Stock Market Predictions

Caterpillar sees slowdown in dealer sales growth

Stock Market Predictions

The world's largest maker of construction equipment said on Thursday that dealer sales -- an indicator of future revenue -- rose 35 percent worldwide over the past three months, a slower rate than the 45 percent growth reported in July.

Caterpillar shares were down 4.7 percent at $83.56 on Thursday morning, exceeding the 4.1 percent drop in the S&P 500 Index. .SPX Over the past year, Caterpillar shares have risen about 26 percent, outpacing the 10 percent climb of the Dow Jones industrial average .DJI.

Growth in North America slowed most dramatically -- to 27 percent from 50 percent -- and growth in the Asia-Pacific region dipped to 20 percent from 28 percent. Latin America was the one area to report an acceleration, with sales growth rising 1 point to 52 percent.

The report, which came in a filing with the U.S. Securities and Exchange Commission, marked the third straight decline in the growth rate from the most recent peak of a 66 percent rise in dealer sales for the three months ended in April.

Caterpillar, whose competitors include Japan's Komatsu Ltd (6301.T) and South Korea's Doosan Infracore Co Ltd (042670.KS), warned investors last month that economic growth in the United States and other developed economies had been slower than expected this year, and also warned of signs of sagging demand in China, the world's fastest-growing major economy.

A report by the American Institute of Architects released on Wednesday also suggested nonresidential construction activity was slowing down in the United States. The slump in building homes and other buildings has contributed to the nation's persistent high unemployment rate by reducing demand for blue-collar workers in the construction trade.

(Reporting by Scott Malone, editing by Matthew Lewis)

HP sinks as investors flee business revamp

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Investors also appeared to lose confidence in Chief Executive Leo Apotheker after a flurry of HP announcements on Thursday including an $11.7 billion acquisition offer, a shuttering of its mobile efforts and the potential spin-off its PC business.

This was on top of disappointing financial guidance for the third quarter in a row. HP may also be risking future PC sales as its customers could flee to rivals like Dell Inc in the uncertainty, one analyst said.

"They're doing too many things at the same time," said Sterne Agee analyst Shaw Wu.

Even if it makes sense in the long term, HP should not have told the world it was thinking of getting rid of its PC business, which brings in 16 percent of its profits, Wu said.

"Why would anybody want to do business with them if it's up for sale," he said. "To have this in limbo for 12 months is going to be pretty material."

On top of this, investors worried that HP's offer of nearly $12 billion for British software company Autonomy Corp was too high and questioned why it was giving up so soon on the mobile business it bought for $1.2 billion from Palm Inc, Wu said.

HP shares fell as low as $22.76 on Friday making it the biggest loser on the New York Stock Exchange. Before the announcements its shares had closed at $31.39 on Wednesday. Investors fled to rivals like Dell, pushing its shares up nearly 3 percent, as it is expected to profit from HP's chaos.

"There's not a lot of confidence in (Apotheker's) management," said Wu, noting that he had to lower guidance every quarter since he joined HP. "This is just further proof,"

At least two brokerages downgraded Palo Alto, California-based HP, and five cut their price targets, mainly citing uncertainty and expenses related to the restructuring.

"Last night HP may have eroded what remained of Wall Street's confidence in the company and its strategy," Needham & Co said in a research note.

Gleacher & Co analyst Brian Marshall cut his price target for the stock to $39 from $50 saying he "materially underestimated the magnitude and timing of this metamorphosis."

He said however that HP "is undergoing a sound strategy transformation by focusing on high-growth, high-margin opportunities in the enterprise/commercial markets."

With a forward 12-month price-to-earnings ratio of 5.6, the company is trailing its peers, including Dell, Apple and IBM according to Starmine SmartEstimate.

Before Thursday's news HP's stock had already lost nearly a fifth of its value since it reported quarterly results in May.

HP said it has already stopped production of its WebOS-based devices like its TouchPad tablet, which failed to attract buyers.

Cypress Semiconductor Corp -- the main supplier of touch controllers for TouchPad -- will also hurt if the company pulls the plug on the product, brokerage Collins Stewart said.

Cypress' shares fell 1 percent to $16.93 on Friday.

HP has been struggling with its once hugely popular PC business, as niftier gadgets like Apple's iPad have eaten into its business.

Thursday's weak forecast follows smaller rival Dell's lowered revenue outlook earlier this week that dragged down both stocks.

Both companies have been venturing out of traditional comfort zones and into enterprise solutions and services, but continuing soft sales have been a constant source of trouble.

Brokerage Robert W. Baird said HP is no longer a "safe haven" stock and expects it to lose market share.

HP's decision to spin off the PC business reflects commoditization, as consumers change the use of computers, and this may hurt Intel, the world's largest supplier of PC chips, brokerage Nomura said in a note.

"A reversal in average selling prices would remove a key revenue driver over the last six quarters (for Intel)."

(Additional reporting by Rachel Chitra in Bangalore; Editing

by Don Sebastian, Joyjeet Das, Dave Zimmerman)

Bargain hunters wary of cheap bank stocks

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The lowly valuations reflect a deeply bearish view on the European and U.S. economies and the risk to earnings and capital raisings, investors and analysts said.

And profits may not recover to lofty pre-crisis levels anytime soon, as finance watchdogs across the globe tighten the rules after the credit crisis plunged the world into its worst economic crisis since the Great Depression.

"You might say banks were good value now, but they might still be (at that level) in 5-10 years time," said a fund manager at a top UK firm who holds several banks.

"That visibility is what investors are lacking in order to get excited about the sector because they cannot see what the upside trigger is," the fund manager said.

Bank shares -- closely linked to the health of the economy given the hit earnings take from lower income, higher bad debts and trading losses -- are trading at half their historic averages, sending a grim signal on economic prospects.

The European bank index is trading at 6.7 times the next year's expected earnings, according to Thomson Global Markets I/B/E/S estimates -- well up from the sector's low of 4.9 times when the financial crisis raged in 2008.

But that compares to an average multiple of 10.8 over the last decade and 12 over the past 16 years.

The reasons are that investors expect more trouble in short-term funding, losses from euro zone government debt and weak investment bank trading income.

In terms of book value, the sector is trading at an average of 0.6 times book value, compared to a 16 year average multiple of 1.6.

"The market is starting to price in writedowns of sovereign debt not only in Portugal, Greece and Ireland but also Italy and Spain and the associated recapitalizations ... It is getting pretty extreme," the fund manager said.

Barclays (BARC.L) and Societe Generale (SOGN.PA) shares are respectively trading at 4.4 times and 3.7 times earnings for the next 12 months, less than half their 10-year averages of around 9.5. BNP Paribas (BNPP.PA), Santander (SAN.MC) and Intesa Sanpaolo (ISP.MI) are also heavily discounted.

FUNDING FEARS

Bank shares took another drubbing on Friday. By 0915 GMT the DJ STOXX 600 bank index .SX7P was down 2.1 percent to 134.8 points, after falling to 132.8, its lowest level since April 2009. The index has lost a quarter in the last month.

"Current prices suggest that the market is discounting much more than a moderate, medium-term earnings downgrade driven by weaker revenues," Leigh Goodwin, Citi analyst, said in a note.

"The market now fears widespread, enforced and dilutive recapitalizations lie ahead for the banks sector."

An immediate concern is over banks' funding. The pressure is most apparent for European banks in need of short-term dollar borrowings, after U.S. money market funds cut their exposure to euro zone banks in recent months.

Concerns heightened this week after an unidentified euro-zone bank borrowed $500 million in one-week dollars from the European Central Bank, for the first time since February, signaling a possible squeeze in dollar funding.

Such strains are unlikely to escalate to the liquidity crisis seen during 2007 and 2008, however, because the ECB has put mechanisms in place to provide unlimited funds. But it will force banks to pay far more for their funding.

That could last for many years to come and is one of the structural shifts that will force banks to shrink, reshape and cut lending. Investors need to come to terms with lower returns that may struggle to hit mid-teen percent that many banks are targeting, analysts said.

"There are more structural issues that are preventing people from looking at the stocks, recognizing they have come down a lot and identifying potential value," said David Miller, a partner at Cheviot Asset Management.

"I don't see much of that and wouldn't want to push money that way as a manager," he said.

(Reporting by Steve Slater and Sinead Cruise, Editing by Douwe Miedema and Andrew CallusU)

Marvell's outlook reassures investors, shares up

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The company, which makes processor chips used in smartphones and also provides microcontrollers to hard drive makers, projected third-quarter revenue of $940-$980 million, largely above prior consensus of $958.1 million.

"Marvell's product cycles in TDMA based-Smartphones, Solid-State Drive controllers ... provide visibility into growth in 2012," Jefferies analyst Mark Lipacis said.

Shares of the company have been battered at the stock market and have lost over almost half their value since touching a high of $22 in January.

"We think that the case that Marvell is out of favor in the investment community is an easy one to make. For starters, Marvell is the worst-performing semiconductor stock in 2010-11 and third-worst performer year-to-date," Lipacis said.

Lipacis, slashed his target price by a $1 to $17 on the company's stock on valuation concerns but maintained his "buy" rating on the stock.

At least three other brokerages also cut their target price on similar concerns.

"We view July quarter results and guidance as a positive catalyst relative to investor expectations and Marvell's recent stock performance," Kauffman Brothers analyst Mike Burton said.

Marvell shares have lost 36 percent in value since the beginning of the year, trailing the broader Dow Jones US Semiconductor Index .DJUSSC, which has lost 16 percent during the period.

Shares of the company were trading up 7 percent at $12.78 before markets opened. They had closed at $11.97 on Thursday on Nasdaq.

(Reporting by Himank Sharma in Bangalore; Editing by Joyjeet Das)

LDK Solar cuts outlook, shares slump

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The company's shares fell nearly 11 percent in extended trade following the announcement.

The company said it expects second-quarter revenue of $480 million to $500 million, down from a prior view of $710 million to $760 million.

Gross margin for the quarter is expected to be between 1.5 percent and 2 percent. It has previously forecast gross margin of 22 percent to 26 percent for the period.

The company also said it would write down $55 million to $60 million of inventories.

Shipments of wafers and modules were also much lower than expected during the quarter, LDK said.

LDK shares dropped 10.8 percent to $5.86 in after-hours trade after closing at $6.57 on the New York Stock Exchange.

LDK will report second-quarter results on August 29.

(Reporting by Nichola Groom, editing by Matthew Lewis)

Kodak shares rise 17 percent on interest in patents

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Tech patents, particularly ones for mobile devices, took the spotlight when Google Inc said on Monday that it would buy Motorola Mobility Holdings Inc for $12.5 billion in a deal that includes all the handset maker's patents.

On Wednesday, Kodak was the top gainer on the New York Stock Exchange with a 26 percent increase in share price.

Kodak, which said in July it was shopping around a portion of its patents related to digital imaging, is luring investors who are just starting to grasp how much money its patents could fetch.

Kodak's patent portfolio has been estimated by analysts to be worth between $2 billion and $3 billion.

The once iconic photo company said it had hired Lazard as an adviser on the patent sale.

On Wednesday, The Wall Street Journal, citing anonymous sources, reported the patents have drawn interest from a "strategic buyer in the wireless industry looking to use the patents for defensive protection."

Kodak declined to comment on the patent sale.

Shares rose 45 cents, or 16.7 percent, to $3.14 on the New York Stock Exchange on Thursday, despite a sharp selloff in stocks generally.

(Reporting by Liana B. Baker, editing by Gerald E. McCormick)

Shares of miners surge as gold price hits new high

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The ARCA Gold Bugs Index .HUI, whose components include some of the world's largest producers, rose more than 3 percent on Friday, lifted by gains in the shares of majors like Barrick (ABX.TO), Newmont Mining (NEM.N) and Goldcorp (G.TO).

The price of gold, often viewed by investors as a safe haven during turbulent times, has risen more than 30 percent this year, as investors worry about a double-dip recession and U.S. and European sovereign debt levels.

A surge in the number of gold and silver ETFs -exchange-traded funds that invest in the precious metals - has also helped drive bullion prices higher.

Shares of Barrick were up C$1.09, or 2.2 percent at C$50.39 on the Toronto Stock Exchange, while Newmont and Goldcorp were up 2.8 percent and 2.5 percent, respectively.

Shares of smaller rival Agnico-Eagle (AEM.TO) were among the biggest net gainers on the TSX on Friday morning, up 3.1 percent at C$64.97.

The price of spot silver also rose more than 3 percent to $41.65 an ounce on Friday, sending shares of top silver producers higher.

Pan American Silver (PAA.TO) rose 3.97 percent to C$30.13, while Silver Wheaton (SLW.TO) was up 4 percent at C$38.00 on the Toronto Stock Exchange. Coeur d'Alene (CDE.N) climbed 7 percent to $26.54 on the New York Stock Exchange.

(Reporting by Euan Rocha and Julie Gordon)

New York & Co dives on weak outlook

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The New York-based company, which operates 543 stores in 43 states, said it expects comparable store sales for the third quarter to fall this year -- a swing from the 3.6 percent gain it saw last year.

Gross margins too are expected to be weak -- between 24 to 25 percent -- as high product costs and discounts hurt.

For the third quarter last year, gross margins were 27.89 percent.

"The guidance outlook for the third quarter was weaker than anticipated, the gross margin and comparable store sales were below expectations," Avondale Partners analyst Mark Montagna told Global Markets.

The company reported second-quarter sales of $228.6 million, missing analysts' estimates of $236.8 million, according to Thomson Global Markets I/B/E/S.

Excluding items, the loss was 15 cents a share, in line with estimates.

Comparable sales in the quarter dropped 3.4 percent.

"Weakness in our casual assortment, combined with significantly less clearance merchandise than last year, led to a comparable store sales decline," Chief Executive Gregory Scott said.

Shares of the company fell to a nine-month low of $3.26 in early trade on the New York Stock Exchange.

(Reporting by Chris Jonathan Peters in Bangalore; Editing by Maju Samuel)

European software stocks leap on HP's Autonomy bid

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Swiss banking software maker Temenos' shares rose 4.7 percent in early trading, Germany's Software AG rose 2.5 percent and British IT company Micro Focus rose 0.9 percent.

Rajeev Bhal, software analyst at British financial services firm Matrix Group, said he saw Micro Focus and Temenos as likely targets but not Software AG or British accounting software maker Sage, which he saw as "red herrings."

"We continue to see Micro Focus (BUY, 420p TP) as a likely bid candidate given multiple approaches already in place and the attractive valuation," he wrote.

"Temenos has a strong product and routinely tops industry league tables for new customer wins, and has demonstrated in the past its ability to recover from setbacks."

HP said late on Thursday it was in talks to buy Autonomy and to spin off its personal computer business, the world's largest, beginning a reinvention of itself as a higher-margin, software-focused business.

Shares in Autonomy itself leapt 75 percent to a 10-year high of 2,500 pence, below HP's bid of 2,550 pence per share, which represents a premium of 79 percent to Thursday's closing price. Autonomy has recommended the bid.

Shares in British chip designer ARM, which like Autonomy is part of a technology cluster in the English university town of Cambridge, also rose 2.9 percent.

(Reporting by Georgina Prodhan; Editing by Andrew Callus)

Yingli profit beats Wall Street, sees sector bounce

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The solar industry has been battered in 2011 by steep declines in the prices for the modules that turn sunlight into electricity, shrinking profit margins and pushing some of the largest players into the red.

The MAC Solar companies index has slumped more than 31 percent so far this year, more than three times the drop in the S&P 500.

Yingli, however, managed to beat Wall Street forecasts with its second-quarter earnings issued on Friday as it shipments jumped nearly 37 percent from the first quarter, and it stuck with its forecast that it would sell more than 1,700 megawatts of solar panels this year.

That helped lift Yingli's share price more than 3 percent, gaining back a bit of the selloff that has wiped off more than 40 percent of its value this year.

"The stock has probably found a pretty nice bottom right here," said Mark Bachman, analyst with Avian Securities LLC.

"They were the first company so far this earnings period to come out and say things are looking better. We anticipate a year-end gold rush."

Global demand for solar panels sank in the first half as governments in the top two markets, Germany and Italy, pared their subsidies that make the technology competitive with fossil fuels such as coal and natural gas.

Those subsidy cuts came even as the major producers ramped up their production, causing a glut in panel supplies that swelled inventories across the industry, driving prices lower.

That price pressure drove Evergreen Solar, once an industry darling, into bankruptcy earlier this week after it struggled to keep pace with its Chinese rivals.

To be sure, those Chinese companies have suffered as well. JA Solar Holdings Co Ltd said its solar module sales prices fell 20 percent in from the first quarter, pushing it to a net loss in the second quarter.

China Sunergy Co reported a worse-than-expected loss on Friday, and chopped its 2011 shipment forecast.

On Monday, all eyes will turn to Suntech Power Holdings, the world's biggest solar company by production capacity, Its shares slumped more than 5 percent on Friday to challenge their lifetime lows.

LDK Solar, which makes the silicon wafers that are used to build solar panels, cut its revenue and margin forecasts after the market close on Thursday, and said it would write down the value of its inventories.

"The wafer market could face a prolonged downturn due to industry oversupply," said Wells Fargo analyst Sam Dubinsky, who cuts his 2011 profit forecast for LDK by about two-thirds.

Still, those low wafer prices help most of the module makers, since the wafers typically make up more than half their costs.

BETTING ON BRIGHTER SUMMER

Yingli, which said its net income nearly doubled to $58.1 million, or 36 cents per American Depositary Share (ADS) from a year ago, topped Wall Street forecasts and said it has seen strong interest from customers since June.

"We saw the sign of demand recovery triggered by the drop of module price," Chief Executive and Chairman Liansheng Miao said in a statement.

Its revenue of $680.6 million easily topped the $616 million that analysts had expected.

The turmoil from the first six months of the year may give way to a rebound in the second half, companies have said. Italian buyers have returned now that uncertainty about the subsidies has abated, and sales to new markets, such as the United States, China and other Asian countries are growing steadily.

And Germany, which bought only 1,000 MW of modules through May versus 1,700 in the same period of 2010, is expected to return heavily to the market now that panel prices have sunk.

"We have already signed several contracts for products for delivery from August through to the fourth quarter of the German end market," JA Solar Chief Executive Peng Fang told analysts on Thursday.

Yingli's American Depositary Receipts in New York rose 3 percent to $5.80, while LDK tumbled more than 17 percent to $5.43. The MAC Global Solar energy index fell 3.4 percent.

(Reporting by Matt Daily, Nichola Groom in Los Angeles, Krishn N Das and Vaishnavi Bala in Bangalore, editing by Dave Zimmerman)