Stock Market Predictions

Hartford Financial sees lower Q3 credit loss

Stock Market Predictions

The Hartford, which is one of the oldest companies in America, said it expects a third-quarter credit loss of about $61 million, primarily on structured securities, and a net unrealized gain of $2.6 billion as of Sept 30.

Shares of the Hartford, Connecticut-based insurer were trading nearly flat at $17.76 in the morning session Friday on the New York Stock Exchange.

(Reporting by Aditi Sharma in Bangalore; Editing by Anil D'Silva)

Mongolia, Ivanhoe, Rio agree on mine; shares rise

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The news calmed investors, who had sold off the stock last month after Mongolia's finance minister told local media that the government was discussing changes to the terms and conditions of the agreement.

The 2009 deal gave a 66 percent stake in the massive Oyu Tolgoi project in Mongolia's South Gobi region to Canadian miner Ivanhoe, in which mining giant Rio Tinto (RIO.AX) now owns a 48.5 percent stake.

The Mongolian government holds the remaining 34 percent stake and can increase its stake to 50 percent after 30 years.

Some politicians had hoped Mongolia could increase its stake in the project faster than outlined in the existing agreement, but investors warned that populist policies could slow the country's mining boom.

Wednesday's joint statement said that "all parties have reaffirmed their continued support for the investment agreement and its implementation." It sent Ivanhoe's shares up as high as C$18.81 on the Toronto Stock Exchange. The stock was 11.52 percent higher at C$17.33 in the afternoon.

Rio Tinto's UK-listed shares closed up 7.6 percent.

The statement said the shareholders were "united in their commitment to secure the necessary project finance and bring the Oyu Tolgoi project to completion and full production."

Dahlman Rose mining analyst Adam Graf said the news was positive for the development of Oyu Tolgoi and for future mining projects in Mongolia.

"It shows that the contracts have held and that Mongolia honors contracts," he said, noting that the government's move may have been based more on politics than a real desire to change the pact.

Ivanhoe and Rio Tinto have already sunk billions of dollars into Oyu Tolgoi, which is expected to begin initial production in 2012.

They expect average annual output during its first 10 years of commercial production to exceed 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds (544,000 tonnes) of copper.

(Reporting by Clara Ferreira-Marques in London and Julie Gordon in Toronto; editing by Janet Guttsman)

Teva gets okay to buy Cephalon with conditions

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Teva said on Friday that it expects to close the deal, valued at nearly $7 billion, by October 14, subject to approval by the European Commission. The commission has said it would have a decision by October 13.

To win antitrust approval for the deal, Teva agreed to supply rival generic drug maker Par Pharmaceuticals (PRX.N) with Provigil, which is used to combat drowsiness, for one year, the Federal Trade Commission said.

Provigil has annual U.S. sales of about $1.1 billion, Teva and Cephalon said in a statement.

The FTC also required Teva to sell Par the rights and assets of a cancer pain drug developed by Cephalon and sold as Actiq, and a muscle relaxant, known chemically as cyclobenzaprine hydrochloride.

According to IMS Health data, annual U.S. sales for the two drugs are $298 million, the companies said.

The Cephalon/Teva deal, which was announced in May, was arranged to boost the brand-name business of Israel-based Teva, best known as the world's largest maker of generic drugs.

Cephalon's pain, sleep and cancer drugs will help Teva reduce its reliance on the big-selling Copaxone treatment for multiple sclerosis medicine, which faces increasing competition.

While primarily a generic maker, Teva has recently bought Barr Pharmaceuticals and Ratiopharm to boost its branded segment.

Cephalon's top-selling Provigil is set to lose patent protection next year, while adoption of a newer version, Nuvigil, has been disappointing.

The FTC sued Cephalon in 2008, saying it broke the law by paying generic drug makers, including Teva, to keep copycat versions of Provigil off the market. That lawsuit continues.

(Reporting by Diane Bartz; Editing by Tim Dobbyn, Berard Orr)

Express Scripts shares jump as forecast reassures

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Wall Street had been bracing for a lower profit outlook from the company, so the forecast removed some uncertainty hanging over the stock. The long-term projections helped reassure investors about growth prospects.

Express Scripts cut its projected 2011 profit range by about 6 percent, citing higher spending and fewer prescriptions being filled because of consumer worry about the weak economy.

It said spending would be higher due to a contract dispute with drugstore chain Walgreen Co (WAG.N) and in anticipation of integrating its $29 billion purchase of rival Medco Health Solutions Inc (MHS.N).

Express Scripts last month warned investors of potentially weak prescription volume, causing some analysts to lower their profit forecasts and investors to send the stock down.

"A lot of people had been expecting it was going to happen and a lot of them were saying, 'I don't want to own it ahead of that because it could pull back,'" Jefferies & Co analyst Brian Tanquilut said. "But now we're seeing that it's not as bad ... This sets the bottom for the stock."

Separately on Thursday, Express Scripts revealed fiscal forecasts through 2014 in a securities filing on the Medco merger.

The projections, which the company said were prepared a month before the Medco deal was announced and pertained to it as a stand-alone company, offered earnings-per-share estimates that eclipse the average estimates of analysts, according to Thomson Global Markets I/B/E/S.

"Even with a more moderated script view suggested since then, we see this disclosure as providing comforting clarification around future growth," Barclays Capital analyst Lawrence Marsh said in a research note.

Marsh said the annual growth in EBITDA (earnings before interest, taxes, depreciation and amortization) for 2012 to 2014 amounted to about 12 percent, above his expectations of average growth of 8 percent.

The merger filing also revealed that Medco approached Express Scripts about a transaction in early June, more than a month before they announced the deal, and that the companies talked as early as 2006 about a potential combination.

Express Scripts shares were up $3.77 to $39.71 in afternoon trading on Nasdaq. Medco shares were up 6.9 percent to $48.79 on the New York Stock Exchange.

STAGNANT ECONOMY

Express Scripts' lower 2011 profit forecast is the latest sign that Americans are cutting back on healthcare spending to save money because of uncertainty in the economy.

Chief Financial Officer Jeff Hall told an investor conference last month that Express Scripts generally sees prescriptions increase 3 percent to 5 percent in an average year, but there has been virtually no growth over the past three years.

Hall also said the economy had worsened over June and July and the company did not see it improving.

Since Hall's comments, Express Scripts shares had fallen about 16 percent through Wednesday, compared with a 4 percent drop for the S&P 500 index .SPX.

Express Scripts said in a statement on Thursday, "The company now believes that it is more likely than not that the continuing stagnant economic conditions will negatively impact claims volumes to a greater extent than it had anticipated."

It expects prescription claims will fall short of its previous forecast for 750 million to 780 million this year.

Overall, Express Scripts forecast 2011 earnings of $2.95 to $3.05 per share, down from its prior view of $3.15 to $3.25.

The company noted that its revised range still amounts to annual earnings per share growth of between 18 percent and 22 percent.

Since June, Express Scripts has been locked in a contract dispute with Walgreen, which plans to stop filling prescriptions for Express Scripts members starting in January. Express Scripts said it was spending to help clients as they transfer away from Walgreen pharmacies.

The company said it was speeding up spending on some projects to create more capacity in advance of the Medco deal.

"A lot of those costs are one-time," said Gabelli & Co analyst Jeff Jonas. "To the extent that you are pulling forward spending from 2012 into 2011, that means 2012 will be even better."

In cutting its forecast, Express Scripts also pointed to greater competition in the marketplace "resulting in increased client demands and expectations."

5 YEARS IN THE MAKING

The filing revealed that a deal that has been simmering for five years came to a boil in June when Medco Chief Executive David Snow telephoned his counterpart at Express Scripts, George Paz.

Representatives from the two companies held preliminary discussions in 2006 and went as far as to enter into a confidentiality agreement in November of that year, although the agreement expired in 2009, the filing said.

The two sides stayed in touch over the ensuing years, according to the filing, but the preliminary talks did not proceed further.

Last February, Medco's board decided to review alternatives to being a stand-alone company, the filing said.

During 2011, Medco suffered significant contracts losses that raised concerns about its prospects. After reviewing an array of options, the filing said, a committee of the Medco board called the "Medco M&A committee" concluded the best alternative was a merger with Express Scripts and recommended contacting its rival.

Two days later, Snow made the initial call to Paz. The deal was announced on July 21.

(Reporting by Lewis Krauskopf in New York; Editing by Derek Caney and John Wallace)

Samsung says third-quarter to top consensus as phones boom

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Indeed, analysts expect Samsung to report record profit from handset sales in the third quarter and overtake Apple as the world's biggest smartphone vendor in unit terms.

The South Korean firm estimated its quarterly operating profit at 4.2 trillion won ($3.5 billion) versus a consensus forecast of 3.4 trillion won by analysts surveyed by Thomson Global Markets I/B/E/S. That would be down 14 percent from a year ago but up 12 percent from the preceding quarter.

The estimate released on Friday was higher than even the most bullish street view of 3.95 trillion won. Detailed earnings for July to September will be released later this month, Samsung said.

"Samsung's estimates are far better than expected," said Park Jong-min, a fund manager at ING Investment Management. "Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded."

Investors are looking for signs the telecoms business can sustain strong growth for the year-end holiday season as its flagship Galaxy line of smartphones and tablets squares off against Apple's new iPhone, which goes on sale next week.

Stellar growth and strong profit margins from its telecom business mark a big transformation for a company, which has relied for years on its mainstay computer memory chips to boost profit. It had a negligible share of the smartphone market until early last year.

Samsung shares held steady on Friday, while the broader market rose 2.6 percent, an underperformance that analysts blamed on the prospects for a tougher fourth quarter owing to weak prices for memory chips and flat screens. However, Samsung shares had risen sharply in September as the wider market fell.

Earnings at the world's biggest technology firm with sales of $130 billion last year, are set to slide to 3.4 trillion won in the fourth quarter, consensus estimates show.

Profit from Samsung's telecoms division is widely expected to top earnings from the semiconductor business at the world's biggest memory chip maker.

Analysts say Samsung is one of the best placed companies to deliver something fresh and exciting to rival Apple, which has released a string of big-hit products in the past two decades.

It already makes the closest competing tablet by sales to Apple's iPad.

Samsung sold 19 million smartphones in the second quarter and shipments are expected by analysts to have risen to more than 28 million units in the third quarter compared to the 60 million units Samsung is targeting for 2011.

Samsung sold about 1 million fewer smartphones than Apple in the second quarter.

It plans to release its first smartphone based on the latest version of Microsoft's mobile operating system this month, while a 5.3-inch screen Galaxy Note, a hybrid of a smartphone and a tablet, is set to go on sale later this year.

Samsung leads a pack of companies selling phones on Google's Android operating system.

"The Galaxy S II probably played a key role in boosting the company's earnings and it will continue to do so pretty much unchallenged, until Apple unveils a better new version of iPhone," said Kyung Woo-hyun, a fund manager at Daishin Asset Management.

Samsung, which worked out how to make black and white TVs in the 1970s by tearing apart Japanese models, has become a top global brand over the past decade.

It boasts a market value of $118 billion, much bigger than the combined value of Sony Corp, Nokia, Research In Motion, Toshiba and Panasonic Corp.

Samsung's shares have fallen 5 percent over the past three months versus a 12 percent drop in Apple's shares.

APPLE CHALLENGER

Expectations for further momentum in Samsung's smartphone business grew after Apple's newest iPhone, unveiled this week, left investors and Apple's fans wishing for more than a souped-up version of its previous device introduced more than a year ago.

"I previously thought Apple's new iPhone would slow Samsung's handset earnings momentum, but there was no iPhone 5, and the iPhone 4S will not be a burden on Samsung in the fourth quarter," said Ahn Seong-ho, an analyst at Hanwha Securities.

But an intensifying legal battle with Apple over patents and designs threatens to dent growth of Samsung's handset and component business. Apple is also Samsung's biggest customer, buying mainly chips and displays.

"I am very surprised at the (profit) numbers. I am guessing either a particular lineup of products with higher margins sold well, or cost cutting measures were aggressively implemented," said James Song, an analyst at HI Investment & Securities.

Some analysts expected one-off gains such as reduced provisioning costs relating to royalty payments to Microsoft over smartphones and tablets using Android, or a cheaper won currency to boost profitability.

The South Korean won tumbled 9.4 percent against the dollar in the third quarter, making Korean products cheaper to overseas consumers.

Chips and flat screens are underperforming as consumers delay buying TVs and computers in a slowing global economy. This has pushed down prices of key components.

Prices of dynamic random access memory (DRAM) chips used in PCs tumbled about 50 percent in the third quarter and many analysts, including those at Citi and UBS, believe Samsung was the sole profitable DRAM maker in the third quarter.

Major global technology companies from Hynix Semiconductor to LG Display and Sony Corp are expected to report operating losses from their core businesses in July-September.

($1=1191 won)

(Additional reporting by Hyunjoo Jin and Jungyoun Park; Editing by Jonathan Hopfner and Anshuman Daga)

Illumina outlook drags down genetic tools sector

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Declining sales in the wake of weakening global markets and a lack of clarity on government funding levels have pushed down the stocks of Illumina and its peers by about a fifth over the past three months.

"The life science tool sector saw a softening in academic spending market as early as the second quarter and most of the companies realized that academics right now are in the state of uncertainty," Robert W. Baird & Co analyst Quintin Lai told Global Markets.

Companies such as Illumina, Affymetrix Inc (AFFX.O) and Life Technologies (LIFE.O) get 20-40 percent of their revenue from U.S. government-backed research and could be hurt by a budget squeeze.

Illumina shares took the most beating as the company was more at exposure than the others, Lai said.

"What was built into the stock price was that Illumina was not going to have any hiccup and that Life Technologies and Affymetrix are going to be suffering the headwinds," Lai said.

"Now, when you see results like Illumina's pre-release last night, the stock got hit really big today."

San Diego, California-based Illumina, which currently serves life-sciences research, applied markets and the molecular diagnostics market, said it expects these conditions to continue through at least the fourth quarter and suspended its full-year outlook.

Illumina said it expects to post revenue of about $235 million for the third quarter, compared with Wall Street expectations of $278 million.

Citigroup said while there has been ongoing concern over a weakening environment for the tools sector, the magnitude of Illumina's miss was a surprise and cut its price target on the stock to $32 from $44.

Three other brokerages also cut their price targets on Illumina's stock.

Illumina's shares were at $27.80 in late morning trade on Nasdaq after falling to a nearly two-year low of $25.71. Shares of Bruker BioSciences Corp (BRKR.O) were down 4 percent at $13.15, while those of bigger rival Thermo Fisher Scientific Inc (TMO.N) were down 6 percent at $50.36.

Affymetrix's stock was down 6 percent at $5.35 and Life Technologies shares lost 7 percent of their value to trade at $36.50.

(Reporting by Kavyanjali Kaushik in Bangalore; Editing by Sayantani Ghosh and Sriraj Kalluvila)

Cargolux: no deal reached on Boeing 747 delivery

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The freight carrier said talks would continue over the weekend and that it would provide an update when a deal is reached. The company gave no estimate for when that would be.

The elongated version of Boeing's largest plane had been set for delivery September 19, but Cargolux suddenly refused to take the plane, embarrassing the world's second-largest aircraft maker.

"We continue to work with Cargolux and look forward to delivering its airplanes," said Boeing spokesman Jim Proulx.

Boeing and its customer previously had declined to identify the source of their friction.

But last week Akbar Al Baker, Chief Executive of Qatar Airways, which recently took a 35 percent stake in Cargolux, said the delay was because of General Electric Co (GE.N) engines not meeting performance guarantees.

He said the issue had been resolved, and that the plane would be delivered around October 12. But he declined to say whether Luxembourg-based Cargolux would receive compensation from GE for the engines not meeting agreed standards.

Boeing has taken 75 orders for the 747-8 Freighter, which lists at $319.3 million, according to the company's website.

Another customer, Atlas Air Worldwide Holdings (AAWW.O), last month terminated orders for three early-production Boeing 747-8 Freighter jets, citing lengthy delivery delays and "performance considerations."

Boeing also is testing a passenger version of the updated 747-8, dubbed the Intercontinental, which it plans to deliver in the fourth quarter to an unidentified VIP customer.

The upgraded 747 promises to burn less fuel, and the passenger version offers more comforts. The plane also boasts new wings, a new tail, state-of-the-art engines and a new cockpit.

Production of the 747-8 has been delayed by more than a year.

The 747 was the world's largest airplane until 2005, when EADS (EAD.PA) unit Airbus unveiled its A380.

Last month, Boeing finally made first delivery of its 787 Dreamliner, a carbon-composite plane, capping three years of delays to delivery of that plane. The lightweight, fuel-efficient 787 represents a bigger leap in technology than the revamped 747-8.

(Reporting by Philip Blenkinsop, Kyle Peterson and Tim Hepher; Editing by Steve Orlofsky, Bernard Orr)

Sony shares dip on report to buy Ericsson phone venture stake

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Talks were ongoing and could break apart at any time, the paper said, citing people familiar with the matter.

Both Ericsson and Sony declined to comment on the report. The dip in Sony's shares to 1,444 yen compared with a gain of 1.2 percent in the benchmark Nikkei 225.

(Reporting by Tim Kelly; Editing by Joseph Radford)

Sprint seeks to raise capital; investors flee

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Shares fell 20 percent to close at $2.41 on Friday, while its credit default swaps rose, reflecting greater concerns about a default risk. Shares of Sprint affiliate Clearwire Corp tumbled 32 percent to $1.39.

The news that Sprint could spend more cash than it brings in to upgrade its network provoked angry questions at an investor meeting with Chief Executive Dan Hesse.

Analysts complained that Hesse gave few clear answers and instead raised many fresh questions. In particular, they were worried that Sprint said its cash shortfall did not yet factor in the undisclosed sum of money the carrier has to pay Apple Inc for the right to sell the popular iPhone.

"They're going to be spending more money than they're bringing in for the next couple of years... even before iPhone costs," Hudson Square analyst Todd Rethemeier said, adding that this makes Sprint -- already a risky investment prospect -- an even more dangerous bet.

The Wall Street Journal previously reported that Sprint agreed to pay Apple $20 billion over four years as part of their agreement.

Hesse conceded that selling the iPhone would be expensive, but promised it would be "quite accretive" to Sprint's profits over time.

"The part we struggle with here is the fact that Sprint wants us to think about the subscriber benefit from the iPhone, but ignore the financial impact," Jennifer Fritzsche from Wells Fargo wrote in a research note.

LIQUIDITY QUESTIONS

Sprint outlined a plan to spend $7 billion on a network upgrade that it wants to complete by the end of 2013, two years earlier than previously suggested. The company said that upgrade would save it $10 billion to $11 billion.

Chief Financial Officer Joe Euteneur said Sprint would pay for the upgrade with cash from its balance sheet and by raising capital. He said he could not provide details as he wanted the flexibility of being able to tap the market at the best time.

The company also flashed a presentation slide saying it expects its liquidity to improve after 2013, implying a tough two years before that.

Analysts, many of whom have covered Sprint for years, told management that they did not understand the presentation and several asked about liquidity.

"Seeing all these balls in the air is a little scary," said Evercore analyst Jonathan Schildkraut.

Analysts said there was no immediate risk of Sprint defaulting on its debt. But, in a sign of investor nervousness, Sprint credit default swaps rose.

It now costs $1.5 million paid upfront to insure $10 million of Sprint debt for five years, in addition to annual payments of $500,000, according to data provider CMA. That is up from an upfront cost of $1.04 million plus $500,000 a year on Thursday.

CLEARWIRE UNCERTAINTY

Sprint owns 54 percent of Clearwire, and was questioned about how long it plans to support the venture.

Executives for Sprint said it would stop selling phones using Clearwire's high-speed WiMax network by the end of 2012, and refused to speak about plans beyond that.

Sprint also said it hopes to bolster its own network using spectrum from Clearwire's rival, LightSquared, backed by hedge fund manager Phil Falcone, if that becomes available.

Sprint declined to comment on whether it would offer Clearwire more funding. When asked if Sprint would let Clearwire go bankrupt, Hesse's response was that if there was a bankruptcy, he would "expect it to be constructive."

Clearwire Chief Executive Eric Prusch told Global Markets that he was optimistic that the company would be able to raise the $1 billion financing it needs to continue to operate and upgrade its network. He added that Sprint was still dependent on Clearwire's network.

At the Sprint meeting, Joan Lappin of Gramercy Capital Management angrily asked why it was spending to upgrade its own network while Clearwire, which has much more spectrum than Sprint, needs funding.

The question was greeted by loud clapping and cheering among analysts and investors.

Sprint said its network upgrade would help boost its margin from operating income before depreciation and amortization by 4 percent to 6 percent by 2014. It also said it would raise its margins by another 4 percent to 6 percent by improving its operations.

But analysts questioned whether investors would see any boost in profit because of the spending plans.

Bernstein Research analyst Craig Moffett also worried that Sprint's service could suffer while it sets aside spectrum for the network upgrade. It is not clear how the company would avoid "creating a capacity gap" when there will be big demands on the network, he said, particularly iPhone users.

Sprint plans to upgrade its network using Long Term Evolution, the same technology used by bigger rivals, AT&T Inc and Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc.

(Additional reporting by Liana B. Baker. Editing by Gerald E. McCormick and Robert MacMillan)

France, Belgium set to finalize Dexia break-up

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Dexia, whose board was also due to meet Sunday, was forced to seek government help this week after a liquidity crunch hobbled the lender and sent its shares into a tailspin.

Belgian caretaker Prime Minister Yves Leterme told a news conference Saturday evening that final negotiations between France and Belgium would take place in Brussels Sunday.

Finance Minister Didier Reynders said Belgium had been in touch with France, Luxembourg and the European Commission.

"I hope tomorrow we will reach our goals," he said.

The Franco-Belgian bank's near collapse stoked investors' anxieties about the strength of European banks and coincided with growing talk about coordinated EU action to recapitalise banks across the continent.

The burden of bailing out Dexia led ratings agency Moody's to warn Belgium late Friday that its Aa1 government bond ratings may fall.

Some investors view the response to Dexia's woes as a test of European governments' ability to take decisive action to rescue banks if the euro zone debt crisis worsens.

French President Nicolas Sarkozy was due to meet German Chancellor Angela Merkel Sunday in Berlin to thrash out differences on how to use the euro zone's financial firepower to salve a sovereign debt crisis that threatens the global economy.

Dexia's overhaul will see its French municipal financing arm split from the group and merged with French state bank Caisse des Depots and Banque Postale, the post office's banking arm.

The Belgian government wants to nationalise Dexia's largely retail banking business in Belgium.

Healthy units, such as Denizbank in Turkey, will be sold.

A 'bad bank' supported by state guarantees will hold 95 billion euros in bonds, including 12 billion euros of sovereign debt of weaker euro zone periphery nations.

Including 7 billion euros of securities linked to U.S. mortgages, France and Belgium may need to provide guarantees to cover up to 200 billion euros of assets, which would be more than 55 percent of Belgian GDP.

The key issues for Sunday's talks will be how to divide up the 'bad bank' assets, how much Belgium should pay to nationalise Dexia's Belgian banking business and whether others, such as Belgium's regions, would be involved in its purchase.

Dexia's shares have been suspended since Thursday afternoon and have lost 42 percent since last Friday.

(Editing by Louise Ireland)