Better Than Expected Results from Microsoft and Ford Support Stocks
Better Than Expected Results from Microsoft and Ford Support Stocks, While Markets Await Hints on Stress Tests
Companies continued to report their results for the quarter ending March 31, as the ongoing recession continues to weigh down on companies’ earnings, though earnings were generally strong compared with median estimates, yet earnings were indeed affected by the ongoing recession amid the worst financial crisis since the Great Depression.
Microsoft reported net income declined by 32% to $2.997 billion or 33 cents a share compared with net income of $4.388 billion or 47 cents a share reported a year earlier, revenue declined to $13.648 billion compared with $14.454 billion a year earlier and inline with median estimates.
Chris Liddell Chief Financial Officer at Microsoft expressed his relief over the company’s results amid the current difficult conditions surrounding the economy, as seemingly Microsoft’s “cost-savings initiatives” manages to sustain profitability.
On the other hand, Ford reported a net loss for the first quarter of 2009 of $1.4 billion or 60 cents a share compared with net income of $70 million or 3 cents a share reported a year earlier, Ford also reported a net loss excluding special items of $1.8 billion or 75 cents a share compared with net income of $477 million or 20 cents a share reported a year earlier.
Ford CEO Alan Mulally stressed that the current difficult conditions were reflected through the results, as global demand for autos continue to deteriorate, however the auto giant continues to restructure its operations, Ford managed to reduce its $10.1 billion debt obligations during the firs quarter by $2.4 billion, meanwhile Ford expects to return back to profitability or at least breakeven in 2011.
As for today’s economic fundamental, a report released today by the US Census Bureau showing that durable goods orders dropped by 0.8% in March following the prior revised rise of 2.1% and well above median estimates of a 1.5% drop, while durable goods orders that exclude autos declined 0.6% better than median estimates of a 1.2% drop and down from the prior revised rise of 2.0%.
Tightened credit conditions, rising unemployment, and the ongoing deteriorating in the housing sector continue to weigh down on economic growth, as consumers continue to reduce their spending, which counts for nearly 2/3 of economic activity in the United States.
The existing home sales index which was released yesterday indicated that the housing market is still weakening, as sales of previously owned homes dropped more than expected in March, meanwhile the new home sales index for the month of March also indicated an ongoing deterioration in the housing sector.
The new home sales index decreased by 0.6% in March to an annual rate of 356,000 units from the prior revised estimate of 358,000 well above median estimates of 337,000 units, meanwhile house prices declined by 12% compared with a year earlier, and the supply of new homes for sale declined to 10.7 months from 11.2 months.
Meanwhile speculations continue to mount over the government’s results for the Stress Tests for the U.S. largest 19 banks, as the government will start discussing those results with the banks.
The government is seeking assurance that banks in need for capital will be able to raise money through private investments, otherwise the government will step in for the rescue though conditions will be strict indeed, the government announce the final findings on May 4, for the Stress Tests, but will provide some details today over the structure of those tests.
The banking sector has been under huge pressures and signs of relief started to emerge recently, however no one can be sure whether banks will be able to sustain those results and accordingly lay down the corner stone for stability in global financial markets, though we can judge that 2009 will probably mark a better year for banks and financial institutions.
Yet on the other hand, the International Monetary Fund expects banks’ losses worldwide to reach $4.1 trillion next year in which more than half will be associated with U.S. banks and financial institutions.
Stocks extended the rally in today’s early trading session, as the DJIA index was up by 103.14 points or 1.30 percent and was last traded at 8060.20, while the S&P 500 index rose 11.04 points or 1.30 percent and was last traded at 862.96, and the NASDAQ Composite index was up by 23.02 points or 1.39 percent and was last traded at 1675.23, data as of 10:06 New York time.
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