Market Report: Story Stocks^™

Numerous airline names are trading higher Tuesday morning, including UAUA (+14.5%), AMR (+9.4%), DAL (+8.7%), CAL (+7.6%), JBLU (+7%), and LCC (7.1%)... There are a couple of news items out that are contributing to the move higher in the sector, including UAUA's Jan operational performance, which was released after the close of pit trading yesterday. The co announced that total consolidated revenue passenger miles increased in Jan by 2.4% on a decrease of 2.0% in available seat miles. For Jan 2010, consolidated passenger revenue per available seat mile is estimated to have increased 9.5% to 11.5% YoY. Jesup and Lamont says that the co's rev outlook is consistent with its recent updates. They note that their Q1 EPS est is a loss of ($0.59) compared to the Street est of a loss of ($2.03). The firm believes that if trends continue, the consensus est will come towards their level... There was also news out that Japan Airlines said it would keep its partnership with AMR in the Oneworld alliance, ending an attempt by DAL to entice the bankrupt carrier to its rival SkyTeam group.

Wholesale inventories fell 0.8% in December after rising an upwardly revised 1.6% in November.

The consensus expected inventories to increase by 0.5%.

The drop in inventories should have been expected. The latest GDP report suggested wholesale inventories declined 0.7% during the month.

Further, most of November's inventory increase was due to a sharp rise in farm product inventories. As we mentioned in the economic preview, the gains in farm product inventories were not sustainable. They fell 4.5%.

Sales growth remained strong as wholesale sales increased 0.8%. No single sector drove sales as 8 out of 19 sectors posted monthly sales gains in excess of 3.5%.

As a result of the increase in sales, the inventory/sales ratio declined from 1.14 in November to 1.12 in December.

McDonald's (MCD 62.92) reported another month of global same-store sales gains in January despite a disappointing decline in U.S. sales.

McDonald's reported a global same-store sales increase of 2.6% in January.  Systemwide sales rose 9.1%, or 4.3% in constant currencies, for the month.

In the U.S., same-store sales fell 0.7%, although McDonald's said the results still outpaced the overall quick-service restaurant industry.

In Europe, same-store sales rose 4.3% for the month, led by France and the U.K., partially offset by Germany.

January same-store sales in Asia/Pacific, Middle East and Africa were up 4.3%, led by performance in Japan and Australia, partially offset by a difficult comparison in China and other markets due to the timing of Chinese New Year, the company said.

Shares of Electronic Arts (ERTS 17.49) are under pressure in Tuesday's premarket trading after the video game publisher issued downside guidance for its next two quarters.

Electronic Arts was able to top estimates for its fiscal third quarter, posting earnings of $0.33 per share, $0.02 better than the First Call consensus of $0.31.

Revenues fell 22.7% year-over-year to $1.35 billion, in-line with the $1.34 billion consensus.  EA said the revenue decline is due to several factors, including fewer titles this holiday quarter and a weak overall packaged goods sector in Europe.

Looking ahead, Electronic Arts issued downside guidance for its fiscal fourth quarter.  The company projects earnings of $0.02 to $0.06 per share, well below the current consensus of $0.13.  EA expects Q4 revenues to range from $800 million to $850 million; the consensus calls for $850.97 million.

Electronic Arts also issued downside guidance for its fiscal first quarter, projecting a loss of $0.35 to $0.40 per share, much worse than the current consensus estimate of a loss of $0.04.

Additionally, EA issued downside guidance for fiscal 2011, saying it sees earnings of $0.50 to $0.70 per share (consensus $0.74) on revenues of $3.65 billion to $3.90 billion (consensus $4.07 billion).

The company did say that it projects fiscal 2011 operating costs to be approximately $100 million lower than fiscal 2010.

Shares of ERTS are down 7.7% about an hour ahead of Tuesday's opening bell.

Coca-Cola (KO 52.65) reported fourth quarter earnings that narrowly missed the consensus estimate, but profits and revenues both rose from the same period last year.

Coca-Cola reported fourth quarter earnings of $0.66 per share, $0.01 worse than the First Call consensus of $0.67.  Operating income was up 4% year-over-year.

Revenues rose 5.4% year-over-year to $7.51 billion, topping the $7.21 billion consensus.  The company said that the revenue increase was driven by a 5%positive currency impact and a 1% increase in concentrate sales, offset by a 1% negative impact from price/mix.

Unit case volume increased 5% in the quarter, with strong growth in emerging markets (China +29%, India +20%), developing markets (Brazil +8%, Mexico +4%) and developed markets (France +12%, Germany +3%).  North America was a weak spot, with unit case volume down 1%, primarily due to continued macroeconomic pressures impacting consumer spending and foodservice traffic, the company said.

The Atlanta-based company was unable to keep costs completely in check, as cost of goods sold increased 3% in the quarter, primarily driven by a 1% increase in concentrate sales and a 6% impact from currencies.  Selling, general and administrative expenses increased 9% in the quarter, with the increase partly attributable to a net increase in pension and incentive costs.

Shares of KO have underperformed the market so far in 2010, with KO down 7.6% year-to-date while the S&P 500 has dropped 5.2%.