Big Bank Pain, Regionals Gain (SBUX, EBAY, UNH, PNRA, FTBK)
It was a bad day to be a big bank. After the Democrats lost an important Senate seat earlier this week, President Obama turned his party’s frustration onto big banks, an issue that a disgruntled populace can easily get behind.
Interestingly, an FBR analyst said after checks with his sources in Washington that the proposal was hastily done and Congress wasn’t consulted. Among the things the President called for were that commercial banks could no longer engage in proprietary trading on their own behalf as well as for clients.
Washington should be aware of any unintended consequences of bank restrictions. As former Fed economist Vincent Reinhart told McClatchy Newspapers, “When you put a system of regulation in place, they [Wall Street] figure out ways to get around it. It’s an invitation to change corporate structures that may move stuff more off the radar screen.” Remember there was a lot of off-the-radar, off-the-balance sheet transactions that caused the recent financial meltdown in the first place.
Stocks were pounded for a second-straight day, with the Dow off -213 points to 10,390. The S&P fell -22 points to 1,116, while the Nasdaq dropped -26 points to 2,266. Oil tumbled -$1.66 to $76.08 a barrel, while gold dipped -$9.60 to $1,103.00 an ounce.
On the economic front, initial jobless claims rose by 36,000 to a seasonally adjusted 482,000, according to the Labor Department. Economists were expecting a small drop. Elsewhere, the Conference Board said its index of leading indicators rose 1.1%, more than the 0.7% increase expected by economists.
In earnings news, coffeehouse operator Starbucks (SBUX) announced a fiscal Q1 profit of $241.5 million, or 32 cents per share, on sales of $2.72 billion. That easily surpassed Wall Street views for EPS of 28 cents on revenue of $2.65 billion. A year ago, the company posted a profit of $64.3 million, or 9 cents per share, on sales of $2.62 billion. Same-store sales rose 4.0%. For the full year, the company raised its EPS guidance to a range of $1.05-$1.0 from 96 cents. Analysts were looking for EPS of $1.02. The stock rose 1.7%. Fourteen Pro investors counted the stock among their top-15 holdings at the start of Q4, while over 500 tickerspy members included the stock in their portfolios.
eBay (EBAY) shares jumped 8.6% after the online auction house bested analyst EPS estimates. For Q4, the company earned $1.36 billion, or $1.02 per share, up from $367 million, or 29 cents per share, a year ago. Excluding one-time items, adjusted EPS was 44 cents, 4 cents ahead of the consensus. Revenue rose 16% to $2.37 billion, just ahead of the $2.29 billion estimate. In its payment segment, which includes Paypal, revenue jumped 28%. The number of active registered eBay users rose 3%, while gross merchandise volume climber 24% to $14.2 billion. Looking ahead, eBay guided for Q1 EPS of between 39-41 cents versus analyst estimates of 39 cents. Eighty-one Pro investors counted the stock among their top-15 holdings at the start of Q4, while over 500 tickerspy members included the stock in their portfolios.
Health insurer UnitedHealth Group (UNH) saw its Q4 profit rise 30% to $944 million, or 81 cents per share, up from $726 million, or 60 cents per share, a year earlier. The results included an 18-cent charge over a class-action lawsuit. Revenue rose 7% to $21.8 million. The Wall Street consensus was for EPS of 73 cents on $21.72 billion in revenue. For 2010, the company reaffirmed its previous guidance for EPS of between $2.90-$3.10. The stock fell -4.2%.
Panera Bread (PNRA) shares got a 7.3% lift after the bakery-cafe operator upped its Q4 guidance. The company now expects to record EPS of 94-95 cents, including a 5-cent charge for asset retirement activity, versus a previous forecast for EPS of 85-87 cents, including the same charge. The company also announced that company-owned same-store sales were up 5.9% in Q4 and 9.4% so far in January.
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