Tech Names on Tap
The broad indexes ended higher as investors headed into earnings season for technology stocks. Shares of Dell ( DELL) rose over 2% to close at $13.13, after David Faber of CNBC reported that Microsoft ( MSFT) was considering investing up to $3 billion, as part of a private-equity deal to take Dell private. Microsoft's shares were down slightly to close at $27.17. KBW analyst Shaw Wu said in a note that a take-out of Dell in the range of $13 to $14 a share is "possible," but that "a materially higher price is less likely," because "attractive returns could prove difficult." The analyst -- who has a "Neutral" rating on Dell -- also said that "as we have seen in the recent past, LBOs like Freescale and First Data that look like winners end up not living up to promises as acquirers underestimate the secular pressures a company in decline faces." When discussing the advantages and disadvantages of Dell going private, Wu said "going private takes the company out of the quarter-to-quarter grind of being a publicly traded company. But on the negative, not having publicly traded stock could make it more difficult to make larger, transformative acquisitions as the company will likely spend the majority of its cash flow servicing debt interest." Shares of Apple ( AAPL) rose 1% to close at $504.77, heading into the company's fiscal first-quarter earnings announcement, scheduled for Wednesday, after the market close. The consensus among analysts polled by Thomson Reuters is for Apple to post earnings of $15.50 a share, on revenue of $59.553 billion, increasing from $11.00 a share, on revenue of $41.806 billion, a year earlier. UBS analyst Steven Milunovich continues to rate Apple a "Buy," but on Monday lowered his price target for the shares by $50 to $650, while cutting his fiscal 2013 EPS estimate to $44.68 from $47.00, because survey work by Consumer Intelligence Research Partners indicates that "(1) demand for storage has declined from about 30GB with the 4S to 20GB for the iPhone 5 with fewer customers opting for the 64GB model, and (2) demand for older models has increased from 33% in the 4S cycle to 50% so far for the 5."
Back to the Banks
The KBW Bank Index ( I:BKX) rose 1% to close at 53.90, with all but three of the 24 index components showing gains for the session. Shares of Bank of America ( BAC) were up 2% to close at $11.35, reversing their 5% slide during the previous two sessions. The company on Thursday reported meager fourth-quarter earnings of three cents a share, springing from its large mortgage putback settlement with Fannie Mae ( FNMA) and its portion of the $8.5 billion foreclosure settlement between federal regulators and the largest mortgage loan servicers. With "27 of the top 100 regional banks" having reported their fourth-quarter results through Friday, Oppenheimer analyst Terry McEvoy said in a note on Monday that "revenue increased 10.7% annualized in 4Q12 vs. 4.9% in the prior quarter. With net interest income flat, the growth is coming from fee income largely on the strength of mortgage banking. The ability of banks to increase net interest income in '13 will rest on whether loan growth can offset
Regions Financial of Birmingham, Ala., reported adjusted fourth-quarter operating earnings of $311 million, or 22 cents a share, beating the consensus estimate 21 cents. The adjusted earnings excluded roughly $42 million in pretax costs for the termination of a third-party investment in a REIT subsidiary. Fourth-quarter GAAP earnings available to common shareholders were $261 million, or 18 cents a share, compared to $312 million, or 21 cents a share, in the third quarter, and a net loss to common shareholders of $135 million, or 48 cents a share, in the fourth quarter of 2011. Fourth-quarter net interest income was $818 million, increasing slightly from $817 million the previous quarter, but declining from $849 million a year earlier. The net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- was a tax-adjusted 3.10% in the fourth quarter, widening from 3.08%, both in the third quarter and in the fourth-quarter of 2011. While the company's average total loans declined 1% sequentially and 5% year-over-year to $74.622 billion in the fourth quarter as commercial real estate and residential mortgage loans continued to decline, average commercial and industrial loans grew 1% quarter-over-quarter and 9% year-over-year, to $26.414 billion. Meanwhile, average indirect auto loans grew by 7% sequentially and 26% year-over-year, to $2.295 billion in the fourth quarter.
Shares of State Street ( STT) of Boston rose 3.5% to close at $55.25. The company on Friday reported fourth-quarter operating earnings available to common shareholders of $521 million, or $1.11 a share, increasing from $473 million, or 99 cents a share, in the third quarter, and $454 million, or 93 cents a share, in the fourth quarter of 2011. The adjusted fourth-quarter earnings excluded $139 million in acquisition and restructuring costs, mainly related to the reduction of 630 staff positions, which will be completed this year. Highlights for the quarter included $260 million in investment management fees, increasing 4% sequentially and 29% year-over-year, ""primarily due to stronger equity markets, net new business, and higher performance fees." Please see TheStreet's earnings coverage for more detail on State Street's fourth-quarter results. Guggenheim analyst Marty Mosby rates State Street a "Buy," with a $57 price target, and on Tuesday said that "as the operating environment stabilizes going into 2013, revenue growth should continue; furthermore, positive efficiencies should continue to build and excess capital should be deployed through either share repurchases or acquisitions." "As a result, we expect STT to be able to grow operating earnings per share by about 10% in 2013 and improve operating return on tangible common equity back toward 18%." State Street's shares have already risen 18% year-to-date, following a 19% return during 2012. The shares trade for 12.6 times the consensus 2013 EPS estimate of $4.38. The consensus 2014 EPS estimate is $4.98. Based on a quarterly payout of 24 cents, the shares have a dividend yield of 1.74%. Interested in more on State Street? See TheStreet Ratings' report card for this stock.
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