Stock Market Predictions

InvenSense slumps as customer troubles forces outlook cut

Stock Market Predictions

The company, which makes motion-sensing chips used in smartphones and gaming devices, now expects $38 million to $40 million in revenue for the first quarter of fiscal 2013, down from its previous forecast of $38 million to $42 million.

"A number of our key customers were caught offguard by temporary component shortages associated with a new model of 4G LTE smartphone," CEO Steven Nasiri said on a conference call with analysts on Thursday.

He said the shortages had forced delays in new product releases or lowered outlook at some customers.

InvenSense counts Nintendo Co Ltd (7974.OS) and Samsung Electronics Co Ltd (005930.KS) among its largest customers.

"The issue is a lower-than-expected ramp of new handsets due to the limited availability of Qualcomm Inc's (QCOM.O) 8960 chip," Piper Jaffray analyst Gus Richard said in a research note.

He, however, said Qualcomm's chipset had strong wins under its belt and a high attach rate with this chip meant good news for InvenSense in the long term.

Shares of InvenSense, which competes with STMicroelectronics (STM.PA), Sony Corp (6758.T) and Panasonic Corp (6752.T), had soared in their market debut last November.

The stock fell to $12.58, their lowest since January, in early Friday morning trading on the New York Stock Exchange. They cut some losses to trade down 21 percent at $13.18 later in the session.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Supriya Kurane)

Aer Lingus plays safe with maiden dividend

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Aer Lingus, which has not made any form of distribution to shareholders since its stock market listing in 2006, said on Friday it intends to declare an ordinary dividend of 3 cents per share, to be paid in July.

This will make a total payout of approximately 15.9 million euros ($21 million) this year.

However the airline, in which Abu Dahabi's Etihad Airways bought a small stake this week, backed away from boosting the payout with a special dividend like those promised by rivals Ryanair (RYA.I) and easyJet (EZJ.L).

The chief financial officer of Ryanair, which is the largest shareholder in Aer Lingus, welcomed the dividend, but described the payout as "paltry," saying 50 million euros would be more appropriate considering its 1 billion euro gross cash pile.

"If it was Christmas I'd be calling you Scrooge," said Ryanair's Howard Millar, speaking at Aer Lingus' annual general meeting on Friday.

British low-cost airline easyJet said in November it would make its first dividend a bumper payout, paying a special dividend of 34.9 pence on top of an ordinary dividend of 10.5 pence, making a total payout of 195 million pounds.

Ryanair, which in 2010 paid its first dividend after listing 13 years earlier, and has said it will likely approve a substantial dividend this year.

Aer Lingus said it expects to pay a final dividend of 3 cents per share in each of the next two years, subject to the group's financial position being maintained.

"The board believes that this dividend represents a reasonable proportion of profitability and will not be detrimental to Aer Lingus' financial strength," the company said.

Analysts said shareholders may be disappointed, but uncertainty surrounding the airline could be the reason for its conservative payout.

"Ryanair and easyJet set a precedent that there might be some sort of special dividends here. There will probably be a little bit of disappointment that there isn't," Davy's analyst Stephen Furlong told said.

"I'm assuming they adopted a more prudent approach," he said, noting the volatile operating environment for airlines as well as uncertainty surrounding the group's pension deficit and ownership.

Etihad Airways bought a 3 percent stake in the Irish airline on Tuesday, positioning itself as a potential buyer of the indebted Irish government's 25 percent stake in Aer Lingus which it plans to sell as part of its international bailout.

However analysts said Etihad would likely want to resolve uncertainty over whether Aer Lingus may eventually have to contribute to a pension deficit that rose to 700 million euros at the end of 2011.

Shares in Aer Lingus were down 1.1 percent at 1511 GMT, outperforming the wider market .ISEQ which was down 2.6 percent.

($1=0.7603 euros)

(Editing by Erica Billingham)

Westlake Chemical pulls $1.9 billion offer for Georgia Gulf

Stock Market Predictions

Shares of Georgia Gulf fell 9 percent to $31.30 in post-market trade on Friday.

Westlake also said it plans to liquidate its holdings of Georgia Gulf common stock as market conditions permit.

The company, in February, had threatened to withdraw its sweetened $1.9 billion offer, or $35 a share, for Georgia Gulf.

"We are disappointed in this result but we continue to work on our previously announced important strategic initiatives," said Westlake Chief Executive Albert Chao.

Shares of Westlake, valued at $3.98 billion, rose 5 percent to $59.78 in after-market trade on Friday.

(Reporting by Sunayan Bhattacharjee in Bangalore; Editing by Saumyadeb Chakrabarty)

Buffett plays down health concern, mulled megadeal

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The question of who will succeed Buffett, 81, as chief executive became more of an imperative after Buffett disclosed the diagnosis on April 17.

While Buffett called it "a really minor event," his early-stage prostate cancer was a reminder that for all his success as an investor and all the plaudits he gets, Buffett is mortal and would be hard to replace at the company he has run since 1965.

That made the future of Berkshire, with or without Buffett, a central focus of the five hours of questions at its annual meeting on Saturday in downtown Omaha, Nebraska.

"I don't think that every deal that I made would necessarily be makeable by a successor, but they'll bring other talents," including skills to be an effective chief risk officer, Buffett said. "We're not going to have an arts major in charge of Berkshire."

Charlie Munger, who is Berkshire's 88-year-old vice chairman and sat beside Buffett, quipped: "I rather resent all this sympathy and attention that Warren is getting. I probably have more prostate cancer than he does."

The annual meeting is the centerpiece of a weekend of events that Buffett has dubbed "Woodstock for Capitalism." Close to 40,000 shareholders were expected to attend this year.

Buffett on Saturday also said that he recently considered a more than $20 billion acquisition, and would have sold some Berkshire stock holdings he wanted to keep to get it done.

"I wish we could have made it," he said. "It could happen. I don't think it will happen."

Buffett did not name the target. A takeover of that magnitude would have been close in size to Berkshire's biggest takeover -- the $26.5 billion purchase of railroad company Burlington Northern Santa Fe in 2010.

It would have also dented Berkshire's $37.83 billion cash hoard. Buffett said he wants to keep $20 billion on hand. Berkshire has about 80 operating units, which sell such things as car insurance, chemicals, clothing, furniture and ice cream.

WAL-MART, POSSIBLE SUCCESSORS

This year's meeting had fewer fireworks than the 2011 meeting, which was dominated by the then-recent, scandal-driven resignation of Buffett heir apparent David Sokol.

Yet Buffett offered a blunt assessment on a scandal enveloping Wal-Mart Stores Inc, in which Berkshire held a $2.33 billion common stock stake at year end.

Last month, the New York Times said the retailer's majority-owned Wal-Mart de Mexico unit ran a widespread bribery campaign in that country to win market dominance, and that senior Wal-Mart executives tried to cover it up.

"If you read the New York Times story, and there's always another side to it, it looks like they may well have made a mistake in how that was handled," Buffett said.

He nonetheless said he did not believe the matter "changes the fundamental dynamic" about Wal-Mart or its earnings power.

Among the internal candidates seen as possible future Berkshire chief executives are Ajit Jain, Buffett's top insurance lieutenant; Matthew Rose, who leads Burlington Northern; and Greg Abel, who runs the MidAmerican Energy unit.

Tony Nicely, who runs the Geico auto insurance unit, has long been seen as a candidate, but is now in his late 60s.

"I virtually know that the successor we have in mind ... has the culture and the people embedded as I do," Buffett said.

Buffett has also hired two portfolio managers, Todd Combs and Ted Weschler, to handle some of Berkshire's investments. He said each was recently given another $1 billion to invest, boosting their portfolios to $2.75 billion each.

The meeting took place one day after Berkshire said first-quarter profit more than doubled, as its insurance business was spared the huge losses that natural disasters in Australia, Japan and New Zealand caused a year earlier.

Buffett even said that Berkshire is writing "a lot more" reinsurance in those countries, as well as in Thailand.

He was also upbeat about Berkshire's prospects, despite slow U.S. economic growth and the inability of the United States and other countries to get their fiscal houses in order.

"I would stay away from medium- or long-term government bonds, our own or those of other countries," he said.

Buffett also said that despite his huge investment in International Business Machines Corp, which topped $11.7 billion at year end, he would not plunge into other technology giants such as Apple Inc and Google Inc.

"The chances of being way wrong in IBM are probably less, at least for us," than in Google or Apple, Buffett said.

Though Berkshire shares have lagged broader stock and insurance stock indexes in recent months, shareholder enthusiasm at the meeting does not appear to have flagged. "(The) stock is a home run over the next five years," said Bill Smead, chief investment officer of Smead Capital Management in Seattle.

Berkshire did not repurchase shares in the first quarter, and Buffett said he would be comfortable repurchasing stock at a price of 1.1 times book value, and perhaps higher.

Buffett also said Berkshire may buy more newspapers. It owns the Buffalo News, just bought the hometown Omaha World-Herald, and is a longtime shareholder of Washington Post Co.

ANALYSTS TAKE THE FLOOR

As in recent years, Buffett and Munger fielded questions from shareholders and three journalists.

For the first time, they also took questions from three insurance industry analysts -- Barclays Capital's Jay Gelb, KBW's Cliff Gallant, and Dowling & Partners' Gary Ransom -- who each have the equivalent of a "buy" rating on Berkshire.

While some hoped the analysts would add depth to the meeting, some of their questions concerned relatively arcane matters such as mortality rates in insurance, or whether Geico would use electronics to track driver behavior. Gelb did ask the question that prompted Buffett's comment about a mega-takeover.

Prior to the questioning, shareholders were regaled with the annual comedy-infused movie made by Buffett's daughter Susie.

In one sketch, Buffett sang and played the ukulele with the cast of the TV show "Glee."

Another featured Buffett's secretary Debbie Bosanek, whose effective tax rate is higher than her boss's and helped inspire the Obama administration's proposed "Buffett rule" to raise taxes on the wealthy that recently failed in Congress.

Bosanek was shown with her feet up on her desk, discussing magazine covers. A helpful Buffett fielded phone calls for her.

(Reporting By Ben Berkowitz in Omaha; Additional reporting and writing by Jonathan Stempel in New York; Editing by Bernard Orr and Tim Dobbyn)

Cadence Pharma falls to life-low on disappointing results

Stock Market Predictions

The company suspended production of Ofirmev by its primary supplier after it recalled one lot of Ofirmev in February when it found an unidentified particle in a vial. It incurred higher costs on transition of shipments to a secondary supplier.

On Thursday, Cadence said it expects revenue from Ofirmev sales of $10 million to $10.4 million for the second quarter.

At least two brokerages lowered their price target on the stock and reduced their sales estimates on Ofirmev, but maintained their "outperform" rating on the stock as they continue to believe in the sales potential of the drug.

"Our significant reduction in estimates is the result of increasing our time to peak sales given the slower-than-anticipated launch, as well as slightly lower peak penetration," Wedbush analyst Richard Lau said.

The analyst, however, said he continues to believe Ofirmev will be a strong selling drug given its differentiated position as a non-narcotic intravenous analgesic.

"Cadence's characterization of clinical and marketing efforts should enhance conviction on Ofirmev's value in Cadence's share price, albeit slower than we had initially projected," JMP Securities analyst Charles Duncan said.

The company's stock - among the top percentage losers on the Nasdaq on Friday - fell to a low of $3.07. It was later down 12 percent at $3.15.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Joyjeet Das)

LinkedIn jumps as results underscore growth prospects

Stock Market Predictions

The strong results underline the success of social and professional networking sites, as investors watch closely to see if the model is sustainable before Facebook goes public in one of the most eagerly awaited initial public offerings ever.

LinkedIn, which makes money by selling services and subscriptions to companies looking to for new recruits, added 16 million members during the first quarter, taking the total to more than 161 million.

"We believe LinkedIn's member network is creating a pull that is solidifying its product set as a must-have for human resources professionals," Canaccord Genuity analyst Michael Graham said in a research note to clients.

"These products appear to be in the early phase of a hard-to-stop penetration curve, lending high confidence to continued growth expectations," he said.

Graham, who is rated four stars by Thomson Global Markets StarMine for the accuracy of his earnings estimates on LinkedIn, raised his price target on the stock to $135 from $95. StarMine awards five stars to the top 10 percent of analysts and four stars to the next 23 percent.

Analysts also expect the surge in mobile usage to drive up sales at the company, as more people log in through their smartphones and tablets.

"LinkedIn is disrupting both the online and offline job recruitment markets, and deeper corporate penetration and increasing member engagement will drive strong results going forward," J.P. Morgan Securities' analyst Doug Anmuth said.

LinkedIn -- started in the living room of ex-PayPal executive Reid Hoffman in 2002 -- said on Thursday it bought content sharing company SlideShare for about $119 million in a deal that will help its users upload and share presentations.

Analysts at Citigroup, Barclays Capital, BMO Capital Markets and Evercore Partners also raised their price targets on the stock.

According to Thomson Global Markets StarMine, two analysts rate the stock "strong buy," eight rate it "buy," 11 have a "hold," and only one rates it a "sell." The mean price target on the stock is $108.47.

LinkedIn shares, which touched $120.62 on the New York Stock Exchange on Friday, were trading up 8 percent at $117.96.

The stock, which rallied after hitting a year-low of $56.15 late November, had touched a nine-month high of $110.61 on April 27.

(Reporting by Fareha Khan and Sayantani Ghosh in Bangalore; Editing by Tenzin Pema, Sreejiraj Eluvangal)

Teen retailer Tilly's shares surge in market debut

Stock Market Predictions

Tilly's had priced its IPO of 8 million shares at $15.50, above its expected range of $11.50 to $13.50 per share, raising $124 million.

The stock's strong debut mirrors those of other consumer companies like luxury brand Michael Kors Holdings Ltd (KORS.N), whose stock has more than doubled in value since it got listed in December, and women's specialty retailer Francesca's Holdings Corp (FRAN.O).

Irvine, California-based Tilly's is named after co-founder Tilly Levine, who opened the first store in 1982 with current chairman Hezy Shaked.

With the motto "If it's not here ... it's not happening," Tilly's aims to be the go-to destination for trendy clothing and equipment for skating, snowboarding and other action sports.

It offers products from Billabong International Ltd (BBG.AX), Quiksilver Inc (ZQK.N), Volcom, Hurley, FOX and Infamous and others, targeting teenagers and young adults.

Continuing growth, healthy sales and trendy assortments make the company less vulnerable to competition, setting it off as a good buy, analysts said.

"They have a strong brand following. Tilly's doesn't need to take away market share from other competitors like Aeropostale (ARO.N), American Eagle Outfitters (AEO.N) and Urban Outfitters (URBN.O)," IPOfinancial.com President David Menlow told Global Markets.

Tilly's sales increased 20 percent in 2011 to $400.6 million. Net income jumped 41 percent to $34.3 million.

Comparable store sales rose 10.7 percent in 2011, after a 6.7 percent increase in the prior year.

Zumiez (ZUMZ.O), another surf and skatewear retailer, too has performed well. The company's earnings have exceeded expectations for two years and its shares have risen about 42 percent this year.

At the same time, the IPO market has been unforgiving of market debuts of companies like private equity firm Carlyle (CG.O) and Everbank Financial (EVER.N), which made quiet entries into the public markets.

"Investors see higher growth prospects for technology or consumer companies because most of these companies do not use their IPOs as an exit strategy for their investors, like financial companies seem to be doing," said Josef Schuster, founder of Chicago-based financial services firm IPOX Schuster LLC.

Tilly's sold 7.6 million shares in its IPO, while stockholders sold 400,000 shares.

Tilly's runs 140 stores in 14 states, each roughly 7,800 square feet in size, and an e-commerce website, tillys.com.

The company plans to add at least 21 more stores in the year and also plans to grow e-commerce sales.

Brian Sozzi, chief equity analyst at NBG Productions, was skeptical about the heavy investments that would go into opening big-size stores but was in favor of opening smaller stores.

"The stores are always going to be important, because you do need to sell the experience," he said.

Sozzi also noted that e-commerce is a viable prospect for retailers. "You have to cultivate that in-store experience and then go online," the analyst said.

Tilly's shares closed at $16.81, up more than 8 percent from their IPO price, and were among the most traded stocks on the New York Stock Exchange on Friday.

(Reporting by Tanya Agrawal and Ranjita Ganesan in Bangalore; Editing by Roshni Menon, Sreejiraj Eluvangal)

Propylene-maker PetroLogistics falls in debut

Stock Market Predictions

PetroLogistics, which competes with units of Chevron Corp (CVX.N), ExxonMobil Corp (XOM.N) and Williams Cos (WMB.N), processes natural gas byproduct propane into propylene, used in consumer products to building materials.

Propane prices have risen in the last one year as production failed to keep pace with demand.

The company, which counts Dow Chemical Co (DOW.N) and units of Total and BASF Corp as its customers, could be hurt in the next few years as some of its top customers look to build their own propylene plants.

"Their major customers building their own plants will result in an increase in the number of plants and excess supply ... They stand to lose some of their customers," said Francis Gaskins, a partner at IPODesktop.com.

Resources companies that went public in the last one year have struggled to generate interest among investors due to volatility in crude oil and natural gas prices.

"Investors are staying away from energy plays," Jim Krapfel, an IPO analyst at Morningstar, said.

"The stock is also flying under the radar and investors are focusing on companies they know well."

PetroLogistics, however, said it has benefited from cheaper natural gas, which has fallen to a decade low, while oil prices surge.

PetroLogistics' weak market debut after it sold 35 million units at the bottom of its already lowered price range of $17 to $19 per share, contrasts with a 20 percent rise in the shares of teen retailer Tilly's Inc in its debut.

After PetroLogistics' offering, private equity firms Lindsay Goldberg and York Capital own 63 percent of the company's common units.

Last year, PetroLogistics posted a profit of $21.9 million up from a loss of $39.7 million in 2010. Sales rose to $614.9 million from $30.4 million.

The Houston-based company's units closed down 3 percent at $16.50 on Friday on the New York Stock Exchange.

(Reporting by Ashutosh Pandey, Eileen Anupa Soreng and Jochelle Mendonca in Bangalore; Editing by Sreejiraj Eluvangal and Supriya Kurane)

Estée Lauder warns of potential China slowdown

Stock Market Predictions

The red flags overshadowed large sales gains of the company's skin-care products, particularly the fanciest lines, at U.S. department stores in the most recent quarter that helped mitigate declines in France and elsewhere in Europe, which the company called a "soft market."

Estée Lauder said in a statement it is "cautious of macroeconomic factors that could slow the growth trend of the Chinese economy." Last quarter the company's revenues in China rose by a "double-digit percentage."

Chief Executive Fabrizio Freda said Estée Lauder's expansion into smaller cities in China and into more airports there can shield it from a slowdown.

"We can defend ourselves by going where the growth is," he told Global Markets.

For the current fourth quarter, Estee Lauder expects net sales to rise 10 percent to 11 percent in constant currency terms.

Despite the expectations of continued sales gains, Estée Lauder's current-quarter adjusted profit forecast of between 11 and 16 cents per share missed the 20 cents analysts were projecting, according to Thomson Global Markets I/B/E/S.

Shares were down 4.3 percent to $61.38 in late morning trading.

Estée Lauder said it plans to ramp up its advertising expenses, including a U.S. television campaign for its Clinique brand starting next week.

The company's torrid growth at home and abroad in the last year sent shares to a 52-week high last week, setting them up for a drop at even a small sign of trouble, one analyst said.

"There is a lot a momentum priced into the stock," said Erin Lash, an analyst with Morningstar.

Estée Lauder's shares are trading at a price to forward earnings ratio of 28.5, making them expensive compared to shares of Elizabeth Arden (RDEN.O) and Revlon (REV.N), at 18.6 and 11.27 respectively.

STRENGTH AT DEPARTMENT STORES

Net sales last quarter rose 3.8 percent to $2.25 billion.

The sales gains in the quarter were led by Estée Lauder's skin care products, which include La Mer and Clinique moisturizers and were far above those of fragrances, makeup and hair care, categories that account for just over half of its revenue.

Estee Lauder's products benefited from a "high single digit" percentage jump in sales at U.S. department stores which include high-end chains Saks Inc (SKS.N) and Macy's Inc's (M.N) Bloomingdale's.

The maker of Bobbi Brown, MAC and other cosmetics, reported net profit rose 4.6 percent to $130.4 million, or 33 cents a share, in the third quarter ended March 31, up from $124.7 million, or 31 cents a share, a year earlier.

Excluding one-time items, Estée Lauder earned 38 cents per share, beating Wall Street analysts' estimates by 5 cents. The company raised its full year adjusted earnings per share forecast to a range of $2.21 to $2.26 from an earlier $2.16 to$2.23.

(Reporting By Phil Wahba; Editing by Gerald E. McCormick, Dave Zimmerman)

Treasury to sell more AIG common stock

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The Treasury said the size and price of the offering are to be determined. Buyers purchased $6 billion of AIG common stock in March and $5.8 billion worth in May 2011.

AIG has said it intends to buy up to $2 billion of the stock sold in the offering, the Treasury Department said in a statement. AIG bought around $3 billion worth of stock in the March sale, a Treasury official said.

The Treasury and the Federal Reserve made $182 billion available to prop up the company, which couldn't meet its credit insurance obligations when housing markets crashed. U.S. authorities retain approximately $44 billion of that investment, a Treasury official said.

The AIG rescue was the largest U.S. government bailout of a private company in history.

Bank of America Merrill Lynch (BAC.N) , Citigroup (C.N), Credit Suisse, Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N), J.P. Morgan (JPM.N) and Morgan Stanley (MS.N) have been hired as bookrunners for the offering, Treasury said.

Treasury said last month it expects that many of the financial crisis programs it and other banking authorities implemented will end up making a profit for taxpayers.

(Reporting by Mark Felsenthal; Editing by Bernard Orr and Tim Dobbyn)