RB's "Market Notes" - Corn +40%, Burberry Hurts Luxury Retail, Viacom Leaves DirectTv, Apple Gonna Miss & More

By: Rob Black - Wed, 11 Jul 2012 12:26:39 -0800

Loser:  Earnings Season Not Starting Well
Winner:  Markets Await the Fed Reserves Notes
Winner:  U.S. Corn-Crop Forecast Cut
Loser:  Burberry Leads Luxury Stocks Lower
Loser: Viacom Pulls MTV & Comedy Central From DirectTv
Winner: Apple: Headed For Earnings Miss?
Winner:  Lionsgate’s ‘The Hunger Games’ Finale Gets Split In Two
Winner: Amazon Testing Smartphone?
Winner:  DreamWorks Building Indoor Theme Park


Loser:  Earnings Season Not Starting Well

Dow set to have its 5th down day in a row

Engine maker Cummins and semiconductor equipment maker Applied Materials warned of weaker than expected earnings as weakness developed late in the quarter.

There have only been a few companies reporting earnings so far, and most have been small companies. Nevertheless, the number reporting earnings below estimates is startling.

Of the 13 companies that have reported, and 10 have posted earnings below the average analyst forecast. Typically, close to 65% of companies will beat forecasts.

Again, these are small companies and not too much should be read into the limited data. Nevertheless, earnings season is off to a very poor start.

Winner:  Markets Await the Fed Reserves Notes

At 2:00 ET, the minutes from the June Fed meeting will be released.

 The minutes will be scrutinized for any hint of a leaning towards implementing another round of quantitative easing (Fed buying bonds to increase money supply).

Quantitative easing is widely seen as supportive to stock prices.

There is a chance that the Fed minutes boost stock prices, but otherwise the market's anxiety over the heavy slate of earnings due the next few weeks is likely to weigh on sentiment in the days ahead.


Winner:  U.S. Corn-Crop Forecast Cut (Corn +40% Since June . . Loser Consumers)

The U.S. cut its corn-harvest estimate 12 percent and said inventories next year will be smaller than forecast in June as the worst Midwest drought since 1988 erodes prospects for a record crop.

Farmers will harvest 12.97 billion bushels, down from a June prediction of 14.79 billion.

Corn prices through yesterday surged 42 percent since mid-June as areas of moderate to extreme drought expanded to 53 percent of the Midwest.

Tighter supplies than expected may boost costs for ethanol makers including Archer Daniels Midland and meat producer Smithfield Foods.

Prices have rallied in the past week as a record heat wave blanketed the Midwest just as 50 percent of the crop was trying to pollinate. About 40 percent of the crop was in good or excellent condition as of July 8, down from 77 percent on May 18, government data show.

World output in the crop year that begins Oct. 1 will be 905.23 million tons, down from 949.93 million forecast in June.

Global inventories on Oct. 1, 2013, will total 134.09 million tons, down from 155.74 million forecast in June and 129.37 million projected for the end of this marketing year.


Loser:  Burberry Leads Luxury Stocks Lower

Burberry, led luxury-goods stocks lower after reporting sales that missed analysts’ estimates for a second straight quarter, fueling concern that Europes’s debt crisis and slowing growth in China are finally taking a toll on high-end demand.

Burberry is  the U.K.’s largest luxury company.  

Cie Financiere Richemont (Cartier Jewelry), LVMH Moet Hennessy Louis Vitton, Tifanny, and Coach all lower.

There is a slowdown in the broader global economy and as luxury is cyclical, this slowdown is starting to appear in the luxury-goods quarterly reports.

Oddly it is positive that sales increased 11 percent to 408 million pounds ($634 million),.

Loser: DirecTV Customers Lose Viacom Channels as Fee Talks Fail
 

Viacom’s 26 channels, including MTV, Nickelodeon and Comedy Central, went dark for almost 20 million DirecTV subscribers just before midnight as the companies failed to reach a new programming fee agreement.

Viacom said that its programs amount to 20 percent of the audience at DirecTV.

DirecTV cited falling ratings at Viacom’s channels.

Direct TV  said Viacom demanded a 30 percent increase in fees over the term of a new contract, amounting to more than $1 billion in additional costs.

Viacom said its fees account for less than 5 percent of the satellite service’s programming expenses.
The standoff marks the latest fee tussle between a pay-TV provider and program supplier.

Such fights have blacked out millions of subscribers in recent years, including 14 million Dish Network customers who lost access to AMC Networks last month. 

 Viacom stock has gained 3.2 percent this year.

 DirecTV has climbed 14 percent this year.

Winner: Apple: Headed For Earnings Miss?
 

Some Apple analysts are getting a little worried that the company may slightly miss Street expectations when it reports fiscal third quarter results on July 24.

Mizuho Securities analyst Abhey Lamba asserts in a research note that the company “has already started experiencing a slowdown due to the impending iPhone 5 launch.”

For the quarter, he thinks the company will report revenue in the $36.5 billion to $37.5 billion range, below the consensus at $37.6 billion.

He also thinks that September quarter guidance will be below consensus.

“Although Apple experienced strong momentum in iPad sales which should benefit from increased distribution of the new iPad, inventory build-up and lack of competition, our checks indicate that the company has started to experience slowdown ahead of the expected launch of the iPhone 5,” he writes. “We expect the company to ship around 27 million iPhones vs. consensus of ~29-30 million devices.
 
Consensus for iPhones needs to move lower while there is upside to consensus iPad forecast,” he says.
 
Despite his short-term concerns, Lamba maintains a Buy rating and $725 target on the stock.

Winner:  Lionsgate’s Hunger Games Being Split into Two

As expected, the final installment of “The Hunger Games” is getting split into two films.
 
That’s the same strategy employed by the final films in the Harry Potter series and the Twilight franchise; the coming “The Hobbit” book adaptation is also being divided into two movies.

The first film grossing more than $678 million worldwide.
 
 Lionsgate owns a library of more than 1,300 movie and TV titles that it distributes

Lionsgate also owns the lucrative Twilight series of movies.
 
Winner: Amazon Testing Smartphone?

The Wall Street Journal reports that the company is working with Asian component suppliers on testing a smartphone, citing “people familiar with the situation.”

Officials at some Amazon parts suppliers say the company could begin mass production of a phone late this year or early in 2013.

According to the report, Amazon is testing a smartphone with a screen of between 4 and 5 inches, which would be consistent with most other Android-based smartphones.

The story does not specifically say that the device would be Android-based, but it would be the logical conclusion given that Amazon uses a version of Android for its Kindle Fire tablet.

Winner:  DreamWorks Building Indoor Theme Park

DreamWorks has reached an agreement with the developer Triple Five to build an indoor theme part at the company’s American Dram complex in the Meadowlands in New Jersey.

The theme part will feature characters from DreamWorks films, including Shrek, How to Train Your Dragon, Kung Fu Panda, Puss in Boots and Madagascar.

American Dream overall will have nearly 1.7 million square feet of retail space, along with a water park, an ice skating rink, and indoor ski part and theaters.
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