Stock Market Predictions

Spansion shares plunge on loss outlook

Stock Market Predictions

Spansion shares fell 34 percent to $9.18 -- their lowest since the company emerged out of bankruptcy in May last year -- making the stock the biggest percentage loser in morning trade on the New York Stock Exchange.

Spansion, once the global leader in a type of flash memory called NOR, which is used for storing code that runs devices, said it expects to save about $30 million annually from the facility closure.

For the third quarter, the company posted an adjusted loss of 12 cents per share, against analyst estimates of earnings of 18 cents. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Gopakumar Warrier)

Appliance makers cut jobs in face of slack demand

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Whirlpool Corp (WHR.N), which has weathered a long U.S. housing slump, said it would cut some 5,000 jobs -- a tenth of its workforce in North America and Europe -- closing a plant in Arkansas, moving another from Germany to Poland and reducing overall manufacturing capacity by about 6 million appliances.

Its main rival AB Electrolux (ELUXb.ST) said it would detail its cost-cutting measures by the middle of next month.

The ongoing U.S. housing slump, along with stubbornly high unemployment, is crimping demand for appliances, air conditioners and other home systems.

"They're playing a tough hand," Jeffrey Sprague, founder of Vertical Research, said. "The market continues to erode (and) the entire industry is in a tight squeeze here."

The trend hitting Whirlpool and Electrolux has played out in other pockets of the industrial sector. Air conditioner maker Ingersoll Rand Plc (IR.N) earlier this month reported a 63 percent drop in profit that it blamed on depressed housing.

3M Co (MMM.N) earlier in the week disappointed analysts by missing expectations due to continued malaise in television demand and troubles in Europe.

Both Whirlpool, the world's largest appliance maker, and No. 2 Electrolux reported weaker quarterly profits and cut their full-year forecasts, warning that demand in North America and Europe will be weaker than expected.

"Given the weaker demand environment in the U.S. and western Europe, we adjust capacity and our overhead costs," Electrolux Chief Executive Keith McLoughlin told Global Markets.

Not all industrial companies are feeling pain.

More diversified players, including United Technologies Corp (UTX.N), General Electric Co (GE.N) and Caterpillar Inc (CAT.N), reported healthy profit growth and optimistic forecasts. Their strength is due in part to strong demand from rapidly developing economies, including China, India, Russia and Brazil, and exposure to sectors that don't directly face consumers, such as mining and aerospace.

WEAKNESS SPREADING

Whirlpool and Electrolux have been cutting costs and shifting business to emerging markets, but Whirlpool now expects growth in Asia and Latin America to slow, too.

"Our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs," Whirlpool Chief Executive Jeff Fettig said in a statement.

Shares in Whirlpool, already down by more than a third this year, slumped 13.6 percent on the New York Stock Exchange.

Sprague, of Vertical Research said that "it's quite possible (Whirlpool's moves) are not enough." He said Whirlpool's margins, like those of the entire sector, will be under severe pressure until at least 2013, and even then the extent of recovery is uncertain.

Particularly troubling trends for Sprague include Whirlpool's difficulty generating cash flow, and the shifting market in Brazil, which represents a major chunk of Whirlpool's business. He said the Brazil market, where Whirlpool has enjoyed a secure position, is beginning to open to new competition that could spark a price war.

Electrolux shares, also down by around a third since January, gained 7 percent in Stockholm, amid some investor relief that the drop in quarterly earnings was not as bad as expected.

WEAK RESULTS

Whirlpool's third-quarter adjusted profit was $2.35 a share, below the average analyst forecast for $2.68 a share, according to Thomson Global Markets I/B/E/S.

It now expects full-year earnings per share of $4.75 to $5.25, down from its previous estimate of $7.25 to $8.25.

The company will take a restructuring charge of about $500 million from the next quarter through 2013 related to the cost-cutting moves, which will remove $400 million from annual costs by end-2013.

Two years ago, Whirlpool closed its manufacturing facility in Evansville, Indiana, with the loss of about 1,100 jobs.

Electrolux, whose brands also include Frigidaire and AEG, reported third-quarter adjusted operating profit of 1.10 billion Swedish crowns ($173 million) versus a 1.06 billion crown mean forecast in a Global Markets poll and 1.98 billion crowns a year before.

Sales dipped to 25.7 billion crowns from 26.3 billion crowns in the same 2010 period.

(Reporting by Scott Malone in New York, Mihir Dalal in Bangalore and Helena Soderpalm, Johannes Hellstrom and Patrick Lannin in Stockholm, Editing by Gerald E. McCormick and John D. Stoll)

Interpublic profit shines amid slowing ad spending

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Most ad groups across the world have been under increasing pressure in recent months due to uncertainty over Europe's sovereign debt crisis and sluggish growth elsewhere.

Earlier on Friday, WPP Plc (WPP.L), the world's largest advertising company, cut its 2011 outlook on slowing growth in the United States and the euro zone debt crisis.

In contrast, Interpublic said it will meet or surpass its organic revenue growth forecast of 4-5 percent and operating margin outlook of 9.5 percent, despite macro uncertainties.

"We have seen little in the way of pullbacks among clients, despite the economic climate," Chief Executive Michael Roth told analysts on a call.

The performance of the most economically sensitive sectors -- automobiles, financial services and retail -- remained solid in the third quarter, Roth said.

He added that in 2012, Interpublic would be vigilant on costs, though it was too early to comment, given the uncertain macroeconomic environment.

Results from Interpublic and its larger U.S. peer Omnicom (OMC.N) bode well for smaller U.S. advertising companies such as Lamar Advertising (LAMR.O) and Focus Media Holding Ltd.

Earlier this month, Omnicom Group Inc (OMC.N) posted estimate-beating results as its international sales surged.

For the third quarter, Interpublic's net income jumped to $208.1 million, or 40 cents per share, from $45.3 million, or 8 cents per share, a year ago.

Excluding a benefit from the sale of about half of its holdings in Facebook, the company earned 16 cents per share.

In August, the company sold half of its 0.4 percent stake in Facebook for $133 million, recording a related pre-tax gain of $132.2 million.

Analysts expected third-quarter net income of 10 cents a share on $1.65 billion in revenue, according to Thomson Global Markets I/B/E/S.

Shares of New York-based Interpublic were trading up 14 percent at $10.16 on Thursday on the New York Stock Exchange after touching a high of $10.50 earlier in the session. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Gopakumar Warrier, Saumyadeb Chakrabarty)

Hewitt buy drags on Aon margins, shares slide

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Aon last year bought HR specialist Hewitt Associates Inc HEW.N for $4.9 billion in a bid to create the world's largest HR services company.

But costs of more than $1 billion at the expanded business in the third quarter almost entirely canceled out incoming commissions and fees. The HR Solutions division's operating margins fell 590 basis points to 11.2 percent.

On a post earnings conference call, Aon said it was still on track to save about $242 million related to the Aon-Hewitt restructuring, and expects to achieve its long-term operating margin of 20 percent in HR solutions.

Sandler O'Neill analyst Paul Newsome said, "The core issue is that they made an acquisition which was controversial to begin with, and is not going as well as we would like it to go."

Shares in Chicago-based Aon fell as much as 10 percent in early Friday trading from a 3-month closing high of $50.94.

Revenue from its brokerage unit rose 9 percent in July-September, with reinsurance revenue up 1 percent to $365 million, and retail revenue up 12 percent as new business grew in Canada, and generally strong growth in Asia and New Zealand.

Unlike in developed markets, insurance has significant growth potential in emerging markets as faster-growing economies and rising disposable income feed demand for vehicle, home and life coverage.

July-September net income attributable to common shareholders rose to $198 million, or 59 cents a share, from $144 million, or 51 cents a share, a year ago. Excluding items, earnings from continuing operations were 69 cents a share.

Analysts had forecast earnings of 73 cents a share, according to Thomson Global Markets I/B/E/S. (Reporting by Aditi Sharma and Aman Shah in Bangalore, Editing by Ian Geoghegan and Gopakumar Warrier)

Sanofi hit from EU Lovenox copies seen minor: broker

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Although the European Medicines Agency wants to update its guideline on biosimilar drugs, the brokerage reckons that the drug's much lower price in Europe than in the United States and competition from similar treatments could deter generic drugmakers from developing cheap copies of Lovenox.

"While the entire loss of EU Lovenox sales by 2015 would lower our EPS (earnings per share) by 4 percent, in practice we see no more than 1-2 percent EPS sensitivity," the analysts said in a note to investors.

Despite its having lost patent protection, there are no Lovenox biosimilars in Europe because current guidelines require a comparative clinical trial in each of its six indications.

Novartis' (NOVN.VX) generic unit Sandoz, which sells a biosimilar version of Lovenox in the United States with Momenta Pharmaceuticals (MNTA.O), has said this process would be too expensive.

Sales of Lovenox, once one of Sanofi's multi-billion euro selling products, totaled 1.1 billion euros ($1.6 billion) in the first half of 2011.

Sanofi shares, which have lost around 10 percent of their value since the start of the year, were trading virtually unchanged at 52.52 euros at 1425 GMT (10:25 a.m. EDT).

($1 = 0.707 Euros)

(Reporting By Elena Berton; Editing by Christian Plumb and Ben Hirschler)

Fiat share plan seen easing route to Chrysler merger

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Fiat and its sister company Fiat Industrial (FI.MI) said late on Thursday the proposed conversion would streamline the capital structure and simplify governance for both groups.

Analysts said the plan was moderately earnings-enhancing as it would reduce the total number of issued shares and eliminate the cost of higher dividends for holders of savings and preference shares.

Simplifying the equity structure would also allow Fiat to remove a possible barrier to a full merger with Chrysler, which it has managed since a bailout deal with the U.S. government in 2009, they added.

Fiat now owns 53.5 percent of the U.S. No. 3 automaker, and that is due to rise to 58.5 percent by year-end.

Mediobanca's senior analyst Massimo Vecchio said in a report that a merger with Chrysler -- which CEO Sergio Marchionne has said is the goal -- would be easier because savings shareholders would no longer be able to block this.

He also noted that if Fiat decided to spin-off luxury sports car brand Ferrari, it would no longer need to issue Ferrari savings and preference shares to Fiat shareholders.

For truck and heavy equipment maker Fiat Industrial, the conversion would similarly ease any disposal of truck unit Iveco by avoiding a savings shareholder vote.

"The first thing that comes to mind is that this operation has been done to have a single type of share in view of a merger with Chrysler," said another analyst, speaking on condition of anonymity. "It removes a technical barrier."

Both companies are owned by the Agnelli family's holding company Exor SpA (EXOR.MI), which said on Thursday it intended to maintain its 30 percent stakes in both companies -- moving to quash at least for now long-running speculation that it may want to dilute its stakes.

In trading on Friday, Fiat savings shares (FIAn.MI) were up 16 percent and its preference shares (FIA_p.MI) rose 19 percent. Fiat Industrial's savings shares (FIn.MI) advanced 32.5 percent and the preference stock gained 37 percent.

A Milan trader said the prices were moving in line with the premium implicit in the conversion rates for Fiat and Fiat Industrial.

DEBT WOES

Fiat ordinary shares, however, fell more than 7 percent to 4.74 euros, with one trader saying hedge funds were arbitraging the ordinary shares with the preference shares.

But several analysts said the fall was due to much higher than expected net industrial debt overshadowing a better-than- forecast trading profit in the third quarter.

"The biggest surprise in the quarterly release was certainly the ballooning level of net debt," said Credit Suisse in a report. It increased to 5.8 billion euros, well above analysts' consensus forecast of 4.1 billion euros.

Trading profit -- which is similar to operating profit but excludes one-off items, impairments, changes in the value of securities held by the company and profits from associates -- came in at 851 million euros, against 705 million euros in the analyst consensus distributed by Fiat.

Fiat reported results after the market close on Thursday, incorporating Chrysler for the full quarter for the first time, and will hold a conference call at 10:00 a.m. ET on Friday.

(Additional reporting by Michel Rose and Nigel Tutt; Editing by David Holmes and David Hulmes)

MF Global stock, bonds fall again as clouds darken

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The company run by former Goldman executive Jon Corzine has shed 62 percent of its market capitalization this week, after it posted a quarterly loss, and after two ratings agencies cut its debt rating to junk.

MF Global stock dropped as much as 27 percent in early trading to $1.04, its lowest ever, but later rebounded to $1.29 on the New York Stock Exchange.

The company's bonds were trading at distressed levels in the mid-40s, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70.

MF Global had offered the notes at par in August.

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear. (Graphic of MF Global's market share among futures commodity merchants: link.reuters.com/syz64s )

MF Global tapped Evercore to advise it on strategic options including a possible sale, said a source familiar with the situation.

A second source, who was briefed on the matter, said the company is "focused on doing a smart deal, a fair deal," and that it did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients.

"However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity," she wrote.

MF Global has declined to comment on its troubles.

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

European Union leaders stuck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio and Paritosh Bansal in New York, and Charmian Kok in Singapore; Editing by Phil Berlowitz and Matthew Lewis)

Goodyear Tire profits on pricing gains; shares up

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Goodyear's focus on sales of higher-priced premium tires in the past year showed results as the $739 million gain in operating income in the quarter more than offset the $554 million rise in raw materials cost.

In North America, its home market and also its largest, Goodyear sold 8 percent fewer tires, but sales rose 18 percent.

The company's earnings of 72 cents per share, excluding one-time items, beat analysts' expectations of 27 cents, according to Thomson Global Markets I/B/E/S.

It was the third consecutive quarterly profit for Goodyear.

Goodyear said it expected its commodities costs to rise more than 30 percent in the fourth quarter from a year earlier and estimated a full-year increase for rubber and other raw materials at 30 percent, in the range of its previous forecast.

In a conference call with analysts, Darren Wells, Goodyear's chief financial officer, said the company's raw materials cost was expected to rise more than $600 million in the fourth quarter.

"Based on our announced price increases, we expect price mix to essentially offset this impact in the fourth quarter," Wells said of the commodities cost.

While the revenue from sales is expected to remain on a pace set in the first nine months, Wells said, the fourth quarter will show the number of tires sold to rise about 1 percent, down from a previous forecast of a rise of 3 percent to 5 percent.

"Goodyear expects the global tire industry will continue to grow in 2011, although at the low end of ranges previously forecasted," the company said in a press statement.

Akron, Ohio-based Goodyear reported a third-quarter net profit of $161 million, or 60 cents per share, compared with a year-earlier loss of $20 million, or 8 cents per share.

The results included $35 million in charges for rationalizations, asset write-offs and accelerated depreciation; $4 million for discrete tax charges; and a gain on asset sales of $5 million.

Revenue rose 22 percent to $6.06 billion.

Goodyear shut its tire plant in Thailand on October 20 because of the floods there, said Wells. He said that the company does not yet know when it could reopen. He said less than 1 percent of company sales are affected.

Wells said the company will give updates on the impact of the plant's closing on fourth-quarter earnings.

Shares of Goodyear were up 7.2 percent at $15.17 in morning trading on the New York Stock Exchange. The broader S&P 500 was trading essentially flat.

(Reporting by Bernie Woodall in Detroit; Editing by Derek Caney, Lisa Von Ahn, Dave Zimmerman)

Cablevision's profit miss drags down entire sector

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The disappointing earnings report sent Cablevision shares plunging as much as 16 percent and dragged down other stocks in the sector, including Comcast, Time Warner Cable, Dish Network and DirecTV.

Shares in those companies fell between 3.5 percent and 4 percent on Friday.

Cablevision missed Wall Street's consensus by 14 cents on Friday and its earnings report raised questions among analysts about the company's growth prospects, as its faces mounting costs and a shrinking user base.

"The earnings miss is a big and ugly one," said Bernstein Research analyst Craig Moffett in a research note. "The key issue is growth. Without growth, it's hard to grow margins."

Cable companies have been losing video customers to phone companies such as Verizon Communications, which offers FiOs TV, as well as to Internet companies such as Netflix Inc and Hulu.

Cablevision was the second cable company in two days to report disappointing earnings and then have its shares fall by double digits. On Thursday, Time Warner Cable lost more video customers than expected and its shares fell 10 percent.

Cablevision, which mainly serves the New York area but now has operations in Montana and Wyoming, said it lost 19,000 video subscribers in the third quarter.

Verizon competes with Cablevision in the greater New York area and in the same period it added 131,000 video customers. Earlier this month, Verizon said it expects to add 200,000 FiOS TV customers in the fourth-quarter.

Brean Murray analyst Todd Mitchell said Friday's results show that Cablevision is "having trouble in their New York clusters."

Cablevision executives also blamed the weak economy for stunting housing growth and hurting its business. If people are not moving into new homes, they will not sign up for new TV service. The company's chief operating officer called it a "cyclically challenging time."

"You have a situation currently where you have pretty slow housing growth, virtually no housing growth, and actual reduction in household formation," said Cablevision's COO Tom Rutledge on the conference call.

Cablevision said it took a hit of $16 million because of Hurricane Irene, a storm that affected the New York area in August.

One bright spot for Cablevision was its Internet additions. Analysts were expecting it to add 5,000 new Internet customers and it added 17,000 in the quarter.

Cablevision posted a profit of $39.3 million, down from $112.1 million a year earlier.

Adjusted for various charges, the company reported earnings per share of 17 cents, which missed analysts' expectations of 31 cents per share.

Cablevision, which is controlled by the Dolan family and also owns a newspaper and TV networks, saw its total revenue increase 8 percent to $1.67 billion. The revenue was in line with estimates.

The company's shares were down 12.5 percent at $15.14 in afternoon trading on the New York Stock Exchange, after falling as low as $14.50 earlier in the session.

(Reporting by Liana B. Baker in New York, editing by Gerald E. McCormick, Dave Zimmerman and Carol Bishopric)

Corrects attribution for quotes in 11th and 12th paragraphs, to Cablevision's Chief Operating Officer Tom Rutledge and not the company's CFO Gregg Seibert. Also corrects year ago earnings figure to $112.1 million.

MF Global board meets on sale options: Bloomberg

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The talks were said to have begun in New York at 4 p.m. EDT to discuss apparent offers from five potential buyers of the company.

"We're not commenting on the record about this meeting," MF Global spokeswoman Tiffany Galvin said.

A source familiar with the situation said on Friday that MF Global was racing to sell all or part of its business this weekend, with its futures brokerage business seen as the most attractive.

MF Global stock fell over 60 percent this week and the bonds were distressed after the firm posted a $191.6 million quarterly loss and as Moody's Investors Service and Fitch Ratings cut the company's credit ratings to junk.

(Reporting by Sam Nelson in Chicago; Editing by Peter Cooney)