Market Watch Updates

[Conrad Alvin Lim]

Good quarter expected for trust banks
Capital markets strength seen driving revenue growth
By Kathie O'Donnell, Markethingych
Last Update: 8:42 PM ET Apr 13, 2006

BOSTON (Markethingych) -- Analysts are predicting double-digit percentage growth in earnings-per-share for three of the four big trust banks reporting next week after a strong first quarter for the capital markets, data from Thomson First Call shows.
State Street Corp. (STT) , Northern Trust Corp. (NTRS) and Mellon Financial Corp. (MEL) are scheduled to report Tuesday. Bank of New York Co. (BK) , which on Saturday announced it was exiting the retail banking business, is set to report Thursday.

"I'd say it should be a good quarter," said Robert Lee, an analyst at Keefe Bruyette & Woods.

Analysts polled by Thomson First Call expect State Street to earn 77 cents a share, up 15% from the same quarter a year earlier. Northern Trust is expected to earn 68 cents, up 8%, and Mellon is expected to post 49 cents, up 11%. Bank of New York is expected to earn 54 cents, up 10%.

Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, said he expects "strong" revenue growth from all four trust banks.
"The primary driver for the revenue is stronger global capital markets coming from equity markets, increased (merger and acquisition) activity (and) increased bond activity," Cassidy said. "Just all those cylinders are firing simultaneously."

Lee said increased M&A and trading activity benefits companies like State Street, Northern, Mellon and Bank of New York, which derive some of their revenue from lending securities.

"(When) a deal is happening, people need to borrow securities for arbitrage positions and things, and that creates demand for securities to be lent," he said, adding that increased trading also drives demand. "If you are a professional trader or investor instituting different trading or investment strategies, you may also have need to borrow securities."
Cassidy said Northern is the stock he expects to gain the most if earnings exceed expectations.

"Everybody right now is the most bearish on them," he said. "We think State Street is going to have the strongest results, but everybody expects that. So for State Street to get the pop, and they could, they really need to blow away the results."

Northern, by contrast, has prompted "quite a bit of concern" because of growth in its operating expenses, Cassidy said. Northern is the only one of the four banks that has yet to report on options expensing, he said.

"So that's going to drive their operating expenses up a little higher than their peers," Cassidy said. "I think people feel that they are going to have a tough quarter, us included, but that may already be priced into the stock."

Northern Trust spokesman Richard Jurek, however, said the company has reported on a pro forma basis what the options impact would be for at least two years now in its quarterly and annual filings. The company's 2005 annual report also projects the impact for 2006, he said.

As for State Street, it's been managing its investment portfolio more aggressively in the past 12 to 18 months, Cassidy said.

"They are expected to see a continued improvement in their net interest margin, which will help their net-interest-revenue growth," he said, adding that State Street has also put behind it large increases in operating expenses tied to its 2003 acquisition of most of Deutsche Bank's global securities services business and the downsizing of State Street's real estate holdings.

"Therefore, we anticipate that their operating expense growth will be more manageable relative to revenue growth," Cassidy said, adding that he expects State Street to have achieved positive operating leverage in the first quarter.

"Right now State Street is leading the four of them in this race, and it's because they've got the revenue momentum [and] control of expenses," he said, adding that Northern is in fourth place. "Northern has historically led the pack, and they've given up the leadership position to State Street."

Bank of New York should have good numbers because it tends to get more of a tailwind from higher stock trading volumes than its peers, Cassidy said. The bank has also put behind it most of the expenses tied to a backup facility built outside New York City following the Sept. 11 tragedy, the analyst said.

"The incremental expense of building the facility [was] completed at the end of '05," he said. "We anticipate Bank of New York will show good numbers as well due to the anticipated slowdown of operating-expense growth associated with that build out."

Cassidy said he expects "very solid" revenue growth from Mellon, adding that it probably has the greatest amount of revenue tied to asset management. The "unknown" for Mellon is how well it will manage expenses he said.

"That's not as clear as it is for the others, plus they've got the charge from their former CEO leaving," the analyst said, referring to Mellon's former chairman and chief executive, Martin McGuinn. "So they'll have a couple of one-time items in there."
While Mellon should report good numbers, it may not have the "kick" that Bank of New York and State Street get from slower expense growth, Cassidy said.
Separately, SunTrust Banks Inc. (STI) , one of the nation's largest banking organizations, is set to report first-quarter results on Monday. Analysts polled by Thomson First Call on average expect it to post earnings per share of $1.43.

[Conrad Alvin Lim]

Inflation, housing collapse are risks to Fed forecast
Core CPI expected to remain moderate, while housing cools according to plan
By Rex Nutting, MarketWatch
Last Update: 6:01 AM ET Apr 15, 2006

WASHINGTON (MarketWatch) -- The two main risks to the Federal Reserve's benign forecast for the economy are runaway inflation and a collapsing housing market.
Economic data to be released in the coming week should provide some reassurance to Fed officials and to the markets, if economists' forecasts hold true.
Rising energy prices could produce some modestly scary headline inflation numbers but core inflation probably remains under control, economists say.
The housing numbers will likely show an orderly retreat from unsustainable levels.
The economic data could be overshadowed by the release of minutes on Tuesday from the first Federal Open Market Committee meeting under new Chairman Ben Bernanke. Bernanke, a noted proponent of more transparency at the Fed, could show a few more of his cards in the minutes than his predecessor, Alan Greenspan, felt comfortable revealing.
In particular, watch for detailed comments from members about the amount of slack in the economy, or on the risks from the housing market, or about their forecast for more moderate growth later this year.
Currency markets, as usual, will have an ear c*cked for any news from Washington as the Group of Seven finance ministers meet Friday ahead of the weekend meetings of the International Monetary Fund and World Bank. Expectations for news are unusually low. The Washington visit by Chinese President Hu Jintao could also add volatility and interest to the trading week.
The main number for the week comes on Wednesday at 8:30 a.m. Eastern with the release of the consumer price index for March. Economists polled by MarketWatch see the CPI rising 0.3% or even 0.4% (the average forecast is 0.34%) in March after a tame 0.1% gain in February. See Economic Calendar.
Inflation will be, in the words of Goldman Sachs economist Jan Hatzius, "Ho hum, except for energy." Economists think the core CPI rose 0.2% in March, which would push the year-over-year increase down to 2% from 2.1% in February.
Higher gasoline prices were the main reason for the jump in headline inflation. According to the Energy Department, gasoline prices rose about 6% during the month. However, natural gas prices fell, providing some offset.
The risks for core inflation lie on the upside, said Haseeb Ahmed, an economist for JP Morgan Chase. There are three wild cards in the CPI report which could tilt the core higher: Lodging, medical and apparel. A surprise in any of the three wouldn't necessarily represent a fundamental change in the inflation environment, but rather a problem with the month-to-month measurement.
Hotel prices soared in March 2004 and March 2005, which helped to push the core rate up 0.3% in each of those months. It might be a new pricing trend in the industry, or it might be coincidence. Ahmed thinks lodging prices rose 1% in March after seasonal adjustment, but "the risk is for a larger gain."
Hatzius, on the other hand, is looking for a "tamer report" on lodging this year, because the seasonal factors have been updated and because of reports of reduced pressures on occupancy rates.
Medical care prices rose 0.5% in February and could do the same in March, Ahmed said. A one-time change in government reimbursements implemented in January had held down prices in January and were only partially unwound in February, Ahmed said.
Apparel prices tumbled 1% in February, probably because of a seasonal adjustment problem. That could be reversed in March.
The producer price index is likewise expected to show the impact of higher energy costs on the headline number, while the core PPI should be tame. The PPI will be released on Tuesday at 8:30 a.m. Eastern. Economists look for a 0.4% rise in the PPI after plunging 1.4% in February. The core rate is expected to rise 0.2%.
As always in the PPI, intermediate and crude prices are worth watching. The core intermediate PPI has been relatively stable for the past five months around 4.5% to 4.8% year-over-year gain. Any movement in either direction could be significant for Fed policy.
Economists expect housing starts to slow further in March after falling 8% from January's 33-year high courtesy of the hot-house weather. The consensus sees starts sinking about 4% to 2.04 million annualized units in March.
With inventories of unsold homes "rising almost inexorably, construction and new starts will surely moderate in the coming months," Ahmed said.
A few economists expect a much larger decline. UBS economist James O'Sullivan predicts a 10% drop to bring construction back in line with sales. O'Sullivan notes that February's starts were still above year-ago levels despite higher mortgage rates and softer sales.
The Fed is looking for housing to slow at a moderate pace this year. If the market looks headed for an outright collapse, it could bring a quick end to Fed tightening. But it's unlikely the Fed would react to any one month's housing numbers, especially considering the rampant skepticism at the Fed that even falling home prices would curb consumer spending.

[Conrad Alvin Lim]

Google profit rises 60% as sales surge
Sales excluding partner payments soar 92%

By Bambi Francisco, MarketWatch
Last Update: 7:06 PM ET Apr 20, 2006

SAN FRANCISCO (MarketWatch) -- Google Inc. reported late Thursday first-quarter profit rose 60% as the world's largest provider of Internet searches saw strong growth to advertisements on its own properties and overseas operations.

The better-than-expected results sent Google shares up as much as 7% to $445 in after-hours trading Thursday. The stock has risen more than 20% since trading near $330 in mid-March.

One analyst expects to raise his target price on Google before the market opens. "While we need to work through impact of higher capital expenditures, we believe our estimates will come up enough to support a higher implied value in the $515-$530 range," wrote Anthony Noto, an analyst at Goldman Sachs.

Late Thursday, Mountain View, Calif-based Google (GOOG) reported net income of $592 million, or $1.95 a share, up from $369 million, or $1.29 a share, a year earlier. Those results include stock-option costs and other expenses. Analysts expected Google to earn $1.75 a share on that basis.
Revenue grew 79% to $2.25 billion. Excluding the payments Google makes to its content distribution partners, sales leaped 92% to $1.53 billion, above analyst expectations of $1.47 billion. Sales from Google's own properties grew at 97%.

Google handily beat sales estimates while not sacrificing margins, noted Goldman's Noto, who estimated that Google's cash flow margin came in at a better-than-expected 65.5%.

Additionally, Google's search sales grew faster than Yahoo's revenue from search, according to analysts. On a sequential basis, Google grew its revenue by 19%, or more than twice as quickly as the estimated 9% to 10% sequential growth rate that analysts estimate Yahoo's search revenue grew in the same period.



Google controls 49% of the market for Internet searches and has been gaining market share against rivals like Yahoo Inc. and Microsoft Corp.'s MSN service, according to data provided by Nielsen//NetRatings. As its share of that market grows, Google is capturing a greater portion of online advertising spending.
"Our own internal estimates show that we're gaining share in all of our key markets in the U.S., U.K. and newer markets like India," Google Chief Executive Eric Schmidt said on a conference call following the report.

Strong ads on owned properties, international
Google derives advertising revenue from marketers who bid to place their ads on the search engine's properties, as well as Google's partner sites. In the quarter, Google grew sales on its sites by 97%, faster than the growth rate of its overall sales. As of the end of the March quarter, Google derived 58% of its sales from paid search advertisements on its own Web sites. It generated another 41% from its distribution partners, which include content sites and other search engines.

Google's sales from international operations rose 91% to $936 million and now account for 42% of total sales vs. 39% of total revenue in the same period a year ago. Sales from the U.K. accounted for 15% of total sales. Schmidt called international sales "very, very strong." Google added 1,110 employees in the quarter, expanding its work force by 20% to 6,790.

Outlook
Google doesn't provide forecasts. Wall Street analysts expect Google will earn $2.06 a share on sales of $1.58 billion in the second quarter.

For the full year, analysts expect Google to earn $8.74 a share, up 53% from a year earlier, on sales of $6.7 billion, a rise of 68%. End of Story

[Conrad Alvin Lim]

Oil companies cruise toward record earnings
Exxon Mobil sales seen topping $100 billion
By Jasmina Kelemen, MarketWatch
Last Update: 8:21 PM ET Apr 20, 2006

HOUSTON (MarketWatch) -- With little in sight to put the brakes on rocketing crude prices, equities analysts expect oil companies to once again post record quarterly profits next week when the industry's biggest names open their books.

"Given the current market fundamentals we expect average prices for both oil and gas this year to be significantly above 2005 record levels," said Fadel Gheit, an energy analyst at Oppenheimer, an investment bank. "As a result, we expect 2006 earnings to be above 2005 record levels."

Among the majors presenting results next week are Exxon Mobil Corp. (XOM), ConocoPhillips (COP) and Chevron Corp. (CVX)

Oil and gas companies are not only expected to significantly exceed earnings and revenue reported in the first quarter of 2005 but are also likely to surpass analyst expectations because consensus estimates are too low, said Gheit.
"We believe consensus earnings estimates are too low, based on oil prices below $59 a barrel and gas prices below $8.53 per million cubic feet," said Gheit in an earnings preview report to clients.

"We expect significant upward earnings revisions starting 2Q06," said Gheit.
Pumped by record-high spot crude oil prices, the energy sector is on course to post the highest earnings growth of any market sector, according to Thomson Financial. As of Jan. 1, analysts were expecting to see 43% growth, with Exxon Mobil, Chevron and Conoco the top three contributors to earnings gains, said the Thomson Financial Research Group in a report published late last week.
It's typical for analysts to revise their growth outlooks downward as earnings season progresses.
Exxon, a Dow Jones 30 component and the world's biggest publicly traded oil company, will present its first-quarter results on April 27. Analysts polled by Thomson First Call expect the integrated giant to post net earnings of $1.46 a share on revenue of over $100 billion.

The lofty numbers are likely to unleash a new round of public outrage as prices at the gasoline pump tick back up toward $3 a gallon.

Chevron, No. 2 behind Exxon Mobil, is set to announce its results on April 28. Wall Street is pegging the company's earnings at $1.78 a share on revenue of $54.5 billion. Earnings should come in 40% higher year-over-year, mainly due to Chevron's Unocal acquisition, said Gheit.

ConocoPhillips, which reports April 26, should turn in earnings of $2.33 per share, up 32%, on revenue of $52.5 billion. Amerada Hess Corp. (AHC) is seen coming in at $4.78 a share, up an eye-popping 107% from a year ago, on revenue of $6.2 billion, when in announces on April 26. The New York-based exploration and production company is expected to post the biggest year-over-year earnings jump because of the rollover of very low oil price hedges, said Gheit.

Apache Corp. (APA), which is weighted more heavily toward natural gas production than oil, is seen posting earnings on April 27 of $2.14 a share on revenue of $2.12 billion.

Anadarko Petroleum Corp. (APC) also reports April 27. According to First Call, Wall Street analysts expect it to boost its first-quarter earnings 42% to $2.92 a share on $2 billion in sales.

[Conrad Alvin Lim]

Pentagon giants ready to report
By August Cole, MarketWatch
Last Update: 2:46 PM ET Apr 20, 2006

SAN FRANCISCO (MarketWatch) -- The Defense Department's three biggest contractors, Lockheed Martin, Boeing Co. and Northrop Grumman, are ready to report their first-quarter results next week, with analysts looking for earnings and revenue growth from both military and civilian government work.

Already, Honeywell International (HON)[/url], United Technologies (UTX)[/url], General Dynamics (GD) and Textron Inc. (TXT) have reported improved results, setting the tone for the aerospace sector.

Strong spending by the U.S. military during the first three months of the year is expected to bolster the quarter. "We expect this will drive strong Q1 results for large-cap defense and we carry above consensus estimates on all four names, although we see the most upside potential at [Lockheed Martin and Northrop Grumman," wrote UBS analyst David Strauss in an April 13 note. He said that the average cash outlay from the Defense Department was almost $41 billion a month during the quarter, more than double where it was in 9 years ago.
Already, Wall Street has bid up defense shares since pessimism mounted last fall that budget tightening would hurt growth, as would spending on military operations instead of research and development.

Lockheed Martin Co. (LMT) gets the most Defense Department dollars of any company and its play for broadening its business into civilian markets will get lots of attention when the company reports on April 25. Higher first-quarter earnings of $1.14 a share and revenue of $9.03 billion are expected from Lockheed, according to Thomson First Call. Lockheed's aircraft business, which is developing the next two U.S. fighters while still selling the older F-16 model abroad, will be closely watched. Beyond military hardware, investors will be looking for updates on the company's push into the information technology and systems markets for military and civilian government customers.

Boeing Co. (BA) is the Pentagon's No. 2 contractor and defense sales account for more than half of its revenue but it is the booming business of selling jetliners that has driven shares to a new high. On Thursday, the stock hit a peak of $86.26. When it reports on April 26, Chicago-based Boeing is expected to report a higher profit of 75 cents and revenue of $14.4 billion, according to First Call. On the defense side, Boeing is going through a restructuring that will bring some of its operations closer to Washington, D.C. The company also announced the latest cutbacks at its Wichita facility as work there on military jets is pared back or winding down. But Boeing still has a lead role on one of the largest defense programs today to modernize the Army's fighting forces.

No. 3 Defense Department contractor Northrop Grumman (NOC) will report its results April 25.



According to First Call, analysts expect a profit of 99 cents a share and revenue to be about flat at $7.44 billion.
Northrop, whose Gulf Coast shipbuilding operations took a hit from Hurricane Katrina, is vying for work on the Navy's next destroyer, a program that has faced budget pressure. But the division responsible for the most sales is its electronic systems group, which makes surveillance and navigation equipment.

Missile and electronics specialist Raytheon Co. (RTN) will report its results on April 27. Analysts expect a profit of 53 cents a share for the quarter and revenue of $5.20 billion.

And Rockwell Collins (COL) will report its quarterly results on April 26. Analysts expect a profit of 63 cents a share and revenue of $3.88 billion.

[Conrad Alvin Lim]

AT&T, Sun Micro, Lockheed Martin, DuPont, Amazon
By MarketWatch
Last Update: 8:50 PM ET Apr 24, 2006

SAN FRANCISCO (MarketWatch) -- Among the companies whose shares are expected to see active trade in Tuesday's session are AT&T Inc., Sun Microsystems Inc., Lockheed Martin Corp., DuPont and Amazon.com Inc.

Aflac Inc. (AFL) is expected to report first-quarter earnings of 70 cents a share, according to analysts polled by Thomson First call.

Amazon.com Inc. (AMZN) is seen posting a first-quarter profit of 12 cents a share.

AT&T Inc.'s (T) first-quarter per-share profit is expected to be 48 cents.

Corning Inc. (GLW) is expected to post earnings of 23 cents a share in its first quarter.

E.I. Du Pont De Nemours & Co. (DD) is seen posting a first-quarter profit of 80 cents a share.

HCA Inc.'s (HCA) first-quarter results are expected to show a profit of 89 cents a share.

JetBlue Airways Corp. (JBLU) is expected to report a first-quarter loss of 20 cents a share.

Lockheed Martin Corp. (LMT) is seen posting earnings of $1.14 a share in its first quarter.

Lucent Technologies Inc.'s (LU) fiscal second-quarter results are expected to shows a per-share profit of 3 cents.

United States Steel Corp. (X) is expected to post earnings of $1.48 a share in its first quarter .

After Monday's closing bell, Sun Microsystems Inc. (SUNW) said its fiscal third-quarter loss widened, despite surging sales. The company also said Chief Executive Scott McNealy has resigned, and will be succeeded by President and Chief Operating Officer Jonathan Schwartz.

Watch list
CNet Networks Inc. (CNET) posted a first-quarter loss on higher sales, yet the company chopped its full-year profit forecast mostly due to the expensing of employee stock options.

Cognex Corp. (CGNX) said first-quarter profit rose to $8.8 million, or 18 cents a share, from $5.3 million, or 11 cents, a year ago. Sales for the three months ended April 2 advanced to $59 million from $43.2 million in last year's first quarter. Analysts' average estimate stood at 19 cents a share on sales of $61.4 million, according to Thomson First Call.

Con-way Inc. (CNW) said first-quarter net income was $46.4 million, up from $31.1 million last year. Income from continuing operations for the first quarter was $45.5 million, or 83 cents a share, up from $38.9 million, or 69 cents a share, last year. Analysts polled by Thomson First Call were looking for per-share income of 76 cents. The freight transportation company reported quarterly revenue of $1.06 billion, up from $947.7 million last year. Analysts were looking for a result of $1.05 billion.

Chubb Corp. (CB) reported better-than-expected first-quarter earnings as the profitability of the company's professional liability insurance business improved dramatically.

Crane Co. (CR) posted a 50% surge in first-quarter profit on the back of a strong performance in its fluid handling business.

Dov Pharmaceutical Inc. (DOVP) said results from the Phase III trial of its analgesic bicifadine for chronic back pain didn't achieve a statistically significant effect relative to placebo on the primary endpoint of the study.

Everest Re Group (RE) reported first-quarter results that missed analyst estimates after the reinsurer unveiled more losses from the past year's record hurricane season.

Plum Creek Timber Co. (PCL) reported nearly a 10% drop in profit for the first three months of the year on a soft market in the South, though rising sales and strong demand in its Northern timber operations kept its earnings from slipping as far as Wall Street had feared.

Mindspeed Technologies Inc. (MSPD) reported a fiscal second-quarter net loss of $7.11 million, or 7 cents a share, vs. a net loss of $18.4 million, or 18 cents a share, in the year-ago period. Excluding certain items, the per-share loss came in at 4 cents compared with 11 cents last year. Revenue at the Newport Beach, Calif.-based semiconductor solutions company rose to $34.6 million from $26.6 million. Analysts polled by Thomson First Call had forecast a per-share loss of 3 cents on revenue of $35 million.

JDA Software Inc. (JDAS) said its quarterly profit sank 31% and its revenue declined as it failed to close a significant number of deals during the period. The company also said it would acquire supply-chain management software firm Manugistics Group Inc. (MANU) for $211 million in cash.

NutriSystem Inc. (NTRI) said first-quarter net income was $22.3 million, or 60 cents a share, compared with $3.23 million, or 10 cents a share, during the same period last year. Analysts polled by Thomson First Call were looking for per-share income of 41 cents. Revenue for the quarter was $146.8 million, up from $37.4 million last year. Analysts were looking for revenue of $125 million.

Pactiv Corp. (PTV) said it more than doubled its first-quarter profit as it was able to offset some raw material costs and saw lower expenses for product launches.

PartnerRe Ltd. (PRE) said first-quarter net income came in at $193.2 million, or $3.21 a share, up 73% from a year earlier, when the Bermuda-based reinsurer made $111.4 million, or $1.84 a share. Operating earnings, which exclude after-tax realized investment gains and losses, were $133.7 million, or $2.32 a share, versus $67.6 million, or $1.21 a share, a year earlier, the company reported. PartnerRe was expected to make $1.93 a share, according to the average estimate of 14 analysts in a Thomson First Call survey.

Pitney Bowes Inc. (PBI) posted a higher first-quarter profit and offered an upbeat look ahead on rising demand for its digital-mailing products.

Netflix Inc. (NFLX) said it swung to a first-quarter profit on a 47% increase in subscriber revenue.

Rent-A-Center Inc. (RCII) said first-quarter net income was $40.3 million, or 57 cents a share, compared with $42.7 million, or 56 cents a share, during the same period last year. Analysts polled by Thomson First Call were looking for a per-share result of 50 cents. The rent-to-own operator said quarterly revenue was $607 million, up from $601.8 million last year. Analysts were looking for revenue of $600 million.

Ruth's Chris Steak House Inc. (RUTH) said net income rose to $5.9 million, or 25 cents a share, from $2.3 million, or 6 cents a share, in the year-ago period. Total revenue increased 15.5% to $65.4 million. Analysts, on average, expected it to post a profit of 26 cents a share on revenue of $64.8 million, according to Thomson First Call. Comparable restaurant sales rose 6.8% at company-owned restaurants and 5.5% at franchised restaurants. The restaurant operator said it agreed to buy seven franchised restaurants with an option to acquire an eighth unit for $37 million in cash.

W.R. Berkley Corp. (BER) said first-quarter net income came in at $162 million, or 80 cents a share, up 34% from a year earlier, when the property and casualty insurer made $121 million, or 61 cents a share. Operating earnings, which exclude realized investment gains and losses, were $160 million, or 79 cents a share, compared with $121 million, or 61 cents a share, for the same quarter of 2005, the company reported. Net investment income jumped 47% to $131 million and net premiums written increased 8% to $1.3 billion, the insurer added.

YRC Worldwide Inc. (YRCW) reported first-quarter net earnings of $42.1 million, or 71 cents a share, down 16% from $49.9 million, or 96 cents a share, in the year-ago period. On an adjusted basis, earnings came in at 72 cents a share compared with 92 cents a share last year. Revenue rose to $2.37 billion from $1.68 billion. Analysts polled by Thomson First Call had forecast earnings of 68 cents a share on revenue of $2.32 billion.

Slightly higher margins and same-store sales growth in the U.S. helped Yum Brands Inc. (YUM) offset some foreign currency headwinds overseas and post an 11% increase on total revenue growth of 2%.

Zoran Corp. (ZRAN) reported first-quarter earnings of $20.8 million, or 43 cents a share. During the same quarter a year ago, Zoran posted a net loss of $18.8 million, or 43 cents a share. There were 48.5 million shares outstanding in the quarter vs. 43.2 million a year ago. Revenue at the Sunnyvale, Calif.-based developer of circuits for digital video and audio products rose to $142.2 million from $73.9 million.

[Conrad Alvin Lim]

Earnings growth expands to include all sectors
U.S. market leadership now extends into basic materials and telecom
By Leslie Wines & Dan Gallagher, MarketWatch
Last Update: 6:43 PM ET May 5, 2006

NEW YORK (MarketWatch) -- Three weeks into an unexpectedly hot first-quarter earnings season, the U.S. energy sector, the solo-act star performer of 2004 and 2005, is beginning to share the spotlight with some shining prospects. A host of new market leaders in industries like basic materials, financial services and even telecommunications have broken into the spotlight and are driving profit growth and gains in U.S. stocks.

"The world is not just about energy anymore, but it is not as though energy has lapsed into a subconscious coma," said Hugh Johnson, chairman of Johnson Illington Advisors. "Energy is still doing well. But a number of other sectors are too."

Of the stock market's 10 sectors, all but three groups -- so-called defensive stocks in utilities, consumer staples and consumer-discretionary items -- appear on track to post double-digit profit gains for the most recent quarter, according to data provided by Thomson Financial.

And although the defensive sectors can't boast searing growth, they're at least poised for single-digit increases, according to Thomson. No single sector experienced flat or negative growth. "The things that are most noticeable to me are that the earnings are much better than expected and a stronger earnings growth rate is spreading to other sectors," Johnson said.

As of Friday, with report cards now in for 85% of the companies in the Standard & Poor's 500 Index, America's biggest companies are on track to post earnings growth of 14% -- well above the 10.4% advance that Wall Street predicted at the start of earnings season, according to Thomson Financial.

Indeed, the first quarter is shaping up as the 11th consecutive quarter of double-digit earnings growth. As such, it caps the longest streak of quarters with a gain of 10% or more since the period spanning 1992 to 1995.
Peter Cardillo, chief market strategist at S.W. Bach, projected that earnings in all sectors are likely to remain strong from April through June, but a slowing is likely to begin sometime in the third quarter. If so, that would depress earnings -- and most likely stock prices, too. "The higher cost of oil is going to weigh on the economy and that is going to weigh on corporate earnings," Cardillo said.

Late-stage recovery
Analysts say Corporate America's ability to spread of earnings and stock price growth beyond the energy sector is evidence that the economy is moving into a more advanced stage of a recovery that is now in its fourth year. According to Johnson, early stages of recoveries often are driven by consumer activity, while business spending tends to expand later in the cycle.

The unexpectedly buoyant late-stage strength is intensified by the fact that the recovery is global, with broad and strong worldwide corporate spending on construction and infrastructure, business development, and on catering to the expanding demands of international consumers.

Surging business activity also has improved earnings and enlivened demand for stocks in industries like telecommunications, while basic materials and industrials are benefiting from a global construction boom.
So far, companies that provide basic materials and financial services are delivering the biggest positive surprises in the current parade of quarterly earnings. The materials sector caught analysts off-guard, providing earnings that were 15% above Wall Street expectations, according to Bob Keiser, a Thomson Financial markets expert.

Alcoa Inc. (AA) startled the market with its April 10 report of earnings of 69 cents a share, sharply above the 51 cents expected by Wall Street analysts. Alcoa's robust report triggered a rally that set a new 52-week high for the stock, and it led the way for another sharp upside surprise from its fellow materials producer, DuPont (DD).

Earnings in the financial-services sector exceeded analysts' estimates by 10% on average, thanks to unexpected factors like continued strength in commercial loans and very strong trading results, especially in the volatile commodities sector. Insurers benefited from benign catastrophe losses.

Among financial concerns with unexpectedly strong results were Goldman Sachs Group Inc. (GS) , Citigroup Inc. (C) , Bank of America Corp. (BAC) and Allstate Corp. (ALL) . Other sectors with strong upside surprises included industrial and health-care companies, both of which came in with earnings 6% above expectations.

In terms of overall earnings growth -- as opposed to upside earnings surprises -- the strongest result was registered in the high-flying energy sector, which registered 36% growth. Despite another impressive leap in earnings, energy companies didn't provide as many market stunners. In some cases even highly lucrative results disappointed investors who grew used to the exorbitant gains seen in the fourth quarter of 2005, when sector profits shot up a whopping 53%.

Indeed, on April 27 shares of Exxon Mobil Corp. (XOM) actually lost more than 1% after the world's biggest energy company announced net income of $8.4 billion. That was its largest-ever profit in the first quarter and up from $7.86 billion a year ago. The result, while historic, still fell short of the average analyst estimate.

In other sectors, industrials and technology stocks both showed 17% earnings growth for the first quarter, according to Thomson. Telecom logged a 16% increase, while both health-care and materials both posted 11% growth and financial stocks enjoyed 10% improvement.

As usual, there were some, but not many, laggards.

But the only sectors not enjoying double-digit growth in the first quarter were consumer discretion stocks, which advanced by 9% as a group. Utilities rose 7% overall, and consumer staples had the smallest gain at just 4%
More sector leadership switches seen ahead

If economic growth does in fact moderate in the second half, its chief victim is likely to be the over-extended American consumer, who led the charge at the beginning of the recovery Rising interest rates and record-high oil prices -- along with a weaker housing market that would crimp homeowner spending plans -- are all factors that make consumers watch their budgets more closely.

Should this scenario come to pass, analysts say, earnings most likely would suffer in the consumer discretionary and staples categories, dragging stock valuations lower with them.
Already those sectors are facing a more bearish outlook. For the second quarter, analysts on average predict earnings growth of 7% in the consumer-discretionary sector, according to Thomson data. That's down from the 16% growth rate predicted for the sector at the start of the year.

In the consumer-staples group, average estimates call for growth of just 4% -- down from 7% at the first of the year.

However, outstanding earnings and valuation gains are quite likely in the second half for companies in basic materials, industrials, telecommunications and other industries that serve the corporate market, said Jeffrey Kleintop, chief investment strategist at PNC Advisors.

"The sectors most likely to see sustained growth are at the business end," Kleintop said, noting that although consumers may be starting to feel the pinch, corporations still enjoy strong cash flow and are likely to continue spending on expansions throughout 2006.

This would mark a reversal from the early stages of the recovery, when consumer-oriented stocks outperformed those in industries catering to businesses.

The energy sector currently has the highest estimated earnings growth rate for the second quarter at 22%, according to Thomson data. That's up from the 16% growth rate predicted at the start of the year. The materials sector has an estimated growth rate of 11% -- up significantly from the 3% growth rate predicted at the start of the year.

Robert Pavlik, portfolio manager at Oaktree Management, expects continuing strong performances from a number of industrial companies which had strong earnings and delivered strong outlooks, including Caterpillar Inc. (CAT) , Emerson Electric Co. (EMR) , Deere & Co. (DE) , United Technologies Corp. (UTX) and Cummins Inc. (CMI) .

End of Story
Leslie Wines is a reporter for MarketWatch in New York.
Dan Gallagher is a reporter for MarketWatch in San Francisco.

[Conrad Alvin Lim]

Raytheon Awarded $61 Million Contract to Support NOAA's R&D High Performance Computing System

Last Update: 9:03 AM ET May 10, 2006

RESTON, Va., May 10, 2006, 2006 /PRNewswire via COMTEX/ -- Raytheon Company (RTN) has been awarded the National Oceanic and Atmospheric Administration (NOAA) research and development (R&D) high performance computing system contract to maintain, operate and upgrade high performance computing platforms. The contract award is valued at $61 million; the total ceiling value, inclusive of all options, is $368 million during the next eight years.
Under the terms of the agreement, Raytheon Information Solutions (RIS) will lead a team effort to improve the cost-effectiveness and organizational alignment of the R&D high performance computing resources for NOAA's three primary weather and climate research labs.
"Our team looks forward to leveraging our extensive experience and our innovative capabilities to support NOAA's mission of delivering timely, accurate and often life-saving weather and climate information to our citizens," said Ron Ross, vice president of RIS. "NOAA's selection of Raytheon underscores the strong partnership we've established throughout our 30-year relationship and its confidence in our ability to deliver mission-critical solutions."
The new high performance computing system program will enhance the current high performance computing systems at NOAA's main facilities at the National Centers for Environmental Prediction in Camp Springs, Md.; the Earth Systems Research Laboratory in Boulder, Colo.; and the Geophysical Fluid Dynamics Laboratory in Princeton, N.J.
Raytheon Intelligence and Information Systems is a leading-edge provider of government information and intelligence technology solutions, providing the right knowledge at the right time enabling our customers to make timely and accurate decisions to achieve their mission goals.
Raytheon Company, with 2005 sales of $21.9 billion, is an industry leader in defense and government electronics, space, information technology, technical services, and business and special mission aircraft. With headquarters in Waltham, Mass., Raytheon employs 80,000 people worldwide.

[Conrad Alvin Lim]

Garmin schedules special meeting to vote on split
By Angela Moore
Last Update: 7:11 AM ET May 15, 2006

NEW YORK (MarketWatch) -- Garmin Ltd. (GRMN) on Monday said it scheduled a special meeting of shareholders on July 21 to consider and approve a two-for-one stock split. The record date for shareholders entitled to vote at the special meeting is May 30. If shareholders of the navigation device maker approve the stock split at the special meeting, Garmin's board will then determine and announce a record date and effective date for the stock split.

[Conrad Alvin Lim]

Jury finds Enron's Lay, Skilling guilty
By Jasmina Kelemen & Jim Jelter, MarketWatch
Last Update: 2:52 PM ET May 25, 2006

HOUSTON (MarketWatch) -- Former Enron chiefs Kenneth Lay and Jeffrey Skilling were found guilty Thursday of defrauding investors and conspiring to hide the company's crumbling finances ahead of its collapse in late 2001.
The two men emerged from the dust of what had been the world's biggest energy-trading company as symbols of an era of rampant corporate greed and recklessness.

The verdict gave federal prosecutors the legal heft to cement that reputation. At the same time, the jury cast aside the notion that the two men were the unwitting victims of an elaborate accounting scam by subordinates and unfairly scapegoated by over zealous federal investigators.

The jury's eight women and four men found former Chief Executive Officer Lay guilty on all six counts of fraud and conspiracy.

They found his protégé, former CEO Skilling, guilty on 19 counts of fraud and conspiracy, but acquitted him on all but one count of insider trading stemming from his sale of 500,000 shares on Sept. 17, 2001.

All told, Skilling sold about $62 million worth of company stock over the year leading up to Enron's headlong plunge into Chapter 11 on Dec. 2, 2001 -- at the time the biggest bankruptcy in U.S. history.

"Justice has been served today. The jury's verdicts help to close a notorious chapter in the history of America's publicly traded companies. Appeals aside, the end of the trial will mark the end of a dark era," Sen. Michael Oxley, chairman of the House Financial Services Committee, said in a statement issued moments after the verdict was read.

Oxley, together with Sen. Paul Sarbanes, forged the tough 2002 securities act that bears their names in an effort to rein in rogue executives and rebuild shaken investor confidence in corporate America after a series of high-profile scandals at companies like WorldCom, Tyco and HealthSouth.

Lay, 64, surrounded by his family on the first bench of the spectator gallery, showed little emotion to the verdict, shaking his head as jury forewoman Deborah Smith repeated the word "guilty" six times.

Skilling, 52, who led the Houston-based firm from February to August 2001, rocked gently in his chair alongside lead defense lawyer Daniel Petrocelli.
Petrocelli spun his defense around the argument that Skilling was unaware of the elaborate off-book accounts stitched together by then-Chief Financial Officer Andrew Fastow in a bid to mask Enron's massive debt. He vowed to appeal the verdict against his client.

Fastow, who took the witness stand against his former bosses, pled guilty to fraud in January 2004. He agreed to cooperate with prosecutors preparing their case against Skilling and Lay in exchange for a reduced, 10-year sentence.

Freddy Delgado, one of the jurors, told reporters the argument that Skilling and Lay didn't know what was going on in the company was simply not a credible defense.

"To say that you didn't know what was going on was not the right thing," he said.

Fellow juror Wendy Vaughn agreed. "I think they had a duty to find out what was going on," she told reporters gathered on the sixth floor of the federal courthouse in Houston.

Judge Sim Lake, presiding over the trial, set sentencing for Sept. 11. Maximum sentences for the two executives could keep them behind bars for the rest of their lives.

Judge Lake also ordered Lay to hand over his passport before allowing him to leave the building.