San Francisco Fed Reserve Bank President Yellen to speak about the U.S. economic outlook at the University of California/San Diego with a Q&A session.
Aracruz Cellulose (NYSE: ARA) to report Q2 earnings; conference call at 11:00am.
Tuesday, July 8
Richmond Fed Reserve Bank President Lacker to speak about U.S. economic outlook to the National Economists Club in Washington with a Q&A session expected.
If you haven't noticed the surging price of oil at the pump or the surging prices of your electric bills, maybe oil at $124.00 and higher per barrel will catch your eyes. Maybe proposing higher margin limits on oil futures trading isn't such a bad idea after all.
Despite this, retail sales managed to come in better than most were expecting... even if you can chalk that up to an extra day because of Easter in March. Jobless claims also fell by 18,000 from last week to about 365,000. Below are the unofficial closing levels for the major US index levels:
Barr Phrarmaceuticals, Inc. (NYSE: BRL) was the drug company blow-up today. The company missed earnings estimates and lowered guidance. As the company is a generic drug giant, does this mean people are going off their meds? Shares tanked by 22% to $38.28 in the final minutes today.
Really, the way Hansen Natural Corp. (NASDAQ: HANS) shares are dropping -- down about 14% as I write this and setting a new 52-week low earlier in the session -- you'd think the company reported disastrous results. Not so!
True, Hansen Natural reported Wednesday a lower-than-expected first-quarter profit due to lower profit margins, but the results weren't that bad. For the quarter, the company's net sales rose to $212.2 million and it earned $28.8 million, or 29 cents a share. Analysts, however, expected 35 cents on revenue of $221, according to Thomson Reuters. The thing is, that compared to last year, profit climbed 43% and revenue jumped 28%. It seems that the Monster Energy brand drinks had a lot do with Hansen's revenue growth, especially the new Java Monster dairy-based coffee drink.
The problem? Already in the fourth quarter investors were concerned about decreasing margins, and this quarter as well Hansen said its profit was hurt by higher costs, including a 34% boost in costs of sales and a 15% rise in operating expenses. Talk about margin squeeze.
Unilever (NYSE: UL) is the world's second-largest maker of food and detergent, so you would expect the company to hurt with rising commodity prices. But Unilever has been proactive and has raised prices 4.8% in the quarter to offset its rising costs. In fact, the company said revenue will beat its forecast for the first time in six years on increased prices and sales of Dove soap, Hellmann's mayonnaise and Lipton tea. First-quarter net income climbed 33%, exceeding analysts' estimates.
As expected, April retail sales have so far indeed been strong, although there are some ares weakness is seen.
Costco (NASDAQ: COST) shares are up 1.2% in premarket trading after the warehouse club retailer said April same-store sales increased 8%, beating analysts' expectations of 6.1%.
Wal-Mart Stores Inc. (NYSE: WMT) shares are also higher in premarket trading, up 1.8%, after the world's largest retailer, said same-store sales climbed 3.2%, beating the 2.1% forecast by analysts. Staying with Wal-Mart for a moment, it said it plans to invest millions in Canada and open more supercenters.
The more luxurious items, though, such as lingerie sold at Limited Brands (NYSE: LTD) have seen a slowdown as the company said that April same-store sales fell 5%, falling short of the 2.3% sales decline analysts had anticipated.
We are investing in optimistic times. News -- good or bad -- seems to magically morph into an opportunity to move markets higher. In the past week, even more than usual, weak economic news was accompanied by commentary along the lines of, "it could have been worse," and other euphoric sentiments.
It is difficult to determine whether this is another short-covering bear market bounce or a real rally. But next week will bring us new information that will start to indicate where the answer lies. For now, investors are looking at the glass as half-full. Cash on the sidelines is moving in to equities, partly because there are very few other alternatives. Yields are low, commodities are risky and real estate is taboo.
Next week begins with the celebration of Cinco de Mayo, yet the markets were way ahead -- it has shifted into party mode on its own during the past few weeks. Here is a summary of key events to watch during the week ahead:
Monday, May 5
First off, the market gets a chance to react to news of Microsoft withdrawing its bid for Yahoo. It will be interesting to see how far Yahoo's stock price sinks as well as what all the market watchers think Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) will do next.
Hewitt Associates (NYSE: HEW) the HR firm that has been showing amazing strength is set to report. First Call is looking for quarterly earnings of $.38 as compared to a year ago of $.23. There may be opportunity for this firm as we go into harder economic times where companies are looking for an easy solution to labor concerns.
Also reporting is Nam Tai Electronics (NYSE: NTE). It could have a good quarter since the need for computer parts is on the rise. Intel and Apple did well to show that international demand is still hot for electronics and this is one of the parts manufacturers. Through its electronics manufacturing services operations, Nam Tai makes electronic components and sub-assemblies, including liquid crystal display (LCD) panels, LCD modules, flexible printed circuit sub-assemblies and image sensors modules and printed circuit board assembly for Bluetooth headsets. First Call estimates are for $.19 as compared to year ago of $.19 per share on $163 million of revenue.
MOST NOTEWORTHY: UBS AG, Ansys and AstraZeneca were today's noteworthy upgrades:
Deutsche Bank upgraded shares of UBS AG (NYSE: UBS) to Buy from Hold after the company announced further write-downs and plans to boost capital.
Jefferies upgraded shares of Ansys (NASDAQ: ANSS) to Buy from Hold as they like the Ansoft (NASDAQ: ANST) acquisition and feel yesterday's sell-off creates an attractive entry point.
AstraZeneca (NYSE: AZN) was raised to Neutral from Underweight at JP Morgan following the positive Crestor study results.
OTHER UPGRADES:
Piper raised Akamai (NASDAQ: AKAM) to Buy from Neutral.
Goldman upgraded Hansen Natural (NASDAQ: HANS) to Buy from Neutral.
Vertex Pharma (NASDAQ: VRTX) was raised to Market Perform from Underperform at Wachovia and to Outperform from Neutral at Baird.
The oil sector is in the news today as executives from Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP) head to Capitol Hill to testify on tax breaks, asking why "the cash-rich industry needs $18 billion in tax breaks over ten years." Instead, some think, this money can be used to subsidize renewable energy projects. In addition, the industry's record profits will likely be questioned. Meanwhile, oil prices were down to $100.94.
Dell (NASDAQ: DELL) plans to close its desktop manufacturing facility in Austin, Texas as it continues to cut costs and lay off workers -- 10% of its workforce -- saying these measures will save as much as $3 billion.
Apparently, Microsoft Corp. (NASDAQ: MSFT) is standing firm on its $44.6 billion bid for Yahoo Inc. (NASDAQ: YHOO) and won't raise it, according to The Wall Street Journal. While many analysts believed the software maker would meet Yahoo! half way and raise its bid, especially as the two met to discuss the bid, it seems Microsoft simply could not find a reason to do so. Or at least so is reported, which could also be a negotiation tactic. YHOO shares are down 1.3% in premarket trading (7:06 a.m.).
Hansen Natural (NASDAQ: HANS) is recently trading down $3.65 to $40.50 in pre-open trading.
HANS reported Q4 EPS of 45 cents versus consensus estimates of 38 cents. Q4 net income was up 103% from last year.
Goldman Sachs says: "the stock fell after-hours based on the margin disappointment and because headline sales growth slowed from 61% in 4Q to 33% in Jan/Feb."
HANS overall option implied volatility of 64 is near its 26-week average of 62 according to Track Data, suggesting non-directional movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Apple Inc. (NASDAQ: AAPL) COO Tim Cook, speaking at a Goldman Sachs investment conference, backed Apple's goal of selling 10 million iPhones in fiscal 2008. AAPL shares are up over 2.6% in premarket trading. Cook also said Apple is open to exploring new ways of selling its iPhone including offering it with other networks. Next week, he said, Apple will show developers how to create software for the iPhone. An event is scheduled for March 6.
Reporting today:
Gap Inc. (NYSE: GPS) is expected to report earnings of 33 cents a share in the fourth quarter.
Kohl's Corp. (NYSE: KSS) is expected to report earnings of $1.34 a share in the fourth-quarter .
Hansen Natural Corp. (NASDAQ: HANS) is expected to report earnings of 39 cents a share in the fourth-quarter.
Viacom Inc. (NYSE: VIA) is expected to report earnings of 83 cents a share in the fourth-quarter.
The markets stayed in a holding pattern today, not really moving up or down very much. Oil made some mild gains as November futures rose up $1.58 a barrel to $81.52 as a storm is forecast for the Gulf of Mexico.
The NYSE had volume of 2.7 billion shares with 2,024 shares advancing while 1,227 declined for a gain of 41.90 points to close at 10,142.93. On the NASDAQ, 1.7 billion shares traded, 1,659 advanced and 1,294 declined for a gain of 4.14 to 2,733.57.
In options there were 3.9 million puts and 6.1 million calls traded for a put/call open interest ratio of 0.64. Verizon Communications, Inc. (NYSE: VZ) saw heavy volume on the October 42.50 calls (VZJV) with over 182,000 options trading. The October 40 calls (VZJH) also had volume move with 164,600 options trading. The stock pays a dividend tomorrow so this is likely dividend arbitrage. Petroleo Brasileiro S.A. (NYSE: PBR) saw heavy volume on the October 60 calls (PBRJL) with over 173,700 options trading and also has a $0.43 dividend tomorrow. AT&T, Inc. (NYSE: T) saw heavy volume on the October 37.50 calls (TJU) with over 75,900 options trading. Research In Motion Limited (NASDAQ: RIMM) moved heavy volume on the October 100 calls (RULJT) with over 38,600 options trading ahead of its earnings after market close today. There were also bearish option players on RIMM with it moving 26,200 October 90 puts (RFYVR) with options trading.
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.
MOST NOTEWORTHY: NutriSystem, Endo Pharmaceuticals, Corporate Express NV, Aventine Renewable Energy Holdings and BioFuel Energy were today's noteworthy downgrades:
NutriSystem (NASDAQ: NTRI) was downgraded to Hold from Buy at Lazard and to Buy from Strong Buy at Broadpoint following its lowered Q3 guidance.
Jefferies downgraded shares of Endo Pharmaceuticals (NASDAQ: ENDP) to Hold from Buy after Impax Laboratories (NASDAQ: IPXL) filed a Paragraph IV challenge against Opana ER yesterday to reflect the potential for a generic version of Opana ER arriving as early as 2010 and the possibility of a similar threat against Lidoderm.
Corporate Express (NYSE: CXP) was downgraded to Hold from Buy at ING, as they believe the new CEO's long-term targets are overly ambitious.
JP Morgan downgraded Aventine Renewable (NYSE: AVR) and BioFuel Energy (NASDAQ: BIOF) to Neutral from Overweight, citing weaker fundamentals in ethanol pricing.
Shares of Hansen Natural Corp. (NASDAQ:HANS) were trading up almost 17% before its conference call started. At the end of the call shares were still up about 13.5% at $47.20.
We noted early this morning how the company was chugging earnings, and shares went up even further. Overall, the interpretation was that the company is trying to be very conservative.
Here are some of the comments from the conference call (2:32PM EST) Chairman Rodney Sachs said it will be difficult to ramp sales like last year and it sees more gradual sales increases from here. The company's accounts receivable increase and DSO's were up a bit as a large customer (Cadbury) takes longer to pay. The increase in net sales in June were much higher than in December, and that contributed to DSO's being up from end of last year. The company called its inventory only a nominal increase, particularly since its days of inventory is lower now. Accounts payable rose threefold, but it says this was in-line with growth and cost of goods was much higher as it is gearing up production this time of year. Deferred revenues almost doubled on receipts from distributors.
2:45 PM GUIDANCE: Sales into July sales are up 43% in the company, Monster are up well over 50%, but any reason for it looking under plan is that it was a short month on delivery days and it believes it will normalize. The company had some product shortages in the new java sales that are being deferred to August.
As far as the market and market share, it has increased year of year even though there was a dip from a new competing Red Bull and Rockstar releases. It thinks it has 24% of market share in its category how it measures internally. Pepsico' Inc's (NYSE: PEP) brand of specialty drink is losing market share according to the company and is cannibalizing its Mountain Dew brand. The category is still quite healthy, although the growth of the category slowdown has to be expected as size rises. It is starting to open new accounts but taking a little longer than anticipated on expansion. Canada is doing well and growing working within the Pepsi system arrangement and doing promotions there. The brand is being well-received in Baja Mexico and it is doing well and they are happy with it. Other international operations are being explored and have begun talking to partners, but the company doesn't want to rush it. Continuing to improve efficiency. Sponsorships has increased as far as marketing, but that should decrease rest of year. Merchandise displays is expensive but works well in stores.
A study in the September Consumer Reports (subscription required) shows that the amount of caffeine found in eight ounces of 12 popular energy drinks ranged from 50 to135mg, with most in the 75 to 80mg range, reports Reuters. That compares to the amount of caffeine in an eight ounce cup of coffee, which ranged from 65 to 120mg, with an average of 85mg, says the National Coffee Association.
The study attempts to surprise consumers by proving that many energy drinks have the same caffeine as a similar cup of coffee. What the study didn't highlight, according to Reuters, was exactly how many energy drinks and coffee people consume during a typical day. The likelihood of people drinking only eight ounces of an energy drink, or coffee, is absurdly low.
Visit any Starbucks (NASDAQ: SBUX) or 7-11 store, and consumers will notice that the smallest size cup in most franchises is 12 ounces, and the largest, 24 ounces. Only Dunkin Donuts provides coffee-drinkers with a smaller version.
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Monday, July 7
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Hansen Natural
Hansen Natural
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Apple shares rise on report Steve Jobs is free of cancer
Toyota whups GM in the first half of 2008
Bush: Wall Street got drunk!
