Market briefing--Lori (slow)
NYSE -- Deb (fast)
i’m lori rothman. recapping the day on wall street. the three benchmark indices fell as crude oil rose above $70 a barrel and a federal reserve official earlier said the central bank must be vigilant about containing inflation. we saw jumps in gold and silver prices today. all of that weighing on stocks. the dow down 63 points, 11,073. the s&p off 3.79 of a point, 1285. no surprise, the stronger industries were energy and materials-related stocks. we started the week lower but a host of earnings reports this week could make a big difference in how the market plays out the rest of the week. let’s go straight to deborah kostroun live at the new york stock exchange with more on today’s trading.
>> thanks a lot, lori. yes, today we were lower, but we have a host of earnings we’ll get this week and today we had earnings from citigroup. we have 120 companies in the s&p 500 scheduled to report their quarterly results this week. we have―we’re pretty heavy in the financial area. if you look at what we’re expecting tomorrow, we have merrill lynch, state street, u.b.s., wells fargo. other financial earnings from banks, as well―washington mutual as well as mellon. so you can look at their performance today but this is all ahead of their earnings tomorrow and of course we always like to keep tabs on the financials because they comprise 20% of the s&p 500. other earnings that we’re looking for in tomorrow’s session, from a few areas of the market . mattel, d.r. horton and freeport-mcmoran as well as johnson & johnson. freeport-mcmoran, that area of the market , all of those materials have been performing well. that as those commodity prices continue to be ratcheting up. if you look at one area of the market that was an underperformer and has been for the past week or so, that’s really the h.m.o. stocks. h.m.o. stocks have been under pressure as you’re looking at a lot of medicare reimbursement payments and concern about that, putting pressure on the h.m.o. stocks. once again in today’s session, h.m.o. stocks lower. united healthcare will be releasing earnings tomorrow but you can see the downward draft in the h.m.o. stocks over the past week. and another area of the market that has been doing quite well, a lot of the industrial stocks. here’s this one example of another industrial stock doing well. this is probably a company you’ve never heard of, called gardener denver, maker of air compressors and blowers, rising to a record today, up almost 13% after the company saying first-quarter profit exceeding its forecast and with today’s gains, puts the market value of this company near $2 billion. the company saying increased shipments from higher-than-expected orders leading to significant improvement. basf extending its bid for engelhard for a fourth time. engelhard shareholders have until april 28 to tender shares. basf has said they might raise the bid to $38 but have not decided whether to revise that offer. engelhard shares have traded above $38 since the offer was initially made in january so we may be hearing more about this here in the next week or so. back to you in the studio. >> thank you. citigroup’s latest results, better than wall street expected. that goes for both earnings and revenue. the international businesses are what made the difference, which had c.e.o. chuck prince claiming his strategy is working. margaret popper covers the banking sector for us and is here with more.
>> thanks, lori. chuck prince delivered a profit rise when analysts predicted a fall and hit his target for half of earnings to come from international. small wonder prince was patting himself on the back today. he told investors, i say this publicly in front of the owners, we said we’d execute and we’ve done that. net income climbed almost 4% from a year ago, trading in investment banking income rose to records for sales and profit. overall revenue was 5% higher with international growth especially strong at 19%. shares of citigroup rose .6% in reaction to the news. to listen to citigroup chief financial officer, sallie krawcheck tell it, citigroup’s future lies overseas.
>> we’re investing aggressively but there will be volatility. while we would like to say that the asian markets , the the latin american markets go up in a straight line, we know that’s not true. there will be volatility there over time but over time we will be more and more international.
>> and krawcheck told me international growth was the bright spot in citi’s consumer banking business.
>> we opened a record number of branches this quarter, in our history, just under 300 branch, many of them overseas and we’re starting to see the impact of the investments we’ve made overseas pay off for us this quarter with double-digit revenue growth overseas with big double-digit earnings growth overseas.
>> citigroup’s trading unit is the largest of any bank’s. equity trading revenue was 2/3 higher than a year ago while bond trading revenue rose 8%. the totals for both were the highest ever. krawcheck credited the turnaround to chuck prince and tipped her hat to outgoing chairman sandy weill who steps down tomorrow.
>> thanks very much. earlier, we told you that shares of bear stearns rose to a record today on a report china construction may invest $4 billion for a 20% stake in the fifth biggest u.s. securities firm. that report came from the “wall street journal.” a spokeswoman for bear said the firm does not comment on market rumors. earlier, we said a chinese official would not comment. that was incorrect. in fact, a chinese official denied the report. more than 1500 c.e.o.’s and government officials are meeting in d.c. at the world healthcare conference this week. the agenda consists of speech it’s impact of healthcare costs on companies and on the u.s. economy. joining us from the conference is michael critelli, c.e.o. of pitney bowes. that’s next.
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Listen Interview: World Healthcare Conference
>> welcome back. riseing healthcare costs are a growing concern among american employers. our next guest eases the burden by spending now to help save later. here to explain is pitney bowes c.e.o. michael critelli, joining us from the world healthcare conference taking place in washington, d.c. welcome, michael.
>> thank you very much, lori. i’m very glad to be here.
>> tell us about your healthcare spending at pitney bowes, your spend-now, save-later strategy?
>> we have, over the last 15 years been able to keep our rate of increase well below the benchmark of other companies and other plans and during most of the 1990’s our costs per employee were virtually flat. i think what has enabled that to happen is a relentless focus on preventive care, early case management and more recently, on plan designs that encourage people to comply with the treatment programs for chronic diseases which are, in fact, the largest increasing component of our u.s. healthcare spending. we think we have a winning formula.
>> does your healthcare coverage plan influence who you hire? are you less likely to hire someone who’s a smoker?
>> no. we don’t make that kind of cut. we do prohibit smoking on company facilities and we aggressively work with smokers to get them to quit. we’ve had good success with that. but we do not discriminate against smokers in the hiring process.
>> why aren’t more companies taking on your healthcare cost strategy?
>> i don’t know the reason, but i think in a lot of companies the focus is on healthcare as a current period cost. we look at investment in health as an investment in human capital. in some instances, we spend more in year one to get big paybacks in years two and beyond and i don’t think many companies look at it that way. those that do have had the kind of success we’ve had and i think it’s a lesson that needs to apply not just to employer health plans but to insured plans and to the way the government manages its health programs.
>> mr. critelli, i’d like to ask you about your business. pitney bowes is expanding beyond post annual meters, now, through acquisitions. i know you’re probably asked this often, how electronic substitution, email, electronic billing and payment, how that’s influencing your outlook now.
>> it really hasn’t had a big effect on us. while the internet is certainly affecting first-class transactional mail and reducing it slowly year by year, it’s also opening up big opportunities in direct marketing and in what we call remote commerce, the movement of packaged goods and parcels which we think has great growth opportunity for us, and tremendous opportunities in software, services and digital printed supplies. as the meter moves to digital printing, we’re getting huge supplies grow. we find that the internet, as in total, has probably created as many opportunities as it’s taken away.
>> and you’ve made some 20 acquisitions since 2000. are you looking at any other deals right now?
>> we are continually looking at ways to expand our business, both through organic growth and through acquisition. our most recently announced acquisition was an e-discovery firm called ibeus consulting to help pitney bowes legal solutions offer greater value and litigation support. regardless of what happens to the legal business, litigation is likely death and taxes, always with us and continuing to grow.
>> we spoke in december and at that point you raised the quarterly gifford a penny to 32 cents a share and said pitney bowes will continue to increase its dividend annually. is that still the plan?
>> we’ve done it for 24 years. our policy is to have continually increasing dividends. what we’ve done this year is stepped up our share repurchase because we think the stock is undervalued and we will continue to do that until we think the stock is fully valued.
>> i believe you have 241 million more authorized share buybacks? >> actually, we increased our authorization about a month and a half ago, so we now have, after that authorization, we have over $500 million. obviously, we’ve done repurchases since then and will give an update at our earnings report next monday.
>> i’d like to ask you about that earnings report but i know that’s off limits at this point in time. you mentioned you felt your shares were undervalued. anything else other than what we’ve discussed that you’re planning to do to boost up your shares?
>> the best thing we can do to improve the value of our shares is not only to continue to get results within our guidance, which is 4% to 6% organic top-line growth and 8% to 10% earnings per share share growth, but to give a roadmap for shareholders as to how we’re going to do in 2007 and beyond. i think many shareholders believe in our message, but they want to see a more specific guidance for 2007. so we’re going to, particularly as we make a decision about disposing of our capital services business, we will give more precise guidance on a go-forward basis.
>> michael critelli, c.e.o. of pitney bowes, thank you so much. good luck with your speech tomorrow.
>> thanks very much.
