Stocks Float Lower On Lazy Summer Friday (JCP, NVDA, RMBS, ADSK, BX, DYN, NRG, SORL)
Today may have been Friday the 13th, but it was one of the least scary days for investors the past few sessions, as stocks ended slightly lower on a lazy summer day. There was plenty of economic data to digest, which once again was a bit mixed with inflation tame and consumer confidence up, but retail sales a bit below expectations. We wouldn’t be surprised to see stocks remain a bit sluggish to close out the summer with earnings season winding down and uncertainty abound. However, we remain bullish with attractive valuations abounding and the return potential from other investments like Treasuries looking limited.
Stocks ended lower on the day, with the Dow off -17 points to 10,303. The S&P dipped -4 points to 1,079, while the Nasdaq fell -17 points to 2,173. Oil edged down -35 cents to $75.39 a barrel, while gold edged up 10 cents to $1,214.90 an ounce.
It was a busy day on the economic front. The University of Michigan reported that its monthly consumer sentiment index rose to 69.6 in August from 67.8 in July. The reading was slightly ahead of the 69.3 median economist forecast, but lackluster July retail sales numbers put a damper on the news. The Commerce Department reported that retail sales rose by 0.4% last month, but the gain was largely attributable to car dealers and gas stations, providing little indication of improvement in the broad retail space. The increase was -10 basis points (bps) under economist expectations for a 0.5% increase. Meanwhile, the Consumer Price Index rose 0.3% in July, and the core CPI, which excludes the food and energy sectors, was up by 0.1%, both in line with expectations.
In earnings news, department store J.C Penney (JCP) slipped by -4.7% after the firm’s outlook came in below expectations. The retailer expects current-quarter EPS in the range of 16-20 cents, and full-year EPS in the range of $1.40-$1.50, both under analysts’ 24-cent and $1.54 consensus for the respective periods. In the second quarter ended July 31st, the company earned $14 million, or 6 cents per share, compared to a loss of -$1 million in the same period last year, during which the firm broke even on a per-share basis. Revenue slipped by -0.1% to $3.94 billion. Analysts were expecting a nickel in EPS for the period on $4.0 billion in revenue. At the end of the first quarter, five Pros held J.C. Penney among their top-15 U.S.-listed equity bets. As of this writing, 180 tickerspy members had the stock in their portfolios.
Computer graphics chipmaker Nvidia (NVDA) jumped by 4.8% after Rambus (RMBS) granted the firm a patent license at a 1% royalty rate for SDR memory controllers and a 2% royalty rate for other memory controllers. The companies have been tied up in tech patent litigation for over two years, and while court battles may continue, the announcement served to divert investor attention from Nvidia’s relatively ugly second-quarter earnings.
Nvidia recorded a loss of -$141 million, or -25 cents per share, in Q2, compared to a loss of -$105.3 million, or -19 cents per share, a year ago. Excluding one-time items, adjusted EPS came to 3 cents per share, well below analysts’ 11-cent consensus. Revenue was up nearly 5% for the period to $811.2 million, which was also below analysts’ $832 million expectations. Nvidia expects revenue to increase by between 3-5% sequentially in the third quarter, which would equate to between $836-$852 million. Analysts were looking for sales of $884 million in the third quarter.
Engineering software maker Autodesk (ADSK) rose by 2.4% to end the week after topping Wall Street’s expectations in the second quarter ended July 31st. The company posted net income of $59.9 million, or 25 cents per share, up from $10.5 million, or 5 cents per share, in Q2 2009. After excluding certain items, adjusted EPS came to 36 cents versus the 27-cent analyst consensus. Revenue was up 14% to $472.8 million, also topping the Street’s $459.0 million expectations. Autodesk forecast adjusted net income per share of between 28-33 cents on revenue of between $450-$475 million for the current quarter. Analysts were looking for Q3 EPS of 30 cents on $464 million in sales.
In M&A news, private equity firm The Blackstone Group (BX) will buy Texas-based electric energy play Dynegy (DYN) for $4.7 billion (including the assumption of debt), or $4.50 per share, a 62% premium to Thursday’s closing value. Blackstone will then sell four of Dynegy’s natural gas assets to NRG Energy (NRG) for $1.36 billion. Dynegy shares soared by 63.0% on the news, while Blackstone slipped by -3.5%. According to the terms of the deal, Dynegy has a 40-day window to solicit other bids. Assuming the Blackstone deal comes to fruition, it is expected to close by the end of 2010. Six Pros counted Dynegy shares among their top-15 U.S.-listed equity positions at the end of the first quarter, and 212 tickerspy members currently hold the stock in their portfolios.
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