Market briefing --- Derek (slow)
Mcdonald's --- June (slow)
Taking stock --- Levi (slow)
i’m derek davis. recapping the day on wall street, markets ended the day higher with the dow jones industrial average up about 12 points to 10,640. s&p 500 index up 1 1/2 to 1227 and nasdaq composite up almost four points to 2156. welcome donald’s stock was the best performer on the dow after its second quarter earnings beat analyst estimates. june grasso has more on what’s behind the numbers.
>> derek, it wasn’t big mac that drove profits at mcdonald’s. it was healthy foods. shares of the world’s largest restaurant chain rose as much as 5%, the biggest jump for the stock in nine months. second quarter earnings, excluding some items were 53 cents a share. five cents above analyst estimates. the items were nine cents a share in taxes to bring home $2 billion from overseas profit. jim skinner extended mcdonald’s push into healthy foods. u.s. restaurants led the sales gain as skinner used $1 coupons to bring in customers for new fruit and walnut sal yade. mcdonald’s began the push beyond burger and fries in 2003 when salads and grilled chicken sandwich set off months of gains.
>> it is significant. if you break it down, one, they are continuing to have strong growth here in the united states. most encouragingly, they are picking up overseas that’s been an area that’s been slowing mcdonald’s growth really for the past 18 months or so.
>> the chain has not been as successful with menu change necessary europe. the company’s largest market after the u.s. where sales fell in the second quarter. sales in europe gained 1.3% in june, the first increase since march. peter jankovskis is optimistic about a turnaround there.
>> we hope to see some recovery in the economies there, and certainly economic weakness has been a major drag there holding results back. mcdonald’s has also been very aggressive in the past few months in terms of reshuffling management.
>> mcdonald shares gained 29% last year when its u.s. comparable store sales increased nearly 10%, their biggest increase in 30 years. this year is different. even with today’s rally the stock is down more than 3%. back to you, derek.
>> thank you, june. utility stocks may extend a 2 1/2 year rally. investors say takeovers, higher dividends and demand for alternative energy sources will lead the gains. year-to-date the group is the second best performer in the s&p 500, just behind energy shares. bloomberg news reporter harry levy is following the gains and he joins me now with this addition of taking stock. welcome to “bloomberg after the bell.”
>> thanks.
>> utilities are seen by many investors as a defensive, no?
>> sure, yeah.
>> how can you explain the group’s performance thus far?
>> there have been a few phases of this. this group was decimated when enron collapsed in 2001 to the point where investors really got out of the space all together and sent the group down along with the market to its low in 2002. then you have the following two years. 2003 and much of 2004 which was basically redevelopment a lot of investors found the stocks cheap. captains were going back to the basics. they were getting away from a lot of the energy trading and the overseas investments that got enron in trouble they were going back to providing the service people paid for, which is just a good solid utility. so along with that, investors were paying for the hopes that that’s what would happen. then really since late last year you had the consolidation phase. you had the two biggest takeovers in the history of the industry with exelon buying public service enterprise group and duke energy buying cinergy. that’s brought the gains this year.
>> are we going to see more consolidation in the industry?
>> some investors are hopeful. that could start with the repeal of the public utilities holding company act which is part of the energy bill bush sent to congress. it’s being debated right now. if that goes through you had investors such as warren buffet say they would be looking to invest more in the space.
>> how does this group continue to grow after the run it’s had?
>> growth is going to slow. they had quarterly profit growth of almost 40% in the fourth quarter that. came down and came down more in the second quarter. we’re getting those reports starting next week. what investors are going to be looking for is growing dividends from these companies that’s one of the reasons they’ve always been consider add tractive investments. also the redevelopment of this infrastructure.it’s not done. we had rolling blackouts a few summers ago in california. we had the blackout in new york city two summers ago. so there’s clearly some modernization that needs to be done still in the network of utility, of delivering energy this this country. so that’s where the further investment may be.
>> any other spaces investors looking to avoid?
>> well, part of the story here is that with the growth in this industry, you have this huge rally and these stocks are actually selling for much higher multiples. the price earnings ratio is much higher than it has been historically and is on par with the market now. these stocks are no longer selling for a discount. some investors are going to look at that and get out of it all together based on that.
>> how much are you hearing about alternative energy sources with oil and natural gas at the current levels?
>> because you’ve seen near record―you’ve seen record oil and natural gas prices, it’s going to make some of these alternative energy sources more attractive. some of the things that were more expensive are going to look less expensive when you see oil.
>> for instance?
>> wind power and nuclear power which are considered cleaner forms of energy. s.b.l. energy is one company in that space.
>> ari levy, thank you very much for joining us at bloomberg―at “bloomberg after the bell.” half sales of “harry potter” are outpacing even the previous installments in the series. we’ll find out what it means for the “harry potter” publisher. concerned about human
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Listen Market briefing --- Derek (slow)
Harry Potter --- Mike (slow)
>> well, one less hurdle for procter & gamble. the skp won european union anti-trust approval to buy gillette after agreeing to sell its battery toothbrush business. consumers had raised concerns that the merger may enable p&g to get a stranglehold on the number of product categories. p&g agreed to buy gillette back in january for $57 billion in order to add faster growing mach 3 razors, oral b toothbrushes and rite guard anti-perspirants. the deal needs u.s. approval. we were scheduled to talk with christopher probyn of state street global advisors. unfortunately we have to talk to him at another time. the world’s favorite young wizard is at it again. the latest “harry potter” book is on its way. sales are expected to boom as fans of the series count down to the weekend. how much revenue the u.s. publisher can expect? bloomberg’s mike schneider spoke to richard robinson, c.e.o. of scholastic corporation, about what demand he is seeing.
>> there’s a tremendous demand from retailers who have a good feeling for their customers. head of barnes & noble said he would sell 50,000 an hour in the next 24 hours. the arrhythmia a particular on that gets you far into selling the number of copies.
>> i would presume that a second printing is all but inevitable. how quickly would you expect to make that decision and how many more will be printed?
>> we have lots of books out there. if people want to buy more than we’ve got, we have to deal with that when it happens. there’s a wonderful feeling about this. you mentioned the different age levels. one of the great things is that as people get older they’re still reading harry potter. this has become 7 to 8 years old to any age with a lot of interest in 15 to 19-year-olds. bear in mind that harry potter is still only 8% of total sales even in this great year where book six is coming out. scholastic is a global raoegd and learning company with children’s book channels, education, international sales.
>> still a major, major significant aspect of your operation. have you talked to the author about possibly continuing the series? would you expect to get the rights or buy the rights to continue publishing?
>> she’s made it clears that seven-book program. we don’t know what will happen after that. we’re preparing the company for life without “harry potter” or a smaller portion of our total business.
>> can you look for a potter- substitute or replacement?
>> i don’t think that exists. this is one of the great phenomenons of publishing history and raoegd history. our company is about our core business which is children’s book publishing and distribution about educational technology, sales around the world in asia, latin america. “harry potter” is wonderful, kind of a symbol of the greatness of reading and the importance of an imaginative tale and importance of people focusing on literacy. it’s not --
>> sorry. only 30 seconds left. how much time will you anticipate between this one and the next and final one?
>> we really don’t know. they have been coming about two years apart. so we would assume sometime around two years from now there would be the final book. but we don’t know.
>> and that was richard robinson c.e.o. of scholastic corporation. china’s cnooc failed to persuade unocal’s board to accept a new takeover offer in part because the state-owned oil company didn’t raise its $18.5 billion cash offer. according to people familiar with the matter, cnooc promised to set aside $2.5 billion in an escrow account to cover unocal against possible shareholder lawsuits should a sale to cnooc fail. u.s. lawmakers threatened to block a c-nook-unocal deal because of national security concerns. california congressman will introduce an amendment to the energy policy that said it would block cnooc’s takeover.
>> what we’re trying to do is keep unocal within the u.s. i have serious concerns about a chinese nationally owned oil company buying a u.s. energy producer. that’s my concern with this. i want to move as quickly as it can to stop that from happening.
>> chevron’s offer for unocal received approval from u.s. regulators. they’re set to vote on the offer on august 10 if they approve, then chevron plans to close the deal on the same day. stock up more than 50%. all right. coming up, this week’s edition of “money & sports.” the end of a lockout. n.h.l. reached an agreement with the players union this week. question is, can the league revive its revenue? we have that story and more when we return.
