December U.S. Auto Sales Miss Expectations

The tough sledding in December does not suggest a difficult 2014, however, as several executives and analysts expect auto industry growth to continue outpacing the overall U.S. economy as it has since the recession.

In addition to the late U.S. Thanksgiving holiday weekend, December sales were hurt by snow and ice storms that kept consumers away from dealerships, automakers and analysts said.

"Sales were pulled into November, but also people were more impacted by the compressed shopping season, most of which was in December," Kelley Blue Book senior analyst Karl Brauer said. "People were doing more Christmas shopping than car shopping."

He added that industry-watchers should not be overly concerned by a December that was affected by the timing of a holiday in the previous month. Last month included January 2 due to a quirk in the calendar that affected how automakers typically report monthly sales.

Monthly auto sales are seen as an early indicator of consumer spending.

U.S. industry sales in 2013 finished at 15.6 million vehicles, up 7.6 percent from 2012, while December results inched up 0.3 percent. The annualized sales rate in the final month was 15.4 million vehicles, well below the 16 million expected by economists surveyed by Thomson Reuters.

The timing of Thanksgiving weekend had a greater impact on December sales than in recent years, causing automakers to miss expectations, said Mustafa Mohatarem, General Motors Co's chief economist.

The late December holiday season is generally one of the heaviest sales periods at U.S. auto dealerships. GM, Ford Motor Co and Volkswagen AG all said the weather was less of a negative factor than the timing of the Thanksgiving holiday.

December sales were counted through Thursday, when much of the U.S. Midwest was buried in snow. The storm is now over the U.S. Northeast, but January sales will have time to recover from the current storm as the bulk of sales typically occurs later in the month, said Kurt McNeil, GM vice president of U.S. sales operations.

GM shares ended 3.4 percent lower at $39.57 while Ford shares rose 0.5 percent to close at $15.51 on the New York Stock Exchange on Friday.

BEST YEAR SINCE 2007

For all of 2013, industry sales were 50 percent higher than 2009 when they slumped to 10.4 million vehicles during the height of the recession. It was the best full-year performance since 2007, when sales hit 16.1 million vehicles.

While some economists and analysts expect 2014 sales to rise to between 16 million and 16.5 million vehicles, there is growing concern that competition will intensify, leading to higher incentives and lower profit for companies.

Research firm TrueCar.com said vehicle transaction prices fell by an average of $200 per vehicle in December, or 0.6 percent, over last year, while incentives were up $103 per vehicle, or 4 percent.

The gradually improving economy, including stronger job and housing markets, will drive future growth, as opposed to consumers' need to replace aging vehicles, which the industry has described as pent-up demand, said Bill Fay, U.S. head of the Toyota brand. He also cited auto loan interest rates, near historic lows, as a positive.

Ford boasted the biggest gain in U.S. market share for the year, adding four-tenths of a point to finish at 15.9 percent. Subaru also showed the same rate of increase to 2.7 percent.

Chrysler increased its share by two-tenths of a point to 11.3 percent, while GM was flat at 17.9 percent. The biggest losers were Kia and its parent Hyundai Motor Co, which lost four-tenths and three-tenths of a point, respectively, to 3.4 percent and 4.6 percent.

GM's December sales fell 6 percent, to 230,157 new vehicles, below analysts' expectations of a slight sales gain.

Sales of GM's Chevrolet Silverado full-size pickup truck fell 16 percent in the month as analysts said the automaker did not load incentives onto the redesigned vehicle to match what rival Ford was doing with its market-leading but older F-Series.

Ford's sales rose 2 percent to 218,058 vehicles, missing expectations. Its F-Series pickup truck, which finished as the best-selling vehicle in the U.S. market for the 32nd straight year, had an 8 percent sales gain.

Toyota's Camry finished as the top-selling passenger car for the 12th consecutive year.

GM introduced new versions of its Chevrolet Silverado and GMC Sierra pickup trucks last year while Ford will launch a redesign of its trucks later this year.

Toyota Motor Corp's U.S. December sales fell 1.7 percent to 190,843 vehicles, versus expectations of a slight gain.

Chrysler reported a 6 percent gain last month in its U.S. auto sales to 161,007 vehicles. That was the automaker's best December since 2007, but still narrowly missed analyst expectations. Ram pickup truck sales rose 17 percent.

Jeep sales rose 34 percent in the month, led by the new Cherokee, which sold four times as well in December as the vehicle it replaced, the Jeep Liberty, did a year earlier.

Honda Motor Co sales rose 2 percent to 135,255 vehicles, which also missed analysts' expectations.

Nissan Motor Co sales rose 10.5 percent in December, allowing the Japanese automaker to finish with its best year for U.S. sales ever. Hyundai and Kia saw their combined sales also miss analysts' expectations.

Daimler AG's Mercedes-Benz won bragging rights as the top-selling luxury brand, edging BMW by a count of 312,534 vehicles to 309,280 vehicles.

Chrysler is majority-owned by Italy's Fiat SpA. Earlier this week, the two companies announced that Fiat would buy the remainder of Chrysler that is currently owned by a United Auto Workers healthcare trust, for $4.35 billion. That deal is expected to close by January 20.

(Editing by James Dalgleish and Matthew Lewis)

P&G Shares Fall After Forecast Misses Expectations

The news spooked investors who do not want to wait until 2014 for better sales increases. Shares of the world's largest household products maker fell as much as 6 percent after closing at an all-time high of $82.54 on Tuesday.

"There's a lot of frustration that they've been talking about a lot of actions they've been taking but we haven't really seen an acceleration in the sales growth," said David Blount, co-portfolio manager of the Growth & Income Fund at Eagle Asset Management, which includes P&G shares.

The company, maker of Pampers diapers, Gillette razors and many other products, has been under greater scrutiny to improve after cutting profit expectations in the past and learning that activist investor Bill Ackman invested in the stock.

Cincinnati-based P&G also posted a fiscal third-quarter profit on Wednesday that topped estimates despite sales that were weaker than both the company and analysts had anticipated.

Chief Executive Bob McDonald was roasted by analysts on a conference call a year ago when P&G gave a profit warning. While Wednesday's call was not as tense, analysts wanted to know why the company has not yet posted better sales growth more than a year into its turnaround.

P&G, which announced a $10 billion restructuring in February 2012, said that its push for more innovation means that several products such as new Iams pet foods and Olay skin creams will soon hit stores. After cutting billions of dollars in costs, along with eliminating hundreds of more jobs than anticipated, it will now spend more to promote those new goods and even to build the plants to produce them around the world.

FOURTH-QUARTER FORECAST

For the current fourth quarter ending in June, P&G said profit should fall to 69 cents to 77 cents per share, while analysts expected it to earn 81 cents per share, according to Thomson Reuters I/B/E/S. P&G earned 82 cents per share in the fourth quarter of fiscal 2012.

The company cited factors including weak market growth, higher marketing and other costs and volatility in Venezuela, Argentina, Egypt, Syria and South Korea.

Wednesday's fiscal third-quarter results were a sharp departure from the fiscal second quarter, when P&G raised its annual profit forecast and its shares jumped. On Wednesday, on the heels of the better-than-expected third quarter profit, it raised only the bottom end of its annual forecast range by 2 cents per share.

"They're still making progress, they're still on the right track, it is just going to be a little more slowly than what people expected," said Edward Jones analyst Jack Russo.

P&G insists that its forecast is "realistic, not conservative," especially given the headwinds it faces such as volatility in Venezuela and elsewhere, Chief Financial Officer Jon Moeller told analysts.

Along with spending on marketing to promote its new products, P&G is dealing with what it calls a "choppy" economic recovery, and sees a 1 to 2 percent impact on its sales this year from foreign exchange rates.

Its shares slid as low as $77.48 on Wednesday and were last trading down 4.7 percent at $78.05, wiping out nearly all of this month's gains. Shares of rivals such as Colgate-Palmolive Co and Kimberly-Clark Corp were down less than 2 percent.

JOB CUTS EXCEED GOAL

While products such as single-dose Tide Pods laundry detergent have boosted U.S. sales, P&G said it still needs to figure out the formula for getting products such as Pantene shampoo and Olay skin creams to stand out among competitors. Net sales decreased in the hair care and skin care business in the latest quarter.

P&G is taking the right steps by cutting costs, bringing out new products and growing in developing markets, but it is important for it to show progress in the beauty unit in the next quarter or two, said Russo.

P&G said it earned 99 cents per share on a core basis in the quarter ended in March, topping analysts' target of 96 cents. Core earnings exclude items such as restructuring charges.

Overall sales rose 2 percent to $20.598 billion while analysts were looking for sales of $20.73 billion. The company had forecast 3 to 4 percent in sales growth.

P&G's organic sales, which strip out the impact of divestitures and foreign exchange changes, grew 3 percent - at the low end of its forecast of 3 to 4 percent.

On a net basis, the company earned $2.57 billion, or 88 cents per share, in the fiscal third quarter. That was up from $2.41 billion, or 82 cents per share, a year earlier.

McDonald declined to comment on any discussions he may have been having with Ackman, who is known to push for change at companies in which he invests. Ackman's Pershing Square had a 1.02 percent stake in P&G, or 27.95 million shares, as of December, making it P&G's eighth-largest shareholder, according to Thomson Reuters data.

P&G said it now plans to repurchase $6 billion of its stock this year, at the high end of its prior forecast for $5 billion to $6 billion in buybacks. Last June, P&G decided to hold off on buybacks, but in August quickly reverted back to its usual plan.

P&G also said it had cut 6,250 jobs as of March 31, ahead of its goal to cut 5,700 jobs by the end of June.

(Reporting by Jessica Wohl; in Chicago; editing by Jeffrey Benkoe and Matthew Lewis)

Lowe’s Net Income Tops Expectations

NEW YORK (AP) — Home improvement retailer Lowe's Cos. credits cleanup efforts after Superstorm Sandy and its new pricing strategy for fourth-quarter earnings that surpassed Wall Street expectations.

The results are a sign that people are beginning to feel better about spending money on their homes as the housing market slowly recovers. Analysts will be watching Lowe's larger rival Home Depot's earnings report on Tuesday to see if its results show a similar story.

Lowe's CEO Robert Niblock said the company is seeing a pickup in spending even in areas of the country hit hardest by the housing slump, like Florida, Arizona and California.

"Rising home values have given homeowners additional confidence in spending on their homes," Niblock said in an interview with The Associated Press.

Lowe's net income fell 11 percent from last year's quarter, which included an extra week of revenue. Its earnings forecast for the year was below expectations but its revenue projection beat the consensus.

Mooresville, N.C.-based Lowe's has revamped its pricing structure, offering what it says are permanent low prices on many items across the store instead of fleeting discounts. It has also focused on hiring more workers and improving its inventory. In January it said it planned to hire 45,000 seasonal workers ahead of its busy spring season and add 9,000 part time employees on a permanent basis.

In a call with analysts, Chief Customer Officer Greg Bridgeford said the pricing strategy helped spur strong sales of cabinets and countertops, tools and outdoor power equipment.

During the quarter, the number of transactions fell 6.9 percent, mainly due to the extra week in the quarter a year ago. But average ticket rose 2.1 percent to $62.37.

Lowe's net income totaled $288 million, or 26 cents per share, for the three months ended Feb. 1. That's down from $322 million, or 26 cents per share, a year ago. Analysts expected 23 cents per share, according to FactSet.

There were 11 percent fewer shares outstanding in the latest quarter than a year ago. That increases the value of each share. An extra week in the quarter last year had boosted year-ago earnings by 5 cents per share.

Revenue fell 5 percent to $11.05 billion from $11.63 billion. Analysts expected $10.85 billion. Revenue in stores open at least one year rose 1.9 percent. The measure is a key gauge of a retailer's fiscal health because it excludes stores that open or close during the year.

Morningstar analyst Peter Wahlstrom said the quarter was generally good and in line with his expectations, helped by better gross margins — the amount of each dollar in revenue a company actually keeps — and a lower share count.

Standard & Poor analyst Michael Souers kept his "Sell" recommendation on the stock.

"While we see a modest recovery in housing, we see rising interest rates as a threat to home refinancing, a key driver of remodeling," he said.

For the fiscal year, net income rose 7 percent to $1.96 billion, or $1.69 per share, from $1.84 billion, or $1.43 per share. Revenue edged up to $50.52 billion from $50.21 billion last year.

Lowe's, which operates 1,754 stores in the U.S., Canada and Mexico, expects fiscal 2013 net income of $2.05 per share. Analysts expect $2.10 per share.

The company expects revenue to rise 4 percent, implying revenue of $52.54 billion. Analysts expect $51.69 billion.

Shares slipped 2 cents to $37.65 in morning trading Monday. They have traded in a 52-week range of $24.76 to $39.98.

Economix Blog: Q. and A. on Forecasting Based on Voter Expectations

A new academic study concludes that poll questions about expectations  – which ask people whom they think will win – have historically been better guides to the outcome of presidential elections than traditional questions about people’s preferences. From my article about the study, by David Rothschild and Justin Wolfers, and the reaction to it:

Most recently, Mitt Romney won the Republican nomination despite at various points trailing other candidates — Rick Santorum, Newt Gingrich, Herman Cain, Rick Perry — in polls of Republican voters’ preferences. Even when Mr. Romney was behind, Republicans typically told pollsters that they expected him to win the nomination….

In presidential races since 1952, the expectations question has pointed to the winner in 81 percent of states, based on data from the American National Election Studies. The question about voting intentions pointed to the winner in 69 percent.

Below is a lightly edited interview with Mr. Wolfers, conducted by e-mail, focusing on the implications of the study for current presidential polls.

In the article, I discussed only briefly the expectations polls about the 2012 race, and some of the Twitter feedback was eager for more. By my count, there have been five recent major polls asking people whom they expect to win — by ABC/Washington Post, Gallup, Politico/George Washington University, New York Times/CBS News, and the University of Connecticut. There is also sixth from Rand asking people the percentage chances they place on each candidate winning. How consistent are the polls?

There’s a striking consistency in how people are responding to these polls. The most recent data are from the Gallup poll conducted Oct. 27-28, and they found 54 percent of adults expect Obama to win, versus 34 percent for Romney. Around the same time (Oct. 25-28), there was a comparable New York Times/CBS poll in which 51 percent of likely voters expect Obama to win, versus 34 percent for Romney.

But these results aren’t just stable across pollsters, they’ve also been quite stable over the past few weeks, even as the race appeared to tighten for a while. Politico and George Washington University ran a poll of likely voters on Oct. 22-25, finding 54 percent expect Obama to win, versus 36 percent for Romney. The University of Connecticut/Hartford Courant poll of likely voters got a somewhat higher share not venturing an answer, with 47 percent expecting Obama to win versus 33 percent for Romney. Finally, the ABC/Washington Post poll of registered voters run Oct. 10-13 found 56 percent expect Obama to win, compared to 35 percent for Romney.

I’m rather surprised by the similarities here – across time, across pollsters, across how they word the question, and across different survey populations (likely voters, registered voters, or adults) – but I suspect that is part of the nature of the question. You just don’t see the noise here that you see in the barrage of polls of voter intentions, which are extremely sensitive to all of these factors.

I always throw out the folks who don’t have an opinion, and count the proportions as a share of only those who have an opinion. By this measure, the proportion who expect Obama to win is: 61 percent (Gallup), 60 percent (The New York Times), 60 percent (Politico), 59 percent (Hartford Courant), 62 percent (ABC). The corresponding proportions who expect Romney to win are: 39 percent, 40 percent, 40 percent, 41 percent and 38 percent. Taking an average across all these polls: 60.3 percent expect Obama to win. Or if you prefer that I focus only on the freshest two polls, 60.7 percent expect him to win.

The results do seem have tightened somewhat since the first debate, which Romney was widely seen to have won, right? Do the patterns — or lack of patterns — in the numbers help solve the issue of what most people are thinking of when they answer the expectation question: Private information (their friends’ voting plans, yard signs in their neighborhood, etc.) or public information (media coverage, speeches, etc.)?

The results of the polls of voter intentions seem to have tightened a bit since the first debate. There’s an interesting school of thought in political science that basically says: voters are pretty predictable. But they don’t think too hard about how they’re going to vote until right before the election. So what happens is that public opinion through time just converges to where it “should” be. And viewed through this lens, the first debate was just an opportunity for people who really should always have been in Romney’s camp to figure out that they’re in Romney’s camp.

So why did the expectations polls move less sharply than intentions polls? One possibility is that your expectations are explicitly forward-looking, and perhaps people saw the race tightening as they saw that some of the support for Obama was a bit soft. Let me put this another way: There are two problems with how we usually ask folks how they plan to vote. First, the question captures the state of public opinion today, while the expectations question effectively asks you where you think public opinion is going. And second, polls typically demand a yes or no answer, when the reality may be that we know that our support is pretty weak, and it may change, or we aren’t even sure whether we’ll turn up to the polls. The virtue of asking about expectations is that you can think about each of your friends, and think not just about who they’re supporting today, but also whether they may change their minds in the future.

I worry that it sounds a bit like I haven’t answered your question, but that’s because I don’t have a super-sharp answer. If I had to summarize, it would be: expectations questions allow you to think about how the dynamics of the race may change, and so they are less sensitive to that change when it happens.

Based on your research and the current polls, what does the expectations question suggest is the most likely outcome on Tuesday?

If a majority expects Obama to win, then right there, it says that I’m forecasting an Obama victory.

But by how much? Here’s where it gets tricky. The fact that 60 percent of people think that Obama is going to win doesn’t mean that he’s going to win 60 percent of the votes. And it doesn’t mean that he’s a 60 percent chance to win. Rather, it simply says that given the information they have, 60 percent of people believe that Obama is going to win. Can we use this to say anything about his likely winning margin?

Yes. I’ll spare you the details of the calculation, but it says that if 60.3 percent of people expect Obama to beat Romney, then we can forecast that he’ll win about 52.5 percent of the two-party vote. That would be a solid win, though not as impressive as his seven-point win in 2008.

The proportion who expect Obama to win right now looks awfully similar to the proportion who expected George W. Bush to win in a Gallup Poll at a similar point in 2004. Ultimately Bush won 51.2 percent of the two-party vote.

Right now, Nate Silver is predicting that Obama will win 50.5 percent of the popular vote, and Romney 48.6 percent. As a share of the two-party vote, this says he’s forecasting Obama to win 51 percent of the vote. Now Silver’s approach aggregates responses from hundreds of thousands of survey respondents, while I have far fewer, so his estimate still deserves a lot of respect. I don’t want to overstate the confidence with which I’m stating my forecast. So let me put it this way: My approach says that it’s likely that Obama will outperform the forecasts of poll-based analysts like Silver.

We’ll find out soon enough. Thanks.

Coca-Cola's Revenue Misses Wall Street Expectations

The world's biggest soft-drink maker, with brands such as Sprite, Fanta and Minute Maid, also said revenue and profit were hurt by the stronger U.S. dollar, which reduces the value of overseas sales.

Still, earnings were in line with analysts' expectations and Coca-Cola shares fell only 27 cents, or 0.7 percent, to $37.86 on the New York Stock Exchange.

Coca-Cola gets most of its sales from outside the United States, so shifts in currency can have a big effect. In the third quarter that ended on September 28, the strong dollar shaved 5 percentage points of growth from net revenue and 7 points from operating income.

Aside from currency, results in Asia, particularly China, disappointed some analysts, though Sanford Bernstein analyst Ali Dibadj said it was not surprising, given the softening of consumer sentiment and the slowing of an economy that had been a growth engine for multinational companies in recent years.

"China is slowing down a little bit for the long-term benefit of China. As China will settle, there's a little bit of adjustment," Chief Executive Officer Muhtar Kent told Reuters. "Take a plane -- when it leaves cruising altitude and is going to land, the ride gets rougher. But it will settle."

Kent said he expects settling into a lower growth rate will happen within the next few months.

Sales volume rose 3 percent in the Pacific region; JP Morgan analyst John Faucher expected 4.5 percent growth.

In addition, European consumers have been hurt by the debt crisis. In the latest quarter, consumers were buying bottled soft drinks to take home, which is less profitable for the company than drinks sold in restaurants.

"Go to Madrid and look at the cafes. There aren't a lot of people sitting around drinking Cokes or coffee or whatever," Gary Fayard, chief financial officer, said on a conference call.

Also, European sales are growing most Eastern and Central Europe where prices are lower, Kent said. This helps volume of sales but hurts revenue.

Third-quarter net income for Coca-Cola was $2.31 billion, or 50 cents per share, up from $2.22 billion, or 48 cents per share, a year earlier.

Excluding items, earnings were 51 cents per share, in line with analysts' average estimate, according to Thomson Reuters I/B/E/S.

Revenue rose 1 percent to $12.34 billion. Analysts were expecting $12.41 billion.

Worldwide sales volume rose 4 percent in the quarter, driven by gains in all regions. Volume rose 1 percent in Europe, 2 percent in North America, 5 percent in Latin America and 11 percent in the Eurasia and Africa region.

Sales volume in the Philippines was flat, due to typhoons. In Japan, soda volume fell 5 percent from the year-earlier period when new products boosted sales. Volume rose 2 percent in China.

Closer to home, North American revenue and profit rose, helped by a recent acquisition and the impact of certain commodities hedges.

Coke is also seeing tougher competition from PepsiCo Inc, which is working hard to improve its North American beverage business. It has increased marketing spending with a focus on core brands like Pepsi-Cola and analysts have been saying that the renewed effort is working.

Through Monday's close, Coke shares were up 9 percent year-to-date, while the Dow Jones U.S. Beverage Index gained 10 percent and the Standard & Poor's 500 index rose 14.5 percent.

(Additional reporting by Brad Dorfman in Chicago; Editing by Maureen Bavdek and Phil Berlowitz)