News Archive

Yellen tells Senate Democrats U.S. economy looks good: media reports

WASHINGTON (Reuters) – Federal Reserve Chair Janet Yellen on Thursday offered an upbeat assessment on the U.S. economy in a meeting with Senate Democrats, even as she noted risks from overseas, according to media reports.

According to The Wall Street Journal, Senator Joe Manchin of West Virginia told reporters after a private luncheon with Yellen that she said “things are going well” for the U.S. economy.

“She feels the economy is strong, a lot is good,” Manchin said, according to the Journal.

New York Senator Chuck Schumer told Bloomberg: “Her message is that the economy’s getting better but there’s still a ways to go in terms of job creation.

“That worry seems, in her mind, to be paramount and that’s why she is not going to raise rates immediately,” he said.

The meeting came a day after Fed policymakers upgraded their assessment of the U.S. economy, while acknowledging that international developments could play a role in their decision on when to raise benchmark borrowing costs from near zero.

“She was generally pretty positive about fundamentals here, you know some concern about the foreign situation,” Senator Tim Kaine of Virginia said, according to the Journal.

Senator Richard Durbin of Illinois called Yellen’s comments “very positive,” according to both reports.

(Reporting by Timothy Ahmann; Editing by Leslie Adler)

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Broadcom’s fourth-quarter results exceed expectations

SAN FRANCISCO (Reuters) – Broadcom Corp (BRCM.O) posted fourth-quarter results on Thursday that exceeded Wall Street’s expectations as the Apple supplier increased its focus on Wi-Fi and broadband chips, sending its shares higher.

The chipmaker’s results appeared to be supported by strong sales at key customer Apple Inc (AAPL.O), which this week said it sold 74.5 million iPhones in its fiscal first quarter, trampling expectations.

“They’re probably benefiting from the upside of the iPhone 6, but probably offset by Samsung smartphones not selling so well and some weakness in the Chinese handset market,” said Kevin Cassidy, an analyst at Stifel Nicolaus.

Shares of Synaptics Inc (SYNA.O), which makes display drivers for smartphones, surged in extended trade after it posted fiscal second-quarter results above expectations.

Broadcom shares have soared 28 percent since the company said in June it was deciding how to get out of baseband technology after falling behind in the development of 4G technology increasingly used by carriers.

Exiting that business frees up resources to focus on the company’s better-performing networking and broadband businesses and the company in December returned some of its freed up cash to shareholders with an increased dividend.

Broadcom, a leader in connectivity chips with features like Wi-Fi and Bluetooth, reported fourth-quarter revenue of $2.14 billion, up 3.8 percent from the year-ago period.

It also said revenue in the first quarter would be $2.0 billion, plus or minus $75 million.

Analysts on average had expected fourth-quarter revenue of $2.11 billion and expect first-quarter revenue of $2.01 billion, according to Thomson Reuters I/B/E/S.

In the fourth quarter, Broadcom posted a net profit of $390 million, or 64 cents a share, compared with a net profit of $168 million, or 29 cents a share, last year.

Non-GAAP earnings per share totaled 76 cents in the fourth quarter, including stock-based compensation.

Not including stock-based compensation, Broadcom said its EPS was 90 cents compared to 87 cents expected by analysts.

Shares of Synaptics rose 9.65 percent in extended trade after closing regular trade up 1.91 percent at $68.31.

Broadcom’s stock rose 1.67 percent in extended trading after ending up 0.82 percent at $41.31 on Nasdaq.

(Reporting by Noel Randewich; editing by Meredith Mazzilli and G Crosse)

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Google fourth-quarter revenue misses Wall Street target

SAN FRANCISCO (Reuters) – Google Inc’s (GOOGL.O) (GOOG.O) revenue grew 15 percent in the fourth quarter but fell short of Wall Street’s target on declining online ad prices and unfavorable foreign exchange rates.

Shares of Google edged up 0.1 percent to $510.66 in extended trading after an initial dip on the news.

Google’s advertising revenue has come under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where ad rates are typically lower.

The growing popularity of mobile devices has made No. 1 social network Facebook Inc (FB.O) a greater threat in the battle for advertisers. Facebook reported on Wednesday that mobile ads on its network doubled year-over-year during the fourth quarter.

Google said on Thursday the average price of its online ads, or “cost per click,” decreased 3 percent year-over-year in the fourth quarter, while the number of consumer clicks on its ads increased 14 percent.

Some analysts had hoped for gains in cost-per-click, said BGC Partners analyst Colin Gillis, adding that the company, which gets about half of its revenue overseas, also was hurt by the strong dollar.

“Business is slowing. The core is slowing. And what we’re saying is, it’s going to look on paper even worse as the dollar strengthens. And we are not at that point where mobile monetization is improving,” he said. “The thesis that the landscape is changing and Google is missing out – I don’t think it will hold to be true, but they haven’t squelched it.”

Consolidated revenue in the three months ended Dec. 31 totaled $18.10 billion, compared to $15.71 billion in the year-ago period. Analysts polled by Thomson Reuters I/B/E/S were looking for revenue of $18.46 billon.

Chief Financial Officer Patrick Pichette said in a statement that revenue grew “despite strong currency headwinds.”

Net income rose to $4.76 billion, or $6.91 per share, from $3.38 billion, or $4.95 per share, a year earlier. Adjusted earnings per share of $6.88 missed analysts’ expectations of $7.11.

(Reporting by Alexei Oreskovic, additional writing by Peter Henderson; Editing by Richard Chang)

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Ford profit beats estimates, but European outlook worsens

DETROIT (Reuters) – Ford Motor Co (F.N) on Thursday said it would keep relying on North America for its profit this year as the No. 2 U.S. automaker signaled that losses in Europe would be more than previously forecast.

Ford had previously estimated losses from Europe at about $250 million in 2015. On Thursday, however, it backed away from that forecast, saying the loss would narrow from $1 billion in 2014 but would be wider than previously thought.

“We’re seeing a much bigger impact from Russia,” Chief Financial Officer Bob Shanks said.

The company’s earnings beat Wall Street’s expectations but fell from the prior year, mainly due to charges for a previously announced accounting change for its Venezuela operations. Ford also maintained its 2015 profit forecast.

Shanks said the introduction of the latest version of Ford’s F-150 pickup truck was going “extremely well” in North America, where 2014 pretax earnings of $6.9 billion were greater than the overall profit of $6.3 billion. The truck is the major force behind Ford’s earnings.

The profit margin in North America was 8.4 percent last year. Ford had said last fall that figure would finish at the low end of a range of 8 percent to 9 percent.

In the fourth quarter, Ford’s pretax profit fell in North America and Asia.

Ford’s loss in Europe was $443 million, compared with $529 million a year earlier.

Net income was $52 million, or 1 cent per share, a decline from $3.07 billion a year earlier, when results were boosted by a one-time $2.1 billion special tax item. This year, Ford took a one-time charge of $800 million in the fourth quarter for an accounting change in Venezuela that also shields its future earnings from the volatile currency and operations there.

Excluding special items, earnings were 26 cents per share, 3 cents higher than the expectations of analysts polled by Thomson Reuters I/B/E/S.

Revenue of $35.9 billion topped analysts’ estimates of $34.54 billion.

In North America, Ford made a pretax profit of $6.9 billion in 2014, which will yield an annual bonus for about 50,000 union-represented workers of $6,900 per person, down from $8,800 in 2013.

Ford maintained its forecast for 2015 pretax profit of between $8.5 billion and $9.5 billion.

Ford’s shares were up 2 percent in premarket trading at $14.75.

(Reporting by Bernie Woodall and Ben Klayman; Editing by Lisa Von Ahn)

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Honda recalls to squeeze profit, cloud guidance as cheap fuel poses new threat

TOKYO (Reuters) – As Japan’s Honda Motor Co (7267.T) pays hundreds of millions of dollars to replace potentially deadly air bags, hitting earnings, a new headache lies around the bend – cheaper U.S. petrol could lure buyers away from its fuel-efficient cars.

The country’s third-largest automaker reports income for the October-December quarter later on Friday that analysts see falling 17 percent from a year earlier, squeezed by the cost of voluntary recalls involving air bag inflators made by top supplier Takata Corp (7312.T). The hit may be enough to trigger a full-year profit warning.

Still, Honda, like other affected automakers, expects to get those costs back eventually if investigations find Takata at fault. And many analysts say reputational damage seems minimal, including in the United States, Honda’s most important market.

Potentially a bigger near-term concern is cheaper fuel as global oil prices slide, with U.S. sales of light trucks up 10 percent in 2014 against a 1.8 percent rise for passenger cars. That’s a red flag for Honda, which excels in cars that have attracted buyers concerned about fuel economy.

“The fall in fuel prices represents a body blow to Japanese automakers,” said Merrill Lynch analyst Kei Nihonyanagi.

Whatever the current quarter has in store for Honda, the earnings it reports for the third quarter of its fiscal year, due at 0600 GMT, will be hit by the Takata-related recalls. The United States accounts for most of Honda’s 13 million-vehicle air bag recalls and four of the five deaths – all on Honda’s cars – linked to Takata’s inflators, which can explode too forcefully and send metal shards into the car.

Analysts estimate quality-related costs, including a $70 million fine by the U.S. government, will drag Honda’s profit down by hundreds of millions of dollars in the latest quarter.

A poll of 10 analysts put October-December operating profit at 189.11 billion yen ($1.61 billion), down 17 percent from the year before according to Thomson Reuters SmartEstimate.

But analysts see Honda bouncing back quickly from the recalls in terms of brand image.

“The impact on Honda’s sales has been limited,” said Takaki Nakanishi, analyst and CEO of Nakanishi Research Institute. “I think it can recover relatively quickly at this rate.”

For the year though March, SmartEstimate forecast profit at 760.5 billion yen, short of Honda’s guidance of 770 billion yen. While the weak yen may boost the value of overseas sales, Honda will benefit less than others since it has virtually no exports from Japan.

(Editing by Kenneth Maxwell)

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Politics, mobile overshadow Alibaba’s fairy-tale run

SAN FRANCISCO (Reuters) – Alibaba Group Holding Ltd’s underwhelming holiday quarter performance and an escalating war of words with a powerful Chinese industry regulator highlight two major risks to its seemingly fairy-tale ascent: politics and the shift to mobile commerce.

The Chinese e-commerce giant has acquired a rosy aura since its record-breaking IPO last spring, revealing growth rates and volumes that dwarfed industry stalwarts Inc and eBay Inc.

Now, Wall Street is cutting back on expectations in part because of fears that Chinese regulators are sharpening their scrutiny of counterfeit products on e-commerce sites, an endemic problem that Alibaba and others have fought for years.

“As the China-factor gets tempered, then excitement (around Alibaba) is going to get tempered as well,” Cantor Fitzgerald’s Youssef Squali said, after cutting estimates for 2015 revenue and earnings. “At some point, you’re not going to dominate the market and you’re just going to grow in line with the market. But we’re not there yet,” he added.

The gradual migration of users to mobile platforms threatens to weigh on the top line. On Thursday, Alibaba disappointed with 40 percent revenue growth and a monetization rate, the percentage of ecommerce transactions it earns, below Wall Street expectations. That was due to the rising proportion of purchases on mobile devices, from which Alibaba earns less. Its stock fell 9 percent.

Alibaba-watchers were also treated to the unusual sight of a company, regarded as a standard-bearer for a burgeoning technology industry, trading barbs with a government body. China’s State Administration for Industry and Commerce (SAIC) surprised investors by publishing a scathing report – since pulled from its website – lambasting the company for not doing enough to suppress counterfeits.

Throw in questions around how much the world’s largest economy will decelerate, and the Alibaba picture begins to look less than certain for 2015.

“Alibaba does outline anti-counterfeit measures in its filings, but the SAIC report puts the effectiveness of these measures into question,” Stifel analysts Scott Devitt and George Askew wrote on Thursday as the brokerage downgraded Alibaba to a hold from a buy. “The perception issue may persist.”

It is unclear whether the SAIC intends any specific action. But the Chinese company is sensitive to accusations about its efforts to suppress counterfeit products. Meanwhile Beijing, facing persistent U.S. pressure, has declared protecting intellectual property a government priority.

Alibaba’s Vice Chairman Joseph Tsai fired back on Thursday, accusing the influential body of “flawed” methodology and preparing to file a formal complaint.


To be sure, Alibaba’s 40-plus percent growth in revenue and gross merchandise value remains the envy of its rivals. It has been able to sustain that pace thanks to its 80 percent share of a Chinese online market that industry executives agree still has enormous room to grow.

But the world’s largest economy is poised to decelerate after years of eye-popping growth. Economists also warn of a property market deflation and pressure on wage growth.

Last week, Alibaba Chairman Jack Ma brushed aside fears that a slowdown may squeeze his company.

Yet while e-commerce should continue to grow in the Middle Kingdom, the increasing shift to mobile commerce means that the amount Alibaba actually earns will come under downward pressure.

Two-thirds of the company’s sales still come from its consumer-to-consumer marketplace Taobao, where it primarily earns revenue from advertising and marketing services. As with Google Inc and Facebook Inc, Alibaba charges less for marketing on mobile devices than on computers.

It reported a monetization rate of just below 2 percent from mobile, which now comprises 42 percent of overall gross merchandise value versus 36 percent in the previous quarter.

“Near-term predictability of growth and margins has deteriorated given the company’s continued transition to mobile and changes to its user experience,” Cantor Fitzgerald’s Squali wrote in a research note. “This is amplified by recent tensions with SAIC.”

(Additional reporting by Paul Carsten in Beijing, John Ruwitch in Shanghai, and Supantha Mukherjee in Bengaluru; Editing by Lisa Shumaker)

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Zero profit growth expected for U.S. companies in first quarter

NEW YORK (Reuters) – Falling oil prices, a soaring dollar and concern about weaker global demand have increasingly pessimistic analysts predicting Standard Poor’s 500 companies will see no earnings growth at all in the first quarter of 2015.

That would be the worst quarter for Standard Poor’s 500 earnings since the third quarter of 2009, not long after the United States emerged from its recession. Revenue for the first quarter is expected to be worse, forecast to decline 2.0 percent from a year ago, according to Thomson Reuters data.

The biggest drag is expected to be energy companies suffering from the oil price collapse, but analysts have dropped projections in almost every sector as the earnings reporting season has unfolded.

On Jan. 1, SP 500 first-quarter earnings were forecast to rise 5.3 percent, including energy companies, and 10.5 percent excluding energy companies. On Thursday, that consensus forecast was flat from a year ago including the energy sector, and cut to 7.9 percent growth excluding energy.

The weakening profit outlook does not bode well for the U.S. stock market, which has started the year off on weak footing as energy shares have plummeted and investors brace for higher interest rates from the Federal Reserve. The SP 500 is down 2.3 percent for the year so far.

“Disappointing earnings, the Fed probably headed toward tightening in the second half of this year, a very expensive currency, tepid overseas demand – it would seem like a storm that could crack this market,” said Uri Landesman, president of Platinum Partners in New York.

Outlooks from companies themselves are far more negative than positive. While many more outlooks for the first-quarter are yet to come, 26 SP 500 companies so far have warned about the quarter, while just one has raised its forecast, Thomson Reuters data showed.

Expectations for the energy sector have fallen more than any sector for the current quarter.

Earnings for the SP 500 sector .SPNY are expected to drop 56.8 percent, the Thomson Reuters data showed. That compares with a Jan. 1 forecast for a 32.2 percent decline. U.S. crude futures CLc1 fell from a mid-June 2014 high of $107.73 per barrel to settle at $44.45 on Wednesday, a near 59 percent drop.

The materials sector, which includes several U.S. multinationals hit by the stronger dollar, has the next-biggest decline in first-quarter profit expectations, with growth for the sector now projected up just 4.3 percent compared with a Jan. 1 forecast for 17.0 percent growth, the Thomson Reuters data showed.

To be sure, profit growth estimates for the fourth quarter have actually risen in recent weeks. With results in from 32 percent of the SP 500, earnings for the quarter are expected to have risen 4.7 percent.

That compares with a Jan. 1 forecast of 4.2 percent, but that is largely due to strong results from Apple (AAPL.O). Without Apple, SP 500 profit growth is estimated at 2.6 percent.

(Reporting by Caroline Valetkevitch; editing by Linda Stern and Andrew Hay)

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Shake Shack IPO is hot but can it match Chipotle?

(Reuters) – Growth-hungry investors are lining up for shares of burger chain Shake Shack Inc (SHAK.N), whose initial public offering will be priced after the U.S. stock market closes on Thursday.

The IPO market has been particularly fruitful recently for so-called fast-casual restaurant operators such as burger chain Habit Restaurants Inc (HABT.O) and others that hope to replicate the sizzling growth of Chipotle Mexican Grill Inc (CMG.N).

Preliminary demand prompted Shake Shack to raise its expected IPO price to a range of $17 to $19 per share on Wednesday, from between $14 and $16.

If the 5 million shares on offer are priced at the top of the range, Shake Shack would raise $95 million and be valued at about $675 million.

Shake Shack debuts two months after Habit Restaurants, known for its charburgers, floated its shares.

Habit’s shares have risen more than 80 percent from their IPO price since their debut on Nov. 20.

Shake Shack, which traces its beginnings to a hot dog cart in a park in New York City, has 63 restaurants, more than half outside the United States.

Customers in Manhattan and Chicago often wait in long lines to get a taste of its rich milkshakes and hormone- and antibiotic-free burgers.

“It’s a cult,” said Bob Goldin, an executive vice president at consulting firm Technomic.

The chain attracts a relatively affluent clientele, which spends roughly $30 for a meal for two – considerably more than diners spend at struggling fast-food giant McDonald’s (MCD.N).

Shake Shack’s challenge, Goldin and other experts said, is not to expand too quickly. Ubiquity, they said, often works against cult chains.

Shake Shack, founded by New York restaurateur Daniel Meyer in 2001, waited five years to open its second restaurant.

The company has said it plans to open 10 U.S., company-operated restaurants each year and could eventually grow to at least 450 locations.

When Chipotle went public in 2006, it had almost 500 U.S. restaurants. The chain is known for its simple, customizable food made from antibiotic-free meats and fresh produce.

Investors love Chipotle’s rapid growth. The company, which had about 1,700 U.S. restaurants, is known for cranking out ever-higher unit sales without increasing costs.

While Shake Shack has been slower to add restaurants, its domestic average annual sales of $5 million per location for 2013 were about double Chipotle’s.

(Additional reporting by Anil D’Silva in Bengaluru; Editing by Lisa Von Ahn and Ted Kerr)

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Campbell Soup to rejig business according to product categories

(Reuters) – Soup and snacks maker Campbell Soup Co (CPB.N) said it plans to reorganize its business on the lines of product categories instead of geographies or brands.

Campbell will manage its business in three divisions, Americas simple meals and beverages, global biscuits and snacks and packaged fresh, the company said.

Campbell on Thursday also appointed three executives to lead the newly formed divisions.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Joyjeet Das)