Friday, May 23, 2008

Opening View: CA Inc. and Gap Report Earnings, Royal Caribbean Downgraded

Turning to equities, recreational companies are beginning to feel the pinch of the U.S. economic downturn and soaring fuel prices. Specifically, amusement park operator Six Flags ( SIX: View sentiment for SIXsentiment, chart, options) said that it will cut ticket prices by $10 at its St. Louis park to help customers cope with tightening economic conditions and rising prices for everyday commodities.

Meanwhile, Morgan Stanley downgraded Royal Caribbean (RCL: View sentiment for RCLsentiment, chart, options) to "equal-weight" from "overweight," while keeping rival Carnival (CCL: View sentiment for CCLsentiment, chart, options) at "overweight." The brokerage stated that Royal Caribbean's risks are greater given lower margins and higher leverage. "With oil hitting new highs, economic risks growing, some signs of yield weakness, and CCL's share price holding up relatively well, we can understand why investors are increasingly nervous," Morgan Stanley said.

In earnings news, CA Inc. (CA: View sentiment for CAsentiment, chart, options) reported a fourth-quarter profit from continuing operations of $71 million, or 13 cents per share, on revenue of $1.09 billion. Excluding one-time items, CA earned $117 million, or 22 cents per share. Analysts were looking for a profit of 28 cents per share. Looking ahead to 2009, the company expects earnings of $1.45 to $1.52 per share, on revenue of $4.5 billion to $4.6 billion.

Elsewhere, Gap (GPS: View sentiment for GPSsentiment, chart, options) reported first-quarter net income of $249 million, or 34 cents per share, compared with net income of $178 million, or 22 cents per share, in the year-earlier quarter. Sales fell 5% to $3.38 billion. Looking ahead, Gap reiterated its fiscal 2008 earnings forecast of $1.20 to $1.27 per share.

Finally, Yahoo! (YHOO: View sentiment for YHOOsentiment, chart, options) pushed back its annual shareholder meeting from July 3 to "the end of July" as it faces a proxy campaign led by Carl Icahn.

Opening View: CA Inc. and Gap Report Earnings, Royal Caribbean Downgraded

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