China posts surplus on strong export growth. Fears that flagging demand in the U.S. and Europe would weigh heavily on China's trade data didn't play out as exports grew 14.7% in April, helping the country swing to a surplus of $18.16B after posting a slight deficit in March. The data surprised analysts, even as some said the numbers may be inflated: "This probably reflects some overinvoicing [as] it was inconsistent with cargo volumes," one economist told WSJ. Nevertheless, the data served to buoy regional markets as the Nikkei continued its ascent in Japan, rising 0.74% to yet another new five-year record high.
Toyota profits rise to pre-crisis levels. For the first time since before the financial crisis, Toyota (TM) posted a full year operating profit in excess of ¥1T on the back of a weaker yen. Net profit was ¥313.9B for the quarter ended in March which beat analysts' expectations by ¥50.1B. Revenue for the period was ¥5.837T and quarterly operating profit came in at ¥502.3B. TM plans to sell 9.1M vehicles this fiscal year, an increase of 230K.
Hedge Funds' fallible crystal balls on display at Ira Sohn. The likes of Bill Ackman, David Einhorn, and Jeff Gundlach are set to share their latest and (supposedly) greatest ideas with investors gathered at the Lincoln Center for the 18th annual Ira Sohn Investment Conference Wednesday. It was here that Einhorn famously roasted Allied Capital in 2002 and the conference also saw Ackman make an ill-fated call on J.C. Penney (JCP) last year. While the presenters may represent the industry's best and brightest, following the top tips from last year's conference would have produced a 19% gain — less than the 22% an investor would have pocketed in a passive index fund, according to FT.
Top Stock News
Tesla set to post quarterly profit. Tesla (TSLA) is expected to report a quarterly profit (its first ever) of $0.04 per share on revenue of $492.02M after the bell Wednesday. The company has experienced quite a bit of fanfare over the past several months surrounding its premium electric sedan, the Model S. Jefferies said Tuesday the stock (already up 76% YTD) may have further to run as ~46% of the float is still sold short: if earnings and revenue come in line (or beat) "short covering [could] continue driving the stock upwards," the firm predicted.
Star Wars partners Disney and Electronic Arts deliver earnings. New Star Wars partners Disney (DIS) and Electronic Arts (EA) reported quarterly earnings Tuesday evening, and while the force may have been with shares of EA (+8% AH) thanks to better-than-feared guidance, DIS wasn't so lucky, as its shares were lower in late trading despite posting earnings and revenue that beat expectations. Revenue at DIS' Parks and Resorts segment rose 14% while ESPN fueled 9% revenue growth in the Cable division. On the down side, operating income in the broadcasting business fell 40%. Meanwhile, EA missed EPS estimates but said FY14 EPS will exceed the Street's expectations.
Groupon moves past Mason era with earnings. Daily deals site Groupon (GRPN) will report for the first time since founder Andrew Mason was ousted and replaced in the interim by the company's executive chairman and vice chairman. The Street expects $0.03 per share on revenue of $588.92M, but investors are on high alert after last quarter's abysmal results. "Turnarounds take time," Sterne Agee analyst Arvind Bhatia counsels, "a sense of progress … will be key for the stock."
Rejoice: J.C. Penney sales aren't complete disaster. J.C. Penney (JCP) reported preliminary Q1 revenue of $2.635B Tuesday, a mark which sits just short of consensus. A comparable store sales decline of 16.6% during the quarter is actually an improvement, and the retailer is starting to run up against soft comps. Admittedly, the bar is set comically low for the beleaguered retailer: "This is the first time the news hasn't been horrific," one analyst cited by Bloomberg cheerfully said. Shares rose +1.65% AH to $16.77.
Whole Foods raises guidance, announces stock split. Whole Foods Market (WFM) beat analysts' EPS estimates for FQ2 when it reported Tuesday evening, helped by a 6.9% increase in same-store sales during the period. WFM also said it has witnessed a recent pickup in store sales and notes that same-store sales growth is tracking at 9.4% for the current quarter. The company also raised its FY13 EPS outlook to $2.86-2.89 and announced a two-for-one stock split. The stock rose 8.19% AH.
Manchester United's Ferguson to retire. "The decision … is one that I have thought a great deal about," Manchester United's (MANU) Sir Alex Ferguson said, announcing his planned retirement at the end of the season. "It is the right time," he added. Ferguson, whose 27 year tenure brought 13 league titles, has agreed to remain with the organization as a director.
Top Economic & Other News
German industrial production posts surprise gain. German industrial output rose 1.2% in March, beating economists' expectations of a small decline, and posting an increase for the second straight month. The breakdown shows manufacturing output climbed 1.4% and energy production rose 4%, even as construction activity fell due largely to the coldest March in a quarter century. If construction recovers, it could give a further boost to production. The DAX surged to a new record high Wednesday.
Bank of China squeezes North Korea's Foreign Exchange Bank. The Bank of China closed the account of North Korea's Foreign Trade Bank Tuesday, in a sign the rogue nation's cavalier nuclear rhetoric may be affecting its relationship with its biggest trading partner. Although no official explanation was given for the account closure, most suspect the move stems from China's concern about its international reputation. In March, China backed new U.N. sanctions on Kim Jong-un's regime following Pyongyang's third nuclear test, conducted in February. Elsewhere in the Chinese banking sector, China Construction Bank told Reuters it has no business relationship with North Korea's Foreign Trade Bank.
Moody's sees disturbing muni bond trend. While fears of widespread defaults in the municipal bond (MUB) market (perpetuated in December of 2010 by Meredith Whitney) have so far proven overblown, Moody's says a disturbing trend seems to be developing. Although only five defaults were recorded in 2012, that's more than four times the average yearly rate logged from 1970 to 2007. Perhaps the most notable thing about last year's five defaults: three of them were general government defaults as opposed to defaults on bonds tied to specific projects. The historical average for general government muni defaults: 1 every 4.3 years.
RIO executive sees strong Chinese steel demand. Rio Tinto's (RIO) Alan Smith said at a conference Wednesday that China's demand for steel will be robust and will continue to expand until 2030 despite fears of an economic slowdown. As a result, Smith expects his company's iron ore sales to the country will top 147M tons this year, eclipsing last year's record. Smith also predicts China's annual demand for steel will reach 1B tons in the next 17 years.