Stock Market Predictions

Mixed fortunes for new entrants at the markets

Stock Market Predictions

The other entrant, Manning & Napier (MN.N), which offers investment management services, was trading up 4 percent at $12.42 on the New York Stock Exchange, having priced the offer below its expected range.

The companies made their debut during the small window of opportunity between the November 4 debut of Groupon Inc (GRPN.O) and the Thanksgiving weekend.

"The Groupon debut turned a lot of attention to the IPO market and these companies were ready to go if they could, but time is running short for companies that want to list before the end of the year," said IPOdesktop.com analyst Francis Gaskins.

Intermolecular, which develops proprietary technology for the semiconductor and clean energy industries, fell as much as 8 percent in early trading and was down 5 percent at $9.50 on Nasdaq, below its offer price of $10.

The San Jose, California-based company had initially planned a $200 million IPO, but cut the offering size and was expecting to sell its shares between $12 and $14.

Poor market conditions and shares that were perceived as expensive worked against Intermolecular, said David Menlow, President of IPOfinancial.com.

Manning & Napier, which was founded in 1970 and has $42.2 billion assets under management as of October31, sold 12.5 million shares at $12 per share.

Specialty bedding retailer Mattress Firm Holding Corp (MFRM.O), however, attracted strong investor interest and rose as much as 20 percent on Nasdaq, after pricing its IPO at the high end of its range.

"They (Mattress Firm) have a track record of success and increase in sales and earnings, and their after tax margins are consistently 6 or 7 percent which is very good in the specialty retail area," IPOdesktop.com analyst Gaskins said.

Shares of Mattress Firm Holding closed about 16 pct up at $22, while Intermolecular's shares fell 5 percent to close at $9.50 on Friday on Nasdaq.

Shares of New York Stock Exchange listed Manning & Napier closed flat at $12 on Friday.

(Reporting by Aman Shah and Tanya Agrawal in Bangalore; Editing by Supriya Kurane and Sriraj Kalluvila)

Jefferies starts Coca-Cola with buy, PepsiCo with hold

Stock Market Predictions

The brokerage also started coverage on PepsiCo Inc (PEP.N) with a "hold" rating, saying it sees the company being hurt by slower growth in both its domestic and international businesses, modest growth in volume and rising commodity costs.

"We expect (Coca-Cola) to deliver another year of mid-single digit volume growth in 2012 driven by the Latin America, Pacific and Eurasia and Africa segments," analyst Jeff Farmer said in a note to clients and started Coca-Cola with an $80 price target.

Earlier this month, Coca-Cola had said it will invest $2 billion in India over the next five years, to compete with PepsiCo in one of the fastest-growing economies.

However, the analyst said PepsiCo's product portfolio is weighted to slower growing geographies and categories, a disadvantage at a time when investors are increasingly pursuing emerging market exposure.

"About 40 percent of (PepsiCo's) operating income is generated outside of the United States, a big number, but one that puts the company at a disadvantage to its primary global competitor, Coca Cola, at almost 80 percent," Farmer said.

He was also concerned over the possible Frito Lay North America spin-off reported by the New York Post.

"Recent precedents such as Kraft (KFT.N), Sara Lee (SLE.N) and Fortune Brands FO.N suggest that large-cap consumer company spin-offs have not resulted in material value creation," Farmer said.

The analyst set a price target of $70 on PepsiCo stock.

Shares of Coca-Cola closed at $66.62 and those of PepsiCo closed at $64.09 on Thursday on the New York Stock Exchange.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Esha Dey)

Peltz fund no longer owns PepsiCo shares: report

Stock Market Predictions

Earlier this week, Trian Fund Management LP disclosed in a regulatory filing that it held 2.36 million shares in the soft drink and snack company as of September 30.

The shares jumped 3 percent the following day, as investors hoped Peltz's move would usher in a shake-up to the company, where Chief Executive Indra Nooyi is under pressure from many on Wall Street to split it up or make other big changes.

A CNBC anchor reported on his Twitter feed on Thursday that Peltz owned the shares only "for a short-term 'trade,'" citing unnamed sources.

"Assuming the report is accurate, we consider it negative," Stifel Nicolaus analyst Mark Swartzberg said in a research note. "Trian's lack of involvement means the absence of a proven and influential agent of corporate change, in our opinion."

There was no new filing with the U.S. Securities Exchange Commission to reflect any change in Trian's stake in PepsiCo. A spokeswoman for Trian Fund did not immediately return calls seeking a comment.

PepsiCo shares were down 2.3 percent at $63.62 on Thursday afternoon on the New York Stock Exchange.

(Reporting by Martinne Geller and Phil Wahba in New York, editing by Gerald E. McCormick and Matthew Lewis)

Heinz sales miss; updates forecast assumptions

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The moves come as the foodmaker posted weaker-than-expected quarterly sales and lowered its expectation for its full-year gross margin. Its shares fell 3 percent.

The maker of Heinz ketchup, Ore-Ida frozen potatoes and other packaged foods cited sales weakness in Australia and its U.S. foodservice business, which it said hasn't recovered as quickly as expected.

In an effort to adapt to a more difficult operating environment, particularly in developed markets, Heinz said it will close three more factories around the world in addition to closings it already announced.

The closings will cost the company 15 cents more per share this year, on top of one-time charges of 35 cents per share already announced.

Heinz will also introduce a range of smaller-size, less expensive products in the United States that will give it a bigger presence in dollar stores, where cash-strapped consumers are doing more of their food shopping.

"Developed markets are experiencing low consumer confidence, high unemployment and economic uncertainty," said Heinz Chief Executive William Johnson.

Heinz's quarterly profit beat expectations by a penny, but it did not raise its full-year forecast. The earnings forecast also now relies on a lower tax rate than previously thought.

"Heinz trades at a premium to the group, and these are not premium results," said RBC Capital Markets analyst Edward Aaron.

The company's shares were down $1.68, or 3.2 percent, at $51.14 in late morning trading.

$1 KETCHUP, $2 FRIES

Heinz said net income fell to $237 million, or 73 cents per share, in its fiscal second quarter, ended on October 26, from $251.4 million, or 78 cents per share, a year earlier.

Excluding items, it earned 81 cents per share. On that basis, analysts on average were expecting 80 cents per share, according to Thomson Global Markets I/B/E/S.

Sales rose 8 percent to $2.83 billion, but fell short of analysts' average estimate of $2.91 billion.

Sales, excluding the effect of acquisitions and foreign exchange, rose 1.5 percent, as a 2.9 percent decline in volume partly offset a 4.4 percent benefit from higher prices.

To appeal to U.S. consumers with tight grocery budgets, Heinz is launching a 10-ounce pouch of ketchup for 99 cents, a nine-ounce package of mustard for 99 cents and a one-pound package of Ore-Ida French fries for $1.99.

CEO Johnson said the smaller packages are expected to boost sales since they should appeal to consumers who were not buying Heinz' products before, such as dollar store shoppers. They should also be largely neutral or beneficial to its profit margins, he said.

In addition, Heinz is bringing back its canned baked beans to the U.S. market after an absence of several decades.

"We believe this is the right time for the return of this convenient, nutritious, and value-oriented classic," Johnson said. "Consumers have been turning to comfort foods during the recession.

The company said it is on track to meet its goal for fiscal 2012 earnings of $3.24 to $3.32 per share, excluding items.

But compared with its assumptions in May, when it first gave the forecast, Heinz said it now expects a lower gross margin, due to higher commodity inflation and weak sales in Australia and U.S. Foodservice, offset by stronger results in emerging markets and Britain, reduced discretionary spending, lower interest expense and a lower tax rate.

In the latest quarter, sales from emerging markets rose nearly 16 percent organically and accounted for 20 percent of total sales.

Heinz said higher costs for ingredients like beans, sweeteners and packaging led to a 10 percent increase in costs in the second quarter, which it said was the "high water mark" for the year. It forecast a full-year commodity cost increase of 7.5 percent.

(Reporting by Martinne Geller; Editing by Derek Caney, Steve Orlofsky and Gunna Dickson)

Bank of America says it has spent $2.1 billion on share exchange

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The second largest U.S. bank said two weeks ago that it planned to issue up to 400 million common shares and $3 billion in debt to retire existing preferred shares and trust preferred securities. The move improves a measure of the bank's capital and eliminates interest payments, but dilutes the holdings of common shareholders.

Bank of America Chief Executive Officer Brian Moynihan has repeatedly said the bank does not need to issue common stock to meet new international capital standards. At an investor conference on Tuesday, he said the exchange was a "prudent way to manage capital."

According to the filing, the bank has issued investors 185.5 million common shares, worth about $1.1 billion at Thursday's closing price of $5.80, and $998.1 million of senior notes. In return, the bank received preferred stock and trust preferred securities worth about $2.7 billion.

Bank of America said in the filing that it expects the exchange will increase a type of capital known as Tier 1 common by $1.88 billion.

Bank spokesman Jerry Dubrowksi declined to comment on whether the bank will issue the entire 400 million shares or $3 billion in debt.

Bank of America shares on Thursday closed down 1.7 percent at $5.80 amid continuing concern about the ability of European countries to pay their debts. The shares on Wednesday fell below $6 for the first time since early October.

(Reporting by Rick Rothacker in Charlotte, North Carolina; Editing by Bernard Orr)

India's Kingfisher slips to third spot, IndiGo gains

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Kingfisher is unlikely to recover lost ground in coming months because the loss-making carrier has canceled scores of flights in November, catching both customers and government authorities by surprise and spooking investors.

Chairman Vijay Mallya said earlier this week Kingfisher canceled the flights to stop flying on heavily loss-making routes. Kingfisher has also said some aircraft were grounded for fleet reconfiguration after the airline decided to leave its low-cost business.

Kingfisher recorded a market share of 16.7 percent for October, a busy season for the airline industry, trailing IndiGo at 19.6 percent.

Kingfisher was almost neck-and-neck with state-run Air India, which had a share of 16.6 percent, while Jet Airways (JET.NS) remained the dominant carrier with a market share of 24.8 percent, which included its subsidiary JetLite.

Close on Kingfisher's heels was budget airline SpiceJet (SPJT.BO) with a share of 16.1 percent.

Domestic air traffic remained robust, growing 18.3 percent in Jan-Oct from the same period a year ago to 49.6 million passengers. But the numbers have failed to translate into profits for India's airline industry, where all the major carriers except IndiGo are loss-making, hit by high jet fuel costs and an inability to raise fares in a cut-throat market.

The Center for Asia Pacific Aviation (CAPA) has forecast a record $2.5 billion to $3 billion loss for Indian airlines for the year ending March 2012, with state-run Air India alone likely to account for more than half of it.

(Reporting by Aniruddha Basu; Editing by Paul Tait)

Delphi Automotive shares slip in market debut

Stock Market Predictions

Shares of the U.S. auto parts supplier fell as much as 3.4 percent on the New York Stock Exchange. It finished the day 3 percent lower at $21.33.

Delphi, the No. 6 auto supplier in North America last year, priced its IPO of 24.1 million shares at $22 apiece. It had expected an offer price between $22 and $24 a share.

Troy, Michigan-based Delphi itself did not sell any shares in the offering. The IPO consisted of shares sold by some stockholders, including 20.6 million shares from hedge fund Paulson & Co.

The IPO raised about $530 million, and at its current trading price values the company at roughly $7.14 billion.

Since 2005, when it was the largest U.S. auto components supplier, Delphi has whittled down its business and simplified its capital structure. It exited 11 businesses and streamlined its product lines to 33 from 119, according to a filing in May when Delphi first said it would pursue an IPO.

Delphi came out of four years in bankruptcy in 2009 after GM and hedge funds Silver Point Capital LP and Elliott Management took a controlling stake in the company.

Earlier this year, it bought back the stakes held by GM and Pension Benefit Guaranty Corp for about $4.4 billion in a bid to simplify its capital structure.

While Europe is its single largest market, accounting for more than two-fifths of its sales, GM remains Delphi's largest customer.

Goldman Sachs and J.P. Morgan led underwriters for the offering.

(Reporting by Brenton Cordeiro in Bangalore; Editing by Supriya Kurane, Bernard Orr)

Brady Corp Q1 beats Wall Street view

Stock Market Predictions

It continues to see full-year earnings at $2.30-$2.50 per share. Analysts on average were expecting earnings of $2.36 a share, according to Thomson Global Markets I/B/E/S.

The company, founded as W.H. Brady Co in 1914 and renamed Brady Corp in 1998, makes printable labels, photo ID cards, laboratory labels and exit signs.

August-October net income rose to $32.7 million, or 62 cents a share, up from $26.3 million, or 50 cents a share, a year ago.

Excluding after-tax restructuring charges of $2.6 million, the company earned 67 cents.

Sales at the Milwaukee, Wisconsin-based company rose about 6 percent to $349.5 million.

Analysts had expected the company to earn 59 cents a share, before special items on revenue of $338.2 million.

Shares of the company closed at $28.74 on Thursday on the New York Stock Exchange.

(Reporting by Kartick Jagtap in Bangalore; Editing by Don Sebastian)

Novartis looks at options to keep Nyon site open

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Novartis said last month it would cut 1,100 jobs in Switzerland and close two sites there over the next three to five years, sparking an outcry from employee representatives and prompting demonstrations in Basel and Nyon.

Chief Executive Joe Jimenez, who has faced criticism from unions for not contacting workers, met with representatives at the drugmakers' plant in Nyon on Friday.

"The constructive talks with the Canton of Vaud government and the Federal government are well on track," Jimenez said in a statement.

"However, I would also like to point out that Novartis is facing a challenging future and therefore further cost reductions are necessary if the company wanted to keep its R&D spending strong."

The 320 employees at the Nyon plant, which makes over-the-counter products for Europe, went on strike last Wednesday in protest against the planned closure of the site as Novartis axes jobs to keep costs under control in a tough pricing environment.

(Reporting by Caroline Copley)

UBS shares rise on pledge to restart dividends

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At an investor event in New York on Thursday, UBS said it would cut investment bank risk-weighted assets by almost half and shift focus back to its core business of managing the assets of the rich as it pared its profitability targets.

UBS said it would propose a dividend of 0.10 Swiss francs per share for 2011, earlier than many analysts had expected, and implement a progressive capital return program thereafter.

UBS, which until a recent $2 billion rogue trading scandal had just started to restore client confidence shaken by a 2008 government bailout, made its last cash dividend in 2006, when it paid out 2.20 francs a share.

"The return to a dividend this year was a genuine surprise. It is only a token dividend, but they are two years ahead of what most analysts expected," said Jon Peace, banking analyst at Nomura in London.

"It's quite symbolic, especially in a year when other banks are under pressure to cut their dividend right down. The fact they have gone the other way will be remembered by investors."

UBS shares were up 1 percent by 0937 GMT, outperforming a flat European banking sector index .SX7P.

UBS said its investment bank staff would be cut to 16,500 by the end of 2013 and 16,000 by the end of 2016 from 18,000 now, with most job losses achieved by attrition and restructuring rather than redundancies.

The bank said that meant a net 400-500 more jobs would go on top of 3,500 staff it said in August it would cut across the bank, bringing the total workforce reduction to 6 percent at the world's third biggest wealth manager.

Banks worldwide are shedding thousands of jobs as new capital requirements aimed at shielding them from future crises compound the impact of a tough trading environment.

UBS will slash by almost 50 percent investment bank risk-weighted assets of 300 billion Swiss francs ($327 billion) by 2016 as it relegates the investment bank to a provider of services to the private bank, which serves wealthy clients.

MORE TO DO?

But analysts said this reduction was only marginally more than what the bank had already targeted and noted the bank was not exiting many businesses in its investment bank.

"Shareholders should question why UBS requires 16,000 employees and 150 billion francs RWAs to support private banking clients," said JP Morgan Cazenove analysts in a note.

They said a further scaling back of the bank's fixed income, currencies and commodities business was "inevitable" within the next 12 to 18 months.

Nomura's Peace said the bank had left itself leeway to make further cuts without denting morale.

"The subtext is that this is a conservative number and they can go further, but if they say they are going to decimate the investment bank it could significantly raise employee turnover and execution risk," Peace said.

Some investors had called for much more radical steps at UBS, such as entirely spinning off the investment bank, which almost brought it to its knees after more than $50 billion in writedowns on securities in the financial crisis.

"The risky investment bank and the conservative wealth management business do not belong together," said analysts Oliver Forrer and Martin Koch at private bank Wegelin.

"From the perspective of shareholders, a legal and financial splitting off of the investment bank is the only viable path which will pay in the long term."

JPMorgan analyst Kian Abouhossein even suggested earlier this month that UBS and rival Credit Suisse (CSGN.VX) should focus solely on private banking and pool their investment banks if plans to curb risk-taking fail to appease shareholders.

Earlier this month, Credit Suisse announced it was cutting 1,500 jobs and 50 percent of risk-weighted assets in fixed income by 2014 as it more closely aligns investment and private banking.

($1 = 0.917 Swiss Francs)

(Additional reporting by Rupert Pretterklieber in Zurich, Steve Slater and Sarah White in London; Editing by Will Waterman)