Stocks Finish Mixed After Housing Starts, FOMC (AZO, FDS, CAG, CCL, TTPA)
Stocks largely took a pause after yesterday’s nice rally, although the Fed’s comments that it would take further steps to help the economy if needed helped the markets finish mixed. We continue to expect a gradual economic recovery with the jobs market slowly improving. With stocks inexpensive, companies operating extremely efficiently, and many large corporations underleveraged, though, we think this will be enough to pull the market higher.
The major market indices ended the day mixed, with the Dow the sole gainer up 7 points to 10,761. The S&P lost -3 points to 1,140, while the Nasdaq dropped -6 points to 2,349. Oil fell -$1.34 to $73.52 a barrel, while gold dipped -$6.60 to $1,272.40 an ounce.
On the economic front, the Commerce Department said that home construction increased by 10.5% in August to an annual rate of 598,000. Housing starts in the condominium and apartment segment spiked by 32%, compared to a 4% rise for single-family homes, which accounted for 73% of the market in August. Building permit applications grew by nearly 2% to an annual rate of 569,000. Additionally, the FOMC left the federal funds rate at 0.00 to 0.25%, in line with Wall Street’s expectations. The committee noted that the pace of the economic recovery will likely remain modest in the near term, and that conditions will likely warrant “exceptionally low levels for the federal funds rate for an extended period.”
In earnings news, AutoZone (AZO) slipped by -1.4% on the day after reporting its results for the fiscal fourth quarter ended August 28th. The company earned $268.9 million, or $5.66 per share, for the period, compared to $236.1 million, or $4.43 per share, a year ago. Revenue rose by 10% to $2.45 billion. Analysts were looking for $5.44 in EPS on $2.4 billion in revenue, and the company’s EPS increase was impacted by a 2.8-million share buyback. At the end of the second quarter, 20 Pros counted AutoZone among their top-15 U.S.-listed equity positions, and 129 tickerspy members currently hold the stock in their portfolios.
FactSet Research (FDS) added 0.6% after announcing an 8% increase in fiscal fourth-quarter net income. The company posted profits of $39.3 million, or 83 cents per share, for the three months ended August 31st, compared to $36.3 million, or 74 cents per share, in the same period last year. Revenue also rose by 8% to $168.2 million. Excluding a penny per share in tax benefits, adjusted EPS came to 82 cents per share, beating analysts’ 80-cent consensus, as well as the firm’s 78-80 cent guidance. For the fiscal first quarter, FactSet is expecting net income in the range of 83-85 cents per share.
ConAgra Foods (CAG) slipped by -3.6% after missing profit expectations in the fiscal first quarter ended August 29th. The company earned $146.4 million, or 33 cents per share, for the quarter, compared to $165.9 million, or 37 cents per share, in the year-ago period. Excluding certain items, adjusted EPS came to 34 cents per share, missing analyst consensus by a nickel. Net sales dropped by -2% year over year to $2.82 billion, also missing the Street’s $2.96 billion expectations. ConAgra hiked its dividend by 15% and expects full-year earnings growth of between 8-10%. Ten asset managers held ConAgra among their top-15 U.S.-listed equity positions at the end of Q2, and 242 tickerspy members currently hold the stock in their portfolios.
In the travel segment, cruise line operator Carnival (CCL) gained 1.4% after reporting solid summer numbers in its fiscal third-quarter ended August 31st. For the quarter, the company recorded profits of $1.3 billion, or $1.62 per share, compared to $1.07 billion, or $1.33 per share, in the same period last year. Analysts were looking for $1.47 in EPS. Revenue was up 7% to $4.43 billion, in line with Wall Street’s expectations. As for the full year 2010, the company hiked its net income guidance to between $2.48-$2.52 per share from the prior outlook of between $2.25-$2.35 per share. Analysts were forecasting $2.36 in 2010 EPS.
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