Hewlett-Packard (HPQ) -7.89%
While earnings and sales were mostly in line with expectations, Hewlett-Packard’s guidance showed that the world’s largest PC maker can not dodge the recession. To combat the difficult economy the company is cutting pay for most of its employees.
Revenues were down 19 percent in the personal systems group as well as in the imaging and printing segment. Enterprise storage and servers had revenues decline 18 percent, and software revenues were off 7 percent. Services rose 116 percent due to the EDS acquisition.
The company’s downside forecast for the quarter and full-year were well below consensus estimates. Hewlett-Packard’s outlook sent a slew of tech names lower today including IBM, Dell, Intel, EMC, and Cisco.
Going into today, the technology sector was the second-best performing industry in the S&P 500 this year, which is largely due to the safe haven they offer in strong balance sheets.
United Natural Foods (UNFI) +8.29%
United Natural Foods rallied in response to higher-than-expected earnings and guidance from Whole Foods Market (WFMI).
United Natural Foods derives about 31 percent of net sales from its relationship with Whole Foods as their primary U.S. distributor. With United Natural set to report earnings next week, it appears some investors are expecting the company to replicate Whole Foods’ earnings surprise. Is this enthusiasm overdone?
A closer look at Whole Foods results showed that the earnings surprise was from vast improvements in cost controls and store/property management. The important number relating to United Natural is sales, which declined 4.9 percent as shoppers are trading down from costly organic and natural products to less-expensive nonorganic goods.
While we expect to see United Natural report lower sales next week, it will be more important to evaluate the company’s progress integrating Millbrook (purchased in November 2007). The company has also invested in several new distribution facilities that will help widen margins and add capacity so the company can take on more business in the long-run.
Boeing (BA) -1.08%
Boeing continues to lose orders for its new 787 Dreamliner, which is now almost two years behind schedule. Boeing’s backlog still stretches out well over six years, but investors should brace themselves for more cancellations as airlines’ demand for the new fuel-efficient plane wane in light of lower fuel prices and less passenger traffic.
Oil surges
Crude oil rose over 12 percent on the New York Mercantile Exchange after a U.S. government report showed an unexpected drop in inventories as imports declined.
Quick Hits
- The Revenue Barometer
- Credit-card defaults may wipe out more than half of annual profit for some lenders
- Bankruptcy Could Be More Costly
- 11 Bosses Betting Big on Sinking Ships
Peter Lazaroff, Junior Analyst
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