn Technology Group used to reduce the amount of devices that are shipped with nicks and scratches, according to sources. Many customers complained about scrapes on the device during the iPhone’s debut last month, and this was a result of Apple’s decision to use a type of aluminum helping to make the smartphone thinner and lighter, according to Bloomberg.

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AT&T, Inc. (NYSE:T) and IBM have teamed together to offer a service enabling customers to access Big Blue’s back-end infrastructure over the telecom giant’s secure private lines. “It’s an integrated, end-to-end solution that provides access to cloud computing resources, and a secure pipe over which to access them,” stated Dennis Quan, IBM’s VP for SmartCloud Infrastructure, in an interview. “It’s going to unleash a lot of pent up demand for cloud computing because we’ve made the consumption of cloud a lot simpler.” IBM and AT&T have intentions to formally launch the service, directed toward IBM’s Fortune 1,000 enterprise customer base, during Q1 of 2013.

Nokia Corporation (NYSE:NOK) hopes it will be able to take advantage of Apple’s (NASDAQ:AAPL) iPhone 5 navigation issues by marketing the reliability of its own digital maps that it has spent billions crafting, Bloomberg reports.

Goldman Sachs (NYSE:GS) has been lobbying regulators for the exemption of investment vehicles known as credit funds from the “Volcker rule” in a bid intended to keep the firm’s lucrative merchant-banking unit. In the case of failure, Goldman has a plan B as a few of the firm’s executives think that they have discovered a means to extricate the credit funds from proposed limits regarding the amount that can be invested in hedge funds and private-equity funds, sources say, according to the the Wall Street Journal.

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Amarin Corporation plc (NASDAQ:AMRN): As previously disclosed, in each of mid-August and mid-September, the FDA communicated to Amarin that it had not yet made a determination with respect to Amarin’s pending request for five-year, new chemical entity exclusivity for Vascepa, and the cumulative supplements to the Orange Book published shortly thereafter, respectively, did not include an entry with respect to the regulatory exclusivity of Vascepa.Based on information available to Amarin, the FDA has not yet made a determination with respect to regulatory exclusivity for Vascepa. In mid-October, the FDA is expected to publish the September 2012 cumulative supplement to the Orange Book. In recent months, Amarin has repeatedly followed up with the FDA seeking a determination. While Amarin continues to believe its arguments in support of an NCE determination for Vascepa are strong, the FDA may not agree with Amarin’s arguments. Based on Amarin’s dialogue with the FDA, Amarin does not know what determination the FDA will make on the pending Vascepa exclusivity request or when the FDA will make such determination. If Vascepa is not awarded five-year marketing exclusivity, Amarin expects it will be awarded three-year marketing exclusivity. Amarin continues to anticipate commercial launch of Vascepa in the first quarter of 2013, and continues to consider three potential paths for the marketing and sale of the product: an acquisition of Amarin, a strategic collaboration, or self-commercialization, the latter of which could include third-party support.

Yum! Brands, Inc. (NYSE:YUM): Fast-food heavyweight Yum! Brands (YUM) reported better than expected third quarter results Tuesday afternoon. The firm saw revenue grow 9% year-over-year to $3.6 billion, roughly in-line with consensus expectations. Earnings jumped nearly 24% to $0.99 per share net of a one-time refranchising benefit, a few pennies better than consensus estimates.

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Costco Wholesale Corporation (NASDAQ:COST): Costco Wholesale (NASDAQ:COST) proves that the demise of the big-box store is exaggerated, reports the Wall Street Journal’s “Ahead of the Tape.” Fiscal Q4 numbers are due today and should underscore continued success. But investors have to pay above-market prices for that growth, about 80% more than the average 2012 earnings multiple of Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). Hard to justify unless Costco’s superior performance can continue for many more years. The business model faces new competition, and the stock is fully priced. Costco’s shares are tempting to buy, but could lead to buyers’ remorse, the Journal says.

Wal-Mart Stores Inc. (NYSE:WMT): Wal-Mart Stores kicked Amazon out of its 4,000 stores last month when it discontinued Kindle tablets and e-readers. Now, the retailer is poised to use those stores against its online rival once again — this time aiming for the heart of Amazon’s retail model. Wal-Mart said Tuesday it had begun testing same-day delivery for online purchases in a handful of cities across the country. The near-instant delivery is possible because the merchandise is being shipped from Walmart stores.

True Religion Apparel Inc. (NASDAQ:TRLG): True Religion Apparel announced that after receiving indications of interest from third parties regarding a potential transaction with the company, the Board of Directors has formed a Special Committee comprised of its non-management directors to explore and evaluate potential strategic alternatives available to the company, including a possible sale, in order to maximize shareholder value. No decision has been made to engage in a transaction or transactions, and there can be no assurance that any transaction or any other strategic alternative will occur or, if undertaken, the terms or timing thereof. The Special Committee has not set a definitive timetable for completion of the strategic review process, and it does not intend to disclose or comment on developments with respect to the progress of such process until such time as the Board takes some action, if any, or otherwise deems disclosure appropriate or required. The Special Committee has engaged Guggenheim Securities, LLC as its financial advisor, and Greenberg Traurig, LLP as its legal counsel, to assist with the strategic review process.

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Afternoon Buzzers: True Religion Surges 20%, Yum! and Costco Climb Higher

Shares of Yum! Brands (NYSE:YUM) jumped more than 8 percent. The quick-service food company said net income in the third quarter rose 23 percent to $471 million ($1 per share), compared to $383 million (80 cents per share) a year earlier. David C. Novak, chief executive officer, said, “Very strong sales and profit at all of our divisions, including China, Yum! Restaurants International, India and the U.S., drove 19 percent third quarter EPS growth. Given the strength of our year-to-date results, I’m pleased to report we are raising our full-year EPS growth forecast to at least 13 percent, excluding special Items.” McDonald’s (NYSE:MCD) shares also increased on the results.

True Religion Apparel (NASDAQ:TRLG) shares surged more than 20 percent after saying it may sell itself, as the company has been receiving buyout interest. The company’s board has formed a special committee to evaluate and analyze a possible deal.

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Alcoa (NYSE:AA) shares fell more than 4 percent. Late Tuesday, the aluminum giant unofficially kicked off earnings season after the closing bell. Alcoa reported a loss of $143 million (13 cents per share), compared to $172 million (15 cents per share) a year earlier. Excluding special items, earnings per share came in at 3 cents, above analyst estimates.

Shares of Costco Wholesale (NASDAQ:COST) gained 3.19 percent. The company announced that net income rose 27.4 percent in its fiscal fourth quarter to $609 million ($1.39 per share), compared to $478 million ($1.08 per share) a year earlier. Revenue also jumped 14.3 percent to $32.22 billion. The company has now seen its net income increase for three consecutive quarters, while revenue has risen for the last four quarters.

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