Wednesday, July 26, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): The TSX had much to ponder today, as earnings reports from major
North American companies yielded mixed results. The market was buoyed as
gold, financial, healthcare and energy stocks moved up. The Phelps
Dodge/Inco/Falconbridge/Xstrata story continued to evolve. Finally, gold
and oil went up as the world watched a meeting in Rome for signs of a
ceasefire in the Middle East.
* The S&P/TSX Stock Exchange Composite Index leapt 124.95 points, or
1.06%.
* After a morning decline, gold shot up in the late afternoon to close
up US$3.90 at $621.90. Followers of the yellow metal attributed the rally
to a decline in the U.S. dollar and no breakthroughs in the Middle Eastern
peace talks in Rome.
* Oil edged up on a trifecta of continued Middle East unrest, the
weekly U.S. inventory report showing a drop in gasoline supplies after last
week's surprising rise, and news of a guerilla attack on the pipelines of
Italian company ENI in Nigeria. After dropping in the morning, oil rose
US$0.19 to US$73.94.
* Earnings came out from the forestry sector today, as Abitibi posted a
loss and suspended its quarterly dividend. Sales slipped to C$1.25 billion
from C$1.35 billion last year, and operating profits from C$48 million
compared to C$57 million in 2005. The company earned C$157 million (C$0.36
per share), mostly due to tax cuts. Separately, Tembec posted a narrower
loss of C$6.6 million (C$0.08 per share) compared with a loss of C$142.5
million (C$1.70 per share) a year ago. Total sales were C$862.3 million.
* The labyrinthine mining merger story had some new developments today:
Investment Canada, which must vet all foreign companies who spend more than
C$250 million acquiring a native company, approved Anglo-Swiss Xstrata's
bid for Falconbridge. Falconbridge shareholders can make their decision on
Thursday night solely on the merits of the competing bids from Xstrata and
Inco; the latter's stock-and-cash bid is worth about C$2.00 more than
Xstrata's all-cash one. Meanwhile, Phelps Dodge posted lower second-quarter
profits of US$471.7 million or US$2.32 per share, down from US$682.3
million or US$3.38 per share last year. Still, revenues grew to US$2.99
billion and much of the loss was due to one-time accounting adjustments and
special charges. Phelps Dodge says it remains committed to obtaining and
combining the two nickel miners.
* Post-merger reaction briefs: After Bell Globemedia's recent
acquisition of CHUM, suitors are approaching the Standard Broadcasting
Company. Wall Street is worried about AMD's takeover of ATI, thinking AMD
may have paid too much to obtain it as a weapon against Intel. Finally,
Canadian Pacific Railroad says
it's aware of rumours of hostile suitors after it posted record profits
yesterday, and trusts in its lower operating costs to keep it independent.
* Infotech giant the CGI Group, hit by the high Canadian dollar and
less business from parent BCE, says third-quarter net earnings fell from
C$57.8 million last year to C$35.9 million, with earnings per share
totaling C$0.11, down from C$0.13. However, the firm did undergo major
restructuring in the quarter and is currently reshuffling its senior
management.
* More large U.S. firms posted earnings today, with mixed results
keeping the Dow relatively flat. Boeing was down as it reported its first
losing quarter in three years, posting a US$160 million deficit on more
than US$1 billion in charges. The aerospace giant reduced its 2006 earnings
guidance, but raised it for 2007. Pioneering net retailer Amazon posted a
sales jump but was lower overall, reporting US$0.05 per share in earnings,
down from US$0.12 a share last year; analysts had predicted earnings of
US$0.06. In the energy sector, ConocoPhillips, reported a 65% surge in
second-quarter profits, beating expectations, because of higher oil prices
and its acquisition of Burlington Resources. The Altria Group raised its
2006 guidance after posting strong quarterly results. Finally, General
Motors reported a second-quarter loss of US$3.2 billion, due to a massive
restructuring program; but operating profits exceeded analyst estimates.
* The U.S. Federal Reserve's survey of economic conditions, known as
the "Beige Book", was released. It underlined the inflationary impact of
higher energy costs, and detailed a decline in the overall economic growth
in a number of regions.
-- Carolyn.Crapo@contractor.Thomson.com; Thomson Financial Corporate
Services
This is Thomson Financial Corporate Services Canadian Commentary, which
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