For Immediate Release
Chicago, IL – January 21, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Exxon (XOM), Chevron (CVX), Bank of America (BAC), JPMorgan (JPM) and CSX Corporation (CSX).
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Here are highlights from Wednesday’s Analyst Blog:
Producer Price Increases Slow
On a year-over-year basis, intermediate goods are up 3.0% while crude goods are up 12.3%. Crude goods are essentially commodities, and as such their prices tend to be far more volatile than those of finished goods, so the more extreme readings there are not a real surprise. Nor were there any big surprises relative to consensus expectations, although the headline number was expected to be 0.0%, so it was two ticks higher; the core number was expected to be up 0.1% so it was a tick lower, and provided an offset.
The big swing factor in the finished goods level was energy. Energy prices were down 0.4% (seasonally adjusted) in December after surging 5.7% in November on top of a 5.4% increase in October and are up 20.1% year over year. Food prices, however, moved the other direction, rising 1.4% in December after a 0.5% increase in November, but over the last year they are just up 1.1%.
Finished consumer goods have, however, increased in price over the last year far faster at 6.0% than capital goods, which are unchanged over the last year. Mostly that is from the non-durable side, specifically energy, which is up 20.1%. Finished consumer goods excluding energy are up just 1.5% over the last year. Prices for finished durable consumer goods have increased by just 0.3%.
Energy prices had collapsed at the end of 2008, so we are looking at a very low base. Of course, energy prices had also surged to very high levels early in 2008, which made for very easy year-over-year comparisons for most of 2009. The rebound in energy prices should, of course, bode well for the earnings of the big oil firms like Exxon (XOM) and Chevron (CVX).
Overall, this report provides more evidence that inflation is not a serious concern right now. Getting the economy moving and seeing some actual job creation is a far higher priority right now. This means to comply with its dual mandate of trying to achieve both price stability and full employment the Fed will have to keep interest rates at extraordinarily low levels for an extended period of time.
Permits Rise, But Starts Fall
There is a huge “shadow inventory” of existing homes that are far behind on their mortgage payments but have not been foreclosed upon yet. In part, the trail modifications under the HAMP program have slowed down the foreclosure process. However, the vast majority of trial modifications in the HAMP program have not become permanent, and a very large percentage of the ones that do become permanent will run into trouble again.
In part, that is because the HAMP program — not to mention other voluntary efforts by the big banks like Bank of America (BAC) and JPMorgan (JPM) — are mostly about lowering the monthly payments to more affordable levels. Sometimes this just means extending the term of the mortgage, and tacking the missed payments onto principal. Other times it means reducing the interest rate.
While these actions are helpful, if a homeowner is deeply underwater on their home, it still makes economic sense for them to stop paying on their mortgage, even if they are still employed and have the cash flow available to pay it. I expect a second wave of foreclosures to hit later in 2010. Most of the time, a used home is an excellent substitute for a new home. If there is going to be a huge supply of existing homes coming on the market in the near future, perhaps it is not a good thing to be putting lots of resources into creating more new homes.
CSX Earnings Down on Rev Miss
CSX Corporation’s (CSX) fourth quarter earnings from continuing operations of 77 cents per share were only a penny ahead of the Zacks Consensus Estimate. Earnings were down 16% from 92 cents last year.
Results were dragged down by lower revenues due to volume declines in coal, construction and consumer-related markets caused by the weak economy. Lower fuel surcharge recovery caused by a decline in fuel costs also strained earnings.
Revenue declined 13% year-over-year to $2.3 billion due to lower utility coal shipments resulting from diminished demand caused by continuing weakness in steel production, and lower global demand for exports. Coal is expected to remain a headwind into 2010, due to low domestic and global demand, utility stockpiles that are above target levels (and are at the highest level in a decade) and natural gas substitution.
Operating expense fell to $1.7 billion in the quarter, down 12% compared to last year, due to the company’s ongoing cost-cutting efforts network modifications, equipment storage, employee furloughs, reduced crew overtime, lower incentive compensation and layoffs. The number of employees was 29,417, lower than 33,363 in the comparable period last year.
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