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.
Apache Corp. (NYSE: APA): $4.10 EPS (+53.9%) on revenue of $3.8 billion (+54.6%)
EOG Resources Inc. (NYSE: EOG): $2.34 EPS (+50.0%) on revenue of $1.7 billion (+62.2%)
Avon Products Inc. (NYSE: AVP): $0.47 EPS (+44.7%) on revenue of $2.6 billion (+11.5%)
TheStreet.com's Jim Cramer says it's not a strong-dollar sell -- the story here is still too good.
Why did natural gas go down last week? What was that? Inventories were down. The commodity price was up. The fuel itself is green. It is better than ethanol and it is being used to fuel an increasing numbers of cars and trucks.
The whole move down had to have been triggered by something, right? Yeah, how about the fact that the stocks were up a lot and were due for some profit-taking.
Recall that the real "reason" they went down is that the dollar "got strong," and that was supposed to trigger commodity deflation; natural gas is a commodity and is therefore going to go down. (Barron's made this very case this weekend, oblivious to the facts, but loving the theory.)
This kind of thinking is just so stupid that it shows you can get chance after chance after chance to own the fuel that can take care of the nation if we just let it. Of course, the stocks began to come back later in the week as threats of supply cut-offs of crude -- they came true this weekend -- made natural gas declines virtually impossible, despite the "sense" that it peaked. So the money has came back and I believe will continue to come back.
MOST NOTEWORTHY: Energy companies, Regulated and Diversified Utilities and Tailsman Energy were today's noteworthy upgrades:
Bernstein raised its 2008 oil forecast to $92.30/bbl, up 27%, and 2008 natural gas forecast to $8.30/mcf, up 7%. By 2012, the firm expects oil prices to be around $86/bbl and for gas to be $9.2/mcf. The firm upgraded Apache Corp (NYSE: APA) and XTO Energy (NYSE: XTO) to Outperform from Market Perform and EnCana (NYSE: ECA) to Market Perform from Underperform.
Goldman upgraded the Regulated and Diversified Utilities sub-sectors to Attractive from Neutral citing expected economic weakness, positive commodity exposure, and earnings growth. The firm upgraded American Electric Power (NYSE: AEP) to Buy from Neutral.
Citigroup upgraded shares of Tailsman Energy (NYSE: TLM) to Buy from Hold ahead of the company's annual meeting as they believe it will announce a new strategy of low risk resource development on existing acreage and that shares will react positively.
Apache Corp. (NYSE: APA), an oil and gas exploration and development company, is recently trading at $115.10. Crude oil futures are at $104.10, up 4.60% according to Bloomberg. APA over all option implied volatility of 38 is above its 26-week average of 34 according to Track Data, suggesting larger price movements.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Just call Apache a buying opportunity extraordinaire. Oil/gas exploration and development company Apache (NYSE: APA) has dipped about $10 from 52-week highs around $107.50 to about $97, due to oil's recent pull-back.
As a result, APA's p/e is down to about 15. A p/e of 15 may not seem that cheap, but given Apache's upside potential -- it is. Look for Apache to continue to achieve solid growth through internal investment and acquisitions. Apache has several key exploration discoveries set to enter development stage and will drill nine wells in Canada this winter as part of its oil shale operations.
Overall, analysts see Apache's oil and gas volumes increasing about 10%-12% in 2007 and 2008. Even better: the company believes it can generate double-digit production growth for the next decade. The Reuters F2007/F2008 EPS consensus estimates for APA are $7.54/$8.84.
TheStreet.com's Jim Cramer says you have to be bullish on the commodity when we're using more of it than ever, it's running out and $100 a barrel doesn't even sound crazy anymore.
Can you trust the International Energy Agency to be right about how oil demand will be blunted by high prices and how consumption will decline?
First, let's deal with demand. I haven't seen any slowing in demand in any of the indicators I use, in part because gasoline hasn't kept pace with the commodity. Cars, certainly, haven't made any strides in using less gasoline, and news right now out of Ford (NYSE: F) (Cramer's Take) is that there's really been no progress whatsoever.
How about heating demand? I have seen no switch whatsoever to another fuel because of the rise. Not one bit, or you would see a nat gas rally.
How about power plant demand? I am willing to think that some power plant manufacturers will debate switching, but building a new coal plant is something no one feels comfortable with without new standards. Nothing's happened along these lines, though.
MOST NOTEWORTHY: GlobalSantaFe Corp, Transocean, Frontier Oil, Tesoro and Audio Codes were today's noteworthy upgrades:
JP Morgan upgraded shares of GlobalSantaFe Corporation (NYSE: GSF) and Transocean Inc (NYSE: RIG) to Neutral from Underweight based on valuation and improving deepwater rig fundamentals.
Frontier Oil Corporation (NYSE: FTO) was upgraded at Banc of America to Buy from Neutral as they believe the company's assets are ideally located to access cheap Canadian oil sands production. They feel the stock should trade closer to its replacement value, which they estimate at $55/share.
The firm also raised Tesora Corporation (NYSE: TSO) to Buy from Neutral, as the firm believes Terero is the best play on the extended refining cycle given its exposure to California.
CIBC upgraded shares of AudioCodes (NASDAQ: AUDC) to Sector Outperformer from Sector Performer on valuation after their checks suggested the company's business is stabilizing and cost cutting is tracking ahead of plan, which could bring upside EPS estimates.
OTHER UPGRADES:
GSI Commerce (NASDAQ: GSIC) was upgraded to Buy from Hold at Jefferies.
This ought to please the ad wizards in Redmond-based Microsoft Corp. (NASDAQ: MSFT). In two separate surveys recently, the results showed that Microsoft's Internet Information Server (IIS) product was growing faster than one of the world's most popular web server software systems -- the open source Apache Server that runs on the free Linux operating system. Maybe we'll see Microsoft CEO Steve Ballmer do another monkey dance soon.
Is this a celebration moment for Microsoftites? Possibly. NetCraft found that Microsoft's IIS was steadily gaining in popularity as a web-serving platform across the globe, and Port80 found that IIS was beating the free Apache web serving platform among enterprise systems in corporate America. Microsoft's web-serving systems have been around for quite some time, but have never been as popular as some of the competition (and Apache doesn't even cost anything).
Is Microsoft finally becoming a threat to open-source software at the computer server level? These surveys would seem to indicate that, although a few surveys in one year doesn't make an airtight case at all. There are also many things about the DIY nature of open-source computer systems that make survey results difficult to tabulate into meaningful data. Still, survey facts don't lie: Microsoft's IIS saw usage on 36.2% of all active web sites at the same time that Apache lost nearly a million web site names (dropping to a 48.4% market share).
MOST NOTEWORTHY: Wyeth (WYE), Luminent Mortgage Capital (LUM), CheckFree (CKFR), EOG Resources (EOG) and K-Swiss (KSWS) were today's noteworthy downgrades:
Cowen downgraded Wyeth (NYSE: WYE) to Neutral from Outperform based on limited long-term limited visibility.
JP Morgan downgraded shares of Luminent Mortgage (NYSE: LUM) to Underweight from Neutral citing difficult CMO and CDO market conditions.
JP Morgan downgraded CheckFree (NASDAQ: CKFR) to Neutral from Overweight following the company's acquisition by FiServ (FISV).
Matrix cut shares of EOG Resources (NYSE: EOG) to Sell from Buy to reflect lower natural gas prices and increasing costs.
Matrix believes soft demand for athletic shoes is leading to declining sales for K-Swiss (NASDAQ: KSWS), and cut shares to Sell from Buy...
OTHER DOWNGRADES:
JMP Securities downgraded CapitalSource (NYSE: CSE) to Outperform from Strong Buy.
Oppenheimer has turned negative on oil and gas names for the near-term, as they now believe the downside risk exceeds upside potential; they cut shares of Apache Corp (NYSE; APA), BP PLC (NYSE: BP), ConocoPhillips (NYSE: COP), Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM), among others, to Neutral from Buy.
Google Inc. (NASDAQ: GOOG) has had a good time recently nipping at the heels of what many consider its largest enemy -- Microsoft (NASDAQ: MSFT). While I'm not agreeing that Microsoft is in Google's direct cross-hairs more than other companies, the area of customer security and privacy is one area where both companies have taken potshots at one another recently. Google has taken criticism for the immense privacy breaches it apparently is making available to the world, while Microsoft's Windows operating system and other software constantly have security issues, from malware to spyware.
Google recently posted an entry to its security blog that lists the most common web servers that are used to host malware, which then gets distributed to consumer PCs -- turning them into "zombies" for illegal online activity. Yes, you guessed it -- Microsoft's Internet Information Server (IIS) was listed along with the Apache web server (which runs the free Linux operating system) as responsible for distributing 49% of all malware on the internet. You probably know malware -- it's what is responsible for those annoying popups on many millions of PCs, and it generally slows down a PC significantly or crashes it altogether.
Now, to be fair, Google did list the open-source Apache web server as responsible for hosting and distributing malware on the internet as well, so I don't think this was a direct attack on Microsoft, but more as a statement of fact.
But, Google did take its analysis further and determined that Microsoft's server software was actually responsible for distributing malware twice as much as the Apache web server software. While this will not come as a surprise to many IT professionals, it seems that Google could have a motive of undermining trust in Microsoft's products by using published research and analysis showing weakness. Well, it's free to do that, and perhaps Microsoft could turn the tables on Google and point out weakness in the company's software -- except that Google does not make software for web servers.
MOST NOTEWORTHY: Christopher & Banks Corp (CBK), Tiffany & Co (TIF), Sterling Financial Corp (SLFI), and Komag, Inc (KOMG) were today's most noteworthy downgrades:
Matrix believes lower selling prices and volumes are negatively affecting Christopher & Banks' (NYSE: CBK) margins and downgraded to Sell from Hold.
Tiffany & Co (NYSE: TIF) was cut to Neutral from Overweight at HSBC based on valuation.
Suntrust downgraded shares of Sterling Financial (NASDAQ: SLFI) to Reduce from Neutral given the charge from an ongoing investigation into the irregularities discovered with certain financing contracts of affiliate Equipment Finance LLC.
Komag (NASDAQ: KOMG) was cut to Hold from Strong Buy at Needham after the company pre-announced lower-than-expected second quarter results. Bear Stearns downgraded shares of Komag to Peer Perform from Outperform...
OTHER DOWNGRADES:
First Albany downgraded Iomai Corp (NASDAQ: IOMI) to Neutral from Buy.
Citing energy as a favorite sector, Curtis Hesler says, "The question now is, when will oil take off?"
The editor of The Professional Timing Report notes that both crude and natural gas are looking very bullish, and says, "Rather than trying to call the exact low, you should be investing here for the long term. You should be searching for those times when conditions are right for accumulation. This is one of those times."
Indeed, he believe that the commodity bull is about to find "new life" and views crude oil as particularly exciting. He forecasts, "I have no doubt that we will see crude move to new highs this year - and eventually, well over $100/barrel. Crude will encounter some overhead resistance at the $62.00 level this winter; but following a pause, it should easily be able to launch over resistance."
To benefit from this expected strength in oil, he is adding Apache Corporation (NYSE:APA) to his buy list. He says, "This is a great, all-around energy company with virtually no exposure to the strife which seems to seethe in the Middle East."
Meanwhile, he estimates that there is "no terror or war premium left in energy prices" even though he believes the threat remains. He adds, "Apache is a classic, major producer with unusual future potential in terms of both production and increased future reserves."
Hesler concludes, "The stage is being set for the next commodity bull phase, and those who are invested now for that eventuality will be very happy at this time next year."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free website, TheStockAdvisors.com.
MOST NOTEWORTHY: Amazon.com Inc (AMZN) and Vornado (VNO) were on today's list of most notable downgrades:
Bear Stearns downgraded Amazon.com Inc (NASDAQ: AMZN) to Underperform from Outperform to reflect the company's margin erosion, lack of near-term earnings leverage and valuation. They note that margins declined for the fourth consecutive quarter year-over-year in Q4.
Wachovia downgraded Vornado Realty Trust (NYSE: VNO) to Market Perform from Outperform citing the higher bid of $56 for Equity Office Properties Trust (NYSE: EOP), which increases the company's risk profile.
OTHER DOWNGRADES:
Citigroup downgraded shares of Apache Corp (NYSE: APA) to Hold from Buy on concerns that the company's poor 2006 reserve replacement cost in the Gulf of Mexico may suggest maturing project inventory.
JP Morgan downgraded Avid Technology Inc (NASDAQ: AVID) to Underweight from Overweight to reflect the company's weak forecasting and execution after disappointing fourth-quarter results and guidance.
Matrix USA downgraded J.B. Hunt Transport Services (NASDAQ: JBHT) to Buy from Strong Buy on valuation.
Here are some highlights from this past week's 
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Apache Corp.
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MOST NOTEWORTHY: Christopher & Banks Corp (CBK), Tiffany & Co (TIF), Sterling Financial Corp (SLFI), and Komag, Inc (KOMG) were today's most noteworthy downgrades: 
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