Poor Quarter Ends on a Sour Note (GIS, MON, AM, BA, STST, PIR)

Stocks couldn’t keep early modest gains, eventually ending a poor quarter for the market on a sour note. Fear is still permeating in the market; however, we think values can be found with companies still growing the bottom line and flush with cash.

The Home Furnishing Retailer Stocks Index was the top performing tickerspy Index on the day, led by Pier 1 Imports (PIR) with a 5% gain.

Stocks fell on the day, with the Dow off -96 points to 9,774. The S&P lost -11 points to 1,031, while the Nasdaq fell -26 points to 2,109. Oil slipped -31 cents to $75.63 a barrel, while gold rose $3.50 to $1,245.50 an ounce.

On the economic front, U.S. private employers added 13,000 jobs in June, payrolls processor ADP reported. The number came in well below the 60,000 jobs economists were expecting. The May figure in the ADP report, jointly developed with Macroeconomic Advisers LLC, was revised upward to a gain of 57,000 jobs. In an article from Reuters, Zach Pandl, economist at Nomura Securities, offered his opinion, saying, “The data is quite concerning. If this weaker trend in private sector employment is confirmed on Friday, it would increase the risk of weak growth in the second half of 2010.” In a separate report, the Institute for Supply Management-Chicago business barometer fell to 59.1 in June from 59.7 in May, still ahead of economists’ 59.0 forecast. Meanwhile, applications to buy homes dropped -3.3% the Mortgage Bankers Association said, despite the current low borrowing cost environment.

In earnings news, shares of General Mills (GIS) dipped -3.7% after the firm reported weaker profits in its fiscal Q4 earnings report. The cereal maker said net income in the fourth quarter fell to $211.9 million, or 31 cents per share, compared with net income of $358.8 million, or 53 cents per share, a year ago. Excluding one-time items, the company earned 41 cents per share, in line with analyst projections. General Mills’ revenue fell -2% to $3.57 billion, hurt by an extra week in last year’s fourth quarter and the costs of ending some product lines. Looking forward, General Mills expects to earn between $2.46-$2.48 per share, excluding one-time items, for fiscal 2011. The projection was short of analyst forecasts of $2.50 per share. A total of 53 Pro investors counted General Mills in their top-15 U.S.-listed equity holdings at the start of Q2, while 439 tickerspy members held the stock in their portfolios.

Shares of Monsanto (MON) slid -2.4% after the world’s biggest seed maker reported sagging earnings in its fiscal Q3 report. Citing intense generic competition for its herbicide product RoundUp, Monsanto’s net income fell -45% to $384 million, or 70 cents per share, from net income of $694 million, or $1.25 per share, in the same quarter last year. Excluding $86 million in restructuring costs linked to downsizing the RoundUp unit, profit would have totaled 81 cents per share. Revenue fell to $2.96 billion from $3.16 billion a year ago. Analysts were expecting EPS of 80 cents on revenue of $3.17 billion. Earlier in the trading day, the stock fell to as low as $45.30, its lowest point since November 2006. A total of 73 Pro investors counted Monsanto in their top-15 U.S.-listed equity holdings at the start of Q2, while 1,262 tickerspy members held the stock in their portfolios.

Elsewhere in the market, American Greetings (AM) saw its shares drop -3.8% after the firm reported earnings that missed Wall Street’s view. For the fiscal first quarter ended May 28, the company earned $30.8 million, or 75 cents a share, compared with a profit of $10 million, or 25 cents per share, a year earlier. Total sales fell -4% to $396.3 million. The two analysts who cover the company were expecting American Greetings to earn 79 cents a share on revenue of $416.8 million. On its conference call, the second-largest U.S. greeting-card maker said it expected continued pressure on earnings and revenue in the near term in North America due to choppy economic conditions.

In M&A news, Boeing (BA) announced that it will acquire defense manufacturer Argon ST (STST) for $775 million in cash. The deal is worth $34.50 a share, a 41% premium to Argon ST’s closing price of $24.43 yesterday. In a company statement, Boeing said the acquisition will allow it to grow its capabilities in sensors, communications technologies, and information management. The aviation giant noted that the buyout will have an “immaterial impact” on its earnings. Shares of Boeing edged down -0.5% on the news, while Argon shares climbed 40.4%. A total of 51 Pro investors counted Boeing in their top-15 U.S.-listed equity holdings at the start of Q2, while 974 tickerspy members held the stock in their portfolios.

Tags: AM, BA, GIS, MON, PIR, STST