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Pre Market – Warning, Warning, Warning

December 4, 2008 By Chuck

This has been the week of earnings warnings. This morning has been no different:

MERCK (MRK) GUIDES FY09 EPS $3.15-3.30 V $3.52E (EX ITEMS), R $23.7-24.2B V $24.5BE
- Guides FY08 EPS $3.45-3.55 v $3.29e ($3.28-3.32 on 10/22), R $23.7B-$24B v $23.8Be
- Notes that FX will cut FY09 Rev by 3%, EPS by 6%, sees other additional costs from site closings and job cuts.

DUPONT (DD) CUTS GUIDANCE, SEES Q4 EPS -$0.20 V $0.23E (EX ITEMS), TO POST $500M PRETAX LOSS IN Q4
- Guides Q4 sales down 15% y/y approx $5.65B v $7.14Be
- Sees 2009 FY EPS at $2.25-2.75 v $2.87e
- Sees 2009 CAPEX $1.601.8B v $2.0B in 2008, net reduction of $1B in 2009 working capital
- Cutting 2.5K jobs (4% of work force), cuts 4K contractor positions by end of year 2008
- Expects global recession to continue well into 2009, notes global decline in construction and auto markets

AT&T (T) CUTTING 12K JOBS (4% OF WORKFORCE), REDUCING 2009 CAPEX
- Job cuts are due to economic pressures, a changing business mix and a more streamlined organizational structure.
- In response to these business and economic factors, AT&T plans to reduce its 2009 capital expenditures from 2008 levels. Capital plans for 2009 are being finalized now and specific guidance will be provided when the company releases its fourth quarter results in late January.

VIACOM (VIA) CUTTING 850 JOBS (ABOUT 7% OF WORKFORCE), SUSPENDING SENIOR-LEVEL MANAGEMENT SALARY INCREASES FOR 2009
- Job cuts will be implemented across all divisions of the Company.
- In addition, reflecting a comprehensive review of its operations, the Company will write down certain programming and other assets.
- The restructuring and write-down together will result in a pre-tax charge of $400-450M, or $0.42 to $0.48 per diluted share, in the fourth quarter of 2008. These staffing and compensation actions and write-downs are expected to result in pre-tax savings of $200-250M in 2009.
- CEO: We are moving rapidly to adapt to the challenges presented by the current economic environment.

Some retail ‘same store sales’ figures have been rolling in this morning and with few exceptions just about all of them are down significantly for the month of November. Average retail sales are running between 12 and 16% lower by my calculations.

Weekly unemployment claims:

INITIAL JOBLESS CLAIMS: 509K V 540KE; CONTINUING CLAIMS: 4.087M V 4.030ME
- Prior Initial Jobless Claims revised from 529K to 530K

The continuing claims is the scary number here. It continues to rise at an alarming rate. I expect to see continuing claims reach 5 million by the Q1 2009. This will be due to the extension of unemployment claims kicking in on top of additional layoffs that I anticipate in the retail sector following the holiday shopping season.

The S&P 500 continues it’s pinball machine action…

S&P 500 E-Mini Futures Hourly Chart

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Comments

  1. GRASSY says:
    December 4, 2008 at 5:09 PM

    Hey Rebels – i like your work and i am also a Bear – so can i run a risk by you – most / all people on here are Bears, they see the economy declining now and see the markets also due another fall from resistance levels, and the res levels continue to fall, last weeks 8800 is this weeks 8400 … etc.

    So beware, madness of crowds, herd instinct, if we are all slapping each other on the backs telling scary Bear stories we miss the Bull argument.

    Chuck, what is the bull side here, can you consider it in your analysis so we have both sides of the coin – tons of money being thrown at the problem, markets down 45% – value appearing, oil rescuing industry and consumers, property becoming affordable, santa claus and rudolf only a few weeks away, etc… is there a Bull case we should be aware of. Cheers GRASSY