Stock Market Predictions

Lululemon profit and forecast robust, shares rise

Stock Market Predictions

Shares in the company ended up 4.89 percent at C$88.00 in Toronto and up 4.41 percent at $89.94 in New York, standing out amid declines of more than 1 percent in both markets.

Vancouver-based Lululemon warned last quarter that it did not have enough product to meet strong demand for its trendy apparel, which now includes running and cycling gear, and that could limit growth in its fiscal first quarter.

But earnings per share came in 8 cents higher than analysts had forecast.

"I'm not surprised that they had a great quarter because our checks had been very, very positive," said Jennifer Milan, an analyst at Sterne, Agee & Leach. "But I was surprised at the level of the beat, given the fact that they've had inventory constraints for much of the quarter."

Inventories hit a low point toward the end of February, but arrangements for early delivery in April helped boost sales, Chief Financial Officer John Currie said in a call with analysts.

Comparable stores sales rose 16 percent in the first quarter. Currie said sales would have been up around 20 percent with more robust inventories.

Net income in the quarter to May 1 rose to $33.4 million, or 46 cents a share, up from a year-earlier profit of $19.6 million, or 27 cents a share.

Analysts on average had forecast earnings of 38 cents a share, according to Thomson Global Markets I/B/E/S. The company has consistently beaten earnings expectations, helping its shares more than double in value over the past year.

Revenue for the company, which has stores in Canada, the United States and Australia, surged 35.1 percent to $186.8 million.

Gross profit rose 48 percent to $109.7 million.

OUTLOOK STRENGTHENED

Lululemon forecast second-quarter earnings of 42 cents to 44 cents a share on revenues of $200 million to $205 million. For the full-year it forecast earnings of $2.10 to $2.16 a share, on revenue of $915 million to $930 million.

Last quarter, the company said it expected full-year net revenue of $885 million to $900 million and full-year earnings of $1.90 to $2.00 a share.

Analysts had forecast a profit of 40 cents a share in the second quarter, and $2.04 a share for the year.

"There had been some concern that sourcing costs would prove to be more aggressive than they initially thought, and they haven't been," said Sharon Zackfia, an analyst at William Blair & Company.

The revised forecast reflects the upside in the first quarter, which points to expectations by the company that input costs will remain in check, she said.

Lululemon has carved out a lucrative niche market and has become one of the few Canadian retailers that has successfully entered the U.S. market.

"This is a very, very early-stage growth company," Milan said. "They have extreme brand loyalty and given the fact that they've been inventory constrained, I don't think that we've really seen what true demand is for this company yet."

The retailer ended the quarter with 142 stores, compared to 128 a year earlier. It opened three stores in the United States and one in Australia. The company also opened an Ivivva store, aimed at the youth market, in Canada.

It plans to open six Lululemon stores in the United States and one in Australia in the current quarter.

The company also has community-oriented showrooms that offer fitness classes and incorporate local events.

Lululemon's growth has not gone unnoticed by other retailers, and long-established brands like Nike (NKE.N), Adidas (ADSGn.DE), Limited Brands Inc (LTD.N)-owned Victoria's Secret, and Gap Inc (GPS.N) have been stepping up the competition.

($1=$0.98 Canadian)

(Additional reporting by Euan Rocha and Julie Gordon; editing by Peter Galloway)

Harbin CEO backs $750 million buyout offer, shares rise

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Shares of the company rose 10 percent to a high of $17 on Friday on Nasdaq, but were still much below the offer price of $24 a share, indicating investor skepticism.

CEO Tianfu Yang made the offer in last October but is yet to make a formal bid.

The recent stream of bad news involving Chinese companies listed on U.S. exchanges could also be weighing on Harbin's stock, which has dropped 38 percent since the offer.

Shares of several U.S.-listed Chinese companies, including Longtop Financial Technologies (LFT.N) and China Electric Motor Inc (CELM.O), were hammered over issues ranging from regulatory probes to potential accounting frauds.

Harbin's statement comes a day after Citron Research raised doubts about a $400 million credit agreement between Yang and China Development Bank to finance the buyout.

Citron said the agreement, revealed by Harbin earlier on Thursday, did not mention anything about a collateral for the credit facility and that the loan depended on personal guarantees.

However, Maxim Group's analyst Echo He said the agreement was a significant step forward for the leveraged buyout.

"We have learned that the loan is collateralized by Harbin's entire asset or equity ownership," analyst He said in a note.

Yang, Abax and their respective affiliates collectively own about 40.72 percent of Harbin's shares.

CEO Yang had first made the offer to take the company private with Baring Private Equity Partners.

Soon after, Baring backed out as a buyout partner and said it would help with the financing, and this May, Yang teamed up with Abax Global Capital.

Harbin said a special committee of its board has been formed to evaluate the proposal.

High-growth U.S.-listed Chinese companies have been exploring the option of going private and relisting in Asia to get better valuations.

Harbin shares were trading up 5 percent at $16.29.

(Reporting by Divya Sharma in Bangalore; Editing by Don Sebastian and Saumyadeb Chakrabarty)

China stocks fall again, Sina among most traded

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Of the top percentage losers on both the New York Stock Exchange and Nasdaq on Thursday, about half of the issues with share prices over $2 were Chinese companies. The selloff comes amid increasing investor caution following a rash of delistings and accounting scandals.

Interactive Brokers Group Inc (IBKR.O), citing "elevated risk concerns," recently barred its clients from borrowing money to take leveraged positions in more than 150 Chinese securities. That announcement sparked a broad selloff in Chinese shares on Wednesday, including those that weren't listed by the broker.

Thomas Peterffy, Interactive's chief executive, told Global Markets the group was selected for its increased volatility and said he hoped the new rules would prompt the Chinese to toughen accounting standards.

One of the most actively traded Chinese stocks on Thursday was Sina Corp (SINA.O), whose Frankfurt-listed shares were among those named by Interactive. The stock fell 3.8 percent to $92.84 on volume that was more than three times its 50-day average. Taomee Holdings Ltd (TAOM.N), which operates a web site for children, dropped 5.6 percent to $8.50 in its trading debut.

Overall option volume in Sina was three times average daily levels with about 54,000 puts and 53,000 calls traded by late afternoon on Thursday, according to options analytics firm Trade Alert.

"People are buying puts as the stock is getting crushed," said Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com. The new broker rules are "essentially... restricting investors from borrowing money to take leveraged positions in the shares."

"There is heightened risk concern which has led to a recent sell-off in the Chinese stocks, notably Sina," he said. "As a result, we are seeing bearish option activity in Sina, particularly in the front month June 80 and 90 strike puts."

Charles Schwab Corp (SCHW.N) on Thursday also said it had recently adjusted maintenance requirements for "many" Chinese stocks.

Sina's selloff extend recent weakness for the Shanghai-based online media company, which is down more than 20 percent so far this month. Over the past year, however, it has been a momentum favorite to the upside, with gains of more than 150 percent over the past 52 weeks.

In a Thursday filing with the U.S. Securities and Exchange Commission, the company disclosed a prepaid variable share forward sale transaction between New-Wave Investment Holding Co and Goldman Sachs Financial Markets, L.P. in which Goldman may sell up to 1,250,000 shares in Sina.

New Wave is controlled by Sina's president and chief executive, Charles Chao, and owns 8.5 percent of Sina's shares outstanding, according to Thomson Global Markets data.

The stake makes New Wave the second-largest shareholder in Sina, behind the 9.2 percent stake owned by Fidelity Management & Research Company and just ahead of the 7.7 percent stake owned by T. Rowe Price Associates Inc.

(Additional reporting by Doris Frankel; Editing by Leslie Adler)

Viterra profit jumps 80 percent on big Australia crop

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Canada's biggest grain handler said record-high crop shipments from South Australia boosted earnings even as wet weather delayed planting in Western Canada and hurt sales of farm products like seed and chemicals.

Viterra's Australia crop-handling network of elevators and port terminals has given the company a geographic hedge against weather-related crop problems in Canada since it acquired the former ABB Grain in 2009.

"From a strategic perspective, our geographic diversification has delivered to expectations," said CEO Mayo Schmidt.

Regina, Saskatchewan-based Viterra said it had achieved its forecast C$30 million ($30.6 million) in synergies from the takeover six months ahead of schedule.

The company reported a net profit of C$33.1 million ($33.8 million), or 9 Canadian cents a share, for the second quarter ended on April 30, up from C$18.4 million, or 5 Canadian cents a share, a year earlier.

Revenue rose 33 percent to C$2.70 billion.

Analysts had expected earnings of 17 Canadian cents a share and revenue of C$2.3 billion, according to Thomson Global Markets I/B/E/S.

Viterra also declared a semiannual cash dividend of 5 Canadian cents per share, payable July 28. The company's dividend rate is currently 10 Canadian cents per year.

(Reporting by Rod Nickel in Winnipeg and Aftab Ahmed in Bangalore; Editing by Savio D'Souza and Lisa Von Ahn)

Family Dollar up as Ackman's Pershing raises stake

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Shares of Family Dollar, which caters to low-income shoppers with a variety of household goods and food, climbed 3.5 percent to $53.29, outpacing a broad market increase. The shares rose just 3.6 percent since the beginning of the year through Wednesday.

Pershing Square now holds 10.87 million shares, or 8.9 percent of the company's stock, according to the filing with the U.S. Securities and Exchange Commission. The firm held close to 5.8 million shares, or 4.7 percent of Family Dollar's shares, as of March 31, according to Thomson Global Markets data.

Two weeks ago at the Ira Sohn Investment Conference, Ackman said that Family Dollar could become an attractive leveraged buyout candidate. Other hedge funds have also bought the stock this year.

(Reporting by Jessica Wohl, additional reporting by Phil Wahba in New York; Editing by Bernard Orr)

Travelers to post loss, slow buybacks after storms

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The company also warned of worst-case-scenario industry losses on the recent tornadoes in the United States. Travelers is the second major property insurer, after Allstate Corp (ALL.N), to warn of at least $1 billion in second-quarter catastrophe losses from the series of deadly twisters.

Two companies losing nearly $2.5 billion in less than two months is especially noteworthy, since the entire insurance industry lost $13.6 billion to U.S. catastrophes in all of 2010.

Travelers' and Allstate's peers are likely to experience much of the same. MetLife (MET.N) said late Friday its auto and home insurance business lost as much as $153 million more than expected in April and May.

Travelers shares closed 3.1 percent lower, making them one of the biggest drags on the Dow Jones industrial average .DJI and the second-biggest decliner among S&P insurance shares.

Yet one analyst said there was a silver lining in all the catastrophes that could benefit the company.

"We think the record level of worldwide catastrophe losses will provide a catalyst for firmer insurance rates, and see (Travelers) well positioned to leverage that trend," said Standard & Poor's equity analyst Cathy Seifert in a research note, maintaining a "strong buy" rating on the company.

BUYBACKS AT RISK

The global insurance industry has had an unprecedented start to the year. Even without a major hurricane having made landfall, insurers are on track to post their largest catastrophe losses ever, due largely to earthquakes in Japan and New Zealand and a series of once-in-a-century tornadoes.

Analysts have said buyback programs across the industry were at risk, after years of heavy share repurchases that were driven by limited catastrophe losses and few other good options to deploy growing cash piles.

Analysts polled by Thomson Global Markets I/B/E/S had on average expected Travelers to earn $1.29 per share on an operating basis this quarter. Since late April, eight analysts have cut their second-quarter estimates, according to Thomson Global Markets data, but all of them still expected a profit.

As of Friday, none of the 18 analysts reporting earnings estimates on the company had expected it to lose money this quarter. Travelers has beaten Wall Street's average earnings estimate by at least 20 cents per share for the last three quarters in a row.

$1 BILLION LOSS

The difference this time is the weather. Travelers said Friday that its after-tax catastrophe losses for April and May were likely to be between $1 billion and $1.05 billion.

That is double what the company said it would expect to lose for all catastrophes in an average year, based on its long-term modeling.

As a result, the company will buy back less than $250 million in stock in the second quarter. In the first quarter, repurchases topped $1.1 billion.

In the second half of the year, Travelers said repurchases would be about $400 million in excess of operating income. As of late January, the company's total authorization for repurchases was $6.5 billion.

Travelers shares closed down $1.87 at $59.21. At those levels the stock was at its lowest point in nearly two months.

(Reporting by Ben Berkowitz; editing by John Wallace, Dave Zimmerman, Gary Hill)

Toyota forecasts 35 percent profit slide after quake

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Toyota has struggled to restore output after a massive 9.0 earthquake in March rocked northeastern Japan and forced automakers to slash output. The ensuing nuclear disaster and power shortages have compounded their woes.

The production disruption will likely see Toyota lose its title as the world's largest automaker this year.

"This is probably another conservative estimate from Toyota, but it's predicting a loss in the fiscal first half so we can tell how serious the damage from the earthquake was," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo, adding that shares in the company may fall on Monday.

Toyota reiterated its plan to restore output to pre-quake levels by November, helped by a recovery in the supply chain for key parts, and expressed confidence it could claw back market share lost as a result of the quake.

In an encouraging sign for automakers, chipmaker Renesas Electronics Corp said on Friday it now expected to restore supply capacity lost due to quake damage by the end of September, one month earlier than previously planned.

Renesas, the world's biggest maker of microcontrollers, had become one of the biggest bottlenecks in the automotive supply chain that forced car firms to curb production.

"Once our product supply is back to normal, we can compete with no problem. We have the resources and are fully charged," Toyota Chief Financial Officer Satoshi Ozawa said at a briefing in Tokyo.

But Ozawa warned that Toyota was getting hammered by the strong yen and called on the Japanese government to take action to rein it in.

The Japanese currency hit a one-month high against the dollar this week and is now about 5 yen stronger than the 85 per dollar level that Toyota sees as the break-even point for profiting on production in Japan.

STRUCTURAL WEAKNESS

Toyota said it expects operating profit to fall 35 percent to 300 billion yen ($3.7 billion) in the financial year to March 2012, well short of the consensus for a 434 billion yen profit in a poll of 23 forecasts by Thomson Global Markets I/B/E/S.

The forecast, which the company would have announced in May along with its annual results if not for the earthquake, incorporates a 100 billion yen negative impact from the strong yen.

"Structural weakness remains for Toyota, as it has a higher portion of domestic production than Honda and Nissan, which makes it vulnerable to the yen's strength," said Park Sang-Won, an analyst at Eugene Investment & Securities in Seoul.

Toyota forecast global sales would fall 1 percent to 7.24 million vehicles in the year to March. The figures include sales at truck maker Hino Motors Ltd and compact car maker Daihatsu Motor Co.

The drop is expected to place Toyota behind General Motors and possibly Volkswagen AG in the global vehicle sales rankings this year, and reflects a loss of share to smaller rivals such as South Korea's Hyundai Motor Co, which has been nipping at its heels for years.

Toyota played down the possibility.

"We don't see it as necessary to be the largest automaker in the world," Ozawa said. "The most important thing is creating a stable business base."

Toyota said on Friday it expects the dollar to average 82 yen in the current financial year to next March 31, against an average currency rate of 86 yen per dollar last year.

The yen's persistent strength has raised questions about the rationale of Toyota's commitment to producing at least 3 million cars in Japan each year.

Ozawa said it was possible that Toyota President Akio Toyoda was rethinking his position.

"We are in a situation where it's becoming impossible for Japan's manufacturing industry to do business," Ozawa said.

"Our president has been saying that he would never want to see Japan's manufacturing fading from view, but he also said recently that he was unable to respond when someone made the comment that Toyota's production should not be handled only in Japan."

Toyota's shares have fallen 7.5 percent since the disaster, underperforming the benchmark Nikkei 225 average, which has lost 6.5 percent. Its shares on Friday rose 0.9 percent to close at 3,300 yen before the company released the profit forecast.

(Editing by Matt Driskill and Edmund Klamann)

Smucker expects strong 2012 sales despite price hikes

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Smucker, which licenses the Dunkin' Donuts brand and also sells Millstone coffee, has raised prices of its packaged coffee by more than a third since last May. Arabica coffee futures in New York have roughly doubled in the same time.

The diversified food maker, however, has not moved as intensely as chief rival Kraft Foods' (KFT.N) Maxwell House, which has raised prices by roughly 56 percent since May 2010. Price increases by Starbucks (SBUX.O) have been smaller and less frequent.

Over the past two quarters, Smucker -- which derives nearly half of its sales from coffee -- also increased prices of its frosting, flours and oils products.

Orrville, Ohio-based Smucker expects higher prices and its recent acquisition of espresso coffee firm Rowland Coffee Roasters to result in a net sales rise of 20 percent in fiscal 2012. This implies sales of about $5.8 billion for the year, well above analysts' estimate of $5.16 billion.

However, Smucker, which has a market value of over $9 billion, forecast a 25 percent rise in 2012 cost of products.

As a result, despite the strong sales forecast, the company expects a fiscal 2012 profit largely within analysts' estimates.

"While the EPS guidance range for fiscal 2012 is wider than usual, a number of discrete items, such as lapping of a charge, buybacks and (Rowland) deal accretion is enough to get the company to the high end of the range with modest core business growth," Barclays Capital analyst Andrew Lazar said in a client note.

Demand rose for the company's popular brands Folgers, Jif and Pillsbury in the fourth quarter, helping the company beat analysts' estimates. Overall volumes were up 2 percent in the quarter.

"Investors might have expected a bigger beat given very strong sell-through trends on coffee in the quarter, but guidance (especially on the top-line) should be viewed positively," RBC Capital Markets analyst Edward Aaron said.

Higher costs of inputs such as green coffee and transportation expenses pulled down Smucker's quarterly gross margins to 35.5 percent from 40.2 percent in the year-ago period.

The company reported a fourth-quarter profit of $94.9 million, or 82 cents a share, compared with $120.6 million, or $1.01 a share, a year ago.

Excluding items, it earned $1.00 a share, compared with analysts' average estimate of 99 cents a share, according to Thomson Global Markets I/B/E/S.

Shares of the company, which have risen about 16 percent this year, were up 2 percent at $77.61 on Thursday afternoon on the New York Stock Exchange.

(Reporting by Mihir Dalal in Bangalore; Editing by Saumyadeb Chakrabarty)

Nintendo president puzzled by investor reaction to Wii U

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Shares in Nintendo fell almost 10 percent in the two days following the company's splashy presentation of the Wii U, which features a tablet-style controller and high-definition graphics, and goes on sale next year.

"Honestly speaking, the reaction to (Tuesday's) presentation and what I heard from people I met and the mood of the convention did not chime at all with what happened in the stock market," Iwata said in an interview at the E3 games show in Los Angeles on Wednesday. "It's very strange."

But he added that the reaction reminded him of the mixed reaction to the original Wii in 2006 and that it showed that those who had not experienced the new gadget did not fully understand its potential.

"In the end, it is easy to get the mistaken impression that this is just a game console with a tablet," he said. "People who came to the presentation and tried it out have understood very well that it opens up a lot of new possibilities. But people who have not tried it will find it hard to believe that this controller will change things."

In the year following the launch of the first Wii in November 2006, shares in Nintendo tripled but have since given up all those gains. The stock was down 0.6 percent at 16,080 yen on Friday.

Nintendo is emphasizing its plans for the Wii U to bring together the casual gamers who bought the Wii and the more dedicated "core" gamers who tend to prefer rival Sony's Playstation or Microsoft's Xbox.

"At the moment, there is a barrier between the Wii, which is seen as for casual users and the other companies' consoles, which are seen as for core gamers. We are questioning whether that barrier needs to be there," said Iwata.

To that end, Nintendo worked hard on winning over the third-party game developers favored by serious gamers, who failed to back the Wii.

At E3 this week, both Electronic Arts Inc, known for its sports titles, and Activision Blizzard, the owners of the Call of duty shooter franchise, voiced strong support for the Wii U.

(Reporting by Liana Baker and Isabel Reynolds; Editing by Lincoln Feast)

Hynix shares tumble on new share sale concerns

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Top shareholders of the company plan to launch the sale of their $2.9 billion stake on June 21 and a source with direct knowledge of the auction told Global Markets that they would seek to offer 20 percent of the firm including new share issues.

The shareholders had yet to decide how to break down the portion of existing shares and new share sales, said the source, who declined to be named as a final decision is yet to be made.

Hynix told the stock exchange on Friday it has no plans to issue new shares, but one of its top shareholders reiterated that they were keeping the option open to give potential buyers more choices.

"Our principle is selling a 15 percent stake (held by creditors-turned-shareholders) but we'll consider offering new Hynix shares as well," Ryu Jae-han, chief executive of Korea Finance Corp, a major Hynix shareholder, told reporters.

Selling new shares would give Hynix much-needed cash to upgrade its production facilities and better compete with sector leader Samsung Electronics Co (005930.KS) in a notoriously cyclical industry that requires massive capital investment, but some investors are concerned about diluted earnings.

"Some institutional investors are dumping Hynix shares, fearing new share issue will dilute its earnings per share," said Kim Sung-in, an analyst at Kiwoom Securities.

Ryu said creditors were seeking to launch the Hynix sale on June 21 to take preliminary bids in early July, with the deal likely to close between October and November.

Creditors will consider extending the schedule or relaunching the auction should the deal lure only one bidder.

The latest sales attempt is the third auction in as many years. Previous bids failed to attract strong interest as many fear exposure to the cyclical computer memory chip industry.

So far, Hyundai Heavy Industries (009540.KS), the world's top shipbuilder, is the sole potential bidder interested in the auction.

Hynix shares closed down 7 percent on Friday, after falling as much as 8.2 percent, versus the wider market's .KS11 1.2 percent fall.

(Reporting by Ju-min Park and Miyoung Kim; Editing by Jonathan Hopfner and Vinu Pilakkott)