What Do You Need to Know about Deductions?
May 24th, 2010 | Posted by taxAs an employer, you are responsible for calculating and deducting the correct amounts from your employees’ paychecks. Doing your homework in this area is a necessary evil that will pay off in terms of avoiding penalties and other troubles with tax authorities.
Payroll deductions cover a wide range of items such as federal, state and local income taxes. Rules vary from time to time and state to state, so it is important to keep abreast of new IRS and state government mandates. Who pays the deductions also varies — some deductions are paid by the employer, some by the employee and some by both.
Both the employee and the employer contribute to Medicare and Social Security. Make sure your business adheres to the correct payment schedule (quarterly, monthly or semiweekly), which varies according to how much your business collects in employment taxes.
Employers pay for federal unemployment insurance, which funds the federal unemployment program.
State unemployment insurance is a tricky area. Some states view this solely as an employer tax, meaning you do not have to deduct this amount from payroll. Other states impose this tax on employers as well as employees. The same goes for workers’ compensation insurance, which also depends on what type of business are you in.
State and local tax liabilities are just as complicated — if not more so. Start by recognizing that not all states require withholding of state taxes and not all states have local taxes. Things get even more complicated if your business operates in more than one state or if some of your employees live in one state and work in another.
Payments for disability insurance also vary widely according to the state in which you operate. Employers and employees share the responsibility differently in different states.
Since deductions vary from state to state, be sure to check with your tax advisor or state and local tax authorities to determine your specific deduction requirements.
For more useful information on business taxes, read Special Report: Top 10 Tax Tips for Small and Growing Businesses.
Adjusting Your Tax Withholding
May 24th, 2010 | Posted by taxThe act of withholding taxes is supposed to provide an accurate picture of how much you’ll pay in taxes for a given year. Nonetheless, like everything else related to paying taxes, we can (and do) find ways to try to make the system more beneficial for our needs. This being said, you should increase or decrease your withholding if you are having too little or too much withheld from your paychecks.
By filling out a new W-4 Form for your employer, you can make the necessary adjustments to your withholding. On line 5 of the W-4, you can decrease the number of allowances, or on line 6, you can add the amount you wish to have withheld. The more you have withheld, the more likely your tax bill will be covered and you will not owe money at tax time. In fact, you may benefit from a refund check. For those who are not very good at setting money aside for taxes, having more taken out of your weekly or biweekly paycheck is a benefit.
For a married couple where one person has a steady income and the other is an independent contractor or freelancer, adjusting the withholding can be very helpful. Claiming more withholding for the person with the steady salary will be beneficial when the spouse with the independent income has higher earnings. This can be adjusted, should the independent working spouse have lower earnings, and can help ensure that they are covered at tax time.
While you certainly want to make sure you have enough withheld to cover your tax obligations, you do not want to have too much money withheld. While many people look forward to receiving a big tax refund check, this is actually not sound financial planning. The money that appears in the refund check is your money; the government has been holding it because you’re paying too much in withholding. This money could be invested and earning interest for you, rather than just sitting with the government and showing up in your refund check.
Events throughout the year can also alter your tax status at the end of the year. For this reason, it’s important that you review your exemptions at least once during the course of the year, allowing you time to make adjustments. Among the many life situations that can raise or lower the amount of withholding include: buying or selling a home, marriage, divorce, death, birth or adoption of a child, taking care of a parent, and a situation where one spouse starts or stop working.
Make sure to look at income from other sources, which might include the sale of real estate or capital gains from investments. Consider this when adjusting your tax withholding or when paying estimated taxes.
In short, stay on top of your tax withholding. Do the calculations — use online calculators if necessary — to try to get the accurate amount you should have withheld, which should be slightly more than your tax bill.
Claiming Dependents on Your Tax Returns
May 24th, 2010 | Posted by taxWhile it’s easy to look at your two young children sitting across from you at the breakfast table and know that they are indeed your dependents, it’s not always as simple to define who does and does not qualify as a dependent on your tax return. Today, there are numerous living situations that can present gray areas when trying to determine whether someone is a dependent for whom you can claim an exemption.
Due to the many possible scenarios, the IRS has come up with a few simple tests to determine whether you can claim someone as a dependent on your tax return:
1. Relationship: You can claim relatives even if they’re not living with you. You can also claim a nonrelative if he or she has been living with you for the entire year.
2. Citizenship: To qualify for an exemption, your dependent must be either a U.S. citizen or a resident of Canada, Mexico, or the United States for part of the year. If you have adopted internationally and the adoption is not yet finalized, or the child did not automatically become a citizen through the Child Citizenship Act of 2000, you can still claim the child as a dependent if he or she was living with you as a member of your household for the year. Foster children fall under special exemptions.
3. Joint return: If you file a joint return with your spouse, you cannot claim him or her as a dependent. If, however, your spouse meets the other four requirements and files a separate tax return, he or she can be claimed as a dependent.
4. Gross income: For the 2008 tax year, a person’s income must be under $5,350 for you to claim that person as a dependent. All income in the form of money, goods, property, or services that’s not exempt from tax is considered gross income. If your children are under the age of 19, or if they’re under the age of 24 and are full-time students for at least five months during the year, they are exempt from this rule.
5. Support: The person must receive more than half of his or her support for the year from you. Again, this is not the case for children under age 19 or a child who is a full-time student under the age of 24. Children of divorced parents, or parents who have been living apart for some portion of the year, are generally dependents of the parent who has custody or has provided more than half the child’s support for the year.
Using these five tests, you should be able to qualify your deductions. For special situations where you’re unsure of someone’s status, you can find more detailed information by looking at IRS Publication 501. When claiming dependents, remember to include their Social Security numbers on your tax form.
How to Calculate the Tax Savings of Owning a Home
May 23rd, 2010 | Posted by taxOne of the big advantages of buying a home
is that the IRS allows you to deduct, within limits, the property taxes and mortgage interest on your annual tax return. Here’s an easy way to figure out how much you’ll be able to save.
Calculate your monthly mortgage payment and property taxes
Multiply by 12 (if you are paying monthly) or 26 (if you are paying biweekly) to arrive at your annualized payment.
Multiply this annual amount by your federal income tax rate to arrive at a very reliable estimate of your tax savings.
How to Calculate your own tax return refund
May 23rd, 2010 | Posted by taxBy laura lozano
Gather all of your documents. If you had not received the w-2 from employment or 1099′s you should contact the employer. By law they are required to report you as an employee or a contractor and should give you any of these forms. If they dont comply and give it to you, you can report them to the IRS.
Do internet research on tax refund calculators on the internet. There are websites like Turbo tax or HR Block and they are excellent.
Select a website. After selecting a website start filling the information accurately and carefully. Be truthful since this information is actually going to be in the actual tax return.
You will see the amount calculated on the screen as you enter the information. That amount should be the same if you calculate the tax refund calculator in different websites.
Is there a right way to promote health insurance through the tax system?
May 22nd, 2010 | Posted by taxINTRODUCTION
The private health insurance system in the U.S. has been erected on a foundation of tax incentives that promote employment-based coverage over the individual purchase of insurance. In 2006, persons taking advantage of tax breaks for health insurance will save about $150 billion in federal and state income taxes and an additional $75 billion in payroll tax contributions (Sheils and Haught, 2004; Sheils, 2006). (1) Most Americans–some 174 million people, or about 70 percent of those with insurance–are covered by employment-based health insurance (DeNavas-Walt, Proctor and Lee, 2005). Included in that count are about 12 million seniors covered by Medicare who also have supplementary retiree coverage through a former employer.
Although tax incentives have helped millions of people buy health insurance through their employers, this policy approach brings a host of problems. Millions of people do not have access to tax-favored employment-based insurance, and many go without coverage. Many who are offered such insurance turn it down because it is too expensive or does not meet a worker’s individual financial and health needs. Employees may find themselves locked into their current jobs to retain coverage, especially if someone in their family develops a serious medical condition. Even then, there is no guarantee that the employer will not reduce benefits or drop coverage in the future.
Current tax incentives for health insurance also fail on equity and efficiency grounds. The tax expenditure is regressive, providing a greater subsidy to those with good jobs and high incomes and much less to the unemployed and disadvantaged. In addition, the tax system promotes the purchase of excessive insurance coverage that blunts the incentive for efficiency in the production and use of health services. The resulting cost escalation in our health system affects everyone, but its greatest impact is arguably on the uninsured, many of whom do not have the option to take advantage of current tax benefits.
Those flaws in our current system of subsidizing employment-based health insurance are well known. Experts inside and outside government have advanced a variety of policy reforms intended to improve the performance of tax incentives for health insurance. Recent proposals include capping the tax exclusion for employment-based health insurance, tax credits for the purchase of private insurance, tax subsidies for the purchase of high-deductible insurance and health savings accounts (HSAs), and expanding tax subsidies for out-of-pocket health spending. The proposals address different problems in our current system of tax incentives for health spending, and they represent only part of broader health system reform.
Limitations on taxpayers’ ability to disavow tax consequences of contract terms.
May 22nd, 2010 | Posted by taxA fundamental principle of federal income taxation is that the tax consequences of a transaction are determined based on its substance rather than its form. To this end, the government has the ability to look beyond the form of a transaction to its economic substance in determining its tax consequences. Taxpayers have also asserted the substance-over-form argument to disavow the tax consequences of contracts into which they entered. Often these taxpayers bargained away tax advantages as part of the underlying transaction and then attempted to reclaim the tax benefits by recharacterizing the transaction for tax purposes on their income tax return. While the government is entitled to look through the form of a transaction to its economic substance, taxpayers are generally not allowed to disavow the form of their transactions.
Much of the case law addressing this issue developed in the purchase price allocation context. Consider the following scenario: A seller of stock agrees with the buyer to allocate a portion of the purchase price to a covenant not to compete, which is amortizable to the buyer but taxable to the seller as ordinary income. The seller subsequently takes the position that the entire purchase price should be treated as a capital gain, arguing that the agreement to allocate a portion of the purchase price to a covenant not to compete bore no relationship to economic reality.
The circuit courts have split on the issue of when a taxpayer should be able to disavow the form of his or her transaction and assert that the substance of the transaction controls. Some courts have adopted the “strong proof” standard and others the more strict Danielson standard. In a recent case, the New Hampshire District Court applied the strong-proof standard and ruled that a former consulting partner at Ernst & Young U.S., LLC (E&Y), who agreed to exchange her interest in E&Y for stock in Cap Gemini, S.A. (Cap Gemini), was bound by the valuation of her Cap Gemini restricted shares specified in the exchange transaction documents (see Berry, No. 06-CV-211-JD (D.N.H. 10/2/08)).
The Danielson Standard
The Danielson standard has been adopted by the Third, Fifth, Sixth, Eleventh, and Federal Circuits (with some acceptance in the Second Circuit). In Danielson, 378 F.2d 771 (3d Cir. 1967), the stock purchase agreement entered into by the seller and the purchaser allocated a portion of the purchase price to a covenant not to compete. When filing his individual tax return, the seller ignored the purchase price allocation to the covenant not to compete set forth in the purchase agreement and treated the entire proceeds as a capital gain on his return. The seller argued that he could disavow the terms of the stock purchase agreement because the allocation to the covenant not to compete bore no relationship to economic reality. The Tax Court agreed with the seller and round that the covenant did not effectively preclude the seller from competing; thus, the seller appropriately ignored the purchase price allocation set forth in the stock purchase agreement and treated the entire proceeds as a capital gain on his return.
Another Fun Week Produces An Offical Market Correction
May 21st, 2010 | Posted by stockThe market opened the week with little action and sectors trading on their own merits. Tuesday, however, is when the turmoil began, and grew as the week progressed. The accumulating concerns over growth, currencies and debt, combined with current statistics on jobs, the impact of the falling Euro, and new potential financial regulation, to over whelm investors, institutions and hedge funds. In comparison to the Flash Crash, selling was controlled, but the lack of both new money stepping in to buy and little bottom fishing, was no match for the selling, with the market declining 3.90% on Thursday. Friday saw the market open lower, but quickly reversed itself within the first hour and half, as some buyers came back into the market, and the day ending with a 1.50% gain. It was an encouraging close, given that investors typically close out positions over the weekend, and therefore depress prices near the close, but in this case the last half-hour of trading saw the market go up. The damage however was done, and the week ended off 4.23%, with only 39 issues advancing. The loss of 10.65% from the April 23 high now classifies this as the first official correction of the current Bull market, which began on March 9, 2009 (a correction is defined as a 10% decline from the previous high, based on the close). The expected slower growth and stronger US Dollar continued to push down oil, which closed at US $70, a 20% decline from the $87 April month-end close. The lower oil cost will help keep US inflation low, and keep product costs lower (especially for imported Euro component parts), as well as keep gasoline prices down for consumers. Gold, one of the traditional alternatives in declining markets, pulled back to 1178, after running up to 1231 last week, as U.S. Treasures emerged as the flight-to-safety preference. Other news served more as background items, sometimes sparking market reactions, including a poor first-time jobs claim report, an FDIC report that 10% of U.S. banks are classified as troubled, an escalated estimate of the Gulf of Mexico oil spill’s economic and ecological damage, and the likelihood of additional regulatory limits on banking activities. There were positive items as equity analysts increased their 2010 earnings estimates, corporate capital expenditures picked up, and surveys showed that more companies planned to hire this year. Uncertainty, appreciation for risk, and protecting profits, however, ruled the market this week, and most likely will continue to do so for a while.
Picks of the Week: Beazer, DIRECTV, Google, Home Depot, Monsanto
May 21st, 2010 | Posted by stockNotable Wall Street analyst opinions on stocks in the news for the week of May 17-May 21:
May 17
Monsanto Co.: UBS Securities analyst Don Carson kept a buy rating on shares of Monsanto Co. (MON), the world’s biggest seed company, on May 17. He lowered a price target on the shares to $83 from $86.
In a note, Carson said he was reducing estimates to reflect “the prospect of no rebound” in prices for Monsanto’s Roundup broad-spectrum herbicide. Carson said the barrier to price improvement “is due more to competition from multinationals” like Syngenta AG (SYNN) and Dow Chemical Co. (DOW) than to excess inventories of Chinese-produces generic versions of the herbicide.
Carson said he expects Monsanto’s gross profit to remain in the $550 million range, reducing his EPS estimates for fiscal 2010 (ending August) to $3.00 from $3.10, for fiscal 2011 to $3.65 from $3.95, and for fiscal 2012 to $4.40 from $4.85.
Visa Inc.: SunTrust Robinson Humphrey equity analyst Andrew Jeffrey upgraded a rating on shares of Visa Inc. (V) to buy from neutral on May 17. He set a $96 price target on the shares.
On May 14, shares of MasterCard and Visa fell after the U.S. Senate approved an amendment that would empower the Federal Reserve to impose limits on debit-card fees collected by the biggest banks as part of the financial-overhaul bill. Merchants last year paid $19.7 billion in fees tied to debit transactions processed MasterCard and Visa, with more than half that amount paid to banks as interchange, according to the National Retail Federation.
The legislation could hurt revenue at MasterCard and Visa, which collect royalties from banks based on card-spending volumes.
In a note, Jeffrey said he believes “the long-term risk/reward in V shares is more compelling than at any time in last 12 months, growing regulatory risk notwithstanding”. He noted that while some investors will question the company’s valuation in light of the government’s “apparently growing regulatory zeal”, he contends that Visa’s business model is “inherently intact”.
The analyst said Visa’s EPS growth rate of over 20% is sustainable because of a combination of global organic revenue expansion, operating leverage and share repurchases.
May 18
Beazer Homes USA Inc.: Citigroup equity analyst Josh Levin raised a rating on shares of Beazer Homes USA Inc. (BZH), the Atlanta-based homebuilder, to buy from hold on May 18. He has a $7 price target on the shares.
In a note, Josh Levin said the shares were down around 24% since May 3, vs. a nearly 14% decline for the company’s peer group over the same period. Although the stock price has dropped sharply, Levin said the thinks the “fundamentals of [the] BZH story” have improved.
The analyst said he thinks a recent recapitalization of the company served to eliminate risk as Beazer now doesn’t face any debt maturities until 2011 and 2013; remove an overhang associated with possible future equity issuance; and allow management to focus on improving Beazer’s operations.
Levin said his analysis suggests that his $7 price target is “conservative”.
Home Depot Inc.: Standard & Poor’s equity analyst Michael Souers lowered a rating on shares of Home Depot Inc. (HD) to sell from hold on May 18. He raised a price target on the shares to $33 from $31.
On May 18, Home Depot Inc., the largest U.S. home-improvement retailer, raised its annual profit forecast after first-quarter profit exceeded analysts’ estimates on demand for seasonal merchandise.
Excluding some items, earnings were 45 cents a share, Atlanta-based Home Depot said in a statement. Analysts projected 40 cents, the average of 24 estimates compiled by Bloomberg. Home Depot raised its forecast for full-year profit to $1.88 a share from $1.79. Analysts estimate $1.87 on average. Sales in stores open at least a year jumped 4.8 percent, as the number of transactions rose by 13 million to 323 million. In March, Home Depot started cutting prices of flowers, fertilizers and patio furniture in the U.S. to help meet its goal of increasing annual sales for the first time in five years.
The retailer said sales may rise about 3.5 percent this year, up from a Feb. 23 projection of about 2.5 percent.
Revenue advanced 4.3 percent to $16.9 billion in the first quarter. Net income increased to $725 million, or 43 cents a share, from $514 million, or 30 cents, a year earlier.
In a posting on the S&P MarketScope service, Souers said that Home Depot’s earnings before one-time items of 45 cents was 8 cents above his estimate. He said he expects further margin gains in fiscal 2011 (ending January), driven by supply chain improvement and expense control; he increased his fiscal 2011 and 2012 operating earnings per share (EPS) estimates to $1.92 and $2.15 from $1.78 and $1.98, respectively.
“[F]ollowing strong recent gains and given our cautious view on the housing market, we find HD overvalued at over 18 times our fiscal 2011 EPS estimate, a significant premium to the S&P 500,” Souers wrote.
May 19
Analog Devices Inc. Cowen & Co. equity analyst John Barton maintained an outperform rating on shares of Analog Devices Inc. (ADI) on May 19.
On May 18, the maker of chips used in cars, consumer electronics and phone networks reported reported per-share profit of 55 cents, more than the 50-cent average estimate of 19 analysts Bloomberg compiled.
In a note, Barton said that ADI’s revenue, gross margin and GAAP earnings per share (EPS) were all above management’s guidance. Barton said company management cited better-than-expected strength primarily in the automotive and industrial markets. He noted that the company said that it has experienced no significant demand changes from Europe; as a result, it provided third-quarter revenue guidance of $695 million to $715 million.
The analyst raised his $2.06 fiscal 2010 (ending October) EPS estimate to $2.23, and his $2.36 estimate for fiscal 2011 to $2.61.
Hormel Foods Corp.: Janney Montgomery Scott analyst Jonathan Feeney maintained a neutral rating and $36 fair value estiimate on shares of Hormel Foods Corp. (HRL) on May 19. Austin, Minnesota-based Hormel is the maker of Spam lunchmeat.
In a note, Feeney said that Hormel’s second-quarter operating EPS of 67 cents “easily beat” his estimate of 59 cents and the Wall Street consensus estimate of 61 cents. He said results at Jennie-O Turkey Store drove the higher than expected results, contributing $13 million, or 6 cents per share. The largest company’s largest segment, Refrigerated Foods, reported results that were about $3 million ahead of his expectations, Feeney said.
The analyst said Hormel’s Grocery products unit missed his forecast on margin pressure and “disappointing volume against very difficult comparisons”.
Feeney raising EPS estimates for fiscal 2010 (ending October) to $2.82 from $2.67 and for fiscal 2011 to $2.83 from $2.77.
“Given the market’s historical tendency to regard HRL as more of a commodity company when commodity trouble inevitably comes, we see a $36 target (13x forward EPS) as fair,” he wrote.
May 20
DIRECTV: UBS Securities equity analyst John Hodulik maintained a buy rating on shares of DIRECTV (DTV), the largest U.S. satellite-TV provider, on May 20. He raised a price target on the shares to $43 from $39.
In a note, Hodulik said he met with DIRECTV management following the company’s release of first-quarter results. He said that while first-quarter U.S. net subscriber additions missed his expectations, revenue, margins and free cash flow “were better” as U.S. average revenue per user improved and net subscriber additions and average revenue per user in Latin America topped his forecasts.
Hodulik said he expect 2010 net subscriber additions of 398,000 and revenue growth of 7.1%, with strength in Latin America more than offsetting weakness in the U.S.
The analyst raised his earnings per share (EPS) estimates for 2010 to $2.44 from $2.24, and for 2011 to $3.40 from $3.11, reflecting stock repurchases of $4 billion in both 2010 and 2011.
PetSmart Inc.: Janney Montgomery Scott equity analyst David Strasser reiterated a neutral rating on shares of PetSmart Inc. (PETM) on May 20. He has a $30 fair value estimate on the shares.
On May 19, the pet-store chain said it had first-quarter earnings of 46 cents a share. The average estimate of analysts surveyed by Bloomberg was for profit of 43 cents a share. PetSmart forecast second-quarter profit excluding some items of 33 cents to 37 cents a share, compared with the analyst estimate of 36 cents.
In a note, Strasser said the company posted a “solid” quarter, with same-store sales up 2.8% and gross margin up 56 basis points, “both better than our model”.
“When we downgraded the stock on March 23 2010, after a 50% move in about 6 months, we had no qualms about PETM’s strategy or its fundamental story,” the analyst wrote. “We simply believe the rate of improvement is captured in [the stock's] current valuation”.
May 21
Dell Inc.: Kaufman Bros. equity analyst Shaw Wu maintained a hold rating on shares of Dell Inc. (DELL) on May 21. He raised a price target on the shares to $14 from $13.
On May 20, Dell, the world’s third-largest personal-computer maker, reported first-quarter gross margins that missed some analysts’ estimates after rising component costs eroded the benefit of a rebound in corporate demand.
Gross margin, excluding some items, was 17.6 percent, Dell said in a statement.
The higher costs of some components, such as memory chips, cut into profitability for the second-straight quarter even as Dell won new buyers for PCs, which account for more than half of revenue. Dell is working to lessen its dependence on PCs by expanding into services, adding smartphones and readying a tablet to take on Apple Inc. (AAPL) and Hewlett-Packard Co. (HPQ).
“The gross margin is somewhat concerning,” said Wu in a May 20 interview on Bloomberg TV.
Dell reported that first-quarter sales rose 21 percent to $14.9 billion. Net income rose 52 percent to $441 million, or 22 cents a share, from $290 million, or 15 cents, a year earlier. Profit, minus some costs, was 30 cents a share. Analysts on average projected profit of 27 cents on sales of $14.2 billion.
In a May 21 note, Wu said that Dell had a “nice quarter,” but the company’s gross margin and quality of earnings were “disappointing”. Wu said that Dell’s gross margin of 17.6% was below expectations of 17.9%; “it looks like DELL got hit harder on rising component costs” than Apple and Hewlett-Packard. Dell “has a much less diverse business model and thus much less room to maneuver,” Wu said.
“In addition, the quality of earnings continues to be poor where there is a 27% difference between GAAP and non-GAAP EPS compared to 39% and 26% over the previous two quarters,” Wu wrote.
The analyst raised fiscal 2011 estimates for revenue to $61.5 billion from $58.5 billion, and for earnings per share (EPS) to $1.20 from $1.15. “[W]e are assuming higher revenue offset by a lower gross margin thus our EPS raise is more muted,” he wrote.
Google Inc.: Standard & Poor’s equity analyst Scott Kessler reiterated a strong buy rating on shares of Google Inc. (GOOG) on May 21.
On May 20, Google introduced software that puts Web content on television to persuade more consumers to use the Internet in their living rooms and view advertisements that generate revenue.
The new tool, Google TV, will work with Intel Corp. (INTC) chips in products by Sony Corp. (SNE) and Logitech International SA, Google said at a conference in San Francisco.
In a posting on the S&P MarketScope service, Kessler noted that Google TV will include the company’s Chrome browser and employ its search technology to enable users to more easily find shows and videos they are looking for.
“While numerous efforts at ‘Internet TV’ have failed over the years, we think there is considerable potential for Google TV, given advanced open platform and broadband technologies,” Kessler wrote.
CAI International, Compuware, Dell, Visteon: U.S. Equity Movers
May 21st, 2010 | Posted by stockMay 21 (Bloomberg) — Shares of the following companies had unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 4 p.m. in New York.
Aeropostale Inc. (ARO US) rose 5 percent to $28.64, the biggest gain since May 10. The teen clothing retailer reported first-quarter profit excluding some items of 48 cents a share, compared with a median estimate of 46 cents in a Bloomberg survey of 28 analysts.
Brocade Communications Systems Inc. (BRCD US) slumped 8.7 percent, the most since Feb. 23, to $5.36. The maker of switches for data-storage networks said its second-quarter revenue was $501 million, missing the average analyst estimate in a Bloomberg survey of $503.6 million. The shares were cut to “neutral” from “buy” at Goldman Sachs.
CAI International Inc. (CAP US) rose 17 percent to $13.81 for the biggest advance in the Russell 2000 Index. The owner of freight containers was upgraded to “outperform” from “market perform” at Keefe, Bruyette & Woods.
Compuware Corp. (CPWR US) gained 9.6 percent, the most since Oct. 23, to $7.97. The business software maker reported fiscal fourth-quarter profit excluding some items of 17 cents a share, 34 percent higher than the average of three analyst estimates in a Bloomberg survey.
Dell Inc. (DELL US) fell 6.8 percent, the most since Nov. 20, to $13.35. The world’s third-largest personal-computer maker reported first-quarter gross margins that missed some analysts’ estimates after rising component costs eroded the benefit of a rebound in corporate demand. Gross margin excluding some items was 17.6 percent, Dell said, below the 17.9 percent anticipated on average by analysts, according to Maynard Um of UBS AG in New York.
Diamond Offshore Drilling Inc. (DO US) rose 3.9 percent, the most since March 31, to $70.55. G. Scott Burk, an analyst at Oppenheimer & Co., said in a report that recent declines in deepwater oil drillers “could indicate a buying opportunity.” Diamond Offshore may be the best performer because of its 9 percent dividend yield, Burke said.
Hibbett Sports Inc. (HIBB US) rose 3.8 percent to $26.31, the first gain in four days. The sporting goods store chain boosted its 2011 profit forecast to no less than $1.35 a share, topping the average analyst estimate of $1.33 a share.
Marvell Technology Group Ltd. (MRVL US) rose 8.3 percent to $19.32 for the third-biggest gain in the Russell 1000 Index. The maker of processors for the BlackBerry phone reported first- quarter sales and profit that topped analyst estimates.
MasterCard Inc. (MA US) rose 4.1 percent to $213.85, paring its decline since May 13 to 7.9 percent. The world’s second- biggest payments network was upgraded to “buy” from “neutral” at Janney Montgomery Scott. MasterCard “will benefit from multiple expansion” as investor sentiment improves following the passage of financial regulatory reform, analyst Thomas McCrohan said in a report.
Nordson Corp. (NDSN US) rose 8.4 percent, the most since Feb. 23, to $68.10. The maker of adhesive equipment forecast third-quarter profit of at least $1.08 a share, topping the 91- cent average of analyst estimates compiled by Bloomberg.
Red Robin Gourmet Burgers Inc. (RRGB US) plunged 14 percent, the most since Nov. 6, to $20.22. The restaurant operator lowered its forecast for the year, saying profit will be no more than $1.30 a share, less than the average analyst estimate of $1.33.
Salesforce.com Inc. (CRM US) rose 5.3 percent to $83.24, the first gain in four days. Credit Suisse Group AG raised its share-price forecast for the world’s largest seller of Internet- based customer-management software to $70 from $60.
Sony Corp. (SNE US) gained 5.2 percent, the most since Oct. 29, to $32.26. Google Inc. (GOOG US) introduced software that will work with the Tokyo-based electronics maker’s products to put web-generated content on television.
Visteon Corp. (VSTNQ US) surged 87 percent to $1.33 for the biggest gain since Feb. 26. Johnson Controls Inc. (JCI US), the largest publicly traded U.S. auto-parts maker, made an unsolicited offer of $1.25 billion in cash for bankrupt rival Visteon’s interiors and electronics businesses. Johnson Controls gained 1.8 percent to $28.19.
Vitacost.com Inc. (VITC US) rose 11 percent to $9.32, the biggest gain in its eight-month history as a public company. The online seller of dietary supplements and personal care products said it hired Oppenheimer & Co. to explore ways of enhancing stockholder value including a possible sale of the company.
Ziopharm Oncology Inc. (ZIOP US) jumped 9.7 percent, the most since Nov. 6, to $5.64. An experimental drug from the New York-based company said its experimental cancer drug helped keep fast-growing lethal tumors in check longer than a standard treatment.
–With assistance from Esmé E. Deprez in New York. Editors: Stephen Kleege, Joanna Ossinger.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
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