10:43 ET Inventories Gain on Lack of Sales
Total business inventories increased 0.1% in May, slightly weaker than the Briefing.com consensus estimate of 0.2% growth.
Inventory growth for both manufacturers (-0.4%) and merchant wholesalers (0.5%) was known prior to the release. The only new piece of information was that retailer inventories increased 0.3% in May.
The inventory-to-sales ratio increased from its all-time low of 1.23 in April to 1.24 in May.
However, firms remained reluctant to restock their inventory levels at a pace normally associated with an economic recovery. Instead, it is more likely that growth occurred in May not because of an increase in inventory demand but from a general weakening in sales. Sales were weak across all sectors and total business sales fell 0.9%.
Therefore the "growth" in inventory stocks was really just buyers leaving more goods on the shelves than firms expected.
PGR Q2 EPS Beats Consensus
Progressive (PGR 19.63 -0.21) reports second quarter earnings of $0.32 per share, $0.04 worse than the Thomson Reuters consensus of $0.36.
Revenues rose 5.1% year-over-year to $3.71 billion versus the $3.7 billion consensus.
JTX Tops Q4 Expectations
Jackson Hewitt (JTX 1.58 +0.27) reported fourth quarter earnings of $1.14 per share, excluding non-recurring items, $0.08 better than the Thomson Reuters consensus of $1.06.
Revenues fell 11.0% year-over-year to $125.6 million above the $120.3 million consensus.
YUM Raises FY10 Guidance
YUM! Brands (YUM 4.37 -1.13) reports second quarter earnings of $0.58 per share, excluding non-recurring items, $0.04 better than the Thomson Reuters consensus of $0.54.
Revenues rose 19.6% year-over-year to $2.57 billion versus the $2.54 billion consensus.
The company raised fiscal year 2010 guidance; the company sees EPS growth of 12% versus10%+ previously, which equates to $2.39 to $2.43 per share versus $2.48 Thomson Reuters consensus.
The company said, "We are also pleased to report 10% operating profit growth in the U.S., despite flat same-store-sales. Our primary focus is to drive same-store-sales growth during the balance of year given the challenging consumer environment. At Yum! Restaurants International, we increased system sales by 4% prior to foreign currency translation benefit. We expect stronger sales and profit growth for the balance of the year at YRI."
INTC Guides Q3 Revs and Margins Above Consensus
Intel (INTC 22.05 +1.04) reported second quarter earnings after the close yesterday of $0.51 per share, $0.08 better than the Thomson Reuters consensus of $0.43.
On the top line, revenues rose 34.6% year-over-year to $10.8 billion, above the $10.25 billion consensus. The company reported second quarter gross margins of 67% versus the 64.0% Thomson Reuters consensus.
For its third quarter, the company expects to see revenue in the range of $11.2 billion to $12.0 billion, above the current $10.92 Thomson Reuters consensus and gross margins of 67% plus or minus a couple % pts versus the 64.4% consensus.
Intel guided fiscal year 2010 gross margins to 66%, + or - a couple pts, up from previous guidance of 64% + or - a couple pts, versus the 64.2% Thomson Reuters consensus. Intel sees fiscal year 2010 capital spending in the range of $5.0 billion to $5.4 billion; previous guidance $4.7 billion to $4.9 billion.
The company said, "Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history... Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace. The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future."
Retail Sales Dip, but It Could Have Been Worse
Retail sales tumbled 0.5% in June, slightly worse than the -0.2% growth rate expected by the Briefing.com consensus but better than May's -1.1% drop.
Even with the lack of sales, the details suggest a stable consumption path. Core sales -- which exclude the highly volatile motor vehicle dealers, building materials, and gasoline stations -- rose a healthy 0.2% in June after falling 0.2% in May.
Further, the decline in the retail sales data may have been the result of price decreases and not quantity changes. For example, gasoline prices declined 3.6% in June, which is in-line with the 2.0% reduction in expenditures reported by gasoline stations.
However, there are definite downside risks associated with June sales numbers. The employment report revealed a 0.4% decline in weekly wages and the expiration of emergency unemployment benefits is expected to pull aggregate income down another 0.1%. The lack of income explains the weakness in spending on nonessential goods such as motor vehicles (-2.3%), furniture (-1.1%), and sporting goods, hobby, and book stores (-1.4%).
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