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From Briefing.com: 3:02PM FedEx (FDX)
86.62 +1.03: On a day when the market is suffering from selling pressure prompted by inflationary concerns, one name - FedEx - is trading well into the green. The global transport company today announced a price increase for its domestic and international Express businesses. The timing, level, and composition of the increase provides insight for the industry and the entire transportation sector.

FedEx historically raises prices around mid-to late November for the next year. This announcement comes a month and a half early and happens to coincide with its annual investor meeting. The price increase on Domestic and International Express services is comprised of a 5.5% hike in list prices, less a 2% reduction in fuel surcharges, which are currently 15.5%. This compares to a net increase of 2.6% in 2005 and 2.5% in 2004. Additionally, FedEx raised prices on accessories and for some residential services that are in outlying zip codes.

The rate hike is a sign to both its competitors and customers that it expects Express rates will remain firm. This should be taken as good news for its main competitor, UPS (UPS). Over the last few quarters we have become increasingly concerned over the seemingly increasing competitive environment between UPS and FDX. FedEx noted as much in the last quarter, saying it had been seeing heightened pricing pressures from UPS and would likely follow suit. Today's announcement puts to rest some of these concerns, at least for the near-term.

The transportation sector is faced with excruciatingly high energy prices. Cost inflation will be a key theme, not only for this industry, but the entire market with regard to third quarter earnings. The companies best able to mitigate energy and raw material inflationary headwinds are the ones that possess the pricing power and end-market demand strength to pass through prices to their customers. The nation's largest airlines, faced with record jet fuel amongst a bevy of problems, plan to raise prices during the peak holiday season, and reduce capacity and the number of cheap tickets available. The Rails have also indicated they have, or plan to, raise prices due to record yields. Outside the transportation sector, other companies that have announced price increases include, DuPont (DD), TXU Corp (TXU), Clorox (CLX), Caterpillar (CAT) and General Mills (GIS).

FedEx's goals in raising prices are two-fold: to offset high energy costs and to expand operating margins. FDX has maintained a target of 10% operating margins within the Express business, which makes up three-quarters of sales. This target is a considerable improvement from the 8.5% level achieved in FY05. The Memphis, Tennessee-based company is also more exposed than UPS to energy prices due to its heavy exposure in the air freight business. The hike also moves to embed fuel surcharges into core prices. We are likely to see this trend repeated across the entire transportation sector. We think this is just another piece of anecdotal evidence that energy prices have reached a new echelon. In other words, even though we think prices will come back from the high 60's, don't expect to see $30 anytime soon.

FedEx reports its second quarter on December 16th. The market is looking for $1.39 per share. Analysts will incorporate these new rates into their third quarter earnings estimates. UPS reports its third quarter on October 20th, with consensus currently at $0.86. At 15.7x forward earnings, FDX remains priced at discount to UPS (19.5x) whose shares continue to languish, down 20% year-to-date, despite the company narrowing its guidance in the last quarter and indicating it expects a strong second half. ---Kimberly DuBord, Briefing.com

2:44PM Human Genome Sciences (HGSI)

9.47 -4.50: Human Genome Sciences saw its shares plunge more than 30% on Wednesday after the company reported disappointing results for its experimental lupus drug, LymphoStat-B. Although the results of the Phase II clinical trial proved that the drug was safe, well tolerated, and showed signs of effectiveness, it did not demonstrate success in achieving the primary efficacy endpoints of reducing the signs and symptoms of systemic lupus erythematosus ("SLE") at week 24 or increasing the time to first SLE flare over 52 weeks.

LymphoStat-B reduced the signs and symptoms of SLE at week 52 at a level of statistical significance in seropositive patients, a subgroup that represented 75% of the study's patient population, Human Genome said in a statement. Correspondingly, David Stump, M.D., Executive Vice President of Drug Development added, "the statistically significant clinical effect of LymphoStat-B in the seropositive subpopulation is interesting, given the greater disease activity that is observable in these patients." Moreover, he noted that the data augments previous studies and "adds substantively to the evidence of LyphoStat-B's biological activity."

Despite the promise of LymphoStat-B on a cellular level, though, the disappointing results represent a significant drawback for HGSI and partner GlaxoSmithKline (GSK). As such, the company, along with GSK, is currently evaluating whether to proceed with a Phase III development of the drug for the treatment of lupus. Considering the complexity of lupus and the difficult hurdles to establish the drug's efficacy, the outcome of the trial is momentous for future trials.

However, lupus remains a critical area of unmet medical need with no specific treatment approved for the disease. Lupus is a chronic, life threatening disease that affects more than 1.5 million people in the U.S. alone - the majority of which are women and young people between the ages of fifteen and forty-five. Although it is most common in women, it can occur in anyone at any age and typically results in serious dermatological, musculoskeletal, hematological, and/or cardiac manifestations. The exact causes of the disease are unknown and there is currently no cure.

The potential for LymphoStat-B represented a significant opportunity, and may still yet, for HGS and GSK, given the vicious nature of the disease and the lack of a suitable therapy. However, the disappointing trial results have drawn notable concern over the drug's efficacy and development path. With little clarity regarding the continued path for LymphoStat-B, as well as additional products in the company's pipeline, the prospects for HGSI are uncertain. Until the company can demonstrate a reasonable chance for success for the drug and provide a clear timeline for development, investors should remain on the sidelines. --Richard Jahnke, Briefing.com

11:22AM Yum! Brands (YUM)

50.14 +1.87: Yum! Brands, whose restaurants include KFC, Pizza Hut, and Taco Bell, on Wednesday said profits for the third quarter rose nearly 16% due to strong domestic sales and international growth, particularly in China. Net income for the latest quarter increased to $214 million, or $0.72 per share, up from $185 million, or $0.61 per share, last year. Excluding special items, the company would have earned $0.71 per share - a penny better than the average analyst estimate.

At the same time, Yum, based in Louisville, Kentucky, said revenue climbed 2.9% year/year to $2.24 billion, as U.S. same store sales grew by 3%, including 6% growth at KFC and Taco Bell that was partially offset by a 3% decline at Pizza Hut. During the quarter, the company added 100 domestic multi-brand restaurants, of which 67% were converted from single-brand restaurants and 24% were new openings. Yum said it plans to add at least 550 multi-brand restaurant locations in the U.S. during the year.

New restaurant development/expansion around the globe has been a key factor to Yum's continued success. In the third quarter, the company reported that operating profit for its international division grew by approximately 13%, outpacing revenue growth of 7% due to strong performance from its franchise-only business and lower sales key markets - South Korea and the U.K. A total of 176 new restaurants opened in the quarter, as well as positive same store sales, helped drive sales and operating profit growth for the division. In addition, the company's growing China market was bolstered by rapid new restaurant expansion as system restaurants in operation grew 23%. During the quarter, 84 new restaurants were opened in the region, including 73 KFCs and 11 Pizza Huts, lifting sales nearly 18% year/year. Operating profits for China rose 32% to $85 million - compared to a 4% decline in U.S. profits.

Based on the results for the third quarter, Yum raised its fiscal year earnings guidance to $2.64 per share, two-cents ahead of its previous forecast of $2.62. According to Reuters Estimates, analysts are expecting full-year EPS of $2.63. For the current quarter, the company sees EPS of $0.78, in-line with the consensus estimate. As a result of continued growth overseas and strong domestic operations, Yum said it sees FY06 EPS growth of "at least 10%" -equating to $2.90 per share - and 2-3% growth in domestic same store sales. Analysts currently expect the company to report FY06 earnings of $2.89 per share.

Despite rising energy costs and hurricane-related disruptions, which did not have a material impact on earnings, the company's growing portfolio of category leading concepts continues to show solid growth. As the company continues to aggressively expand its operations and drive growth through successful innovation and branding, the company is well positioned to reinvigorate positive momentum in its stock, which despite languishing in recent months is up over 5% year-to-date. At the current price level, YUM presents an attractive investment opportunity given its continued success overseas and compelling growth potential. YUM is trading at approximately 18.6x forward earnings, as compared to 16.4x for MCD and 20.6x for WEN. --Richard Jahnke, Briefing.com

11:17AM Viacom (VIA.B)

32.39 -0.21: Five years after Viacom absorbed CBS, the mega-media conglomerate is now splitting in two. After losing 50% of its market value, Viacom has finally heeded investor calls to unleash its high-growth Cable assets from the burden of the low growth businesses radio, outdoor advertising, and theme parks. Choice is always a good thing, and now investors can choose the Viacom that better fits their investment profile, whether it's the high-growth appeal of the "New Viacom," or the high cash flows of CBS for investors seeking stability and yield.

The Board voted in June to approve the plan to split Viacom into what it called "two nimble and focused companies." In a regulatory filing today, it outlined the specifics. A new publicly traded company will be created that includes its advertising-supported Cable Networks businesses (MTV, VH1, Nickelodeon, Comedy Central, Spike TV and TV Land) BET, Paramount Pictures, and Paramount Home Entertainment. Upon the separation, the entity will be named "Viacom Inc," referred to as the "New Viacom". The goal of the new entity is to "drive strong financial growth and deliver superior returns to shareholders."

Long-time MTV chief, Tom Freston, will head the New Viacom, comprised of 69% Cable and 31% Entertainment, and will compete against the likes of Time Warner (TWX), Sony (SNE), and Disney (DIS). Viacom's strength lies in its global footprint of 165 territories and 110 TV channels that reach 430 mln subscribers world-wide, its global brand recognition, a valuable entertainment library, and secure distribution. Its goal is to leverage these areas to broaden content, expand networks globally, and develop its multiplatform business into new forms of integrated digital distribution (i.e. broadband, video-on-demand, wireless, online communities, and high-def programming). The Cable business has generated a compound annual growth rate of 22% since 1998, operating income of 25%, and consistent margins of 41%. The new entity will carry a lower debt load than CBS and spend profits on acquisitions focused within the Internet and cable-television space.

The existing company known today as Viacom will change it name to "CBS Corp," and will consist of two broadcast networks, CBS and UPN, along with Infinity Broadcasting, premium cable channel Showtime, Viacom Outdoor, Paramount Parks and Simon & Schuster. TV veteran Leslie Moonves will head CBS, who in September said he would seek to increase revenues by releasing more DVD TV shows, revitalizing the Showtime cable network, and boosting Internet sales. CBS Corp is expected to pay a dividend that will at least match VIA's current payout of $450 mln Demonstrating the differences and the clear impetus for the split, the CBS television unit generated 7.3% sales growth last year of $14.5 bln, compared to 11% for the MTV cable unit, which achieved 11% growth. CBS posted a loss from continuing operations of $16.3 bln, or $19.03 per share, after a profit of $1.12 bln, or $0.63 per share, in 2003.

Shareholders will receive 0.5 of a share of New Viacom class A and class B stock and 0.5 of a share class A and class B stock of CBS Corp for every share of Viacom. Both stocks will be listed on the NYSE under the symbols "VIA" and "VIA.B" for New Viacom for class A and B shares of common stock, respectively. The same goes for CBS Corp, with symbols of "CBS.A and "CBS" reserved for A and B shares, respectively.

The separation of the high growth Cable networks and the cash flow generators is expected to result in more agile companies, enabling management to better maximize strengths and leverage resources in developing and growing their respective core businesses. This is Viacom's goal. Whether this plan comes to fruition is the question, and the most interested parties awaiting an answer will be the other media conglomerates sitting on the sidelines watching to see if Viacom's split results in the expected value creation. If all goes according to Sumner Redstone's plan, who will continue to oversee both companies as Chairman, we could see giants like NewsCorp and Time Warner follow in its footsteps. It's about time. ---Kimberly DuBord, Briefing.com

8:56AM Page One - Market Overreacted Yesterday

Stocks tanked yesterday when a Federal Reserve regional president stated the obvious.

Dallas Fed president Fisher said that inflation is at the upper end of the Fed's target range and that the Fed would be vigilant in fighting inflation. That isn't a surprise in any way. The numbers are public and the Fed's mission statement hasn't changed. What is a surprise is the degree of sensitivity to the comments.

The stock market reportedly came to the conclusion that this statement implies that the Fed has further to go to reach a neutral rate than previously expected. Perhaps. But there is no reason to believe that this statement from a regional president magically signals a change in Fed policy.

The market is simply extremely sensitive to fears that inflation will pick up in the aftermath of Katrina and Rita. There is as yet no evidence that this is the case. Energy prices are certainly pushing the total indices, but the core rates of inflation in the months immediately prior to Katrina are extremely low. There have been no post-Katrina releases yet. The speculation about an inflation impact is exactly that - speculation.

The idea that the Fed has to raise rates further shouldn't have been a surprise either. On Monday, the fed funds rate futures implied a 4 1/4% to 4 1/2% rate by March. (The current target is 3 3/4%). That was up about 1/4% from expectations after the last rate hike.

These expectations had changed over the past couple of weeks, however. There was no sudden epiphany yesterday that the Fed might be extra-vigilant towards inflation because of a specific piece of data that changed views. Fed funds futures did not change appreciably yesterday. Rather, underlying concerns broke through. The stock market overreacted.

This doesn't mean stocks are a sudden "buy". It means that there is still a great deal of anxiety towards post-Katrina data. Our view continues to be that both the economic and inflation data will over time prove comforting to the stock market. It will take a while for that to happen, however.

There was no new data yesterday. Fed funds futures didn't move. The fundamentals have not changed. -- Dick Green, Briefing.com

9:14AM Molson Coors Brewing (TAP) Bear Stearns upgrades Underperform to PEER PERFORM. While there may be bad news ahead, firm believes that considerable bad news is already reflected in the share price and the rising short interest, which, at almost 8 trading days, is even higher than it was last quarter. On a relative P/E basis, firm notes that TAP is now at the low end of its peer group.While there may be bad news ahead, firm believes that considerable bad news is already reflected in the share price and the rising short interest, which, at almost 8 trading days, is even higher than it was last quarter. On a relative P/E basis, firm notes that TAP is now at the low end of its peer group.
9:13AM Corning (GLW) Goldman Sachs initiates IN-LINE. While LCD glass should benefit from falling LCD TV prices and low LCD glass supply in 2006, firm says near-term concerns of oversupply further up the food chain will likely limit upside until early 2006.

9:13AM Motive (MOTV) Needham & Co downgrades Buy to UNDERPERFORM . Downgrade follows another missed quarter, as they no longer expect a fundamental turn in the business until at least 2006. They say MOTV has now accumulated a substantial reservoir of skepticism that means that the stock's price is likely to lag any possible fundamental uptick.

9:12AM PortalPlayer (PLAY) Needham & Co downgrades Buy to HOLD. Firm says that if AAPL iPod shipments to fail to live up to high investor expectations or the industry to exit 4Q05 with excess inventory, they expect PLAY shares may sell-off and provide investors with a better entry point.

9:12AM Petco (PETC) Harris Nesbitt downgrades Outperform to NEUTRAL. Target $30 to $26. Firm believes the stock will not perform as well as PETM, the co's principal rival. Furthermore, they believe that as mgmt wrestles with what changes are needed to jump start sales, the stores look less well organized and offer a less attractive shopping environment than hoped for. Firm sees limited downside risk in the co's shares, and believe that if earnings meet expectations in coming qtrs, the stock should increase. However, they note that recent setbacks and poor execution they have observed in many stores leave them hesitant to pay more than a mid-teens multiple for the stock until results show a solid recovery.

9:11AM Conor Medsystems (CONR) Lehman Brothers initiates OVERWEIGHT. Target $35. Firm takes no sides on the intellectual property battle CONR faces with both BSX and ANPI. With no I.P. risk they value CONR in the $35-$40 range; if CONR loses its 2006 IP battles with ANPI, firm would describe fair value as between $15-$18. For ANPI shareholders CONR represents an effective hedge against potential I.P. risk, but also against the potential risk that BSX`s current DES platform loses more share than they anticipate.

9:10AM ADC Telecom (ADCT) Robert W. Baird downgrades Outperform to NEUTRAL. Target $29 to $20. Downgrade is following negative Q4 pre-announcement. Firm believes Verizon is going through an inventory correction for outside cabinet equipment and has shifted spending to lower dollar per unit products such as splitters and couplers. They think this pause/inventory correction in VZ's FTTP rollout is ADC specific and should not affect other equipment vendors.

9:10AM PETsMART (PETM) Harris Nesbitt upgrades Neutral to OUTPERFORM. Target $27 to $30. Firm believes the concerns that led to their downgrade last March have been more than fully discounted in the stock, and they think its growth prospects relative to its principal competition are superior. Also, they believe that the co's EPS growth will sustain at a minimum of about 18% per for the next several years.

9:09AM BankAtlantic (BBX) Sandler O'Neill downgrades Buy to HOLD. Target $21 to $16. Downgrade follows the co's lowered near-term expectations. They think the competitive pressures mentioned by mgmt are clearly a reference to the threat posed by the pending entrance of Commerce Bank (CBH) to the co's South Florida mkts.

9:09AM Bowater (BOW) Prudential upgrades Underweight to NEUTRAL. Firm is maintaining their $27 tgt. Firm notes that a) BOW enjoys over $5 per share in depreciation and has enough EBIT to cover more than $3 per share in interest expense to total $8+ per share in EBITDA and b) BOW cut its losses from $1.00 per share per quarter three years ago even as newsprint demand fell. They think a dividend reduction is actually positive for investors as it would reduce bankruptcy risk.

4:20PM Siebel Systems guides Q3 revs above consensus (SEBL) 10.31 0.00:SEBL guides Q3 revs to about $364 mln, vs. $311. 23 mln consensus. Co anticipates license revs of about $112 mln. Co said it incurred about $12 mln in pre-tax restructuring and other charges in Q3. Excluding the charges, op margin and op income are expected to be about 13% of total revs, and about $46 mln, respectively. Including the charges, pre-tax margin and pre-tax income for Q3 are expected to be about 15% of total revs and about $50 mln, respectively. Ex charges, Q3 pre-tax margin and pre-tax income are expected to be about 18% of total revs, and $62 mln, respectively.

4:15PM Sigmatel buys technology, design team and intellectual property from Apogee (SGTL) 18.30 -1.19:Terms were not disclosed, but terms of the transaction include a contingent earn-out payment to Apogee (ATA), based upon revenues of the business for the one-year period following the acquisition. SGTL expects to record a one-time charge for purchased in-process research and development expenses related to the acquisition in Q4. The amount of that charge, if any, has not yet been determined. STMicroelectronics (STM) currently licenses and sells Apogee's DDX technology-based products.

4:08PM Corning to expand LCD glass manufacturing facility, to invest $425 mln (GLW) 18.52 -0.73:Corning announces plan for next expansion of its L.C.D. glass manufacturing facility in Taichung, Taiwan; co to invest $425 mln over the next two years to increase large-generation glass production. Co adds that Q3 LCD glass volume was about 22%, above previous guidance in the range of 15 to 20%. GLW said it anticipates the need for continued inventory building.