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09:39 am Industrial Production Tops Expectations

Industrial production increased 0.7% in March after increasing an  upwardly revised 1.2% (from 0.6%) in February. The Briefing.com  consensus expected industrial production to increase 0.5%.   Manufacturing production increased 0.5% in March, down from an upwardly  revised 1.4% (from 0.9%) in February. The March gain was in-line with  the ISM production index.  Despite a 0.8% decline in motor vehicles and  parts production, durable goods manufacturing production increased 0.5%.  Nondurable goods manufacturing production increased 0.7%, which was  mostly the result of a 3.3% increase in petroleum and coal products  production.  

Motor vehicle assemblies fell to 11.27 mln SAAR in March  from 11.50 mln SAAR in February. <br><br>Auto assemblies dropped 3.0% to 4.17  mln SAAR and truck assemblies declined 1.3% to 7.11 mln SAAR.  Excluding  motor vehicles, manufacturing production increased 0.6% and total  industrial production increased 0.8%.  In a seemingly odd occurrence,  utilities production increased 1.0% in March after falling 0.3% in  February. While it seemed that weather conditions improved from January  and February, temperatures in March were still below the historical  seasonal average. That led to a 2.7% increase in heating (natural gas)  production.   Mining production increased 1.5% in March, up from a 0.9%  increase in February.  Total capacity utilization increased to 79.2% in  March from an upwardly revised 78.8% (from 78.4%). Utilization levels  were at their highest since June 2008 and are approaching the 80% level  that typically results in a capital investment expansion.

08:51 am Residential Construction Fails to Show Post Winter Bounce

Housing starts increased 2.4% in March to 946,000 from an upwardly revised 920,000 in February. The Briefing.com consensus expected 955,000 new starts. Overall, the residential construction report was encouraging, but it did not provide any evidence that the weakness in January and February was weather related. Starts remained well below 1.00 mln, which was the average in the fourth quarter. If weather was a factor, then there should have been a much stronger bounce from delayed starts. Single-family construction, which languished below 600,000 in January and February, rebounded 6.0% to 635,000. That is more in-line with the trends over the last 12 months.

 Multifamily starts fell 3.1% to 311,000 in March from 321,000 in February. That was a typical decline from a normally volatile sector. The number of homes currently under construction, which factor into GDP, increased a modest 0.4% to 719,000. The effect on GDP will likely be minimal. Single-family construction, which provides the bulk of residential investment, increased to 335,000 from 334,000. Multifamily construction increased 0.5% to 384,000. Building permits dropped 2.4% to 990,000 in March from 1.014 mln in February. Permit issuances have averaged 972,000 over the last 12 months.

07:36 am Bank of America shares fall 1% following unexpected EPS loss

Bank of America (BAC $16.27 -0.12) reported first quarter loss of $0.05 per share, $0.10 worse than the Capital IQ Consensus Estimate of $0.05; revenues fell 2.7% year/year to $22.77 bln vs the $22.1 bln consensus. Excluding the impact of net debit valuation adjustments in both periods, revenue was down 4 percent from the year-ago quarter to $22.7 billion. 
  • The results for the first quarter of 2014 include $6.0 billion in litigation expense related to the previously announced settlement with the Federal Housing Finance Agency (FHFA), and additional reserves primarily for previously disclosed legacy mortgage-related matters. 
  • Net interest income, on an FTE basis, fell 5 percent from the year-ago quarter to $10.3 billion. The decline was driven by lower yields on debt securities due to an approximate $540 million swing in market-related premium amortization expense. Net interest margin, excluding market-related adjustments, was 2.36 percent in the first quarter of 2014, compared to 2.30 percent in the first quarter of 2013.
  • Noninterest income was flat compared to the year-ago quarter, as lower mortgage banking income and lower trading account profits were largely offset by year-over-year increases in investment and brokerage income, equity investment income and gains on the sale of debt securities. 
  • The provision for credit losses declined 41 percent from the first quarter of 2013 to $1.0 billion, driven by improved credit quality. Net charge-offs declined 45 percent from the first quarter of 2013 to $1.4 billion, with the net charge-off ratio falling to 0.62 percent in the first quarter of 2014 from 1.14 percent in the year-ago quarter. During the first quarter of 2014, the reserve release was $379 million, compared to a reserve release of $804 million in the first quarter of 2013.
  • Settlement with FGIC and BK
  • Bank of America reached a settlement with FGIC, as well as separate settlements with The Bank of New York Mellon (BK), as trustee, for certain second-lien residential mortgage-backed securities (RMBS) trusts for which FGIC provided financial guarantee insurance. The agreements resolve all outstanding litigation between FGIC and the company, as well as outstanding and potential claims by FGIC and the trustee related to alleged representations and warranties breaches and other claims involving second-lien RMBS trusts for which FGIC provided financial guarantee insurance. Seven of the trust settlements have already been completed, and the two remaining trust settlements are subject to additional investor approvals in a process that is expected to be completed within the next 45 days.
Consumer & Business Banking
  • Consumer and Business Banking reported net income of $1.7 billion, up $210 million, or 15 percent, from the year-ago quarter. Noninterest income of $2.5 billion increased $88 million primarily due to a portfolio divestiture gain.
    • Consumer Real Estate Services reported a net loss of $5.0 billion for the first quarter of 2014, compared to a net loss of $2.2 billion for the same period in 2013, reflecting a $3.8 billion increase in litigation expense. Revenue declined $1.1 billion from the first quarter of 2013 to $1.2 billion, driven primarily by a $548 million decline in servicing revenue, reflecting a smaller servicing portfolio and a $542 million decline in core production revenue due to lower loan originations. 
    • CRES first-mortgage originations declined 65 percent in the first quarter of 2014 compared to the same period in 2013, reflecting the decline in the overall market demand for refinance mortgages. Core production revenue decreased in the first quarter of 2014 to $273 million from $815 million in the year-ago quarter due to lower volume and a reduction in margins.
Global Wealth & Investment Management
  • Global Wealth and Investment Management reported net income of $729 million, up slightly from the first quarter of 2013, reflecting continued strong revenue performance and low credit costs. Revenue increased 3 percent from the year-ago quarter to a record $4.5 billion, driven by higher noninterest income related to improved market valuation and long-term AUM flows. Return on average allocated capital was 24.7 percent in the first quarter of 2014, down from 29.4 percent in the year-ago quarter, reflecting earnings stability coupled with increased capital allocations.
Global Banking
  • Total revenue, net of interest expense, on an FTE basis excluding net DVA, and net income (loss) excluding net DVA are non-GAAP financial measures. Net DVA gains (losses) were $112 million, $(617) million and $(145) million for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively. 
  • Sales and trading revenue, excluding net DVA, remained relatively flat from the first quarter of 2013 at $4.1 billion. 
  • Equities sales and trading revenue, excluding net DVA was solid compared to the year-ago period. The company continued to increase market share compared to the year-ago quarter. 
  • Return on average allocated capital, excluding net DVA, was 14.8 percent in the first quarter of 2014, compared to 16.3 percent in the first quarter of 2013, reflecting stable net income combined with an increase in allocated capital compared to the year-ago quarter. 
Global Markets
  • Global Markets reported net income of $1.3 billion in the first quarter of 2014, compared to $1.1 billion in the year-ago quarter. Excluding net DVA, net income was $1.2 billion in the first quarter of 2014, an increase of 3 percent compared to the year-ago quarter. Global Markets revenue increased $235 million, or 5 percent, from the year-ago quarter to $5.0 billion. Excluding net DVA, revenue decreased $22 million to $4.9 billion as declines in Rates and Currencies were partially offset by stronger performance in Credit and Equities.
  • Fixed Income, Currency and Commodities sales and trading revenue, excluding net DVA, was $3.0 billion in the first quarter of 2014, a decrease of $51 million, or 2 percent, from the year-ago quarter, as credit markets remained strong but Rates and Currencies declined on lower market volumes and volatility. Adjusting the year-ago quarter to exclude this negative impact, FICC revenue, excluding net DVA, declined 15 percent from the first quarter of 2013.
    • Equities sales and trading revenue, excluding net DVA(H), was $1.2 billion, in line with results from the year-ago quarter. The current quarter benefited from continued gains in market share and higher client financing balances.
Capital
  • Tangible common equity ratio 7.00% compared to 7.20% in Q4; Common equity ratio 10.17% compared to 10.43% in Q4.
  • On March 26, the company announced that it plans to increase its quarterly common stock dividend to $0.05 per share, beginning in the second quarter of 2014. Also, the Board of Directors authorized a new $4.0 billion common stock repurchase program. This authorization, which covers both common stock and warrants, replaces the prior year's common stock repurchase program that expired on March 31, 2014. 
  • Tangible book value per share was $13.81 at March 31, 2014, compared to $13.79 at December 31, 2013 and $13.36 at March 31, 2013. Book value per share was $20.75 at March 31, 2014, compared to $20.71 at December 31, 2013 and $20.19 at March 31, 2013.

07:13 am CSX Corp shares slightly higher following higher than expected earnings

  • CSX (CSX $28.45 +0.16) reported first quarter earnings of $0.40 per share, which is higher than expected, while revenues rose 1.7% year/year to $3.01 billion which is line with estimates.
  • Looking forward, CSX expects modest full-year earnings growth for 2014 on the strength of broad-based merchandise and intermodal gains and an improving domestic coal environment. In addition, the company remains confident in its ability to sustain double-digit earnings growth and margin expansion for its shareholders in 2015 and beyond. 
  • The company expects to sustain a mid-60s operating ratio longer-term. Volume increased 3% year over year as growth in merchandise and intermodal more than offset lower coal volume. 
  • Total revenue increased by 2% year over year driven by this volume growth and pricing gains across most markets. Challenging operating conditions resulting from severe winter weather negatively impacted volume in most markets. 
  • CSX also announced that its Board of Directors approved a 7% increase in the company's quarterly dividend to $0.16 per share, payable on June 13, 2014 to shareholders of record at the close of business on May 28, 2014.

07:12 am Linear Tech shares fall 2% following in line revenues/guidance

  • Linear Tech (LLTC $46.25 -0.88) reported third quarter GAAP earnings of $0.48 per share, which is higher than expected, while revenues rose 10.6% year/year to $348.01 million which is line with estimates. Non-GAP EPS was $0.55. 
  • The company issued guidance for the fourth quarter with revenue +2-6% sequentially (approximately $355-368.9 million) which is line with estimates.
  • "After the slight decline we experienced last quarter, we are pleased to report that the bookings momentum that occurred at the end of our second quarter continued through the third quarter. As a result, we grew revenues 4% sequentially and 10.6% year-over-year. The book-to-bill ratio was positive for the quarter and bookings increased sequentially in all of our major markets, with the automotive, industrial and communications markets showing the most gains. Looking forward, we are encouraged by our current bookings momentum and the breadth of the bookings across our major markets. Accordingly, we are currently estimating sequential revenue growth of 2% to 6% for our fiscal fourth quarter."

07:11 am Intel shares little changed following beat on earnings

  • Intel (INTC $26.89 +0.12) reported first quarter earnings of $0.38 per share, which is higher than expected while revenues rose 1.5% year/year to $12.76 billion which in line with estimates. Q1 gross margin of 59.7% vs Street expectations of just above 59% (co guided for Q1 gross margin of 57-61%). 
  • PC Client Group revenue of $7.9 billion, down 8% sequentially and down 1% year-over-year. Data Center Group revenue of $3.1 billion, down 5% sequentially and up 11% year-over-year. Internet of Things Group revenue of $482 million, down 10% sequentially and up 32% year-over-year. Mobile and Communications Group revenue of $156 million, down 52% sequentially and down 61% year-over-year. Software and services operating segments revenue of $553 million, down 6% sequentially and up 6% year-over-year. 
  • "In the first quarter we saw solid growth in the data center, signs of improvement in the PC business, and we shipped 5 million tablet processors, making strong progress on our goal of 40 million tablets for 2014." 
  • The company issued guidance for the second quarter with EPS of $12.5-13.5 billion and gross margins of 61-65%. The company reaffirmed revenue guidance raises gross margin guidance for FY14, sees FY14 revs flat YoY at approximately $52.7 billion. Gross margin percentage: 61 percent, plus or minus a few percentage points, 1 percentage point higher than prior expectations; R&D plus MG&A spending: $18.9 billion, plus or minus $200 million, higher than prior expectations of $18.6 billion.

07:09 am Yahoo shares soar 8% following beat on earnings/strong Alibaba results

  • Yahoo (YHOO $37.22 +3.01) reported first quarter earnings of $0.38 per share, which is higher than expected, while revenues rose 1.2% year/year to $1.09 billion which is also higher than expected. Display: GAAP display revenue was $453 million for the first quarter of 2014, flat compared to the first quarter of 2013. 
  • Display revenue ex-TAC was $409 million for the first quarter of 2014, a 2 percent increase compared to $402 million for the first quarter of 2013. The Number of Ads Sold increased approximately 7 percent compared to the first quarter of 2013. Price-per-Ad decreased approximately 5 percent compared to the first quarter of 2013. 
  • Search: GAAP search revenue was $445 million for the first quarter of 2014, a 5 percent increase compared to $425 million for the first quarter of 2013. Search revenue ex-TAC was $444 million for the first quarter of 2014, a 9 percent increase compared to $409 million for the first quarter of 2013. Paid Clicks increased approximately 6 percent compared to the first quarter of 2013. 
  • Price-per-Click increased approximately 8 percent compared to the first quarter of 2013 Cash Balance: Cash, cash equivalents, and investments in marketable securities were $4.6 billion as of March 31, 2014 compared to $5 billion as of December 31, 2013, a decrease of $0.4 billion. 
  • Alibaba revenues increased 66% y/y to $3.05 bln; Gross profit increased 73% y/y to $2.37 billion; Net Income increased 110% y/y. 
  • Yahoo sees Q2 revs $1.06-1.1 billion which is line with estimates and sees non-GAAP operating income of $130-170 million


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