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What the Glencore Xstrata Deal Means for the Global Mining Industry
The Glencore Xstrata deal, an all-share merger creating a $90 billion global mining industry powerhouse, would be the sector's biggest and could trigger the busiest year for M&A activity.
The companies announced the deal today (Tuesday) following Glencore's offer last week. Glencore would pay $41 billion for the rest of Xstrata's shares (Glencore already has a 34% stake).
Glencore International is the world's largest publicly traded commodities supplier, and Xstrata is the world's fourth-largest metals and mining company. A Glencore Xstrata deal would create a company rivaling global mining industry leaders BHP Billiton Ltd (NYSE ADR: BHP) and Rio Tinto Plc (NYSE ADR: RIO).
"Glencore being such a dominant trader and marketer of commodities, and Xstrata being such a strong operator of difficult assets, I think it creates enormous value," Prasad Patkar from Platypus Asset Management Ltd. told Bloomberg News. "On one end you have great mining expertise, on the other you've got great marketing expertise. Two and two together should make five."
The new combined entity would be more diversified than other global commodities players, with copper and coal being its biggest earnings drivers. It would be the world's biggest coal exporter for power plants and the top integrated zinc producer.
The new mining industry giant also will go on the hunt for smaller businesses, and encourage other powerful players to do the same.
Anadarko Petroleum Corp. (NYSE: APC) Ready to Rebound After Oil Spill Losses
Anadarko Petroleum Corp. (NYSE: APC) reported after market close today (Monday) a fourth-quarter profit loss, due to a $4 billion pay out made last quarter related to the BP PlC (NYSE ADR: BP) oil spill in 2010.
Anadarko, the largest U.S. independent oil and gas company by market value, reported a $358 million, or 72 cents per share, loss for the quarter. Revenue rose 42.7% to $3.84 billion from the year earlier quarter.
Excluding the spill-related payout and other items, Anadarko earned 85 cents a share. Wall Street expected the company to book earnings of 60 cents a share, more than doubling the 29 cents earned in 2010's last quarter.
Now with its legal battles behind it, the company is ready to take off as higher oil prices and a recent discovery drive future earnings.
China Will Keep Driving Yum Brands Inc. (NYSE: YUM) to New Highs
Yum! Brands Inc. (NYSE: YUM) today (Monday) reported fourth-quarter earnings that beat The Street, highlighting the impact a strong emerging market presence can have on soaring profits.
The quick-service restaurant business that owns KFC, Taco Bell and Pizza Hut chains saw quarterly profit rise 34% to 75 cents a share. Revenue for the quarter climbed 15% to $4.11 billion.
Yum's results beat Wall Street's expectations of 74 cents a share and a 13.1% revenue increase to $4.03 billion.
The yearly earnings per share increase of 14% marked the tenth consecutive year of EPS growth of 13% or more. Monday's earnings report shook off speculation that slowing Chinese growth could hurt Yum in 2011.
In fact, its outlook is as bright as ever.
Yum Brands Inc. (NYSE: YUM): Feeding China
Strong sales in China – Yum's major revenue driver – offset the struggling U.S. business. While full-year same-store sales fell 1% in the United States, same-store sales rose 19% in China.
China's quick-service restaurant industry is expected to grow around 15% this year – almost double China's gross domestic product (GDP) growth, which is only expected to jump 8.4%. The growth outlook means other restaurants will try to cut into Yum's market share and appeal to the country's growing middle class.
"KFC and McDonald's are growing outlet numbers, but so are domestic and foreign chains plus independents," Paul French, Mintel's chief China analyst, told Reuters. "The pie is bigger, but the number of players wanting and getting a slice of it are bigger too. A rising tide does not necessarily raise all boats."
Still, Yum's strong position in the region has readied it to beat competitors. Yum was one of the first U.S. quick-service restaurant businesses to successfully profit in China. It opened its first fried-chicken outlet in the region in 1987 and now has more than 4,200 total restaurants, compared to McDonald's Corp.'s (NYSE: MCD) 1,400 stores.
Yum! Brands expects China to lead the company to 10% total sales growth in 2012.
Emerging markets contributed to 50% of Yum's operating profit in 2011, and should account for a bigger portion this year. Yum! Brands plans to open another 600 new stores in China alone, after opening a record 656 in 2011.
Now Yum is diversifying its market presence. It announced Jan. 6 that shareholders of China's leading hot pot chain, Little Sheep Group Ltd., approved a takeover by Yum. Little Sheep operates about 3,000 restaurants in China, with annual revenue of $315 million.
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Amazon.com Inc. (Nasdaq: AMZN): Growth Phase Pinches Profits, but Investors Should Ride it Out
Internet retailer Amazon.com Inc. (Nasdaq: AMZN) reported soaring revenue and limited profits today (Tuesday) – but investors shouldn't be discouraged by the low earnings as the company invests in future growth.
Amazon.com reported net income of $177 million, or 38 cents a share, compared to net income of $416 million, or 91 cents a share, for the same period the previous year – a 58% plunge. Revenue jumped to $17.4 billion, a 34% rise from the $12.95 billion in 2010's fourth quarter.
While revenue fell slightly short of Wall Street's expectations, earnings were more than double the predicted 17 cents a share. Amazon.com had given fourth-quarter guidance with a revenue range of $16.5 billion to $18.7 billion.
Amazon.com revenue got a healthy boost from sales of Kindle Fire, the tablet and e-reader running Goolge Inc.'s (Nasdaq: GOOG) Android software. Total sales of the Kindle Fire and other e-reader devices increased 177% in the nine-week 2011 holiday season compared to the same period in 2010. The company reported that Kindle Fire is the No. 1 selling product available on Amazon.com since it was introduced in November.
Case-Shiller Home Price Index: U.S. Housing Market Nearing Bottom in 2012
The S&P/Case-Shiller Home Price Index showed another decline for November 2011, its third straight monthly loss, as the U.S. housing market trends toward a bottom this year.
Home prices in both the 10-city and 20-city measures of the Home Price Index fell 1.3% from October. Prices fell 3.6% and 3.7% from November 2010, respectively.
The Case-Shiller Home Price Index has fallen steadily since September. Prices in October fell 1.1% and 1.2% from the month before for the 10-city and 20-city indices.
The home price report was on par with what economists expected, as they see this year bringing an end to drastic price declines.
Facebook IPO: Where's the Love, Mark Zuckerberg?
The long-awaited Facebook IPO is finally arriving – and it's time for Mark Zuckerberg to share the love.
But most of Facebook's 800 million users won't get a chance to grab a piece of the multibillion-dollar deal.
Instead, the shares will be reserved for the wealthiest investors, not the loyal users who have fueled Zuckerberg's rise to riches.
Before Facebook, Zuckererg was just a college student….
Today, Zuckerberg's net worth is $17.5 billion and he's ranked No. 52 on the Forbes list of billionaires – No. 22 in the United States – and No. 9 on the Forbes list of powerful people.
"Zuckerberg made history with Facebook – and now he's the king of social media and social networking – the man with the Midas touch," said Money Morning Capital Waves Strategist Shah Gilani. "But now it's time for him to give some of the gold that he's earned as the head of Facebook back to the people who helped make that happen. They're the ones who have brought his company to the forefront. They're the ones who should be participating in this."
So, how could Zuckerberg use the Facebook IPO to give back to those who've helped him become an Internet legend?
Gilani has a plan for that…
Monday's STOCK Act Vote Could End a Major Congressional Perk
Members of Congress could be one step closer this week to losing one of their most profitable perks, thanks to the STOCK Act (Stop Trading on Congressional Knowledge Act).
The Senate will hold a procedural vote today (Monday) on a bill that prohibits Congress members from using nonpublic information to make stock transactions – known as "insider trading" when conducted by corporate insiders. Today's vote could put a time limit on passing the bill, which the Senate will continue debating this week.
Congress has faced increasing backlash lately for its growing list of financial advantages over the Americans it represents. A CBS News' "60 Minutes" program in November 2011 exposed Congress insider trading – elected representatives trading stocks related to hot topics being debated in Congress before information had been disclosed to the public.
Before You Get Excited About the Facebook IPO…
For more than a year there has been rampant speculation about a Facebook IPO, and now it finally appears as though one is on the way.
The social media giant could file papers for an initial public offering as soon as Wednesday, according to a report from The Wall Street Journal. The company is looking at a deal that would value the social media giant between $75 billion and $100 billion, the WSJ reported, making it one of the biggest in U.S. history.
Scott Sweet of IPO Boutique told MarketWatch a Facebook IPO will likely lead to "pandemonium."
"It's absolutely massive," Sweet said in an interview. "The mere drop of a hint will cause pandemonium."
Facebook is looking to raise as much as $10 billion, which would make it the fourth-largest U.S. IPO behind Visa Inc. (NYSE: V), General Motors Co. (NYSE: GM), and AT&T Wireless. A $100 billion valuation would make Facebook worth as much as global powerhouse McDonald's Corp. (NYSE: MCD).