wall street
YUM! BRANDS INC., $70.20, New York symbol YUM, rose 4% this week after the company reported better-than-expected sales at its China division, which includes 4,260 KFC fried chicken and 987 Pizza Hut restaurants. China supplies around 40% of Yum’s overall earnings. In late 2012, Yum’s sales in the country suffered due to allegations that its KFC outlets bought raw chicken with higher-than-permitted levels of antibiotics from two suppliers. Following an investigation, Chinese regulators did not charge Yum with violating food-safety standards. Even so, Yum has strengthened its food-safety policies. It has also spent more on advertising and other promotions. These moves seem to be working. For the two months ended February 28, 2013, Yum’s same-store sales in China fell 20%, which was better than the company’s earlier prediction of a 25% drop....
The outlook for U.S. banks is mixed. For some, such as J.P. Morgan Chase & Co.—a buy recommendation of our Wall Street Stock Forecaster newsletter—the outlook is positive. J.P. Morgan, $50.48, symbol JPM on New York (Shares outstanding: 3.8 billion; Market cap: $193.2 billion; www.jpmorgan.com), earned a record $21.3 billion in 2012. That’s up 12.2% from $19.0 billion in 2011. Earnings per share rose 16.1%, to $5.20 from $4.48, on fewer shares outstanding. That beat the consensus estimate of $5.00 a share. More borrowers are repaying their loans on time. As a result, Morgan set aside $3.4 billion to cover bad loans in the latest quarter, down 55.3% from $7.6 billion a year earlier. This was the main reason for the higher earnings....
CONAGRA FOODS INC., $34.77, New York symbol CAG, has agreed to merge its flour-milling operations into a new joint venture. Under the terms of the deal, ConAgra, privately held Cargill Inc. and CHS Inc. (Nasdaq symbol CHSCP) will combine their North American mills into a new business called Ardent Mills. ConAgra and Cargill will each own 44% of Ardent Mills. CHS will own the remaining 12%. In total, Ardent Mills will own 44 flour mills and four bakeries. It will sell its products to various food makers....
PROCTER & GAMBLE CO. (New York symbol PG; www.pg.com) is one of the world’s largest makers of household and personal-care products. Its top brands include Tide detergent, Crest toothpaste, Head & Shoulders shampoo and Pampers diapers. The company faces rising competition from generic brands. Last year, it responded with a major restructuring plan, which mainly involves cutting 5% of its workforce and closing plants....
J.C. PENNEY CO. INC., $17.69, New York symbol JCP, fell 21% this week after it reported lower-than-expected sales and earnings. The company operates more than 1,100 department stores in the U.S. and Puerto Rico. Over a year ago, Penney switched to an everyday low prices strategy. It felt the move would entice shoppers to come into its stores more often and not wait for clearance sales....
MOTOROLA SOLUTIONS INC. (New York symbol MSI; www.motorolasolutions.com) makes specialized electronic equipment, such as bar-code scanners and radios for police and fire vehicles. It gets 69% of its revenue by selling its products to governments; the U.S. government is the company’s largest single customer, accounting for 7% of its overall revenue. Businesses supply the remaining 31% of Motorola Solutions’revenue....
WAL-MART STORES INC., $70.40, New York symbol WMT, reported better-than-expected earnings this week. In its 2013 fiscal year, which ended January 31, 2013, Wal-Mart’s sales rose 5.0%, to $469.2 billion from $447.0 billion in fiscal 2012. Acquisitions added $4.0 billion to its 2013 sales. However, unfavourable currency exchange rates cut sales by $4.5 billion. If you disregard currency rates, Wal-Mart’s sales would have risen 5.1%. Sales at the company’s U.S. stores (which supply 59% of the total) rose 3.9%, and same-store sales gained 1.8%. That’s mainly because Wal-Mart’s ongoing cost cuts are giving it more room to cut its prices. Sales at the international stores (29% of the total) gained 7.4%, while sales at the company’s Sam’s Club warehouse outlets (12%) rose 4.9%....
You can draw a number of conclusions from the Heinz takeover, and some make more sense than others. For instance, some Heinz investors are upset that Warren Buffett’s Berkshire Hathaway is supplying more than half of the capital in this $23 billion takeover. They assume, based on Buffett’s involvement and his reputation as a canny investor, that if Warren is buying, the $72.50 a share takeover price must be a better deal for buyers than for sellers. Note, however, that Mr. Buffett’s involvement—what you might think of as the “Warren Buffett seal of approval”—makes it cheaper and easier to arrange financing for the deal. It also makes it possible for the bidding group to come up with a bid that wins quick acceptance. The only way to do that is to offer the sellers a good price and/or good terms....
H.J. HEINZ CO., $72.28, New York symbol HNZ, jumped 19% this week after the company agreed to a friendly takeover from a consortium led by Berkshire Hathaway Inc. (New York symbol BRK.B), the holding company controlled by billionaire investor Warren Buffett. Heinz shareholders will receive $72.50 a share when the deal closes in the third quarter of 2013. The stock is trading slightly below that price, which indicates that investors do not expect a higher bid. Heinz is now a hold....