Earnings --- Ellen (slow)
Interview: PFC Energy---Qureshi, Jamal---Analyst
>> more news after the bell, straight to ellen braitman for details.
>> after the bell, earnings out from medtronic, the medical device maker, 54 cents a share for the company’s latest quarter. if you exclude items, on that basis, matching what analysts were expecting for the second quarter. sales coming in at $2.765 billion, a little shy from analysts’ estimates but 54 cents a share excluding items on the profit front matching for the second quarter.
>> thank you. continuing on, we’ll look at energy prices. crude oil rebounded from a four-month low after an energy department’s report showed an unexpected decline in u.s. inventories. where are oil prices headed from here? joining us with his outlook on energy prices is jamal qureshi, oil market analyst with p.f.c. energy. hi, jamal.
>> hi.
>> why did inventories fall last week when they were expected to rise?
>> the key difference was that we had a real drop in crude imports. we were at about 10.5 the previous week. they came down to 9.7 this week, and that’s not too surprising given that the refinery runs are not coming back that strongly. it looks like we have a lot of refiners who are taking the opportunity from the outages to do deep maintenance.
>> where do we stand in terms of production status in the gulf? how much is back on line and how much more do we have to go?
>> we have 725,000 barrels a day still out. it’s about half back, and will be an ongoing lingering problem. it looks like we won’t have most of the production back until the second half of 26.
>> how will that hurt the industry?
>> now it’s more of a problem of what’s happening on the sweet crude side. for a long time, we had built up a glut of crude. now we’re seeing it is that’s flipped particularly with the sweet cruised which have been redirected into the sour pipeline and we’ve lost some of the sweet crude.
>> let me get your outlook on crude oil prices. yesterday, crude oil closed below the 200-day moving average, which is $56.98 a barrel of the we had a significant move upward in today’s session. could the inventory today be a catalyst for a turning point in prices?
>> it could be but i think actually we have to look at what’s happening in the broader picture, not just the crude stocks. despite the draw down today, crude stocks are quite full. we bounced off the 200-day moving average but to really get out of this upper 50’s range, you’re going to need something stronger on the fundamentals side and we had quite a bit of weakness on the heating oil numbers and that’s where the market is focused heading into the winter so we’ll need sustained cold weather to bounce us strongly off the the 200-day moving average.
>> inventories rose more than expected in heating oil, any chance that could bring down heating bills?
>> certainly. because of the drops in crude prices overall as well as natural gas, that means that we’re probably not going to see quite as dire a situation, weather-dependent, of course, but if the rest of the winter turns out to be normal weather, the predictions from a month ago will be overly dire because we’ve built up a cushion of heating oil.
>> in terms of supply?
>> in terms of supply and inventories and what’s available and in terms of incremental imports of heating oil in europe. they have a glut in central europe and we could see more material moving over if needed this winter.
>> i want to ask a question about crude oil prices. we looked at a six-month chart of crude oil futures. late august, early september, we saw a peak. in the last 2 1/2 months, each time crude prices drop and rebound, they peak at a lower price point. what is the succession of lower peaks mean now in―to you in terms of prices?
>> if we’re going to talk about the technical indicators, i look at those as much more of a short-term set of indicators. we have to see what’s happening on the fundamental side. i truly believe that will drive things much more and at this point we have softer looking gasoline but have to watch the demand numbers to see what happens there and the weather-dependent situation that determines how the winter goes, whether or not we’ll face tight gas prices in the spring.
>> on those fundamentals, predicting a cold snap on the east coast. how will that impact prices?
>> i think we’ll see rebound there. the weather forecasts are supportive. if you look globally to europe and the far east, you see a similar trend for the next week. what comes after that is more important because we’ll see a return to more normal winter temperatures in the early winter but for us to really pull prices back up substantially, say, to go over $60 again, we’re going to need to see more sustained cold and draw-down of inventories as a result.
>> what is your outlook for crude oil prices? do you see us going back above $60 before year’s end?
>> if we see normal winter weather for the next month, month and a half, i think so because we will see heating oil draw downs and i’m referring to what’s happening globally. we need to see the stocks start to come down a bit in germany and places like this, as well as on the u.s. east coast and if that happens, then, yes, i think we’ll get into the low 60’s by year end.
>> thanks for joining us.
>> thank you very much.
>> once again, our thanks to jamal qureshi, oil market analyst at p.f.c. energy. when “after the bell” continues, we’ll check world and national news and applied materials is out with earnings today, beating expectations. we’ll speak with a portfolio manager.
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Listen Market briefing --- Lori (medium)
Applied materials --- Brett (slow)
Tax cut --- Peter (slow)
NYSE --- Deb (fast)
four months. a drop in energy prices gets the credit for that. the headline number shows prices rose .2% after a 1.2% surge in september. economists we surveyed expected the consumer price index to be unchanged. factoring out volatile food and energy costs, core c.p.i. rose .2%, in line with economists’ forecasts. treasuries rose, headed for the biggest two-day gain since august in reaction to c.p.i. government debt prices extended a gain when bernanke said long-run price stability is essential for the economy. bernanke’s nomination was sent to the full senate today. optimism inflation remained contained has pushed the difference in yields from two-year and 10-year treasuries to the narrowest point since 2001. closing numbers -- shares of applied materials rising in the after-hours session. the world’s largest maker of semiconductor equipment reported better-than-expected profit and sales. brett gehrig has more.
>> orders at applied materials rose 15% in the third quarter to $1.69 billion. not only was that the first increase in a year, it was higher than the company’s own forecast back in august. chief executive mike splinter said orders from taiwanese foundries, faces that build chips for other companies’ designs, would increase after falling to less than 1/3 of normal levels. analyst steven chin says the top four foundries are working at more than 80% of capacity. taiwan semiconductor and united micro have plants running close to flat-out. applied materials had to contend with chipmakers cutting back on capacity increases as well as rising tax expenses throughout the quarter. net income fell to $246 million or 15 cents a share, a drop of 46%. taking out two cents a share in tax-related costs, profit was 17 cents a share, beating the average analyst estimates by three cents a share. sales fell 22% to $1.72 billion, also topping analysts’ forecasts. as for the stock, shares of applied materials up 4% so far this year, trailing the almost 7% gain of the philadelphia semiconductor index, but, lori, c.e.o. plinter says 2006 will certainly be a growth year for the company. back to you.
>> thank you. also after the bell, network appliance, the company whose computers store and distribute data, said second-quarter net income rose 28% on increased demand for storage systems which boosted sales. second-quarter net income rose to 70.7 million or 18 cents a share from $55.3 million or 15 cents a a year earlier. sales rose 29%. medtronic is the world’s biggest maker of electronic heart devices. after the bell, the company said quarterly profit rose 52% helped by gains in defibrillator sales. second-quarter net income climbed to $816.5 million or 67 cents a share. it was $535.7 million, or 44 cents a share, a year earlier. revenue increased 15% to a total of $2.4 billion. sales of medtronic’s defibrillators rose 34%. medtronic’s board authorized a stock buyback of an additional 40 million shares. in the energy markets today, u.s. oil companies could face a $5 billion increase in tax bills thanks to a proposal working through the senate. opposition to the proposal could threaten a larger tax-cutting measure pushed by republicans. peter cook joins me from washington with more on this story. hi, peter.
>> hi, lori. the proposal in question is not a windfall profits tax like some of the pieces of legislation debated last week when top oil executives testified on capitol hill, instead, an accounting change proposed by charles grassley and added to his package of tax cuts passed by the committee yesterday and on the senate floor this afternoon. the proposal would alter how oil companies account for inventories. they currently use a treatment called last-in, last-out accounting.
>> this would require them to pay the tax on the difference between the costs that they sell the oil, the world market price, and the first-in, the oldest, the price at which the oldest barrel was purchased.
>> given the recent rise in oil prices, the american petroleum institute says the change amounts to a backdoor windfall profits tax unfairly aimed at a single industry. grassley’s proposal drew sharp criticism from fellow republicans on the finance committee who said they feared it would hurt small independent energy companies. one analyst in washington doubts the proposal will survive a house senate conference.
>> according to joint tax committee, it will cost $5 billion more in taxes, most of that happening in 2006 and a little bit in 2007. so clearly, it’s something that they’re going to fight pretty hard to eliminate from the final package and at the end of the day, i suspect this will not be in the final tax package.
>> mississippi republican senator trent lott said today the proposal is a “deal breaker” for him and he is prepared to vote against the larger tax cut package if not removed. democrats want to go further. byron dorgan is trying to add an amendment imposing a windfall profit tax on major integrated oil companies.
>> crude oil rose today, the commodity rebounded from a four-month low after an energy department report showed an unexpected decline in u.s. inventories. crude oil supplies fell more than two million bales last week and gasoline stockpiles fell more than 950,000 barrels. distillates, including heating oil, rose more than 2.5 million barrels last week. prices rose on speculation heating oil demand will surge as a cold weather front moves into the eastern u.s. today. natural gas rose to a three-week high of 6%. a mixed day on wall street with energy stocks among the biggest gainers. deborah kostroun has more from the new york stock exchange.
>> with cold weather moving across much of the united states, that is creating a lot of demand for heating fuel and that led energy stocks to be the best performers of the 24 industry groups in the s&p 500. also, crude oil rising from its four-month low after the energy department reported an unexpected decline in inventories. natural gas closing above $12 for the first time this month and in fact rising to a three-week high as that cold front is stoking demand for fuel. speaking of commodities, we did see oil services, integrated oil, all of those stocks higher on the day. gold prices rose by the most in 16 months. gold is seen as a hedge against rising consumer prices and you saw gold up $10 on the day. not only was it gold, but also silver, palladium and platinum, all of those commodities sharply higher. the philadelphia gold and silver index higher in reaction to gold’s rise. freeport-mcmoran closing at a high for the day. tyco’s chief executive saying the board is considering splitting up the company, discussing several actions to boost the stock price, including accelerating buy backs and also a dividend. american express had its biggest drop since october 2002. c.e.o. kenneth chenault saying fourth-quarter earnings won’t be as high as some analysts’ estimates. delphi saying they will eliminate 25,000 jobs, and won’t try to reach agreements with workers on wages and benefits. ford announcing a new incentive program in response to discounts offered by general motors. and general motors, it is also the biggest drag in the dow jones industrial average for the year, down 46%. i’m deborah kostroun at the new york stock exchange for bloomberg news.
>> thank you. we are getting more details on applied materials from a conference call. applied materials reported its fourth-quarter numbers after the bell today. applied materials now says, in terms of guidant, first-quarter orders will be up 7% to 10% from the fourth quarter. fourth-quarter orders came in at $1.69 billion. amat sees first-quarter profit of 14 to 15 cents a share and first-quarter sales up 3% to 5% from the fourth quarter. first-quarter thomson financial earnings per share estimate was 17 cents a share and shares of amat are down in the after-hours session. still ahead on “after the bell,” we’ll go inside today’s oil inventory numbers and get an outlook on crude and gas prices for the month ahead with p.f.c. energy’s jamal qureshi.
