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Earnings highlights: BP, CBS, Kraft, Sony, Verizon, Colgate, Nintendo and others

Here are some highlights from this past week's earnings coverage from BloggingStocks:

Continue reading Earnings highlights: BP, CBS, Kraft, Sony, Verizon, Colgate, Nintendo and others

Earnings highlights: Exxon, Starbucks, Viacom, Comcast, Sirius, Kraft and others

Here are some highlights from this past week's earnings coverage from BloggingStocks:

For more highlights from this week, see: General Motors, Motorola, Disney, Sony, Visa, CBS and others

Upcoming quarterly reports include Archer Daniels Midland (NYSE: ADM), Procter & Gamble (NYSE: PG), Jack-in-the-Box (NYSE: JBX), Cisco (NASDAQ: CSCO), News Corp. (NYSE: NWS), Whole Foods (NASDAQ: WFMI), Sprint Nextel (NYSE: S), Time Warner (NYSE: TWX), Freddie Mac (NYSE: FRE), and Blockbuster (NYSE: BBI).

Visit AOL Money & Finance for more earnings coverage.

The week in preview: High expectations for oil and energy

So the earnings crunch continues, and here's a look at some companies scheduled to report results this week that are anticipated to be big winners and losers in terms of earnings growth.

Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.

Clearly expectations are high for oil and energy. Other companies expected to report double-digit earnings growth include Chevron Corp. (NYSE: CVX), CVS Caremark Corp. (NYSE: CVS), NYSE Euronext Inc. (NYSE: NYX), Verizon Communications Inc. (NYSE: VZ), and Aetna Inc. (NYSE: AET).

Continue reading The week in preview: High expectations for oil and energy

Trade idea for recent Aetna downgrade

AET logoAetna (NYSE: AET) shares are falling today after an analyst at Goldman Sachs downgraded the stock to "Sell" from "Neutral," saying the company will face lower profit margins over the next few years. Other companies in the health-care industry also got downgrades today. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AET.

After hitting a one-year high of $60.00 in December, the stock has hit a new one-year low today. This morning, AET opened at $36.98. So far today the stock has hit a low of $36.01 and a high of $37.99. As of 11:55, AET is trading at $37.29, down 2.50 (-6.3%). The chart for AET looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in six weeks as long as AET is below $45 at August expiration. AET would have to rise by more than 20% before we would start to lose money.

Continue reading Trade idea for recent Aetna downgrade

Aetna can see the brighter future from its vantage point

Given the uncertain U.S. economic landscape, and accompanying choppy / consolidating market conditions, adding a few defensive plays is a prudent tack. Among insurers, Aetna Inc. (NYSE: AET) is worth an evaluation.

Aetna's wide product offerings and comprehensive coverage is an operational strength, as is its geographic footprint. These factors, along with cost controls, should enable Aetna to maintain solid earnings growth in FY 2008-FY 2009.

Further, analysts like AET's projected F2008 800,000-900,000 organic net membership growth in its health care segment, superior underwriting discipline, and cost controls. Another positive: on the big client side, the Bank of America Corporation (NYSE: BAC) selected Aetna as its primary benefits provider for its employees, beginning in 2009.

Continue reading Aetna can see the brighter future from its vantage point

Humana (HUM) slashes earnings outlook on higher prescription costs

Yesterday was a difficult trading session for the managed healthcare group, with industry giant WellPoint Inc. (NYSE: WLP) cutting its 2008 profit forecast, blaming higher claims expense and the weak market conditions. Today is another tough day, with health care companies taking another hit on pressure from Humana Inc. (NYSE: HUM), which warned about lower-than-expected first quarter and full year earnings results.

Blaming increased prescription expenses, the second largest seller of Medicare drugs cut its first-quarter earnings outlook to a range of 44 to 46 cents a share against its previous prior guidance of 80 to 85 cents a share. Analysts, on average, expected the health insurer show higher first-quarter earnings of 78 cents, according to Thomson Financial.

The company also projected full-year earnings between $4.00 and $4.25 per share, down from a previous forecast of $5.35 to $5.55. Humana's estimates were below analysts' expectations for full-year earnings of $5.47per share.

Continue reading Humana (HUM) slashes earnings outlook on higher prescription costs

H&R Block CEO Mark Ernst is latest subprime casualty

H&R Block Inc. (NYSE: HRB) Chief Executive Mark Ernst today resigned as his efforts to unloaded the company's money-losing subprime mortgage business Option One Mortgage Corp. to Cereberus Capital Management LP nears collapse, according to Bloomberg News.

Former SEC Chairman and hedge fund manager Richard Breeden, who had long complained about losses at Option One and lead a proxy battle against the company, was named chairman and Alan. M. Bennett, a former CFO of Aetna Inc. (NYSE: AET), interim chief executive. H&R Block is conducting a search for a new CEO. Bennett has told the company he doesn't wish to be considered as a candidate, the company said in a press release.

Cerebeus agreed to pay H&R Block $800 million for Option One in April, well under the $1.3 billion the company had hoped to get. Cereberus may scuttle the deal entirely now given the continued uncertainty of the credit markets. It's unclear what's going to happen to Option One which Ernst had said H&R Block may close if it couldn't find a buyer, Bloomberg said.

Shares of Kansas City-based H&R Block, which have slumped more than 17% this year, rose in pre-market trading. It will be interesting to see if Breeden will be able to help turn around H&R Block now that he's become an insider.

Analyst downgrades: CLAY, PDGI, RBS, PGIC and WSFS

MOST NOTEWORTHY: Clayton, PharmaNet Development, Royal Bank of Scotland, Progressive Gaming and WSFS Financial were today's noteworthy downgrades:
  • JMP Securities downgraded shares of Clayton Holdings Inc (NASDAQ: CLAY) to Market Perform from Outperform citing lack of visibility in the non-agency MBS market. William Blair also downgraded shares to Market Perform from Outperform after the company's in-line quarter, to reflect lowered estimates and uncertainty regarding a recovery time.
  • Jefferies downgraded shares of PharmaNet Development Group Inc (NASDAQ: PDGI) to Hold from Buy as they believe departures of board and management executives have introduced new risk.
  • The Royal Bank of Group PLC (NYSE: RBS) was lowered to Sell from Buy at Citigroup, as they are negative on the company's acquisition of ABN Amro Holding NV (NYSE: ABN).
  • ThinkEquity downgraded shares of Progressive Gaming International Corporation (NASDAQ: PGIC) to Accumulate from Buy following Friday's announcement that it lost its post-trial motions and will proceed to appeals court in the Webb lawsuit. PGIC will have to post a $20M bond, which is more than the firm expected.
  • B. Riley downgraded shares of WSFS Financial Corporation (NASDAQ: WSFS) to Neutral from Buy after they lowered their estimates to reflect the company's higher projected on-interest expense.
OTHER DOWNGRADES:

Earnings highlights: Apple (AAPL), Merrill Lynch (MER), UAL (UAUA), and many others

The earnings crunch continues to roll along, and here are a some highlights of this past week's earnings coverage from BloggingStocks:

Continue reading Earnings highlights: Apple (AAPL), Merrill Lynch (MER), UAL (UAUA), and many others

Defensive stocks: Aetna's steady earnings

Given the current choppy, consolidating market conditions, adding a few defensive plays is a prudent tack. Among insurers, Aetna Inc. (NYSE: AET) is worth a review.

Aetna's wide product offerings and comprehensive coverage is an operational strength, as is its geographic footprint. These factors, along with cost controls, should enable Aetna to maintain solid earnings growth in 2007-2009. The Reuters F2007/F2008 EPS estimates for AET are $3.43/$3.89.

What should one not expect from Aetna? Ill-conceived, poorly-researched endeavors. Aetna is a deliberate, move-forward-cautiously operation with a corporate culture that reflects many of the values of the land of steady habits, its home state of Connecticut. Aetna's shares rose $2.08 to $54.98 in Thursday afternoon trading.

Continue reading Defensive stocks: Aetna's steady earnings

Aetna (AET) soars after beating estimates

AET logoAetna Inc. (NYSE: AET) shares are trading higher today after the company reported a 4% increase in quarterly profit this morning on earnings per share of $0.95, above analysts' expectations of $0.92 per share. Furthermore, the company upped its full-year outlook to $3.48 per share from the $3.40-$3.42 range. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AET.

Aetna stock has been following an upward trend all year, reaching a new 52-week high with today's gains. AET opened this morning at $54.30. So far today the stock has hit a low of $54.30 and a high of $55.38. As of 10:30, AET is trading at $54.94, up $2.04 (3.9%). The chart for AET looks bullish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $47.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 3 months as long as AET is above $47.50 at January expiration. Aetna would have to fall by more than 13% before we would start to lose money. Learn more about this type of trade here.


Continue reading Aetna (AET) soars after beating estimates

Newspaper wrap-up: Some see bubble in oil

MAJOR PAPERS:
  • The office of the Massachusetts secretary of state is investigating whether Bear Stearns (NYSE: BSC) improperly traded mortgage-backed securities for its own account with two hedge funds that failed this past summer, without notifying in advance the funds independent directors, reported the Wall Street Journal.
  • The Schork Report's Stephen Schork sees an oil correction coming and predicted oil in the $65-$68 range, according to the Wall Street Journal's "Heard on the Street" column.
OTHER PAPERS:
  • Insurer Aetna (NYSE: AET) has instituted a tighter reimbursement policy for Amgen's (NASDAQ: AMGN) anemia drugs, creating a setback for Amgen, reported the Los Angeles Times.
  • A consortium led by Icelandic investor Baugur is interested in making an offer for Saks (NYSE: SKS), reported the New York Post, but Saks will not consider a sale until the credit market improves.
  • From BusinessWeek's "Inside Wall Street" section:
    • BusinessWeek suggested that US Airways' (NYSE: LCC) poor performance compared to it's competitors makes it an attractive target to be bought.
    • Rami Rosen of investment firm Oscar growth believes pacts like Radware's (NASDAQ: RDWR) venture with International Business Machines (NYSE: IBM) will help to drive growth.
    • BusinessWeek hailed Amazon's (NASDAQ: AMZN) performance, saying it is one of the few internet companies that has beaten Google (NASDAQ: GOOG).

Analyst initiations: GMTN, LEVP, ITMN, AET and MHS

MOST NOTEWORTHY: Gander Mountain, Lev Pharmaceuticals, Intermune, Aetna and Medco Health were today's noteworthy initiations:
  • Nollenberger initiated shares of Gander Mountain Company (NASDAQ: GMTN) with a Sell rating and $5.00 target, and believes the company's goal of reaching profitability in 2007 could prove overly optimistic.
  • Lev Pharmaceuticals (OTC: LEVP) was initiated with a Sector Outperformer rating and $3 target at CIBC, as the firm believes Cinryze will likely be approved in 1Q08 and they expect the company to have significant pricing leverage.
  • JP Morgan resumed coverage of Intermune Inc (NASDAQ: ITMN) with an Overweight rating and expects shares to be driven by the company's pipeline in IPF and HCV.
  • Aetna Incorporated (NYSE: AET) was initiated with an Outperform rating at Wachovia. The firm feels Aetna is positioned for better growth and higher quality earnings than its peers.
  • William Blair started shares of Medco Health Solutions Inc (NYSE: MHS) with an Outperform rating, as they believe an aging population, rising health care costs, and an acceleration in new product introductions should increase demand for PBM services over the next five years.
OTHER INITIATIONS:

Analyst downgrades 7-16-07: AMZN, ATVI, RTP, SNDK and YRCW

MOST NOTEWORTHY: Amazon.com (AMZN), YRC Worldwide (YRCW), SanDisk (SNDK), Activision (ATVI), Royal Dutch Shell (RDS.A) and KB Home (KBH) were today's noteworthy downgrades:
  • BWS Financial cut Amazon.com (NASDAQ: AMZN) shares to Sell from Hold on valuation.
  • YRC Worldwide (NASDAQ: YRCW) was assumed with an Underweight rating, down from Neutral, as JP Morgan is cautious on the industry's L-T-L pricing.
  • UBS downgraded SanDisk (NASDAQ: SNDK) to Neutral from Buy on valuation.
  • Gabelli downgraded shares of Activision (NASDAQ: ATVI) to Hold from Buy to reflect their expectation of increasing competition for some of the company's key titles.
  • Matrix believes the prolonged weakness in the housing market is eliminating economic profits and cut KB Home (NYSE: KBH) to Strong Sell from Sell...
OTHER DOWNGRADES:
  • First Albany downgraded shares of Travelzoo (NASDAQ: TZOO) to Neutral from Buy.
  • AG Edwards downgraded Aetna (NYSE: AET) to Hold from Buy.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Coventry Health Care gets good bill of health

Coventry Health Care's (NYSE: CVH) earnings report from late April won't make anybody ill. Operaring revenues were up 15.4% to $2.24 billion. Net earnings were $127.5 million and diluted EPS were $.80, excluding a $.04 per share debt refinancing charge. Coventry is growing both organically and by acquisition. It purchased Concentra worker's compensation business unit in order to gain a national market, and has announced plans to acquire selected assets of Mutual of Omaha's health insurance business in the near future. In order to finance these acquisitions, Coventry Health Care retired $170.5 million in debt at 8.125 % to refinance $400 million of debt at 5.95%. The company also bought back 4 million of its own shares for $221 million.

According to CEO Dale Wolf, the company is doing exactly what it promised shareholders it would do: acquire strategic assets, buy back its own stock, refinance debt to more favorable terms, and launch new products and/or policies. One policy that Coventry has been pursuing is to raise premium yields on its members. Current Coventry members yield $271.03 in premiums per month, an increase of 5.6%. But expenses increased 4.8% to $212.43 during that same period, thereby negating most of the increase in premiums.

Coventry forecasts 2Q 2007 revenues of $2.3-$2.4 billion, yielding diluted EPS of $.94-$.96. FY 2007 total revenues are forecast at $8.1-$8.4 billion, yielding diluted EPS of $3.92-$3.98 icluding $.04 per share debt refinancing charges. The stiock opened the year at $49.81, and closed recently at $59.63, a respectable 20% run-up in share price. But health care costs have become a hot topic in Democratic presidential debates recently, and insurance companies have been held responsible for runaway costs and substandard treatment complaints. At half the size of health insurance giant Aetna (NYSE: AET), Coventry is a slightly better deal in terms of its p/e multiple, but there are more attractive investments out there than either one of these.

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Last updated: December 02, 2008: 10:12 AM

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