Wall Street News
Netflix drops despite profit gain. Netflix's (NFLX) Q2 net income rose almost fivefold to $29.5M and EPS of $0.49 beat consensus, while revenue climbed 20% to $1.07B. However, shares dropped 6.05% pre-market, due to an increase in U.S. subscribers of "just" 630,000, which disappointed investors who'd hoped for more after the company started providing original programming such as a revival of the comedy show Arrested Development. "It was a very good quarter by most standards," says Pacific Crest analyst Andy Hargeaves. "But that doesn't cut it when your stock has risen by 200%."
Spain's economy may be turning the corner. The contraction in Spain's GDP slowed to 0.1% on quarter in Q1 from +0.5% in Q2, Spain's central bank said, adding that with confidence indicators improving, it expects a complete turnaround by Q3. If correct, the Q2 figure would be the best - or least worst - since the recession hit at the end of 2011. Many economists aren't as optimistic, but investors seem to be buying into the bank's story, and Spanish shares (EWP) were +1.4% at midday in Europe.
Top Stock News
Telefonica to buy KPN's German ops. Telefonica Deutschland (TEF) has agreed to acquire KPN's (KKPNF.PK) German E-Plus unit in a deal that values the subsidiary at €8.1B. KPN will receive €5B in cash and a 17.6% stake in Telefonica Deutschland. The transaction will create the biggest cellular operator in Germany, and enable the combined entity to better compete with leading operators Deutsche Telekom (DTEGF.PK) and Vodafone (VOD). Telefonica said its goal of cutting debt to €47B this year from €51.3B won't be affected.
Apple's EPS seen falling. The pick of the earnings results out of the torrent of reports that are due after the bell include Apple (AAPL), AT&T (T) and VMware (VMW). Apple's FQ3 EPS is seen falling to $7.32 from $9.32 last year and revenue flat at $35.01B. Analysts estimate that AT&T's EPS edged up to $0.68 from $0.66 and revenue 0.8% to $31.81B. VMware's EPS is expected to have grown to $0.77 from $0.68 as revenue climbed 9.7% to $1.23B.
PacWest Bancorp to acquire CapitalSource for $2.29B. PacWest Bancorp (PACW) has agreed to buy CapitalSource (CSE) for $2.29B in cash and stock. The deal will expand PacWest's presence in Southern California and will be its second acquisition in eight months after it bought First California Financial for $231M in November. The purchase values CapitalSource at $11.68 a share, or a 19% premium to its close of $9.83 yesterday.
Vivendi in talks to sell Africa unit for €4.2B. Vivendi (VIVHY.PK) has entered negotiations to sell its 53% holding in Maroc Telecom (MAOTF.PK) to Abu Dhabi based Etisalat for €4.2B in cash. A sale would be the first step in Vivendi's strategy to focus on its media operations as it reportedly explores how to generate cash from its Activision Blizzard (ATVI) video-games unit.
Prudential to argue that it's no SIFI. Prudential Financial (PRU) is due to appear before the Financial Stability Oversight Council today to try to persuade the regulator not to label the insurer as a "systemically important financial institution." Prudential's hopes might have been raised by two council members dissenting on the decision to designate the firm as a SIFI, although on the downside, the G20's Financial Stability Board has categorized the company as such.
CFTC may probe aluminum warehouse firms. The Commodity Futures Trading Commission has told Goldman Sachs (GS), Glencore (GLNCY.PK), Noble Group (NOBGF.PK) and other companies that operate aluminum warehouses to retain internal documents and e-mails related to the businesses, the NYT reports. The move could presage a formal inquiry into the operations and comes after the paper wrote about how the activities of warehouse owners had driven up the price of the metal.
Senate to investigate banks' commodities activities. The report of a possible CFTC probe into Goldman Sachs (GS) and co. about their aluminum activities comes ahead of a Senate hearing today into the commodities operations of major banks such as JPMorgan (JPM) and Morgan Stanley (MS), as well as Goldman. Legislators are expected to explore whether banks should be allowed to continue to store metal, transport oil and operate mines, and possibly how prices have been affected.
Southwest 737 crash lands at La Guardia. A Southwest (LUV) Boeing (BA) 737-700 crash landed yesterday at New York City's La Guardia Airport, apparently losing its front landing gear upon touchdown. Eight people were injured. The event is the latest in a series of incidents involving Boeing planes, although aviation analyst Scott Hamilton believes it has no connection with the company's 787 problems.
Top Economic & Other News
Japanese government upbeat about economy. "The economy is steadily picking up (and) deflation is easing," the Japanese Cabinet Office said in its monthly economic report. However, the government stopped short of proclaiming a "clear recovery", saying it needed to see more improvement in the "income situation" and further evidence of a pick up in capex.
Detroit bankruptcy hearing set for tomorrow. U.S. Bankruptcy Court Judge Steven Rhodes has set an initial bankruptcy hearing for Detroit for tomorrow, when the city will request that it receive federal court protection from lawsuits. Fearing that their benefits will be cut, Detroit retirees, workers and pension funds have already submitted three suits in state courts to try to stop the bankruptcy filing, although federal law usually trumps state law in these cases.