Wall Street Slides as Energy Shares Hit

Stocks fell on Tuesday as energy shares slid after the latest failed attempt to halt the oil spill in the Gulf of Mexico and the U.S. government announced a criminal probe into the disaster.

Investors punished shares of companies directly involved with the spill and losses accelerated into the close following the news of the investigation.

"It's the fact that no one can really quantify the cost of the BP disaster out there," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

"There's so much uncertainty, investors are stepping to the sidelines."

U.S.-listed shares of BP Plc , which owns the well, tumbled 15 percent. The losses signaled growing frustration over the difficulty of sealing off the worst oil spill in U.S. history.

The Dow Jones industrial average <.DJI> dropped 112.61 points, or 1.11 percent, to 10,024.02. The Standard & Poor's 500 Index <.SPX> fell 18.70 points, or 1.72 percent, to 1,070.71. The Nasdaq Composite Index <.IXIC> gave up 34.71 points, or 1.54 percent, at 2,222.33.

Decliners carried the day on the New York Stock Exchange, outpacing advancers by almost 4 to 1.

BP's American Depositary Receipts have now lost about $75.03 billion since the April 20 rig explosion, and the stock has the lowest price-to-earnings ratio of any of the major oil companies as a result of the fall.

Halliburton Co, which performed some work on the well, lost 14.8 percent after Goldman Sachs removed the company from its "conviction buy list.

Transocean , which owns the rig, slid 11.9 percent to $50.04, while the S&P energy index <.GSPE> shed 4.3 percent.

Markets were choppy throughout the day and had earlier found support from data that showed manufacturing expanded for a tenth straight month in May.

In addition to the stronger-than-expected manufacturing data, construction spending recorded its largest gain in nearly 10 years in April, government data showed.

Despite the positive U.S. data, investors worry about what impact the euro zone's debt crisis will have on global economic growth. Indeed, data showed a more sluggish pace in euro zone manufacturing, while the rate of China's factory output eased.

On the upside, Apple Inc rose 1.5 percent to $260.83 as a successful international launch of its iPad prompted analysts to raise earnings and sales estimates.

In merger news, ev3 Inc jumped 17.4 percent to $22.22 after Covidien Plc agreed to buy the maker of stents and other vascular devices for $2.6 billion. Covidien shares slipped 2.7 percent to $41.24.

Regarding the oil spill investigation, the FBI and other federal agencies, will participate.

"If we find evidence of illegal behavior, we will be forceful in our response," U.S. Attorney General Eric Holder said in New Orleans.

About 9.39 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, shy of last year's estimated daily average of 9.65 billion.

Declining stocks outnumbered advancing ones on the NYSE by 2,403 to 642, while on the Nasdaq, decliners beat advancers 2,224 to 455.

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Wabco posts 1Q profit of $30M, reversing loss

Wabco Holdings Inc., which supplies components for commercial vehicle manufacturers, posted first-quarter net income Wednesday of $30.7 million, citing higher truck and bus production in emerging markets.

The company also lifted its full-year forecast.

The Brussels-based company said earnings for the three months ended March 31 came to 47 cents per share. That compares with a loss of $36.4 million, or 57 cents per share, in the same period last year.

Excluding items, the company earned 51 cents per share. Results on that basis breezed past Wall Street estimates. According to Thomson Reuters, analysts expected 25 cents per share, on average.

Revenue rose to $491.1 million from $333.9 million. Analysts expected $427.8 million.

"The commercial vehicle industry is recovering," said Wabco Chairman and CEO Jacques Esculier.

The company said Asia and South America showed "significant growth" during the quarter, adding that 75 percent of the world's truck and bus production took place in China, India and Brazil.

Wabco raised its full-year earnings forecast to $1.27 to $1.67 per share, excluding items, citing a recovery in European truck and bus demand. Analysts expect $1.32 per share.

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NRG Energy's Wind farm set to move forward

Federal waters off Delaware are officially open to bidders seeking to lease parts of the Outer Continental Shelf. That means NRG Energy’s Bluewater Wind wind offshore farm is a big step closer to completion.

NRG Energy spokesman David Gaier said, “We feel that we are very far along in the game as far as the Mid-Atlantic Wind Park is concerned.” He said the company already has in hand a power-purchase agreement with Delmarva Power for 200 megawatts of energy, an agreement to deliver wind power to the regional electric grid and a lease to install a meteorological tower for studies.

Gaier said the company plans to have turbines generating power by 2014.

Gaier said NRG is reviewing the application from the Minerals Management Service (MMS), which is part of the interior department. “This action by the Department of the Interior formally opens the permitting process for us,” said Gaier. This is the first-ever offshore wind permit process, said Gaier, so the company can’t estimate how long it will take. But, he said, the company expects to meet its deadlines.

Gov. Jack Markell said, “Delawareans are eager to seize the economic and environmental benefits of offshore wind and we are proud to be the first state in which MMS will issue an Offshore Wind Request for Interest.”

Gaier said the company would also have to complete environmental-impact studies, including the effects of the planned park on migratory birds.

“We believe, based on other studies and from long-term experience in Europe, there will be no negative impact on birds. In fact, one of the first organizations to support us in Delaware was Delaware Audubon,” said Gaier.

NRG Energy purchased Bluewater Wind from Australian-based Babcock and Brown in November 2009 after Babcock and Brown had financial problems and went into voluntary administration, selling off its assets. In 2008, Bluewater Wind and Delmarva Power signed a power-purchase agreement after more than a year of contentious negotiation. MMS said if there is no competitive interest, the agency says it may proceed with a noncompetitive lease process. Both options will include public participation and environmental review, the agency said.

The Department of the Interior announced last week the first step in allowing a wind farm project off Rehoboth Beach. Interior secretary Ken Salazar said federal and Delaware officials have been working closely on the project. The Minerals Management Service governs continental shelf leases.

The Request for Interest includes federal waters between Delaware Bay shipping routes. The point closest to land is 7.5 miles due east of Rehoboth Beach.

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Norfolk Southern earnings rise, revenue up

Norfolk Southern Corp. announced Tuesday that its first-quarter profit rose 45 percent from the same quarter a year ago, as the effects of the global recession eased.

Net income was $257 million, or 68 cents a share, for the quarter that ended March 31, up from $177 million, or 47 cents a share, in the first quarter of 2009. The earnings beat Wall Street projections by 2 cents a share. The average earnings-per-share estimate of analysts surveyed by Bloomberg News was 66 cents.

Norfolk Southern's operating revenues for the first quarter rose 15 percent to $2.2 billion, from $1.9 billion in the same quarter last year.

It was the first time in 15 months that the Norfolk-based railroad, the nation's fourth-largest, was able to announce a year-over-year increase in net income. That last occurred on Jan. 27, 2009, when it reported fourth-quarter 2008 profit jumped 13 percent.

For all four quarters of 2009, profit decreases ranged from 32 percent to 45 percent.

"Looking ahead, we are increasingly convinced that the domestic economic recovery is well under way, although the rate of growth is still somewhat unclear," Norfolk Southern CEO Wick Moorman told Wall Street analysts in a teleconference late Tuesday. "...We saw a big upsurge in business in March, and while some of that was clearly catch-up from a snowbound February, we are very encouraged that our April volumes have continued to be strong."

Quarterly revenues were up across all of the railroad's business segments:

--General merchandise rose to $1.2 billion, a 23 percent increase from $975 million in the same quarter a year ago.

--Coal climbed to $629 million from $602 million last year, a 4.5 percent increase.

--Intermodal, involving the shipment of truck trailers and shipping containers, was up 12 percent, rising to $410 million from $366 million in the same quarter last year.

Norfolk Southern released its earnings after the close of trading on the New York Stock Exchange. In trading Tuesday, its stock fell $1.44 a share, closing at $59.65.

On Thursday, Union Pacific, the nation's largest railroad, reported that its net income for the first quarter rose 43 percent, to $516 million from $362 million in the same quarter a year ago. Revenue grew 16 percent, to $3.96 billion.

On April 13, CSX Corp., the third-largest, reported that first-quarter net earnings jumped 24 percent compared with the same quarter a year ago, to $306 million from $246 million. Revenue grew 11 percent, to $2.49 billion.

Burlington Northern Santa Fe, the second-largest, was acquired by Warren Buffett's Berkshire Hathaway Inc. earlier this year and no longer releases its own earnings.

Berkshire Hathaway's first-quarter earnings are expected to be announced early next month.

Norfolk Southern operates roughly 21,000 route miles in 22 states and the District of Columbia and serves every major container port in the eastern United States, including Hampton Roads. Earlier Tuesday, the railroad announced the regular quarterly dividend of 34 cents per share on its common stock, payable on June 10, to stockholders of record on May 7.

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Conoco to halve its 20 percent stake in LUKOIL

ConocoPhillips said it plans to halve its 20 percent equity stake in Russian oil major LUKOIL as part of a program to boost returns and reduce debt.

Conoco, which has big exposure to a weak refining market and is challenged by exploration and production assets in North America that are tilted toward less-profitable natural gas, lags its oil major peers in returns.

ConocoPhillips released a bare-bones plan to revive its finances five months ago, which included the sale of $10 billion in assets.

At the time, investors and analysts speculated that Conoco might sell part of its stake in the Russian oil major and last week Reuters reported that Conoco had decided to do so.

It is "more appropriate" for the company to use proceeds from part of its LUKOIL interest to increase shareholder value, Jim Mulva, Conoco chief executive, told the company's annual meeting with analysts. But he also said it was important for the company to remain in Russia.

LUKOIL was the most likely buyer of the 10 percent stake, which is worth $4.9 billion, analysts at Raymond James said in a research note.

LUKOIL Vice President Leonid Fedun told analysts in London that his company would not rule out buying the shares being sold by Conoco, but added that the Kremlin could oppose such a move.

Conoco said potential dispositions in 2010 include its interests in the Syncrude oil sands project and the Rex pipeline, 10 percent of its Lower 48 and Western Canada portfolio, and its remaining gasoline retail operations.

About half of the assets will be sold in 2010, and the remainder in 2011, the company said.

The company also said it plans a $5 billion share repurchase program and will raise its dividend 10 percent.

The third-largest U.S. oil company said it expects per share production growth of 3 percent in 2010 and 2011 and 3 percent to 5 percent in subsequent years.

At 1600 GMT, the company's shares were up 7 cents, or 0.1 percent, at $52.58 on the New York Stock Exchange.

LUKOIL's Fedun said planned tax breaks in Russia meant its cash flows could rise and that the Kremlin could object if this money was spent buying back the shares.

"The political leadership of the country may see it negatively," he said.

He added that any purchase would depend on LUKOIL's other financial obligations and said he himself would not buy the shares. Fedun already owns 9 percent of LUKOIL.

LUKOIL, Russia's No. 2 oil producer missed forecasts when posting a 23 percent drop in 2009 profit on Wednesday.

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Buffett's Berkshire Hathaway continues to dump Moody's stock

Warren Buffett continues to show that he's no longer in the mood to be a Moody's investor.

Buffett's Berkshire Hathaway reported additional sales of the credit rating firm in an SEC filing Monday. Berkshire has reported such sales at least a half-dozen times in the past year and seems on its way to liquidating the entire stake.

The latest filing reported that Berkshire sold 815,905 shares last week. That raised about $24 million for Berkshire, mere pocket change.

Berkshire still owned about 31 million shares of Moody's Corp. as of the filing.

Berkshire is required to report the transactions within two days of their occurrence because it owns more than 10 percent of the company's stock. Once that ownership level falls below 10 percent, which it seems nearly certain to do, Berkshire will no longer have to update its sales each time they're made.

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GlaxoSmithKline makes vaccine executive changes

British pharmaceutical company GlaxoSmithKline PLC on Friday announced two changes in the executive lineup of its vaccines business.

Jean Stephenne was appointed chairman of GSK Biologicals with immediate effect. He will also continue in his current role as president of GSK Biologicals.

Over the next two years, Glaxo said, operational responsibility will be taken over by Dr. Moncef Slaoui, who will also continue as chairman for research & development.

"Jean has built a world-leading vaccines business and as chairman will continue to be instrumental in driving forward our public health agenda," said Chief Executive Andrew Witty.

"Moncef has more than 17 years experience working in the vaccines area and has played a critical role in developing the strong pipeline we have today. These changes will ensure continued strong focus on delivery and development of this pipeline."

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Growing transportation demand suggests global freight recession over: United Parcel Service

United Parcel Service (NYSE:UPS) and logistics firm Expeditors International (Nasdaq:EXPD) have indicated that strong air freight growth last fall continued through at least January.

A recent surge in demand for rail, truck and air transportation suggests the global freight recession may have ended, industry analysts said Friday.

After bottoming out in the second quarter of 2009, demand has materially strengthened over the last four weeks, says a report from UBS analysts Rick Paterson and Fadi Chamoun.

The International Air Transportation Association recently revised its outlook, saying cargo volumes should increase by 12 per cent in 2010. That's up from seven per cent in earlier forecasts.

The Port of Long Beach says its container traffic grew by 30 per cent in February from last year.

The American Trucking Association said its seasonally adjusted truck tonnage index was up 1.9 per cent in January.

Railways in Canada and the United States saw their non-coal volumes increase over the last week from a year ago.

Total carloads grew by 13 per cent to 739,292, the highest level since November 2008. They are also up 3.5 percentage points from the previous week.

Carloads were down 9.8 per cent from 2008 but things are at least moving in the right direction, added Walter Spracklin of RBC Capital Markets.

Canadian railways were ahead of their U.S. peers, with carloads up by 20.5 per cent compared to an 11.4 per cent increase south of the border, he said in a report.

Canadian carloads improved 9.5 percentage points from the previous week, while U.S. carloads were up 2.2 percentage points.

Canadian National Railway's (TSX:CNR) carloads grew the most, up 23.8 per cent over the week, compared to a group average increase of 13 per cent.

So far this year, its carloads are up 13.4 per cent.

At Canadian Pacific Railway (TSX:CP), carloads increased by 5.3 per cent during the week and five per cent for the year to date. Intermodal traffic grew by 19.2 per cent for the week but is down 0.9 per cent year to date.

Overall Canadian volumes were driven by an 86-plus per cent surge of gravel and metallic ores. Chemicals were up 34.3 per cent and automobiles 42.5 per cent.

Grains decreased by 5.7 per cent in the week. Pulp and paper products were down marginally but lumber was up 13.6 per cent.

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GE Capital, Navistar Partner On Truck Loans

General Electric Co.'s (GE) financing unit will provide customer loans for commercial truck maker Navistar International Corp. (NAV), giving Navistar the ability to finance larger truck fleet purchases.

The partnership between the two companies, which will be called Navistar Capital, will effectively transfer Navistar's retail-level lending operations from its finance subsidiary to General Electric Capital Corp. The new venture will commence in about 90 days, the companies said Tuesday.

About 60 Navistar Financial employees who support its retail lending business will join GE Capital to manage lending under the new venture, the companies said. Navistar Financial, meanwhile, will continue to provide financing for truck purchases by the company's independent dealers.

The two companies declined to divulge how much money GE Capital is committing to Navistar Capital or the details about profit-sharing between the companies. The agreement announced Tuesday will run for three years, followed by one-year automatic renewals that will run indefinitely.

Navistar Financial has been providing customer loans totaling $1 billion to $2 billion a year. The company's traditional focus has been on small and medium-sized trucking companies that have limited credit options elsewhere.

But Navistar has been under pressure in the past year to expand its lending volume as large trucking companies look to the company for purchase financing as they replace their truck fleets. Tighter credit standards have put bank loans off limits for many of these companies, prolonging a sales slump in the commercial truck industry that began in 2007.

Navistar said the ability to provide in-house financing for large truck deals will make the Illinois company more competitive with rivals such as Daimler AG's (DAI, DAI.XE) Freightliner truck line and Paccar Inc. (PCAR).

GE Capital has provided financing for Navistar's customers in Canada for the past 25 years. The Connecticut company also has similar partnerships with other equipment makers, including for the Bobcat-brand of compact construction equipment. GE Credit operates about 40 commercial lending programs across a variety of industries.

Navistar noted that the infusion of capital from GE will allow Navistar to expand its financing options, particularly a lease-to-own program for trucks buyers. Navistar Capital also is expected to strengthen Navistar's balance sheet by lessening Navistar Financial's reliance on borrowing to generate capital for loans.

"The deal is a mild positive for Navistar," said Gregg Lemos Stein, a credit analyst with Standard & Poor's, in a written statement. "We believe the alliance will reduce the risk of heavy funding requirements at Navistar Financial Corp."

Navistar, which has a below-investment-grade credit rating, has been an active issuer in the public market for asset-backed securities. Navistar Financial in January was in the market with a $250 million equipment bond for dealer financing. The security is eligible for financing under the Federal Reserve's Term Asset-Backed Securities Loan Facility, which is intended to rejuvenate the consumer loan-backed market.

Bill McMenamin, vice president of Navistar Financial, predicted the company will lessen its exposure to the asset-backed market once Navistar Capital takes over customer lending.

"Navistar Financial will become a smaller, but more conservatively financed company," he said.

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Walmart Sales Fell 2% in the Fourth Quarter

Wal-Mart Stores Inc. (WMT ), the world's largest retailer, reported that sales fell 2% in the fourth quarter compared to the same period last year. More bad news is on the way. Walmart also forecast a "challenging" first quarter.

All of the big guns at Walmart offered their reasons for the decline. Deflation in the price of groceries, which account for 40% of sales, was one factor. Price discounts in electronics and flat screen TVs were also cited.

Tom Schoewe, chief financial officer, said customer traffic had fallen and, among other things, cited the remodeling of Walmart stores under Project Impact.

The retailer reported adjusted earnings of $4.5 billion or $1.17 per diluted share. Full-year sales increased 4.6% to $112 billion. International sales surpassed $100 billion.

Mike Duke, chief executive, said sales had exceed expectations for the fourth quarter. It ended the year with inventory down 7.8%. He expects the first quarter to be "challenging."

For the current fiscal year, the company expects diluted earnings per share to come in at $3.90 to $4.00. First quarter earnings per share are expected to be between $0.81 to $0.85.

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Norfolk Southern Facilitates $3.1 Billion in Industrial Investment Along Rail Lines in 2009

Norfolk Southern Corporation in the location of 70 new industries and the expansion of 23 existing industries along its rail lines in 2009.

New plants and expansions represented an investment of more than $3.1 billion by Norfolk Southern customers and are expected to create 3,000 jobs in the railroad's territory, eventually generating more than 138,500 carloads of new rail traffic annually.

Norfolk Southern assisted state and local government and economic development officials throughout 19 states in helping customers identify ideal locations for new and expanded facilities.

"The energy sector anchored our results during 2009," said Newell Baker, assistant vice president industrial development. "Our group assisted in the location or expansion of 24 energy related facilities in 12 states across our service area. Ethanol production and distribution accounted for the lion's share of energy projects, with 11 new and expanded facilities that began to receive NS rail service in 2009."

The balance of other projects secured during 2009 was distributed among several of the broad product areas Norfolk Southern serves.

Norfolk Southern works with state and local economic development authorities on projects involving site location and development of infrastructure to connect customers to its rail system and provides free and confidential plant location services, including industrial park planning, site layout, track design, and logistics assistance. During the past 10 years, Norfolk Southern's Industrial Development Department has participated in the location or expansion of 1,084 facilities, representing an investment of $23.9 billion and creating nearly 50,000 customer jobs in the territory served by the railroad.

Norfolk Southern Corporation ( NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District of Columbia, serving every major container port in the eastern United States and providing efficient connections to western rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is North America's largest rail carrier of metals and automotive products.

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GlaxoSmithKline to cut 380 jobs at UK research facility

UK-based pharmaceutical group GlaxoSmithKline is planning to reduce its workforce at the company's R&D facility in Harlow, Essex. According to reports, approximately 380 employees are likely to lose their jobs at the facility.

The company has decided to implement the job reductions following the completion of projects for pain relief, anxiety and depression drugs.

Andrew Witty, CEO of GlaxoSmithKline, was quoted by Canadian Business Online as saying: "Glaxo would discontinue research in some areas including depression and pain, and would focus more on degenerative and inflammatory diseases such as Alzheimer's disease and Parkinson's disease."

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Conn. blast fuels plant plan’s critics

Carlsbad Fire Chief Kevin Crawford said that this week’s fatal explosion at a Connecticut power plant has validated his city’s stand that such projects are dangerous and shouldn’t be underestimated.

The blast occurred Sunday, three days after public hearings wrapped up on a proposal by NRG Energy to build a 540-megawatt plant next to Interstate 5 in Carlsbad.

Construction of the 620-megawatt plant in Middletown, Conn., was nearing completion when crews were testing a natural-gas line. The blast ripped a giant hole in the works, killing five workers and injuring 27. The explosion was heard 20 miles away.

“It gives me a sense that maybe in the eyes of other people, my opinion is getting validated a little,” Crawford said. “Here’s exactly what we were trying to say.”

However, Steve Hoffmann, president of NRG Energy’s Western division, which has proposed the Carlsbad plant, said it’s wrong to link the two.

“I don’t believe you can draw a parallel,” Hoffmann said. “The Kleen Energy (in Connecticut) plant and the Carlsbad plant are very different.

“The Kleen Energy plant was in a building. Natural gas was released in a building … and went off, and that’s what caused the explosion.”

He said the Carlsbad plant will be in the open, so gas can’t concentrate in an enclosure and cause the same kind of blast.

Matthew Layton, manager of the California Energy Commission’s engineering office, said the Connecticut blast hasn’t changed the way the commission is evaluating the Carlsbad proposal, or others, because the agency already places a high importance on safety.

The commission has the authority to license power plants in the state. Two of the commission’s five members held a hearing in Carlsbad from Feb. 1-4, gathering information on all aspects of the plant.

NRG has proposed the plant on its 95 acres west of Interstate 5 and north of Cannon Road, and east of the coastal railroad tracks. It owns and operates the Encina Power Station on the same property, closer to the ocean.

City officials oppose the project. They say the location is no longer suitable for heavy industry. Carlsbad fire officials told the commission last week that the proposed access road encircling the plant would be too narrow, limiting firefighters’ access in an emergency.

However, NRG’s safety experts testified that the plant’s concrete-and-steel construction would render the structure practically noncombustible. Valves installed along the plant’s natural-gas lines would enable workers to cut the supply should a fire erupt, and thus prevent its spread, they said.

Frank Collins, an NRG safety expert, told commissioners that the control measures would be so sophisticated that “the Fire Department is a backup to fire-suppression systems on large fires.”

“Their testimony would indicate to me that maybe they don’t have the same degree of concern or appreciation for the impact of any incident,” Crawford said.

“We’re in the worst-day-of-your-life business and need to get the upper hand. It really says to me, OK, we’re really on the right track on this,” Crawford said, in reference to the explosion.

NRG’s Hoffmann said the company is well aware that disasters happen, and that’s why the plant would have built-in detection, suppression and monitoring systems. He called the Fire Department’s statements about potential danger “wild speculation” and said Encina’s safety record is exemplary.

When questioned last week, Carlsbad fire operations Chief Chris Heiser testified that there have been few recent incidents at Encina. The worst accident was in 1976, when six people died in a crane accident, he said.

Recent reports from Middletown indicate that gas may have vented outside the building into an enclosed area, where welding equipment ignited it.

The Connecticut disaster is prompting calls by residents elsewhere in the country to challenge power plants. Opponents of a proposed gas-fired plant in Brockton, Mass., jammed a state legislative hearing Tuesday, urging lawmakers to block its construction.

California Energy Commission officials hesitated this week to draw conclusions about Sunday’s explosion, saying they want to see the results of an investigation first. However, they said initial reports from Connecticut raised some concerns, such as the procedures used in venting the gas.

“The commission doesn’t allow venting gas into a confined space,” said Layton, the commission’s engineering office manager. “You would vent on a day that would make sure there isn’t a confined area (that would) lead to such an event.”

He also said it wasn’t clear how closely Connecticut officials monitored the venting. He said California requires a chief building officer and a safety monitor to be present for gas venting, and that it didn’t appear a monitor was there.

Layton said commissioners are familiar with the safety debate at the Carlsbad plant. The commission is expected to make a final decision on the proposed plant by the end of the year.

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Eaton Corp. shares rendering of planned Beachwood headquarters with workers

Eaton Corp. shared a rendering of its planned Beachwood headquarters with its employees today, giving a first glimpse of the 470,000-square-foot structure that the company says it will begin building in early 2011.

Appearing to be mostly glass from the outside, the $170 million, semi-circular headquarters will cradle a lake and will be surrounded by walking paths on its 53-acre site, which is the highest point in Cuyahoga County. The development includes a 220,000-square-foot parking garage for Eaton employees. Executives in the highest of the building's 10 floors are to have views of downtown Cleveland and Lake Erie.

In an e-mail to Crain's, Eaton spokeswoman Kelly Jasko said the company plans to move about 700 of its local employees, including those now housed at Eaton Center in downtown Cleveland, to the new building in late 2012.

Site preparation and infrastructure work should begin this summer, the company reported.

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Eaton’s Cutler Says U.S. Doesn’t Need Another Stimulus Package

Eaton Corp., the maker of hydraulics and automotive valves, said the U.S. government doesn’t need another economic-stimulus plan even as his company expects about $1 billion in related funding.

“From a pure economic view, do you need another stimulus plan? Probably not,” Chief Executive Officer Sandy Cutler said in an interview from company headquarters in Cleveland. “Every economy goes through three phases -- there’s an early phase, a mid phase and a late phase -- and that won’t be changed by a stimulus program. Part of what we are seeing now is the early- cycle businesses are recovering.”

Eaton, which also makes power meters and lighting controls, has forecast it will capture $500 million in stimulus funds this year and another $500 million in 2011. The company “immediately” began seeking opportunities to benefit from spending in the $787 billion package that passed last year while Congress was debating the legislation, Cutler said.

The company pursued projects such as rebuilding housing on U.S. military bases and improving efficiency in federal buildings.

“Buried within the stimulus packages are very specific programs that have a pretty good mapping to Eaton’s electrical businesses,” said Eli Lustgarten, an analyst with Longbow Securities in Independence, Ohio. Lustgarten recommends buying Eaton’s shares.

The U.S. should ease away from monetary and fiscal measures that have kept interest rates low and bring them back to about 3 percent, Cutler said in the Feb. 10 interview. Providing research and development credits and making more loans available to small businesses would remedy an underemployment rate of about 17 percent, he said.

Small Businesses

“When the economy starts to move up, that’s normally when your small business goes bankrupt,” said Cutler, 58. “They’ve lived off of their working capital for a year and now when they start to get their first orders in, they place the order, they go to their bank, they can’t get the loan.”

Cutler joined Eaton in 1979 and has served as CEO since 2000. He reduced the company’s reliance on truck and automotive markets to about a quarter of revenue from almost 40 percent of sales in 2004. The company has a larger presence in housing, non-residential construction and aerospace and expanded its international business to more than half of revenue from about 35 percent in 2004.

Net income last year dropped 64 percent to $383 million and sales declined 23 percent as the global recession reduced demand. The company trimmed the workforce by about 17 percent since 2008 to about 70,000 and last year imposed one week of unpaid furlough per worker each quarter. Eaton forecasts 2010 sales increasing about 11 percent, driven by higher demand, a gain in market share and favorable foreign exchange rates.

Auto Demand

The company is seeing demand increase in its auto and trucks unit as is typical early in an economic cycle, Cutler said. The global recovery will be a more muted rebound with higher-than- normal growth from underdeveloped countries, he said.

“I think 2010 in many ways is a transitional year,” Cutler said. “And I think that’s the way one has to think about it in terms of an economic recovery, because many end-markets won’t return to their 2007-2008 time period until we get out into the 2011 and 2012 time period.”

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Gannett’s USA Today to Impose Leave, Extend Pay Halt

Gannett Co.’s USA Today will enforce a weeklong unpaid leave for about 1,500 employees between the end of this month and July to help counter declining advertising and circulation sales, according to a memo to staff.

A yearlong freeze on pay increases begun in February 2009 also will be extended by at least 90 days, the newspaper’s publisher, David Hunke, said today in the memo.

“National advertising revenues in general were still down from the previous year as were paid advertising pages at USA Today,” Hunke said in the memo. “Circulation sales continued to be lower” in the fourth quarter.

Gannett said in December it would require most local newspaper employees to take five days of unpaid leave this quarter, though USA Today employees originally weren’t affected. The McLean, Virginia-based publisher enforced two weeks of unpaid leave for many workers in 2009.

Ed Cassidy, a spokesman for USA Today, confirmed the memo in an e-mail.

Circulation for USA Today, the second-largest by distribution, fell 17 percent from a year earlier to 1.9 million on an average weekday in the six months through September, according to the latest data from the Audit Bureau of Circulations. That compares with an 11 percent plunge industrywide.

The company last year posted a 28 percent decline in publishing advertising revenue to $2.97 billion, according to a Feb. 1 statement. It didn’t break out USA Today’s ad sales.

Ad Hire

Hunke said in a separate statement today that USA Today has hired Gordon Lee Jones as new senior vice president of advertising, replacing Brett Wilson, who stepped down last year. Jones previously was senior vice president of sales and marketing for Cablevision Systems Corp.’s Newsday.

In December, Gannett said it couldn’t rule out additional unpaid leave time this year. Robin Pence, a Gannet spokeswoman, said in an e-mail message that USA Today’s action today was not part of a larger strategy.

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Wabco TVS inks supply pact with Mahindra Navistar

Wabco TVS (India) Limited, part of global technology leader Wabco Holdings Inc of Belgium, a tier-I global supplier for the commercial vehicles industry, has entered into an agreement with Mahindra Navistar Automotives Limited (MNAL), a manufacturer of trucks and part of M&M Group. The pact is for development and long-term supply of air compressor technology products for braking systems and clutch servo technology products.

MNAL, a joint venture between M&M and Navistar, Inc of the US, manufactures a range of trucks and tractor-trailers that set new levels of reliability, efficiency and customer value for the commercial vehicle industry in India.

“Our commitment is to develop and deliver an entire spectrum of commercial vehicles that will benefit our customers in ways that until now are unseen and unheard of in the industry. By partnering with Wabco TVS in India for rigid trucks, we can create and sustain new value in the marketplace through technology innovation that enhances our products for local and export markets,” said Rakesh Kalra, managing director, Mahindra Navistar.

“We are proud to partner with Mahindra Navistar as they move forward to grow their position in high quality commercial vehicles in India and abroad,” said P Kanniappan, managing director, Wabco-TVS (India) Limited. “This significant new business with MNAL further leverages the well-anchored leading position of Wabco TVS in the local market and our ability to maximise value for our customers through improved vehicle safety, increased fuel efficiency and driver effectiveness,” he added. According to Leon Liu, Wabco president (Asia-Pacific), “We are passionate about partnering with MNAL as we continue to contribute to Wabco's pioneering engineering and highly reliable products while further growing our position in emerging markets through deep connectivity with customers.”

This agreement confirms Wabco’s number one position in air compressor technology globally, particularly in India. It also enlarges Wabco's already broad and successful customer base in Asia, he added.

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Moody's Corp. Releases Results for 4th Quarter and Full-Year 2009

Moody's Corp. announced results for the fourth quarter and full-year 2009.

In a release on Feb. 4, Moody's reported revenue of $485.8 million for the three months ended December 31, an increase of 20 percent from $403.7 million for the fourth quarter of 2008. Operating income for the quarter was $178.9 million, a 43 percent increase from $125.4 million for the same period last year. Diluted earnings per share of $0.43 for the fourth quarter of 2009 included a benefit of $0.01 related to previously announced restructuring activities. Excluding restructuring adjustments in both periods, diluted earnings per share of $0.42 for the quarter increased 14 percent from $0.37 in the prior-year period.

Summary of Results for Full-Year 2009

Moody's Corp. said its revenue for the full-year 2009 totaled $1,797.2 million, an increase of 2 percent from $1,755.4 million for 2008. U.S. revenue of $920.8 million increased 1 percent, while non-U.S. revenue of $876.4 million increased 4 percent from the prior year. Operating income of $687.5 million declined 8 percent from $748.2 million for the full-year 2008, and the operating margin was 38.3 percent for the full-year 2009. Excluding the unfavorable impact from foreign currency translation, revenue increased 4 percent from the prior-year period. The impact of foreign currency translation on operating income was negligible. Diluted earnings per share of $1.69 for the full-year 2009 included a net charge of $0.01, reflecting costs related to previously announced restructuring plans partially offset by a benefit from certain legacy tax matters. Excluding these items in both years, diluted earnings per share of $1.70 for the full-year 2009 decreased 7 percent from $1.82 for the full-year 2008.

"Moody's full-year results reflected gradual improvement of credit markets throughout 2009. Strength in corporate debt issuance and growth from Moody's Analytics provided a slight increase in revenue from the prior year, but activity was limited in other areas of the markets," said Raymond McDaniel, Chairman and Chief Executive Officer of Moody's. "We anticipate continuing recovery for 2010, but also expect market conditions to remain challenging until economic improvement across key markets is sustained. With this outlook, we are projecting a stronger revenue increase and a return to earnings growth for 2010, with ongoing expense management to support business initiatives and regulatory and compliance efforts."

Fourth Quarter Revenue

For Moody's Corp. overall, global revenue of $485.8 million increased 20 percent from the fourth quarter of 2008. Excluding the favorable impact of foreign currency translation, revenue increased 17 percent. U.S. revenue of $245.1 million for the fourth quarter of 2009 increased 25 percent from the fourth quarter of 2008, while revenue generated outside the U.S. of $240.7 million increased 16 percent from the prior-year period. Revenue generated outside the U.S. represented 50 percent of Moody's total revenue for the quarter, down from 52 percent in the year-ago period.

Global revenue for Moody's Investors Service ("MIS") for the fourth quarter of 2009 was $331.9 million, an increase of 31 percent from the prior-year period. Excluding the favorable impact of foreign currency translation, revenue grew 26 percent. U.S. revenue of $179.1 million for the fourth quarter of 2009 increased 42 percent from the fourth quarter of 2008. Outside the U.S., revenue of $152.8 million increased 19 percent from the year-ago period, according to Moody's.

Within MIS, global corporate finance revenue of $115.2 million in the fourth quarter of 2009 increased 99 percent from the same quarter of 2008. U.S. corporate finance revenue increased 106 percent from the fourth quarter of 2008, while outside the U.S., revenue increased 90 percent from the prior-year period. Growth was primarily driven by activity in the high-yield bond market.

The company said global structured finance revenue totaled $78.7 million for the fourth quarter of 2009, a decrease of 14 percent from a year earlier. U.S. structured finance revenue increased 5 percent from the year-ago period, reflecting increased issuance activity from asset-backed securities and commercial real-estate finance. Non-U.S. structured finance revenue decreased 25 percent, driven by revenue declines across all asset classes as improved credit market conditions slowed use of securitization for central bank supported programs.

Global financial institutions revenue of $72.0 million in the fourth quarter of 2009 increased 27 percent compared to the same quarter of 2008, due to gains from the banking sector. U.S. financial institutions revenue increased 18 percent, while non-U.S. revenue increased 35 percent.

Global public, project and infrastructure finance revenue was $66.0 million for the fourth quarter of 2009, an increase of 36 percent from the fourth quarter of 2008. U.S. revenue increased 36 percent from the prior-year period, primarily driven by stimulus plan-related public finance issuance. Non-U.S. revenue increased 35 percent with strong issuance in European infrastructure finance.

Global revenue for Moody's Analytics ("MA") for the fourth quarter of 2009 reached $153.9 million, up 3 percent from the same quarter of 2008. Foreign currency translation did not materially impact revenue. Reflecting a realignment of revenue by product grouping in both periods, revenue from subscription-based research, data and analytics of $106.0 million declined by 1 percent from the prior-year period; risk management software revenue of $42.3 million grew 21 percent; and professional services revenue of $5.6 million decreased 26 percent from the prior-year period. A reconciliation table for MA revenue is available at the end of this press release.

In the U.S., MA revenue of $66.0 million for the fourth quarter of 2009 declined 5 percent from the prior-year period, reflecting the effects of customer attrition due to financial market disruption in late 2008 and early 2009. Outside the U.S., revenue increased 10 percent over the prior-year period to $87.9 million, primarily due to growth in the risk management software business.

Fourth Quarter and Full-Year Expenses

According to the company, fourth quarter 2009 expense for Moody's Corp. of $306.9 million was 10 percent higher than in the prior-year period and included higher accruals for performance-based compensation. Moody's reported operating margin for the fourth quarter of 2009 was 36.8 percent. Excluding the restructuring adjustments in the current period, expenses were 11 percent higher than the prior-year period and operating margin was 36.6 percent, compared to 31.1 percent in the prior-year period. Without the unfavorable impact of foreign currency translation, reported expenses increased 8 percent.

Full-year 2009 expenses for Moody's Corp. of $1,109.7 million were 10 percent higher than the prior year. Excluding restructuring adjustments in both periods, Moody's expenses were 8 percent higher in 2009, primarily due to incremental expenses from businesses acquired in the fourth quarter of 2008 and higher incentive compensation.

Moody's said its effective tax rate was 38.3 percent for the fourth quarter of 2009, compared with 28.6 percent for the prior-year period. The increase was primarily due to a favorable true-up of the full-year 2008 tax accrual in the fourth quarter of 2008. In addition, the 2008 effective tax rate included realization of U.S. manufacturing and research credits and deductions. The annual effective tax rate for 2009 was 37.0 percent compared to 36.7 percent for 2008.

Full-Year 2009 Revenue Results

The release said that revenue at Moody's Investors Service totaled $1,217.7 million for the full-year 2009, an increase of 1 percent from the prior-year period. Excluding the unfavorable impact of foreign currency translation, revenue increased 3 percent. U.S. revenue of $663.1 million increased 3 percent, while non-U.S. revenue of $554.6 million decreased 1 percent from the prior year.

Moody's Analytics revenue rose to $579.5 million for the full-year of 2009, up 5 percent from the full-year of 2008. Excluding the unfavorable impact of foreign currency translation, revenue increased by 7 percent. Revenue from research, data and analytics declined by 1 percent to $413.6 million, and professional services revenue was down 10 percent to $20.8 million. For the risk management software business, revenue increased 33 percent to $145.1 million, due to the acquisition of Fermat International in late 2008 and good growth from legacy products and services. U.S. revenue of $257.7 million decreased 3 percent from the full-year 2008 results. Non-U.S. revenue of $321.8 million increased 13 percent from 2008 and represented 56 percent of total revenue, up from 52 percent in 2008.

Capital Allocation and Liquidity

On December 15, Moody's said it increased its quarterly dividend by 5 percent to 10.5 cents per share of Moody's common stock. During the fourth quarter of 2009, Moody's did not repurchase shares and issued 0.4 million shares under employee stock-based compensation plans. Outstanding shares as of December 31, totaled 236.9 million, representing a 1 percent increase from a year earlier. Additionally, as of December 31, Moody's had $1.4 billion of share repurchase authority remaining under its current program. At year-end, Moody's had $1.2 billion of outstanding debt and approximately $550 million of additional debt capacity available under its revolving credit facility. Moody's reduced total outstanding debt by $87 million during the fourth quarter and $274 million for the full-year of 2009. At year-end, total cash and cash equivalents were $473.9 million, an increase of $228 million from a year earlier.

Assumptions and Outlook for Full-Year 2010

Moody's said its outlook for 2010 is based on assumptions about many macroeconomic and capital market factors, including interest rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitization, and the eventual withdrawal of government-sponsored economic stabilization initiatives. There is an important degree of uncertainty surrounding these assumptions and, if actual conditions differ from these assumptions, Moody's results for the year may differ materially from the current outlook.

For Moody's overall, the Company expects full-year 2010 revenue to increase in the high-single-digit percent range. Full-year 2010 expenses are also expected to increase in the high-single-digit percent range. Full-year 2010 operating margin is projected in the high-thirties percent range and the effective tax rate is expected in the range of 37 to 38 percent. Share repurchase is expected to resume at modest levels in 2010 subject to available cash flow and other capital allocation decisions. The Company expects diluted earnings per share for full-year 2010 in the range of $1.75 to $1.85. This outlook assumes foreign currency translation at end-of-year 2009 rates.

For the global MIS business, revenue for the full-year 2010 is expected to increase in the high-single- to low-double-digit percent range. Within the U.S., MIS revenue is expected to increase in the mid-teens percent range, while non-U.S. revenue is expected to increase in the mid-single-digit percent range. Corporate finance revenue is expected to increase in the high-teens percent range with anticipated growth in speculative-grade issuance activity offset by moderation of investment-grade issuance from the high volume of 2009. Structured finance revenue is expected to increase in the mid-single-digit percent range reflecting modest growth in most asset classes. Revenue from financial institution ratings is expected to increase in the low-single-digit percent range, while revenue from public, project and infrastructure finance is expected to increase in the low-double-digit percent range.

For Moody's Analytics, full-year 2010 revenue is expected to increase in the mid-single-digit percent range. Revenue growth is expected in the low-single-digit percent range for research, data and analytics, in the mid-teens percent range for risk management software, and in the high-single- to low-double-digit percent range for professional services. MA revenue is expected to increase in the low-single-digit percent range in the U.S. and in the mid-single-digit percent range outside the U.S.

According to the release, Moody's provides credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody's Corp. is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which encompasses Moody's non-ratings businesses including risk management software for financial institutions, quantitative credit analysis tools, economic research and data services, data and analytical tools for the structured finance market, and training and other professional services. The Corp., which reported revenue of $1.8 billion in 2009, employs approximately 4,000 people and maintains a presence in 27 countries.

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(WLP) WellPoint Beats Consensus Earnings Estimates

(WLP) reported fourth quarter as well as full-year results for fiscal 2009.

The company earned $1.16 per share in the fourth quarter as opposed to $1.34 in the year-ago quarter. The Zacks Consensus Estimate for the quarter was $1.02. For the full-year 2009, Well Point earned $6.09 which was above the year-ago earnings of $5.48 and the Zacks Consensus Estimate of $5.91.

Total operating revenues for the quarter came in at approximately $15.1 billion as opposed to $15.4 billion in the year-ago quarter. The decrease was primarily attributable to lower fully insured enrollment in 2009, partially offset by the rise in premium rate. Total operating revenues for 2009 came in at approximately $60.83 billion as opposed to $61.58 billion in 2008.

Operating gains for the Commercial Business segment decreased 56.5% to $316.8 million in the reported quarter. The decline was due to restructuring costs incurred by WellPoint in addition to a reduction in fully insured enrollment and an increase in the benefit expense ratio for the Local Group business. Operating gains for the Consumer Business segment fell 32.6% to $158.9 million in the quarter. The Other segment reported a 15.7% year-over-year increase in operating gains.

The health insurer completed the sale of NextRx subsidiaries to Express Scripts, Inc (ESRX) on Dec 1, 2009 and received consideration of $4.7 billion from the transaction and recognized a pre-tax gain on the sale totaling $3.8 billion in the reported quarter.

We were disappointed to see a significant decline in medical enrollment. Medical membership came in at 33.7 million as of Dec 31, 2009, which represented a decrease of 3.9 % from Dec 31, 2008. Medical expenses also climbed during the quarter to a benefit-expense-ratio of 84.8% from 83.4% in the year-ago quarter.

The membership decline was most significant in the Local Group business, which saw a 989,000 member decline from the prior-year period. The decrease in membership in this segment was primarily attributable to lapses and in-group enrollment losses arising from the recession and the consequent rise in unemployment.

Enrollment in State Sponsored business witnessed a decrease of 259,000, as WellPoint withdrew from certain State Sponsored programs. Membership declines were also experienced in the Individual and Senior businesses, while enrollment in the National business grew by 101,000 members. Medical enrollment is expected to decline further because of the continuous rise in unemployment. Operating cash flow for the entire 2009 was more than $3.0 billion.

WellPoint expects to earn at least $6 a share in 2010. The Zacks Consensus Estimate for 2010 is $6.10. Currently, we are Neutral on WellPoint shares.

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