Stock Market Predictions

Coca-Cola to raise prices in July

Stock Market Predictions

News of the increases -- to be implemented on July 31 -- was first reported by industry newsletter Beverage Digest, which quoted retail customer pricing letters as saying the increases were due to higher-than-anticipated commodity costs.

Like many food and drink companies, Coca-Cola is facing higher costs for goods like corn, oil and packaging.

Coca-Cola, the world's largest soft drink maker, said earlier this year that it expected to raise prices in that range, but the timing was unknown.

Credit Suisse analyst Carlos Laboy said in a research note that there were concerns the company would wait until after Labor Day, at the end of the summer. That would make it more difficult for other soft drink makers, like PepsiCo Inc and Dr Pepper Snapple, to raise prices on their products during the key summer selling season.

"Today's news should provide some relief for all players in the industry in North America," Laboy wrote.

Beverage Digest reported earlier this month that Pepsi was notifying retailers of price increases of 3 percent to 5 percent between July 10 and around Labor Day.

Coke shares were up 0.2 percent at $65.09 in afternoon trade on the New York Stock Exchange. Pepsi shares were up 0.8 percent at $68.54.

(Reporting by Martinne Geller; editing by John Wallace)

Chipmaker Micron hit by weak PC sales, stock slumps

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Boise, Idaho-based Micron's stock had already slumped 25 percent since the end of April due to worries about lackluster PC sales and potential steep losses in an antitrust trial against Rambus (RMBS.O).

Micron's poor results on Thursday pushed its shares down 12.9 percent in after-hours trading and compounded negative sentiment in the tech sector after Oracle (ORCL.O) also posted quarterly profit that disappointed investors.

"We've all seen a softening of the desktop and notebook PC climate, partially offset by some growth around tablets," Mark Adams, Micron's vice president of worldwide sales, told analysts on a conference call. "At this point, it's hard for us to call too much further out in the future."

Micron Chief Executive Steve Appleton said inventories of DRAM chips used in personal computers were a bit higher than normal but that inventories of NAND chips -- used in tablets -- were tight.

Sales of PCs have grown at a slower pace than expected in recent quarters as some consumers worried about a tough economy hold off on large purchases and others choose Apple's (AAPL.O) iPad and other tablets over laptops.

This month, two prominent market research firms cut their forecasts for 2011 PC sales although PC chip giant Intel (INTC.O) said it was standing by its previous guidance for the quarter ending in June.

SHOCKING

Intel says developing countries like China are driving PC growth, but computers sold there often include fewer DRAM chips than models in the United States and Europe.

"Revenue is a bit shocking," said Avian Securities analyst Win Cramer of Micron's results. "Emerging market PC growth is good but they're not DRAM dependent."

Micron said revenue from DRAM chips was 7 percent lower in the third quarter compared to the previous quarter due to lower sales volume, a bad sign for competitors like Japan's Elpida (6665.T) and South Korea's Hynix (000660.KS).

Revenue from Micron's NAND chips, used in tablets, phones and other mobile devices, declined 5 percent, with prices down 5 percent.

"This market is jittery, worried about demand and macroeconomics," Stifel Nicolaus analyst Kevin Cassidy said of the after hours sell-off of Micron's stock.

He said that with Micron now trading below book value, he would continue to recommend the shares.

NAND and DRAM chips have long been commodities whose prices depend on supply and demand.

To reduce its exposure to market volatility, Micron is increasing its sales of specialty and high-end memory chips that go into solid-state drives and network equipment.

But as Micron's rivals also move into those niches, they in turn risk becoming commodities as well.

ANTITRUST UNCERTAINTY

Adding to uncertainty in the memory chip industry, a trial got underway on Monday in which Sunnyvale, California-based Rambus accuses Micron and Hynix of restricting the availability of memory chips using its technology starting in the 1990s in favor of chips with their own technology.

Rambus claims up to $4.38 billion but analysts say Micron's stock may have been punished too much since larger memory chipmaker Samsung (005930.KS) settled antitrust claims with Rambus last year for no more than $900 million.

Micron posted fiscal third-quarter revenue of $$2.139 billion, down from $2.288 billion in the year-ago period. Analysts on average expected revenue of $2.364 billion, according to Thomson Global Markets I/B/E/S.

Micron said its net profit was $75 million, or 7 cents a share in its fiscal third quarter, compared with $939 million, or 92 cents a share, a year earlier.

Shares of Micron were down to $7.34 in post-session trading after closing up 3.18 percent at $8.43 on Nasdaq.

(Reporting by Noel Randewich, editing by Bernard Orr)

Oracle hardware sales drop, shares fall

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Oracle's earnings came on the same day Micron Technology reported quarterly revenue below expectations, and the combination raised fears about how well the technology sector is holding up in the face of shaky economies, especially in Europe.

Tech investors pay attention to Oracle's earnings as its fiscal quarters are out of sync with most others and it is the first to give a glimpse of business conditions in the most recent months, in this case April and May.

Trip Chowdhry, an analyst with Global Equities Research, said Oracle's results suggest spending on technology has slowed down. "Any company that is in technology is going to get impacted," he said.

While Oracle's quarterly profit, excluding items, rose to 75 cents a share and surpassed expectations by nearly 6 percent, investors had hoped for a more impressive beat. Over the past six quarters Oracle has exceeded profit estimates by an average of 10 percent.

"Traditionally, in the fourth quarter they usually beat by a huge margin. This time they just managed just to beat," Chowdhry added.

Its fiscal fourth quarter revenue rose 13 percent from a year earlier to $10.8 billion, in line with the average analyst forecast of $10.75 billion.

The world's No. 3 software maker reported that fourth-quarter new software sales rose 19 percent from a year earlier to $3.7 billion. That beat its own forecasts of 4 percent to 14 percent growth. New sales, it said, should be up 10 percent to 20 percent in the first quarter.

Yet sales in its hardware division, which it acquired with its purchase of Sun Microsystems, dropped 6 percent to $1.2 billion.

"The story is the software side was decent, the licensing was decent but the hardware was disappointing," said Kevin Caron, a market strategist with Stifel, Nicolaus & Co.

During a conference call after the earnings release, analysts grilled Oracle executives on the drop in hardware sales.

President Safra Catz said that they fell because Oracle had walked away from deals that would have been unprofitable. "We'd just rather make money than make revenue," Catz said, adding with a sarcastic tone, "We're funny that way."

Oracle said it expected first quarter hardware revenue to be in the range of down 5 percent to up 5 percent.

Oracle shares fell 4 percent to $31.15 in extended trade, down from their Nasdaq close of $32.46.

They were down more than 6 percent prior to the conference call, during which the company issued its first-quarter forecasts.

It said it expects to post first quarter profit, excluding items, of 45 cents to 48 cents per share, in line with the average analyst forecast of 46 cents.

The company also forecast that non-GAAP revenue will rise between 9 and 12 percent from a year earlier to between $8.3 billion and $8.5 billion. Analysts were expecting revenue of $8.3 billion.

(Additional reporting by Bill Rigby, David Gaffen, Jennifer Saba and Liana B. Baker; Editing by Bernard Orr)

Accenture's results beat Street, shares rise

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Its shares rose 2.5 percent to $57.30 in after-market trading.

Accenture forecast earnings of $3.36 to $3.40 per share for the year, up from $3.22 to $3.30. The new outlook was on the high end of analysts' expectations of $3.27 to $3.44 per share.

The company's net income was 93 cents per share, which surpassed analysts' average estimate of 90 cents per share, according to Thomson-Global Markets I/B/E/S.

Accenture, which helps companies cut costs and improve operations through consulting, outsourcing and other services, said revenue rose 21 percent to $6.7 billion, from $5.5 billion a year earlier. Analysts were expecting revenue of $6.43 billion.

The company said its new bookings were $7.1 billion in the quarter, with $3.7 billion coming from consulting and $3.4 billion coming from outsourcing services.

Accenture strong results contrasted sharply with Oracle's on Thursday. Oracle Corp (ORCL.O) posted disappointing quarterly results that sparked concerns about a deeper-than-expected slowdown in technology spending.

(Reporting by Liana B. Baker; Editing by Andre Grenon and Steve Orlofsky)

KiOR shares flat in trading debut

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Shares were up marginally at $15.07 in early trade on Nasdaq.

Pasadena, Texas-based KiOR, which uses non-food biomass such as wood chips and switch grass to make crude oil, priced its offering of 10 million shares at $15 each.

It had earlier planned to sell the shares for $19 to $21 each.

KiOR becomes the latest company to see its IPO's success hurt amid uncertainties in the U.S. economy.

Earlier this week, Vanguard Health Systems (VHS.N) priced its IPO below its filed range, raising 18 percent less than expected while oil and gas equipment manufacturer Stewart & Stevenson LLC postponed its IPO.

KiOR has reported a loss every year since its inception in December 2007, and expects to continue posting losses, according to filings with the U.S. Securities and Exchange Commission.

(Reporting by Brenton Cordeiro and Tanya Agrawal in Bangalore; Editing by Joyjeet Das)

Alcoa wins $1 billion aluminum deal with Airbus

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The news sent Alcoa stock up almost 1.8 percent to $15.55 in early trading on the New York Stock Exchange on a day when the broader market fell. Later in the morning, the shares were up 8 cents to $15.36.

Alcoa said the deal with the European planemaker unit of EADS (EAD.PA) calls for Alcoa to provide aluminum sheet and plate using current and advanced-generation aluminum alloys, which are lighter and stronger than traditional metals and composites.

Terms of the agreement, reached this week at the Paris Air Show, were not disclosed, but Alcoa said the agreement has a value of about $1 billion over its life.

Alcoa's aluminum products will be used on most Airbus commercial aircraft, from short-range, single-aisle planes to long-haul jets, including the A380, the company said.

The aluminum, for fuselage panels and structural components as well as wing skins, will be supplied from plants in Davenport, Iowa; Kitts Green, England; and Belaya Kalitva, Russia.

Earlier this month, Alcoa announced it had developed a new generation of alloys and technologies it said could lower the weight of airliners by up to 10 percent and improve fuel efficiency even more.

"The alloys are mostly new and revolutionary for the industry," Eric Roegner, president of Alcoa's Forgings and Extrusions business, told Global Markets in an interview at the time.

He said that mixing aluminum with lithium produces a 7 percent improvement in density and results in significantly lighter products, but with the same strength and stiffness.

"Weight savings depend on where you put them on the plane, but can give you a 12 percent improvement in fuel efficiency." Roegner said.

Alcoa's Forgings and Extrusions business serves the structures market, including the company's aerospace sector, which has about $3 billion in annual revenues.

High oil prices have prompted aircraft makers to look for lighter metals and composites while retaining strength and durability. Alcoa was in the forefront of developing a first generation of lighter materials, but the new ones go way beyond that, the company says.

Alcoa's new aluminum- or aluminum-lithium based alloys and advanced structural technologies use sheet, plate, forgings and hard alloy extrusion products across aircraft structures, including airplane wings and fuselage elements.

The company says aircraft made from these materials can weigh up to 10 percent less than composite-intensive ones and allow for a 12 percent increase in fuel efficiency, on top of the 15 percent already gained from more efficient jet engines.

(Reporting by Steve James, editing by Gerald E. McCormick)

Stifel incentive stock plan still opposed by ISS

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Stifel had a setback on June 1 when shareholders did not approve a proposal to add 6 million shares to the company's incentive-stock program. Proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co had recommended investors oppose the plan, citing their cost to shareholders.

That prompted Stifel to adjourn voting on the proposal until Monday, giving St. Louis-based Stifel time to solicit support from investors. On Monday the bank announced an amended plan that reduced net additional shares by 3.38 million to about 2.63 million.

But ISS on Friday issued a proxy alert that recommended investors again vote down the plan, concluding it still benefits executives at the expense of shareholders.

"As amended, the estimated shareholder value transfer of the restated plan is approximately 57 percent, which continues to exceed the company-specific allowable cap of 20 percent," ISS wrote.

Stifel officials were not available to comment.

Investment banks and brokerages are unlike most public companies, in that a large portion of their income is paid out to employees.

Bonuses paid in shares, which can be substantial, force banks to buy back stock and contain total shares outstanding. Proxy firms like ISS scrutinize stock plans to measure their cost to investors and the rate at which they are paid out.

Stifel Chief Executive Ronald Kruszewski on Monday sent a letter to shareholders seeking their support on the proposal. An existing pool of stock, used as incentive compensation for employees, was running low on shares, he said.

"Our equity incentive plan is both a key element in our compensation structure and a critical tool for recruiting, rewarding, and retaining our employees," Kruszewski wrote.

Stifel's amended plan still requests 6 million new shares, but cancels a provision that would add 1.13 million shares in each of the final three years of a plan expiring in 2018.

The bank has about 3.9 million shares available under an existing plan, and estimates it could exhaust plan shares in two years without a new authorization.

Stifel has said it had 61.9 million shares outstanding at the end of December, on a fully-diluted basis.

Kruszewski said in his Monday letter that the shareholder proxy firms erred when making their calculations.

Their opinions, he said, "are based solely on a formulaic estimate that our plan's cost and our burn rate are higher than they would like them to be."

(Reporting by Joseph A. Giannone)

Airline shares fall as UAL forecast disappoints

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UAL shares were down $2.30, or 9.2 percent, at $22.83 on the New York Stock Exchange.

The NYSEArca Airline Index .XAL, a broad measure of the sector, was down 2.7 percent. Delta Air Lines (DAL.N) lost 6.3 percent and U.S. Airways Group (LCC.N) fell 4.7 percent.

UAL said in a regulatory filing on Thursday that consolidated passenger revenue per available seat mile would rise between 8.3 percent and 9.3 percent in the second quarter. Analysts were expecting a double-digit increase.

UAL cited the impact of a transatlantic joint venture revenue-sharing agreement, and other items, but said demand was consistent with its expectation for a slow, steady recovery.

UBS analysts cut their price target on UAL shares to $36 from $39, saying estimates for second-quarter earnings per share were about 30 cents too high.

Analysts, on average, estimate UAL will earn $1.54 per share in the quarter. The average estimate was about 6 cents higher a month ago, according to Thomson Global Markets I/B/E/S.

Airlines report unit revenue to enable direct comparisons between carriers of varying sizes, a UAL spokesman said.

AMR Corp (AMR.N), parent of American Airlines, on Friday forecast second-quarter consolidated unit revenue will increase between 4.5 percent and 5.5 percent year-over-year. AMR shares (AMR.N) fell 5.6 percent.

Earlier this month, the trade group that represents most global airlines slashed its full-year industry profit forecast by more than half. The International Air Transport Association cited high oil prices and turmoil in Japan. [ID:nL3E7H605H]

(Reporting by Nick Zieminski, editing by Gerald E. McCormick and John Wallace)

Prada's $2.1 billion IPO makes modest HK debut

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The Milan-based company is the second to post first-day gains among the billion dollar-plus IPOs in Hong Kong this year, after MGM China (2282.HK), which rose a tepid 1.8 percent.

Many other global brands are exploring options to list in Hong Kong and Prada's performance is critical in attracting such companies to the world's hottest IPO market.

"It may give an idea to other potential brands listing not to price issues too aggressively," said Conita Hung, head of equity research of Delta Asia Financial.

"Consumers are willing to pay a very high premium chasing after brands, but it's not the case for investors. Investors are concerned about reasonable valuation and pricing."

Prada shares closed 0.3 percent higher at HK$39.60 on Friday, after trading as high as HK$40 earlier in the session.

The maker of luxury bags and Miu Miu dresses priced its $2.14 billion initial public offering at HK$39.50 a share, the bottom of a revised indicative range.

Prada's small gain surprised some analysts who attributed this in part to Friday's 1.9 percent rise in the benchmark Hang Seng Index .HSI.

Both commodities trader Glencore (0805.HK) and luggage maker Samsonite International SA (1910.HK) fell on their first day.

Some of the demand for Prada shares on Friday came from fund managers who didn't participate in the IPO, also helping lift the stock.

Prada's IPO received bids for just half the shares on offer for Hong Kong retail investors, compared with more than 2,000 times oversubscription for the IPO of handbag retailer Milan Station Holdings Ltd (1150.HK), the most popular offering in 2011.

Samsonite had demand worth 1.23 times the volume of shares on offer.

'NEW WAVE'

The move by consumer-focused companies such as Prada to list in Hong Kong is part of a trend to raise brand awareness in China, the world's fastest growing luxury market.

"We're opening a new wave for the luxury goods sector," Chief Executive Patrizio Bertelli said at a ceremony at the Hong Kong stock exchange.

Bertelli handed a glass-encased, bright-red Prada leather handbag during the traditional ceremony at the exchange, receiving a glass bull from Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd (HKEx) (0388.HK).

"We're positive that the greater China region is going to be one of the most interesting prospects in the luxury industry," Bertelli said, adding that the first listing of an Italian company was "a landmark" for the exchange.

Prada had originally set an indicative price range of HK$36.50 to HK$48 per share, before narrowing it to between HK$39.50 and HK$42.25 each last Thursday.

Prada and shareholders Prada Holding BV and Intesa Sanpaolo SpA (ISP.MI) sold 423.3 million shares in the offering, raising HK$16.72 billion ($2.14 billion).

In a statement on Friday, Intesa said its net income will be boosted by 255 million euros ($365.3 million) from the Prada stake stale. The bank slashed its stake in Prada to 1 percent from 5 percent.

In Italy, luxury leather goods maker Salvatore Ferragamo SpA priced its Milan initial public offering on Thursday at 9 euros a share.

Prada, set up in 1913 by Mario Prada as a business selling leather bags, trunks and silverware to the European elite, has become a global fashion empire, with 319 directly operated stores, a third of which are in Asia-Pacific.

The company received tepid demand from retail investors for its IPO as potential buyers were put off by having to pay Italian capital gains tax.

That, coupled with choppy equity markets, had led Prada shares to fall in grey market trading. Phillip Securities Group said in a report on Thursday night that the stock had fallen 2.9 percent to HK$38.35, pointing to a weak start on Friday.

The IPO valued Prada at about $13 billion, compared with the nearly $80 billion market capitalization of LVMH (LVMH.PA), $28.5 billion for Hermes International SCA (HRMS.PA) and $21 billion for PPR SA (PRTP.PA).

At the revised guidance, Prada would trade at a price to-earnings ratio of 22.8-24.4 times, more in line with global rivals.

(Additional reporting by Donny Kwok; Editing by Chris Lewis and Vinu Pilakkott)

Southern Union jumps; bidding seen going higher

Stock Market Predictions

Rival pipeline operator Energy Transfer Equity L.P. (ETE.N) insists that its tax-deferred $4.1 billion offer for Southern Union is better than Williams Companies Inc's (WMB.N) $4.9 billion cash bid.

As natural gas prices remain depressed, and gasoline prices stay high, pipeline companies are scrambling to increase their capacity to transport gas from shale fields to customers.

Southern Union owns and runs pipelines in the U.S. Southeast, Midwest and Great Lakes regions, as well as in Texas and New Mexico.

Southern Union shares jumped 16 percent to a life high of $39.60 in hectic early Friday trading, topping Williams' $39 a share bid price and well above the $33 a share offered by Energy Transfer earlier this month. Over 2 million Southern Union shares were traded, more than double normal daily volumes.

Tulsa, Oklahoma-based Williams, an integrated natural gas company valued at about $17 billion, entered the bidding on Thursday, offering 18 percent more than Energy Transfer's earlier bid.

Dallas, Texas-based Energy Transfer, however, countered by insisting its offer -- a deal that would make it one of the largest U.S. natural gas pipeline companies -- was better.

"The Williams proposal does not have committed financing, may have negative ratings consequences for Southern Union, is subject to completion of due diligence and may have material anti-trust regulatory challenges," Energy Transfer said in a statement late on Thursday.

It stressed, too, that its own offer is a "tax deferred structure that provides Southern Union shareholders significant potential upside." Being a master limited partnership, Energy Transfer does not have to pay corporate income tax.

"Energy Transfer could pay nearly $42 a share ...," Raymond James analysts Darren Horowitz and Kevin Smith wrote in a note.

"The plot thickens ...," wrote Tudor, Pickering, Holt & Co, adding "Energy Transfer likely struggles to match the all-cash offer, but could counter-bid with partial cash option."

"Very interesting game," said Jerry Swank, managing partner at Swank Energy Income Advisors, which at end-March had a 0.54 percent stake in Energy Transfer.

"I don't think you can rule out a higher offer from Energy Transfer. It obviously believes its tax-deferred offer is worth more than the $33 face value. I think the Southern Union team likes the Energy Transfer deal, but it's impossible to predict how this will play out," he said.

Vicki Granado, a spokeswoman for Energy Transfer, declined to comment when asked if it would come back with a higher offer.

Southern Union said it would review the Williams proposal.

(Reporting by Krishna N Das in Bangalore; Editing by Ian Geoghegan)