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The Star Online: Business

Keep an eye on companies where US revenue rules

Posted: 10 May 2014 06:14 AM PDT

NEW YORK: US stock investors are finding the value of staying close to home.

Even as the U.S. economy barely grew in early 2014, companies with a domestic orientation have on balance delivered better first-quarter sales and profit growth than their globally oriented peers.

RBC Capital Markets found that sales growth among companies with a high percentage of their revenue coming from the United States was three times stronger than those with a bigger international sales mix. Earnings growth was six times as robust. U.S.-focused names had bigger upside surprises on both the top and the bottom lines.

"With the U.S. economy vaulting energetically out of its winter cold spell but China looking even more beset by gravitational forces ... the two-speed developed market-vs-emerging market global recovery ... is growing more clear and present," analysts at Nomura wrote in a note to clients.

Companies with U.S.-oriented revenue rank among the year's leading advancers in the S&P 100 Index.

Anadarko Petroleum Corp, which gets more than three-fourths of its revenue from the U.S. market, is up nearly 27 percent in 2014. In its latest quarter, the company's revenue grew 50.1 percent, representing an upside surprise of almost 50 percent compared with expectations.

Utilities are 2014's runaway outperformers, with the S&P utilities index up nearly 11 percent. Utilities also have some of the highest U.S. revenue exposure. The stock of Exelon Corp is up 32.2 percent in 2014; in its latest quarter, Exelon posted revenue growth of 17 percent, good for an upside surprise of 28 percent relative to analysts' forecasts.

Power sector-focused funds have attracted inflows of almost $2 billion in 2014, according to Thomson Reuters' Lipper, though the sector is also favored as a defensive or dividend play, offering an average yield of 3.7 percent.

Conversely, technology companies have the highest percentage of foreign revenue exposure, according to Standard & Poor's. The group, which has sold off recently on concerns that valuations are stretched, has had outflows of $1.25 billion this quarter, according to Lipper.

Qualcomm Inc and Broadcom Corp have more than 94 percent of sales coming from abroad and both disappointed in their most recent results, with Chinese growth a major factor.

The week ahead will feature earnings from several companies representing both the domestic-leaning and international camps.

Applied Materials, which gets about 80 percent of its revenue from abroad, will report results next week. Analysts expect the company to post revenue growth of 19 percent.

Deere & Co, which gets 63 percent of its sales domestically, is set to report earnings on Wednesday, while Wal-Mart Stores Inc, the largest of a slew of retailers reporting next week, is due to post results on Thursday. Wal-Mart gets 71 percent of its revenue from the United States. - Reuters

China to avoid big economic stimulus: central bank chief

Posted: 10 May 2014 06:11 AM PDT

NEW YORK: China will not use any large-scale stimulus to boost its economy, Central Bank Chief Zhou Xiaochuan was reported as saying on Saturday, in response to speculation that authorities might lower reserve requirements for banks to spur growth.

Zhou, who was speaking at a closed-door session at the Tsinghua University, was also reported by Phoenix New Media Ltd as saying the central bank would only "fine-tune" its policy to counter economic cycles.

There has been market speculation that China may reduce the amount of cash commercial banks must hold as reserves at the central bank to shore up its economic growth, which fell to an 18-month low in the first quarter. - Reuters

Merkel says German government would support Siemens-Alstom tie-up

Posted: 10 May 2014 06:08 AM PDT

BERLIN: Chancellor Angela Merkel said on Saturday that the German government would support a tie-up between German engineering firm Siemens and French rival Alstom if the corporate decision-makers decide that it would make sense.

Speaking at a news conference with French President Francois Hollande in the Baltic shore town of Stralsund, Merkel said it was above all a corporate decision and her government did not want to intervene in that process.

Cash-strapped Alstom, which makes power generation and transmission systems as well as trains and trams, is the target of a takeover bid from U.S. giant General Electric.

"Those are corporate decisions and we, from the German side at least, will not get involved in that," Merkel said.

"But we talked about it. If the corporate decisions lead to the point where one says 'that would be advantageous' then Germany will also positively accompany it."

Hollande agreed with Merkel that any take-over was above all a corporate decision.

Both said their governments were waiting for Siemens to make an offer. Siemens Chief Executive Joe Kaeser has already discussed a possible bid for Alstom's energy business with Merkel.

"We are awaiting the detailed offer from Siemens before taking a position. We don't want to prejudge the choice," Hollande said.

He also said the French government was focusing on what would be in the best interests of Alstom and Siemens employees.

Alstom said last week it was reviewing a binding $16.9 billion offer from GE for its energy arm but also left the door open to a potential deal with Germany's Siemens.

The French government has previously signaled that it would prefer a tie-up with German conglomerate Siemens. – Reuters


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