>>> Walt Disney beats by $0.17, beats on revs

Walt Disney beats by $0.17, beats on revs (92.32 +0.20)

Reports Q1 (Dec) earnings of $1.63 per share, excluding non-recurring items, $0.17 better than the Capital IQ Consensus of $1.46; revenues rose 13.8% year/year to $15.24 bln vs the $14.8 bln Capital IQ Consensus. Global success of Star Wars: The Force Awakens drove record quarterly operating income at both Studio Entertainment and Consumer Products & Interactive Media
Media Networks revenues for the quarter increased 8% to $6.3 billion, reflecting higher advertising and affiliate revenues, and segment operating income decreased 6% to $1.4 billion. Advertising revenue growth was due to an increase in units sold and higher rates, partially offset by lower ratings. Affiliate revenue growth was due to contractual rate increases, partially offset by a decline in subscribers and unfavorable foreign currency translation impacts.
Cable Networks revenues for the quarter increased 9% to $4.5 billion and operating income decreased 5% to $1.2 billion due to a decrease at ESPN and lower equity income from A&E, partially offset by growth at the domestic Disney Channels. The decrease at ESPN was due to higher programming costs, partially offset by an increase in advertising and affiliate revenues. Results for the quarter were negatively impacted by the timing of our fiscal quarter end relative to when College Football Playoff (CFP) bowl games were played.
Broadcasting revenues for the quarter increased 7% to $1.8 billion and operating income decreased 7% to $223 million due to higher programming costs and an increase in equity losses from Hulu, partially offset by advertising and affiliate revenue growth and higher program sales.
Parks and Resorts revenues for the quarter increased 9% to $4.3 billion and segment operating income increased 22% to $981 million. Operating income growth for the quarter was due to an increase at our domestic operations, partially offset by a decrease at our international operations.
Studio Entertainment revenues for the quarter increased 46% to $2.7 billion and segment operating income increased 86% to $1.0 billion. Higher operating income was due to an increase in theatrical distribution results, a higher revenue share with the Consumer Products & Interactive Media segment, growth in TV/SVOD distribution and increased home entertainment results.
Consumer Products & Interactive Media revenues for the quarter increased 8% to $1.9 billion and segment operating income increased 23% to $860 million. Higher operating income was due to growth at our Merchandise Licensing business and, to a lesser extent, at our Publishing and Games businesses, partially offset by a decrease at our Retail business and the impact of foreign currency translation due to the strengthening of the U.S. dollar against major currencies.

>>>> US After Hours Summary: LLNW +20%, AKAM +15.7%, PAYC +13.8%,


After Hours Summary: LLNW +20%, AKAM +15.7%, PAYC +13.8%, MKTO +9.9%, SCTY -32.6%, OESX -23.8%, DIS -2.9% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance:  LLNW +20%, AKAM +15.7%, PAYC +13.8%, MKTO +9.9%, PSEC +8.9%, RSYS +7.9%, UNIS +7.7%, ATEN +7.3%, NUAN +6.5%, PNRA +2.6%.

Companies trading higher in after hours in reaction to news:  QGEN +2.0% (to enter into Co-marketing and co-development collaboration), 

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance:  SCTY -32.6%, OESX -23.8%, USNA -12.2%, SGMO -7.1%, MCZ -4.1%, SGEN -3.6%, DIS -2.9%, DWRE -2.7%, LF -2.1%

Companies trading lower in after hours in reaction to news:  MSTX -35% (to offer shares of common stock and warrants to purchase common stock in an underwritten public offering), TRXC -23.4% (entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald to sell up to an aggregate of $43.56 mln of shares of its common stock)

>>> US Close Dow-0.08% S&P-0.07% Nasdaq-0.35% Russell-0.56%

Closing Market Summary: Indices End Session off Highs

The stock market ended a volatile Tuesday affair with a final hour rally that led the major averages to within striking distance of their flat lines. Today's action was hallmarked by a rebound in the short-term oversold market as global growth concerns, the recent rout in financials, and an oil supply glut remained in focus for much of today's session. The S&P 500 (-0.1%) and the Dow Jones Industrial Average (-0.1%) were able to end their day ahead of the Nasdaq Composite (-0.4%).

Other contributing factors to today's action included:

  • Uncertainty ahead of Congressional testimony from Fed Chair Janet Yellen on Wednesday and Thursday
  • Looking ahead to influential earnings from Disney (DIS 92.32, +0.20), Time Warner (TWX 63.21, -4.09), Cisco Systems (CSCO 22.65, -0.28), CBS (CBS 42.65, -1.71), and American International Group (AIG 52.25, -0.05) later this week; and
  • Awaiting retail sales data for January that will be released on Friday (consensus 0.2%)

Today's early weakness saw concerns tied to Japan's sharp losses, the yield on its government bond turning negative, and ongoing worries about the health of Europe's banking sector. On that note, the simmering sense of angst about the European banking sector's exposure to bad loans and negative interest rates continues to weigh especially heavy on Deutsche Bank (DB 15.38, -0.16), which has surrendered 36.3% since the beginning of 2016.

Oil was driven lower amidst the selling action overseas but rebounded into today's session. The rebound in oil helped lift the market from its opening lows, but a bearish report from the International Energy Agency sent oil lower. The report stated that supply glut concerns may be understated for the first half of 2016 and precedes the API Weekly Crude Inventory Report which will be released today at 16:35 ET. WTI crude tumbled 6.0% to $27.93/bbl.

The stock market struggled through the first half of the session, returning to its opening low around 13:15 ET. However, biotechnology began flashing some relative strength at the start and held its ground even as the market was revisiting its worst level of the day. The subsequent rebound saw the iShares Nasdaq Biotechnology ETF (IBB 248.40, +0.28) surge to a new high while the broader market followed suit. Neither the market nor the ETF could hold its ground, backing away from highs into the close.

Five sectors were able to end their day in positive territory with materials (+1.2%) and health care (+0.7%) showing the largest advance. The remaining advancers posted gains between 0.7% (health care) and 0.4% (utilities).

In the consumer discretionary space (-0.3%), media companies showed relative weakness after Viacom (VIAB 32.86, -8.99).announced a fifth straight quarter of missing sales estimates. The company's miss weighed on fellow media company Time Warner, which fell 5.1% ahead of its earnings release tomorrow morning. On a related note, Netflix (NFLX 86.13, +2.81) managed a 3.4% advance as headwinds for conventional cable and media companies served as a tailwind for the streaming company.

Independent oil and gas names saw the largest losses from the tumble in oil with EOG Resources (EOG 65.59 -2.84) and Anadarko Petroleum (APC 37.24, -2.81) surrendering 4.2% and 7.0%, respectively

In the heavyweight technology space, large-caps Facebook (FB 99.54, -0.21) and Alphabet (GOOGL 701.02, -3.14) were unable to end in positive territory. Meanwhile, Salesforce.com (CRM 57.33, +3.28) climbed 6.1% after Jefferies upgraded the stock to 'Hold' from 'Underperform'. 

Today's participation was slightly above the recent average with 1.12 billion shares changing hands at the NYSE floor. 

Treasuries ticked higher during the heaviest selling but backed away from these level as the stock market rallied in the final hour. The yield on the 10-yr note ended its day lower by two basis point at 1.73%. 

Today's economic data included the Wholesale Inventories report for December and the December Job Openings and Labor Turnover Survey:

  • Wholesale inventories declined 0.1% month-over-month in December (consensus unchanged) on top of a downwardly revised 0.4% decline (from -0.3%) in November. On a year-over-year basis, wholesale inventories were up 1.9%.
    • Inventories of durable goods in December declined 0.3% after a 0.4% decline in November. The December downturn was governed by a 0.5% decline in machinery inventories and a 4.4% decline in metals inventories.
    • The only areas that saw inventories increase were automotive (+0.3%), electrical (+1.0%), and miscellaneous durables (+1.6%).
    • Inventories of nondurable goods increased 0.1% in December after declining 0.3% in November. The uptick was paced by a 0.8% increase in inventories for drugs and a 2.1% increase in apparel inventories. The only nondurable areas that saw inventories decline in December were petroleum (-7.8%) and alcohol (-1.0%).
    • Wholesale sales were down 0.3% in December after declining 1.3% in November. The inventory-to-sales ratio held steady at 1.32, yet that was up noticeably from 1.24 in the same period a year ago.
  • The December Job Openings and Labor Turnover Survey showed that job openings increased to 5.610 million from a revised 5.350 million (from 5.431 million) in November

Tomorrow's economic data will include the weekly MBA Mortgage Index and the Treasury Budget for January crossing the wires at 7:00 ET and 14:00 ET, respectively. 

  • Russell 2000 -15.1% YTD
  • Nasdaq -14.8% YTD
  • S&P 500 -9.4% YTD
  • Dow Jones -8.1% YTD

FT : Deutsche considers multibillion bond buyback

FT : Deutsche considers multibillion bond buyback

Deutsche Bank is considering buying back several billion euros of its debt, as Germany’s biggest bank steps up efforts to shore up the tumbling value of its securities against the backdrop of a broader rout of financial stocks.
After European banks suffered a second consecutive day of sharp falls, Deutsche Bank is expected to focus its emergency buyback plan on senior bonds, of which it has about €50bn in issue, according to the bank. The move was unlikely to involve so-called contingent convertible bonds which, along with the bank’s shares, have been the butt of a brutal investor sell-off in recent days, people briefed on the plan said.

Banks can generate capital gains by buying back bonds at a discount to their face value.
The news came as Germany’s finance minister Wolfgang Schäuble and Deutsche’s chief executive John Cryan both sought to assuage market fears. Mr Schäuble said he had “no concerns” about the bank, while Mr Cryan insisted Deutsche’s position was “absolutely rock-solid”.
The bank’s shares still fell 4 per cent, taking the decline since the start of the year to 40 per cent.
Other European banks fared even worse on Tuesday, with Credit Suisse falling 8 per cent and UniCredit 7 per cent, as investor nervousness intensified over the relative weakness of European bank capital and earnings amid broader market turmoil. US banks, which have been hit hard in recent weeks, too, were only marginally weaker at lunchtime on Tuesday.
Investors have also been rattled by the prospect of negative interest rates spreading across the developed world. On Tuesday Japan became the first major economy with a sub-zero borrowing rate for 10-year debt as the total of government bonds trading with negative yields climbed to a new peak of $6tn.
Concern about the solidity of bank debt — principally European bank cocos, which can suspend coupons and may convert into equity in a crisis — has prompted an investor dash to buy protection.
A popular credit derivatives index that tracks the likelihood of default of investment-grade debt of European companies and banks was trading at 119 basis points on Tuesday, near its highest level since June 2013.
Broader investor concerns about the health of the financial sector have coincided with more specific questions about Deutsche’s nascent restructuring programme.

The market jitters have come at a turning point in its recent history. The German group had expanded rapidly over the past two decades, buying up Morgan Grenfell and Bankers Trust as it sought to challenge the US groups at the top table of global investment banking.
However, Deutsche drew a line under this strategy last October when it announced a restructuring plan as it cut jobs, shed assets and exited 10 markets.
After the bank’s shares lost 9.5 per cent of their value on Monday, and its coco bonds also came under pressure, Deutsche put out a statement reassuring investors that it could pay coupons on the hybrid capital, which are due in April.
Deutsche Bank has plenty of scope for a bond buyback, with €220bn of liquidity reserves. The bank has hundreds of senior bonds outstanding, with a total value of around €50bn as of September 2015, according to the company.
The cost of buying protection to hedge against declining prices for these bonds has rocketed in the past week and the senior five-year euro credit default swap was trading at 242 basis points on Tuesday — its highest level since the end of the eurozone crisis in 2011.
Deutsche also has €5bn of debt in the form of additional tier 1 bonds, or cocos, it also has €6bn of tier 2 debt and €5bn of legacy tier 1.
A €1.75bn coco bond with a coupon of 6 per cent was trading at 71 cents on the euro on Tuesday. By contrast, a senior unsecured bond maturing in five years was trading at 97.5 cents on the dollar.

>>> Daimler : Estimates €0.34B worth of charges related to recalls of vehicles i

DAimler : Estimates €0.34B worth of charges related to recalls of vehicles impacted by Takata air bags; affirms outlook 

(NHTSA) has notified Daimler AG that it has been informed that certain airbag models from the manufacturer Takata, which are also installed in Mercedes-Benz cars and Daimler vans, are potentially defective. On the basis of available information on the components, Daimler AG has decided to recall approximately 705,000 Mercedes-Benz cars and about 136,000 Daimler vans in the United States. The expense for this precautionary recall is estimated at a total of about €340 million.

The estimated costs will be recognized as a provision in financial year 2015. Therefore net profit will decrease to €8.7B (2014: €7.3B) and Group EBIT to €13.2B (2014: €10.8B). EBIT from ongoing business remains unchanged at €13.8B (2014: €10.1B).