Home' Trinidad and Tobago Guardian : April 21st 2014 Contents A20
Guardian www.guardian.co.tt Monday, April 21, 2014
We re heading into the heart of
the earnings season this week. It s
a reality check on the health of
the economy and where the mar-
kets stand ... and maybe where
they ll go.
Some of America s most recog-
nizable brands will disclose how
they re doing.
Netflix will be the focus on Mon-
day when it reports after the close
of trading. The stock has been one
of Wall Street s big momentum
plays ---it was the top performing
stock in the S&P 500 last year with
an incredible 269 per cent rise. But
tech stocks have had a volatile ride
over the past several weeks.
So far this year Netflix stock is
down six per cent. It had a big day
Thursday rising four per cent as
investors began to feel confident
about the upcoming earnings
RBC Capital s Mark Mahaney
reportedly expects the subscriber
numbers to be good. He thinks Net-
flix will say it has 2.25 million new
US subscribers and 1.6 million
international subscribers. That
would represent a 26 per cent gain
over a year ago.
On Tuesday, look out for fast
food as McDonald s and Yum
Brands both release results.
McDonald s is often a gauge for
how the global economy is doing
since the brand is in so many coun-
tries and its customers are average
people. During the recession,
McDonald s didn t suffer as much
as most companies since people
were still willing to eat out at a
It s expected to report first quar-
ter earnings of US$1.24 a share.
That would be down from the
US$1.26 it reported a year ago.
The Golden Arches has been fight-
ing off competition for years, but
within the last few months, it has
McDonald s and Yum s Taco Bell
are locked in the "great breakfast
war." Taco Bell launched a nationwide
breakfast menu in late March that
debuted the "Waffle Taco." McDon-
ald s responded with free coffee for
Apple s iPhones represent the
company s single biggest source of
revenue. The average analyst estimate
of sales is 38.2 million, which would
represent a two per cent increase
year over year.
Many analysts also expect the
company to report that sales of the
iPad declined year over year. The
iPad still represents about 20 per
cent of total product sales.
As for Facebook, it has some big
expectations to fill.
In the fourth quarter, Facebook s
revenue increased by a billion dollars
from a year earlier to US$2.59 billion.
So far this year the stock has been
up nearly eight per centand that s
despite a recent pummeling of those
momentum stocks of which Face-
book is a leading favorite.
Investors will of course be watch-
ing Facebook s revenue very closely
as well as any declines in North
American and European users. It may
be one earnings report where any-
thing less than "spectacular" might
disappoint Wall Street, much like
Google last week.
Thursday will be all about Ama-
zon.com and Microsoft.
The stocks tell very different sto-
ries. Amazon is down more than 18
per cent this year while Microsoft is
up nearly seven per cent.
Investors have flocked to Microsoft
as a safe haven in a turbulent market.
At the same time they ve been selling
Amazon as part of the bloodletting
we have seen in the past few weeks.
Microsoft recently began selling
Office for iPad, and in the first week
more than 12 million people down-
loaded Office Apps, a very good sign
for CEO Satya Nadella s new game
plan for the company. But, Microsoft
still has many challenges ahead,
including how to transform aging
business for PC operating software.
Amazon CEO Jeff Bezos recently
made headlines by offering employees
US$5,000 to quit, and has plans to
shake-up other businesses, but on
Thursday he ll be in the earnings
spotlight to help explain how Amazon
performed in the first quarter.
Bezos has certainly been doing his
best to boost earnings. Recently
Amazon increased the price of Prime
membership to $99 from $79. He
also recently launched Fire TV, Ama-
zon s answer to Apple TV and Roku.
Analysts expect Amazon to report
earnings or US$0.23 a share versus
US$0.18 a share in the year ago peri-
od.Friday s earnings focus will be on
Ford, and the expectations are high.
Ford recently reported that March
sales were up 3.3 per cent, much bet-
ter than expected. Leading the growth
was the Fusion model, which is Ford s
mid-sized sedan entry in the largest
segment of the US car market.
Deutsche Bank reportedly upgrad-
ed Ford recently and placed a US$19
price target on the stock saying the
new F-150 pick-up is increasingly
cost competitive. (CNN)
Stocks: It's report card
time on Wall Street
Chinese Premier Li Keqiang s plan to
introduce deposit insurance is meant to
comfort the nation s savers as bad loans
mount. In the bond market, it s fueling
speculation he s preparing to let some
Authorities may tolerate failures of
smaller banks once depositor safeguards
are in place, Kwong Li, chief executive
officer of China Lianhe Credit Rating
Company said. Among lender bonds rated
at or below AA, the extra yield investors
demand to hold the 2022 securities of
China Bohai Bank Company in the north-
ern city of Tianjin surged to an 11-month
high of 245 basis points on April 17. The
premium on the notes due 2019 of Harbin
Bank Company, a lender near China s
border with Russia, has jumped 41 basis
points in the past year to 217.
"With the deposit insurance coming
online, the government is signaling they
may be willing to let some of the smaller
banks default or be consolidated," Li said
in an interview in Shanghai on April 15.
Bank defaults "probably won t happen
until deposit insurance is in place." Lianhe
Credit is Fitch Ratings Ltd. s China joint
Premier Li pledged last month to intro-
duce protection for savers this year as he
shifts toward letting the market set rates,
a move that may push up borrowing costs
for smaller lenders even as it forces them
to pay higher interest to depositors. Almost
1,000 customers rushed to outlets of
Jiangsu Sheyang Rural Commercial Bank
on March 24 amid rumors the lender may
go bankrupt, Xinhua News Agency report-
ed March 26.
The nation s banking regulator has
ordered some smaller lenders to set aside
more funds to avoid cash shortfalls, after
bad loans jumped to the most since the
global financial crisis, three people familiar
said in February.
Concern banks may face increasing dif-
ficulty collecting debts is mounting after
the first default on an onshore yuan note
last month when Shanghai Chaori Solar
Energy Science and Technology Compa-
nymissed part of an interest payment.
Slowing economic growth is adding to
speculation more companies won t be
able to fulfill debt obligations.
Credit-default swaps insuring the
nation s debt against non-payment
climbed 9.5 basis points this year to 89.5
basis points, after expansion in gross
domestic product cooled to 7.4 per cent
in the first three months of the year, the
least in six quarters.
Failures of high-yield trust products
have sparked investor protests, highlighting
the potential for unrest deposit insurance
would seek to preclude. At least 30 people
wearing white masks with the words
"despicable bank" faced special-forces
officers in front of a China Construction
Bank Corporation branch in Taiyuan last
week, as they demanded their money
back from a troubled 973 million yuan
(US$156 million) trust product.
Fang Xinghai, a bureau director at the
Office of the Central Leading Group for
Financial & Economic Affairs, said in
November one or two small Chinese banks
may fail this year because they get about
80 percent of their funding from interbank
markets and higher-cost deposits in sav-
ings vehicles known as wealth manage-
ment products. The group is the high-
est-level agency within the Communist
Party for financial and economic policies.
"Chinese regulators are preparing a
safety net," Kuo said in an April 17 inter-
view from Hong Kong. "Going forward,
when small financial institutions have
some problems perhaps the government
won t necessarily help them out once they
have deposit insurance in place to protect
Sour debt at lenders increased for the
ninth straight quarter at the end of last
year to 592.1 billion yuan, the highest level
since 2008, data compiled by China Bank-
ing Regulatory Commission show. New
non-performing loans amounted to more
than 60 billion yuan in the first two
months of this year, compared with 100
billion yuan for all of 2013, China Business
News reported on April 9, citing uniden-
tified people in the banking industry.
The average non-performing loan ratio
for Chinese banks rose to one per cent at
the end of last year, compared with 0.97
percent in September, CBRC, the nation s
banking regulator, said February 13. The
figure may climb as high as two per cent
by next year, Moody s Kuo said.
The People s Bank of China currently
caps interest paid on deposits at 1.1 times
its benchmark rate, which stands at three
per cent for one-year deposits.
Bank defaults seen as dark side
of deposit vows: China Credit
In this April 11 file photo, trader Anthony Carannante, left, works on the floor of the New York Stock
Exchange. Major US stock indexes rose in afternoon trading on April 17, as investors reacted to quarterly
results from a batch of US companies. Google, IBM and insurer UnitedHealth were among the biggest
decliners, while General Electric and Morgan Stanley were among the largest gainers. AP PHOTO
In this March 25 file photo, Miners chant anti-government slogans during a
protest organised by artisanal and small-scale gold miners in Lima, Peru. The
miners marched in the country's capital for the sixth day asking the
government to repeal regulations aimed at formalising informal miners. The
government's vow to enforce a ban on illegal mining is raising fears of bloody
confrontations. AP PHOTO
WALL STREET REACTIONS
GOLD MINERS PROTEST
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