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Claims Fall, DOL Blames the Weather
The initial claims level fell to 323,000 for the week ending March 1 from an upwardly revised 349,000 (from 348,000) for the week ending February 22. The Briefing.com consensus expected the initial claims level to fall to 338,000. The DOL stated that the decline in claims coincided with strong winter storms, which implies that companies were not able to lay off workers due to weather conditions or laid off workers were unable to apply for unemployment insurance.
While this is possible, a more likely explanation is that the DOL continues to have problems with its seasonal adjustments. The increase in claims for the week ending February 22 happened during a week with a national holiday. The DOL has had notorious difficulty lately adjusting the claims data for the holidays. Big swings in claims over two-week periods have become commonplace. As holiday volatility settles down, the claims data should return to the 330,000 -- 340,000 range. The continuing claims level fell to 2.907 mln for the week ending February 22 from a downwardly revised 2.914 mln (from 2.964 mln) for the week ending February 15. The consensus expected the continuing claims level to increase to 2.973 mln.
Weaker Output Growth Drives Down Productivity Gains in the Fourth Quarter
Nonfarm labor productivity growth was revised down to 1.8% in Q4 2013 from an originally reported 3.2% gain. Productivity increased 3.2% in Q3 2013. The Briefing.com consensus expected productivity growth to be revised down to 2.5%. The downward revision to overall productivity was the result of weaker-than-expected output growth. Fourth quarter GDP was revised down (2.4% from 3.2%) which corresponded to a downward revision in output (3.4% from 4.9%). Total hours worked were revised slightly to 1.6% from 1.7%. Hourly compensation was revised up from 1.5% to 1.7%. The increase in hourly compensation combined with the decline in output reduced the decline in unit labor costs from 1.6% to 0.1%.
Joy Global shares rise 1% following higher than expected earnings
- Joy Global (JOY $56.10 +0.31) reported first quarter earnings of $0.49 per share, excluding non-recurring items, which is higher than expected, while revenues fell 27.0% year/year to $839.3 million which is in line with estimates. The company raised bottom end of EPS of $3.10-3.50 from prior guidance of $3.00-3.50, which is line with estimates and reaffirmed revenues of $3.6-3.8 billion which is in line with estimates. Consolidated bookings in the first quarter totaled $861 million, a decrease of 16 percent versus the first quarter of last year.
- Original equipment orders decreased 43 percent while service orders increased 4 percent compared to the prior year. Current quarter bookings were reduced by $62 million from the impact of foreign exchange movements versus the year ago period, $20 million for original equipment and $42 million for service bookings.
- Market Outlook: Forecasts for 2014 project global growth in excess of 3.5 percent, and for the first time in nearly two years, the Eurozone is expected to see positive growth of over 1 percent. U.S. coal market fundamentals continued to improve through the end of the year and are set to strengthen in 2014. After falling below 1 billion tons in 2013 for the first time in 20 years, US coal production is expected to rebound by 35 to 45 million tons this year. Global copper markets finished 2013 with a smaller deficit than in previous years and are expected to see a marginal surplus in 2014 as new supply comes on line. However, global inventories have declined 37 percent from 2013 highs and combined with the expected 4.4 percent increase in demand should support prices at the $3.25 per pound level.
- Company Outlook: "Commodity prices remain range bound and in some cases below marginal costs requiring further supply curtailments to balance the market. While these conditions make it difficult to predict the exact timing, the ability to delay rebuilds and service on equipment in most regions appears to be nearing a conclusion. Our service bookings in the first quarter increased year-over-year for the first time since the third quarter of 2012. As demand for commodities improves and supply cuts take hold, we expect our service business to follow the general increase in global commodity production..In China, we continue to focus on our local China products incorporating Joy technology and developing superior products against local competitive equipment. We are also leveraging our China supply chain in developing cost reduced products for the local China market and selective export markets."
Staples shares plunge 9% following downside guidance and miss on revenues
- Staples (SPLS $12.25 -1.26) reported second quarter earnings of $0.33 per share, which is higher than expected, while revenues fell 10.6% year/year to $5.87 billion which is lower than expected.
- Q4 Comparable sales -7%.
- The company issued guidance for the first quarter with EPS of $0.17-0.22 which is lower than expected.
- Fourth quarter 2013 total company sales growth was negatively impacted by approximately one percent due to 109 store closures in North America and Europe during the 12 months preceding the fourth quarter of 2013. Changes in foreign exchange rates also negatively impacted total company sales growth by one percent during the fourth quarter of 2013. The company initiated a plan to close up to 225 stores in North America by the end of 2015. The company also initiated a multi-year cost savings plan which is expected to generate annualized pre-tax cost savings of approximately $500 million by the end of 2015.
- The savings are expected to come from supply chain, retail store closures and labor optimization, non-product related costs, IT hardware and services, marketing, sales force, and customer service.Guidance Details: This guidance does not reflect any potential impact on sales or earnings per share related to 2014 restructuring activities. The company also expects to generate more than $600 million of free cash flow for the full year 2014, which reflects cash payments related to previously announced restructuring activities and the company's consideration of the impact from potential 2014 restructuring activities.
Children's Place shares little changed so far following beat on earnings/downside guidance
- Children's Place (PLCE $54.70 +0.00) reported fourth quarter earnings of $0.96 per share, excluding non-recurring items, whcih is higher than expected, while revenues fell 8.2% year/year to $467.5 million which is higher than expected.
- Comparable retail sales declined 4.3% for the 13 week period ended February 1, 2014, following an increase of 4.9% for the 13 week period ending February 2, 2013.
- The company issued guidance for the first quarter with EPS of $0.56-0.66, which is lower than expected.
- This guidance assumes comparable retail sales will be in the range of negative 2% to 4%. THe company issued guidance for the fiscal year 2015 with EPS of $2.85-3.05 which is lower than expected.
- This guidance assumes comparable retail sales for the year will be in the range of flat to negative 1%. The Company opened 8 stores and closed 24 during the fourth quarter of 2013. During fiscal 2013, the Company opened 53 stores and closed 41, ending the year with 1,107 stores and square footage of 5.21 million, a decrease of 0.8% compared to the prior year. In 2014, the Company plans to open approximately 35 stores and close 30, for a net of 5 additional stores in North America. Square footage is expected to remain comparable to 2013. "In 2014, we expect to double our international store count to 65-70, significantly increase our eCommerce business, grow our wholesale business through existing and new partners, and improve the productivity of our North American fleet. In addition, we plan to complete the rollout of our ERP system which will set the foundation for enhanced sales and operating margin over time through state-of-the-art inventory management and omni-channel capabilities." Capital Return Program: Co announced that its Board of Directors has instituted a quarterly dividend and has approved a $100 million share repurchase authorization as part of the Company's strategy to return excess capital to shareholders. In conjunction with the expanded capital return program, the Company amended its existing credit facility to increase its line of credit to $200 million from $150 million and to permit dividend payments on the same basis as stock repurchases. It also extended the agreement an additional year to August 2018. The Board authorized a quarterly cash dividend of $0.1325 per share to be paid April 17, 2014 for shareholders of record at the close of business on March 27, 2014.
Ciena shares rise 1% following beat on earnings
Ciena (CIEN $25.55 +0.19) reported first quarter earnings of $0.13 per share, which is higher than expected, while revenues rose 17.8% year/year to $533.7 million which is higher than expected and adjusted operating margin 5.9% vs. 5.6% last year. The company issued guidance for the second quarter with revenues of $540-570 milion whcih is line wtih estimates. Adjusted (non-GAAP) gross margin in the low 40s percent range Adjusted (non-GAAP) operating expense in the $210 million range. "We continue to benefit from the strategic decisions we've made to expand our role and reach in the market, driving more consistent performance and progress toward achieving our long-term operating targets."
Semtech shares rise 2% following beat on earnings
Semtech (SMTC $25.99 +0.40) reported fourth quarter earnings of $0.23 per share, whcih is better than expected, while revenues fell 16.0% year/year to $126.53 million which is line with estimates. The company issued guidance for the first quarter with EPS of $0.28-0.32, and revenues of $127-133 million which is line with estimates. Capital expenditures are expected to be approxmately $9 million.