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Airline shares tumble on soaring oil prices
CHICAGO (Reuters) – U.S. airline stocks tumbled on Tuesday, smacked by a spike in oil prices amid unrest in the Middle East. "The airlines are having a tough day of it. And it's to be expected, given everything happening out there," said Helane Becker, an airline analyst with Dahlman Rose & Co. The main drag on airline stocks was an oil rally, which boosts the prices of jet fuel, a top cost for airlines. U.S. crude oil was up $4 to $93.71 per barrel on concerns that the revolt in Libya could spread to other major oil producers. According to the Air Transport Association, an airline trade group, every penny-per-gallon-per-year increase in the price of jet fuel means $170 million to $180 million in additional fuel expenses for the industry. The Arca airline index (.XAL) was down 3.97 percent in morning trade. United Continental Holdings (UAL.N) was off 6.5 percent to $25.17, Delta Air Lines (DAL.N) fell 7 percent to $10.69, and AMR Corp (AMR.N), parent of American Airlines, dropped 5.6 percent to $7.02, all on the New York Stock Exchange. U.S. airlines have been recovering from an industry downturn caused by oil price volatility and an economic recession that drained travel demand. Becker said carriers are better insulated from oil shocks than they were a few years ago because of airline mergers and strategic capacity restraint that has kept airplanes full and fares moving higher. "I think we would use it as a buying opportunity," Becker said of Tuesday's share price declines One fare tracker -- Farecompare.com -- said a $10 round-trip domestic fare hike initiated by Southwest Airlines (LUV.N) last week was quickly matched over the weekend by all domestic airlines. It was the fourth broad-based domestic fare hike this year, Farecompare Chief Executive Rick Seaney said in an email. Bond trading revenue, including commodities and currencies, slid 39 percent from the third quarter as worries about European sovereign debt and rising U.S. Treasury yields kept investors on the sidelines. "Things were just dead" in December, though "it's sure a lot more active" in January, Chief Financial Officer David Viniar said on a conference call. Profit fell for a third straight quarter, and revenue fell short of estimates, with year-over-year declines in investment banking and most other business segments. Viniar said Goldman's backlog of investment banking business fell from the third quarter, which may dampen |
Medco Health 4Q profit up 11 percent
NEW YORK – Medco Health Solutions Inc., the country's largest pharmacy benefits manager, said Tuesday its fourth-quarter profit rose 11 percent, reflecting an increase in mail-order prescriptions and its expanded service business. The Franklin Lakes, N.J., company also reaffirmed its 2011 guidance. The new year marks the start of a "patent wave" in which some of the world's best-selling drugs will lose patent exclusivity and face generic competition. Medco said those products will boost its annual profit by about 9 cents per share. It expects to gain 3 cents per share from a generic version of the cholesterol fighter Lipitor, which loses U.S. patent protection on Nov. 30. The company reported net income of $378.5 million, or 88 cents per share, in the quarter ended Dec. 25. That's up from $341.5 million, or 70 cents per share, a year earlier. Excluding costs related to its spinoff from Merck & Co., Medco earned 94 cents per share. Revenue rose 11 percent to $16.93 billion from $15.25 billion a year ago. Analysts surveyed by FactSet expected adjusted earnings of 94 cents per share and lower revenue of $16.62 billion. Medco said it filled 27.9 million prescriptions through the mail, which was an increase of 7.3 percent from a year ago. The company said 33.9 percent of its adjusted prescriptions — which count 90-day mail order prescriptions as three 30-day prescriptions — were filled using low-cost generic drugs. Generic drugs are more profitable for Medco even though they reduce its revenue. The company said it earned $3.22 per adjusted prescription in the fourth quarter, excluding interest, taxes, depreciation, and amortization. It reported a profit of $3.06 per adjusted prescription a year ago. Revenue from Medco's Accredo specialty pharmacy business rose 21.3 percent to a record of nearly $3 billion. Accredo distributes drugs that require special handling, including treatments for chronic illnesses. New business also drove up retail volumes by 7.5 percent. Medco also said its service revenue grew 59 percent to $349.7 million. In September, the company bought United BioSource Corp., which helps companies design studies of drugs and medical devices, collect information and perform research on drugs and medical devices. Stocks opened slightly lower after a 1 percent overnight drop in the S&P 500 (.SPX) but quickly extended losses, weighed down by sectors such as technology (.MIASJIT00PUS), materials (.MIAPJMT00PUS) and energy (.MIAPJEN00PUS) shares. Materials was hit by a selloff in commodities such as oil, which added to its previous day's losses, and a 2.8 percent plunge in U.S. corn futures on Wednesday. The MSCI index of Asia and Pacific shares excluding Japan (.MIAPJ0000PUS) fell 1.3 percent, retreating further from a two-month peak tested on Wednesday and set for its biggest daily fall since mid-August 2010 as investors booked profits. | ||