Stock Market Predictions

BHP bid for Petrohawk gives wings to shale companies

Stock Market Predictions

BHP will buy Petrohawk for $12.1 billion, paying a premium of 65 percent to raise its presence in shale fields, which are underground rock formations rich in oil and gas.

Shares of Chesapeake Energy, Range Resources Corp, SM Energy Co, Southwestern Energy Co, Carrizo Oil & Gas and Ultra Petroleum rose in trading before the bell.

"Transactions of this size always seem to offer a bid to the group ...," Wells Fargo analyst Michael Hall said in a note. "As it relates to specific tickers, Range Resources stands out as a key beneficiary given that it is essentially a pure play shale company."

Shares of Petrohawk, the company that Hall calls "emblematic of the industry's shift toward shale gas development," already have risen more than 28 percent this year. The stock leaped 64 percent on Friday.

"We expect the exploration and production space to outperform in the coming days, with a focus on companies with high relative exposure in the Eagle Ford, and to a lesser extent the Haynesville," Oppenheimer analyst Fadel Gheit said.

He was referring to the shales that straddle parts of South and East Texas, along with Louisiana.

(Reporting by Krishna N Das in Bangalore; Editing by Maju Samuel)

Barclays appeals $4 billion owed to Lehman trustee

Stock Market Predictions

In court papers filed Friday, Barclays said it will appeal to Manhattan federal court the ruling reached by Judge James Peck in U.S. Bankruptcy Court in Manhattan in February.

The ruling entitled the Lehman estate to about $4 billion in so-called margin assets, including the return of roughly $2 billion that trustee James Giddens had already delivered to Barclays.

A Barclays spokesman said in June the company would likely appeal.

Barclays attorney Jonathan Schiller said Peck "erred" in his decision.

"Barclays was expressly promised certain assets, and relied upon receiving them when making the decision to move forward with this historic acquisition," Schiller said in a statement Friday.

Barclays has argued in the past it should be entitled to the margin assets -- collateral Lehman had posted to cover outstanding derivatives trades -- because it took on significant risk when acquiring Lehman's exchange-traded derivatives at the height of the financial crisis. Barclays has said it never would have taken on that risk if not for the margin held to secure those derivatives.

Barclays is also appealing Peck's ruling that it is not unconditionally entitled to about $769 million in Lehman's customer accounts.

Giddens said the matter should be closed.

"More than four months after the Court's opinion on these issues, we believe that clarity and finality have been reached," Giddens said in a statement on Friday.

Barclays won aspects of the case, including Peck's overall ruling validating its hurried purchase of Lehman's brokerage in the days following its filing of the largest bankruptcy in U.S. history.

Barclays also prevailed in a scuffle with the trustee over which side was entitled to $1.1 billion in "clearance box" assets, money held to facilitate the clearance of securities trading. A spokesman for the trustee declined to comment on whether Giddens will appeal that element of the case.

Lehman filed for bankruptcy protection on September 15, 2008, listing $639 billion in assets, six times more than any other bankrupt U.S. company.

The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Nick Brown; editing by Gary Hill and Andre Grenon)

First Horizon talking to regulators to use excess

Stock Market Predictions

Large regional banks like PNC Financial (PNC.N), BB&T (BBT.N), US Bancorp (USB.N) and others have boosted their dividends after receiving regulators' blessings, in a sign that the U.S. banking environment is improving.

"I don't know how long that (capital deployment) will take. But that is something that we intend to work on and we will continue to work through that process," Chief Executive Bryan Jordan said on a call with analysts.

Jordan, however, did not give a firm guideline on when the capital deployment would occur.

"First Horizon needs to redeploy around $500 million in excess capital," Anthony Davis, analyst with Stifel Nicolaus & Co, said.

However, any capital deployment will likely come with more clarity on the bank's private-label buyback liabilities.

First Horizon has been under cloud due to the possibility that it may have to buy back some of the mortgages it securitized and sold to private investors, before it sold off its mortgage business to Metlife Inc's (MET.N) banking unit.

"We are still waiting for development in rep and warranty issues. I don't think they need to enter into settlement like Bank of America (BAC.N) or other larger banks though," analyst Anthony Davis said.

Bank of America, the largest U.S. bank by assets, said it expects to take more than $20 billion in charges after settling toxic loan cases with mortgage bond investors.

As of the second quarter, First Horizon said it had not received any requests for private label repurchases.

FEWER LOAN LOSSES

Despite the overhang of possible mortgage putbacks, First Horizon, the largest bank in Tennessee, set aside just $1 million to cover future bad loans, signaling an improved credit outlook in its South-Eastern U.S. markets.

First Horizon, which counts hedge fund RS Investments, T Rowe Price Associates, Marisco Capital and Vanguard Group Inc among its top investors, also said its net charge-offs fell more than 50 percent to $66 million.

Second-quarter net income available to common shareholders was $42.6 million, or 16 cents a share, beating analysts' estimates of a profit of 11 cents a share.

The company's non-performing assets fell to $747.9 million from $899.8 million.

First Horizon's shares were up 3 percent at $9.75 in midday trade on the New York Stock Exchange. They touched a high of $10.18 earlier in the session.

(Reporting by Tanya Agrawal in Bangalore; Editing by Gopakumar Warrier)

Coca-Cola FEMSA Q2 profit seen up almost 6 percent

Stock Market Predictions

According to a Global Markets survey of five analysts, Coca-Cola FEMSA (KOFL.MX) (KOF.N) will report a profit of about 2.62 billion pesos ($224 million), compared to a profit of 2.48 billion pesos in the year-earlier period.

The company, a joint venture between The Coca-Cola Co (KO.N) and Mexican company FEMSA (FMSAUBD.MX), will report revenue up almost 9 percent in the quarter, according to the survey.

Analysts said investors will be listening for any comments Coca-Cola FEMSA may make about opportunities to expand and deploy the large sums of cash it has on hand.

"In the second quarter, we expect growth rates to remain attractive, but investors may continue to question (Coca-Cola FEMSA and parent FEMSA's) "unhealthy" balance sheets," wrote HSBC analysts in a report.

Coca-Cola FEMSA, which will report second-quarter results on July 20, recently announced plans to buy the drinks division of Mexican company Grupo Tampico in an all stock deal that allows it to maintain a strong cash position on its balance sheet.

The company has more than $1 billion in cash, which it could use to finance further acquisitions, invest in its business or pay a large dividend to shareholders.

Following is a table with the expected results.

(Reporting by Gabriela Lopez)

Giga Capital's shares halve on cancelled offering

Stock Market Predictions

The capital pool company -- a company with no commercial operations or assets, other than cash -- said it did not get regulatory approvals for a $700,000 private placement and its proposal to replace all but one director on the board.

Shares of the company fell to 5 Canadian cents in early trade on the Toronto Venture Exchange.

Giga Capital also said it did not get approvals to continue the company into the province of British Columbia -- which means to bring a company under provincial laws and regulations on top of Canadian federal law.

The company still intends to seek shareholder approval for a six-to-one share consolidation at its annual general and special meeting at the end of August.

(Reporting by Abhiram Nandakumar in Bangalore; Editing by Prem Udayabhanu)

Argonaut Gold Q2 production up 73 percent

Stock Market Predictions

Argonaut Gold said quarterly gold production at its El Castillo Mine -- the company's biggest mine -- was 17,453 ounces, compared with 10,066 ounces last year.

The company, which also operates the San Antonio and the La Colorada project in Mexico, said gold produced at the El Castillo mine in the first half of the year was 35,467 ounces

In January, Argonaut had forecast 70-75,000 ounces of gold output for the year.

Argonaut's shares were trading up slightly at C$6.06 on Friday morning on the Toronto Stock Exchange.

(Reporting by Amruta Sabnis in Bangalore; Editing by Sriraj Kalluvila)

Mattel 2nd-quarter profit tops Wall Street estimates

Stock Market Predictions

The sales increase shows the growing global reach of Mattel. International sales increased 12 percent, excluding currency fluctuations.

"They're looking to have a great year," said Wedbush Securities analyst Edward Woo. "They've gained market share and they're likely to continue to maintain that momentum into the holiday season."

The shares had been up more than five percent, but they gave back some of their gains because they are getting close to their fair value, said MKM Partners analyst Eric Handler, whose price target is $28.

Now the question is whether the shares will keep rising in the run-up to the holidays.

Woo thinks that could happen and his price target is under review. The company is in a position to grow earnings by at least 10 percent on a revenue increase in the mid to high single digits, he said.

"Barbie is getting big internationally," said Handler. "The whole company has become more internationally focused."

The maker of Hot Wheels cars and Fisher-Price toys said second-quarter net profit rose to $80.5 million, or 23 cents per share, from with $51.6 million, 14 cents per share, last year.

U.S. toy companies, which make most of their toys in China, are grappling with rising costs of plastics, packaging paper, freight and labor. Mattel's gross margins fell 20 basis points.

"Costs have been rising, but it's manageable for them," Woo said.

Sales at the company, which counts Wal-Mart Stores Inc (WMT.N), Toys R Us (TOYS.N) TOY.UL and Target Corp (TGT.N) as its biggest customers, rose 14 percent to $1.16 billion.

Analysts on average expected earnings of 16 cents a share, on sales $1.11 billion, according to Thomson Global Markets I/B/E/S.

The company's shares were up nearly 2 percent at $27.29 in midday trading. They have risen 6.3 percent so far in 2011. They trade at about 13.1 times forward earnings, well above the sector average of 7.9. Rival Hasbro Inc's (HAS.O) shares trade at a multiple of about 13.9.

(Additional reporting by Dhanya Skariachan and Nivedita Bhattacharjee in Bangalore; editing by Maju Samuel, Steve Orlofsky and Andre Grenon)

Zillow now sees IPO at $16-$18/share

Stock Market Predictions

In April, Seattle-based Zillow had filed with U.S. securities regulators for an IPO of up to $51.8 million.

On Friday, the company in a filing with the Securities and Exchange Commission said it expects to raise about $56.8 million from the IPO, when calculated at the mid point of its price range and after deducting underwriting discounts and commissions.

Zillow offers rent and house price estimates as well as real estate data on millions of U.S. homes through its websites and mobile phone applications.

The company, which has applied to list on Nasdaq under the symbol "Z," said it plans to sell 3.46 million of its class A common stock and use the proceeds primarily for general corporate purposes.

Underwriters -- Citigroup, Allen & Co, Pacific Crest Securities, ThinkEquity and First Washington -- can purchase an additional 519,300 shares to cover over-allotments, the company said in the filing.

(Reporting by Aditi Sharma in Bangalore; Editing by Maju Samuel)

Google scores a plus as investors toast results

Stock Market Predictions

The shares shot up to $600.25, climbing back to pre-2011 levels on Nasdaq. If the gain stands by the end of Friday, it would mark the biggest single-day gain for Google shares since October of 2008.

"We are witnessing signs of increased competitive advantage for Google, particularly in Display and Local, with Search showing no signs of slowing," Evercore analyst Ken Sena said.

Sena raised his price target on the stock to $735 from $670, while Collins Stewart analyst Mayuresh Masurekar raised his price target to $725 from $680.

Jefferies raised its price target on the stock to $830 from $800, while Barclays Capital lifted its target to $730 and $675.

The results were strong despite a seasonally slow quarter, macro softness and substantially higher costs, analyst Masurekar said.

Going forward, the analysts expect Google to post strong revenue growth on international, display and mobile segments.

On a conference call, Chief Executive Larry Page said Google's new social networking service, Google+, had signed up more than 10 million people.

Clearly, the success of Google+ is a huge swing factor but the early signs of 10 million users and 1 billion items shared are encouraging, Wells Fargo analyst Jason Maynard said.

Evercore's Sena said he was encouraged by Google+ both in terms of traction and the company's plans to integrate its data signals and sharing capability into other products and services.

"TOOTHBRUSH" WORKS

CEO Page had compared Google's approach to being "like a toothbrush," something you use twice a day.

"We have made a good start but we are at only 1 per cent of what's possible... Google is just getting started... and that is why I am here -- working hard to lead this company to the next level," Page said.

The share jump that followed Google's results may be an indicator that the Wall Street is now more willing to give Page the benefit of doubt -- in terms of his investment and leadership strategy -- than just a quarter ago when he stunned investors by cutting short his appearance on the post-earnings conference call.

"We think investors will welcome his reassuring comments about fiscal discipline and product focus," Maynard said.

The better-than-expected results and successful Google+ launch should stem some of the short-term stock angst about their investment and development strategy, Maynard said.

Investors had feared Google's ever-increasing spending would eat into margins. Operating expenses leapt 49 percent to $2.97 billion in the second quarter, to about a third of revenue.

Google is fighting technology heavyweights that include Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O), as well as upstarts such as Groupon, as it seeks to protect its lucrative search business at a time when mobile gadgets and social media are redefining the way consumers use the Web.

All five brokerages kept their top ratings on the stock, which was trading at $592.70 in late morning trade. (Reporting by Supantha Mukherjee in Bangalore and Edwin Chan in San Francisco; Editing by Gopakumar Warrier, Roshni Menon)

Apple stock looks cheap ahead of results

Stock Market Predictions

Solid numbers from the company's quarterly report this week could snap the malaise that has hung over its once unstoppable shares, which have been in limbo since Chief Executive Steve Jobs took leave last January for unspecified medical reasons.

Apple's stock has found itself relatively immobile after quadrupling over the past two and a half years. The share price is up 11 percent on the year, but remain a far cry from brokerage price targets of $450 or more.

The stock rose 2 percent again on Friday in anticipation of stronger second-quarter revenue and profit with component shortages easing for the iPad and momentum accelerating in international markets.

"This stock is still very attractively priced, especially relative to the overall market," said Channing Smith, co-manager of the Capital Advisors Growth Fund, which owns Apple shares.

"About once a year, you get an opportunity when the stock is in a funk and some of the short-term concerns crop up... that's your window to step up," said Tony Ursillo, analyst with Loomis Sayles & Co, which owns Apple shares.

Apart from Jobs -- a survivor of a rare form of pancreatic cancer and the inspiration behind many of Apple's most iconic products -- Wall Street is worried about Google's (GOOG.O) rising prominence in high-end mobile and intensifying competition in digital content with Google and Amazon.com (AMZN.O).

But the world's largest technology company by market value is expected to present a positive short-term picture when it reports Tuesday.

Solid sales of the aging iPhone in international markets and strong demand for new, thinner iPad 2s likely buoyed the second quarter, which also saw an easing in the supply crunch that previously held back sales of the tablet.

The two mobile products were instrumental in contributing to an expected 60 percent increase in Apple's revenue during the fiscal third quarter, according to analysts and investors.

Lower component costs -- owing to an easing of supply shortage of crucial components from Japan -- is another plus that could boost gross margins to as high as 41 percent.

"I am expecting a strong quarter," Ursillo said. "The concern on the street seems to be more about the outlook for the third quarter, ongoing supply constraints for the iPad and the timing of the iPhone introduction."

BIG SECOND HALF

Wall Street expects that the outlook for the second half of the year will be enormous for Apple as it may include the launch of a new iPhone, its best-selling product, and one that accounts for about 40 percent of its revenue.

Apple is famously conservative with its forecasts, but investors will pick apart executives' comments to figure out how much the new iPhone will boost revenue.

The California company typically introduces a new iPhone during the summer, but it has yet to reveal any details on the next model. The new smartphone featuring a faster processor will begin shipping in September, sources have told Global Markets.

Apple will also roll out its new cloud-based iCloud music storage service in the fall along with updates to its operating systems for mobile devices and computers.

"With our expectation for a big second-half new product ramp, combined with growing challenges at smartphone competitors and potential new carrier arrangements, we believe Apple has plenty of upside left in the stock price," said Ticonderoga Securities analyst Brian White.

Anticipation of a new iPhone may have caused some slowdown in sales during the June quarter, but analysts still expect shipments to be in the healthy 17 million range when the consumer electronics giant reports results on Tuesday.

Wall Street estimates that Apple sold about 8 million new iPads along with about 4 million Macintosh computers.

Apple rolled out its popular iPad 2 tablet in 36 countries in the last three months despite supply being backlogged. Wait times for the iPad ordered online have fallen to 3-5 days from two weeks in United States as Apple ramped up production to meet roaring global demand.

Apple is expected to report earnings of $5.83 a share on revenue of $24.9 billion, according to Thomson Global Markets I/B/E/S. Apple has beaten Wall Street estimates for 13 straight quarters.

According to StarMine's SmartEstimate, which places more weight on recent forecasts by top-rated analysts, Apple should post EPS of $6.007 on revenue of $25.3 billion.

(Editing by Robert MacMillan)