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Show World&Nation Page 12 Monday, April 11, 2011 High hones for first-quarter earnings reports NEW YORK (AP) — Look for a lot of winners when companies report their first-quarter earnings. The companies in the Standard & Poor's 500 index have surpassed analysts' profit expectations for two years, or eight straight quarters. Some analysts say they will make it nine straight this earnings season, which begins Monday with a report from aluminum producer Alcoa Inc. "The longer it persists, the more meaningful it is," said Adriana Posada, senior portfolio manager with American Beacon who oversees $18.8 billion in mutual fund and pension assets. "There's a lot more confidence that the economy is in fact improving when earnings continue to surprise" with better-than-expected results. Credit Suisse analysts wrote in a recent report that they expect companies in the S&P 500 will report total earnings per share of $22.66. That's 3 percent above what analysts across the industry were expecting at the end of the first quarter. Over the last eight quarters, earnings have beaten expectations by an average of 7 percent. The difference may sound small, but stocks are priced on the assumption that earnings will meet expectations. If results beat forecasts, expect stocks to go up. Last earnings season, for example, timber company Weyerhaeuser Co. jumped 3 percent the day it reported adjusted earnings per share of 10 cents. That was double analysts' expectations. But the stock market's gains aren't uniform during earnings season, J.P. Morgan strategists wrote in a report. They looked at returns for the S&P 500 in the first half of an earnings month, such as April or July, versus the remainder of the month going back to 2009. In the first half, when investors are surprised by the stream of better-than-expected results, they quickly buy. But beating expectations gets less of a reaction later in the month. Last earnings season, for example, the S&P 500 rose 2.8 percent in the first 10 trading days of January. But the rally fizzled, and the index slipped 0.6 percent over the back half of the month. The same thing happened a year ago. The S&P 500 jumped 3.6 percent in the first 10 trading days of April 2010, but it dropped 2.1 percent over the last 11 days. Analysts expect most of the growth this earnings season to come from companies that produce metals and other basic materials. They say Alcoa will report earnings per share of 27 cents, for example, according to a survey by FactSet. That's more than double its earnings of 10 cents per share from a year ago. Alcoa and other materials producers are benefiting from the global economic recovery, which has factories demanding more raw materials. Other industries whose results are closely tied to the strength of the global economy are also expected to show profit gains of at least 10 percent, such as energy and industrial companies. Analysts expect Exxon Mobil Corp. to report earnings of $1.92 per share, up 44 percent from a year ago. It benefited from higher crude oil prices, which jumped above $100 per barrel during the quarter after starting the year at $91.38. Total revenue growth for the S&P 500 should top 10 percent for the first time since 2006, S&P senior index analyst Howard Silverblatt expects. Most of the growth is coming from bigger spending by companies, rather than by consumers. "As sales increase, and at this point 2011 looks like a double-digit gain, companies will commit to producing more, adding a few hours, then maybe a shift, and at some point eventually hiring," Silverblatt wrote in a recent note. That could lead to higher consumer spending. Much of the revenue growth for big U.S. companies is also coming from overseas customers, rather than domestic ones. The dollar's drop against other currencies through the first quarter increased the value of sales made overseas. To be sure, first-quarter earnings for some companies are under threat because of the earthquake that struck Japan in March. High oil prices during the quarter may also hurt. Delta Air Lines said last month that fewer flights to Japan and more expensive jet fuel will cut its 2011 profit by up to $400 million. Analysts also forecast first-quarter earnings to weaken for some industries, including telecommunications and utility companies. Investors had worried that the start of earnings season would be overshadowed by a government shutdown. But that risk was averted late Friday when lawmakers agreed to a lastminute deal to cut about $38 billion in federal spending. The agreement means economic reports will be released as scheduled this week, including updates on international trade, consumer prices, retail sales, industrial production and business inventories. Weather stokes Libya accepts union's ceasefire plan raging Texas fires FORT WORTH, Texas (AP) — Firefighters from 25 states were battling more than a dozen blazes across much of West Texas on Sunday in what state forest service officials called the single worst fire day the state has ever seen. A fast-moving wildfire had spread to more than 60,000 acres Sunday in Presidio County and Jeff Davis County, where it destroyed about 20 homes in Fort Davis, about 200 miles southeast of El Paso. Widespread electricity outages were reported after numerous power poles burned. But the blaze that started Saturday night missed the nearby McDonald Observatory, one of the world's leading astronomical research facilities, which instead was used as an evacuation shelter, said assistant director Anita Johnson. Revis Daggett, co-owner of Wayside Inn B&B in Fort Davis, called the situation "gutwrenching." "It's very personal and it's quite surreal," said Daggett, whose business was safe from the flames as of Sunday after- noon. "And you look around and you just keep thinking, `Well, you can't control the fire, so what are the possibilities it comes back at you?" Sunday's hot, windy conditions and low humidity, combined with withered shrubs and grasses caused by the drought, made for dangerous conditions, Texas Forest Service spokesman Alan Craft said. Air tankers usually used to douse such massive fires could not be flown Sunday because of wind gusts of 40 to 50 mph, Craft said. Firefighters continued battling a 71,000-acre fire in Stonewall, King and Knox counties, Craft said. The fire has been burning since Wednesday after it was started by a cutting torch being used on pipe near the community of Swenson, about 175 miles west of Fort Worth. Also in West Texas, firefighters had contained a 16,000-acre in Midland County where up to 40 homes and other buildings were destroyed, Craft said. A FIREFIGHTER SURVEYS THE SCENE as the Odessa Fire Department works to extinguish a grass fire Friday in Odessa,Texas. AP photo Join Now! TRIPOLI, Libya (AP) — A delegation of African leaders said Sunday that their Libyan counterpart, Moammar Gadhafi, accepted their "road map" for a cease-fire with rebels, whom they will meet Monday. They met hours after NATO airstrikes battered Gadhafi's tanks, helping Libyan rebels push back government troops who had been advancing quickly toward the opposition's eastern stronghold. The terms of the African Union's road map were unclear — such as whether it would require Gadhafi to pull his troops out of cities as rebels have demanded. "We have completed our mission with the brother leader, and the brother leader's delegation has accepted the road map as presented by us," said South African President Jacob Zuma. He traveled to Tripoli with the heads of Mali and Mauritania to meet with Gadhafi, whose more than 40-year rule has been threatened by the uprising that began nearly two months ago. "We will be proceeding tomorrow to meet the other party to talk to everybody and present a political solution," Zuma said, speaking at Gadhafi's private Tripoli compound, Bab al-Aziziya. He called on NATO to end airstrikes to "give the cease-fire a chance." Gadhafi has ignored the cease-fire he announced after international airstrikes were authorized last month, and he rejects demands from the rebels, the U.S. and its European allies that he relinquish power immediately. Gadhafi enjoys substantial support from countries of the AU, an organization that he chaired two years ago and helped transform using Libya's oil wealth. So it is not clear whether rebels would accept the AU as a fair broker. Though the AU has condemned attacks on civilians, last week its current leader, Equatorial Guinea President Teodoro Obiang Nguema, decried foreign intervention in Libya's nearly two-month-old uprising, which he declared to be an internal problem. An official from the African bloc, Khellaf Brahan, said previously that its proposals call for an immediate cease-fire, opening channels for humanitarian aid and talks between the rebels and the government. Through the rebels have improved discipline and organization, they remain a far less powerful force than Gadhafi's troops. Members of the international community REBEL FIGHTERS STAND BY A burned pro-Gadhafi forces vehicle-mounted rocket launcher inside Ajdabiya, in Libya Sunday. AP photo have grown doubtful that the opposition ward in their most sustained offensive since can overthrow Gadhafi even with air supinternational airstrikes drove them back port, and some are weighing options such as last month. If they had taken Ajdabiya, they arming the fighters even while attempting would have had a clear path to opposition diplomatic solutions. territory including Benghazi, about 100 A rebel battlefield commander said four miles away along the coast. airstrikes Sunday largely stopped heavy "If he controls Ajdabiya, he makes us feel shelling by government forces of the eastern like we are unsafe because he can move anycity of Ajdabiya — a critical gateway to the where in the east," said Col. Hamid Hassy, opposition's de facto capital of Benghazi. the rebel battlefield commander. NATO's leader of the operation said the airWestern airstrikes, initially conducted strikes destroyed 11 tanks near Ajdabiya and under U.S. leadership, began on March 19 to another 14 near Misrata, the only city rebels repel Gadhafi's forces just as they were at the still hold in the western half of Libya. doorstep of Benghazi. An Associated Press photographer saw Hassy said Gadhafi's forces fled the westtwo burning tanks and dozens of charred em gate of Ajdabiya and by mid-afternoon vehicles near the western gate of Ajdabiya had been pushed back about 40 miles west of that looked like they were hit by airstrikes. the city. Another four tanks were destroyed about 25 An AP photographer about 25 miles miles southwest of Ajdabiya. southwest of Ajdabiya saw Gadhafi's forces NATO is operating under a U.N. resolubeating a hasty retreat in the afternoon tion authorizing a no-fly zone and airstrikes using scores of camouflaged vehicles in to protect Libyan civilians. which they had streamed toward the city on The fighting in Ajdabiya on Sunday killed Saturday. The convoy included at least two 23 people, 20 of them pro-Gadhafi forces, heavy vehicles carrying large rocket launchsaid Mohammed Idris, the supervisor of a ers. hospital in the city. A total of 38 people were However, sporadic shelling could still be killed in fighting over the weekend, includheard around western Ajdabiya late in the ing 11 rebels and seven civilians, Idris said. afternoon. The main front line in Libya's uprising A body brought to the morgue, said to be runs along a 600-mile coastal highway from a rebel fighter shot near Ajdabiya's west gate, Benghazi, Libya's second-largest city, to had his hands and feet bound. Another body Tripoli, the capital, where Gadhafi's power is was an Algerian who had been fighting for concentrated. Rebels have been pushed back Gadhafi, Dr. Suleiman Rafathi said at the on two previous advances toward Tripoli, hospital. He said the man's ID confirmed both times as they approached the heavily his origin, but that rebels took the ID before fortified Gadhafi stronghold of Sirte. an Associated Press reporter arrived. Rebels Over the past few days, Gadhafi's forces have said many Gadhafi fighters are foreign have been knocking the rebels back eastmercenaries. Think-tank: Global arms spending slows UtahStateU n ive rsity STOCKHOLM (AP) — The world's military spending grew by only 1.3 percent in 2010, thanks to budget constraints caused by the global financial crisis, with the top three arms investors being the United States, China and Britain, a thinktank said Monday. South America was the region with the largest military spending growth of 5.8 percent, with countries such as Brazil seeking to increase its international influence, said the Stockholm International Peace Research Institute. The institution, known as SIPRI, said global military spending in 2010 was the lowest since 2001. It said the United States topped the list by spending $698 billion last year, followed by China with $119 billion and the United Kingdom with $59.6 billion. SIPRI said the rise in spending in South America was partly driven by increased staff costs and internal security threats in some countries, but that the change also should be seen in light of the region's strong economic growth and relatively limited exposure to the world financial crisis. In many other countries, military investment growth slowed or decreased as governments dealt with budget constraints, SIPRI said. Arms investment growth in Asia slowed to 1.4 percent, reaching a total of $317 billion, and weapons outlays in Europe fell by 2.8 percent to $382 billion in 2010. China increased its military expenditures by 3.8 percent in 2010 to $119 billion. That compared to a growth of 15 percent between 2008 and 2009, and SIPRI said the Chinese government had linked its smaller increase in 2010 to the country's weaker economic performance the year before. Spending cuts also were noticeable in countries with financial problems such as Greece and the smaller economies in central and eastern Europe, the think-tank said. The U.S. arms investment growth slowed to 2.8 percent in 2010, compared with a growth of 7.7 percent in 2009. However, the watchdog said the share of U.S. gross domestic product spent on arms increased to 4.8 percent in 2010, from 4.6 percent in 2009, and noted the country accounted for $19.6 billion of the total $20.6 billion global increase in 2010. "Even in the face of efforts to bring down the soaring U.S. budget deficit, military spending continues to receive privileged treatment," SIPRI said in the report. "At 4.8 per cent of GDP, U.S. military spending in 2010 represents the largest economic burden outside the Middle East," Sam Perlo-Freeman, head of SIPRI's military expenditure project said. In the Middle East, military expenditures rose by 2.5 percent to $111 billion, mainly supported by Saudi Arabia's heavy arms spending. Major oil-producers in Africa, such as Algeria, Angola and Nigeria, also helped increase arms spending in that region by 5.2 percent to $30.1 billion, the think-tank said. |