General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler executive will return to Congress on Wednesday. After facing less than a receptive Senate Tuesday, they will appear before a House committee today to plead for a "bridge loan" to give them a massive infusion of cash they need to stay afloat in their race against the clock. GM's CEO Wagoner "warned that the failure of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the country," saying it would be a "catastrophic collapse." GM shares traded 2.9% lower and Ford's 2.4% lower in premarket action (8:04 am). GM shares have been plunging over 15% by midday trading and Ford's by nearly 25% as Senate lowers bailout expectations, seeking to compromise.
Boeing Co. (NYSE: BA) is delaying jet deliveries by as much as 10 weeks as it attempts to recover from a strike by its machinists, according to a report in the Wall Street Journal. BA shares were down 2.6%, with the market, by midday trading.
Toyota (NYSE: TM) -- The troubles in the auto industry don't affect just American carmakers.Toyota said Wednesday it will reduce production in the U.S. to cope with slowing sales there. It will stop production at all its plants in the U.S. and Canada for two extra days next month, and cut about half of 500 temporary workers at a plant in Georgetown, Kentucky by March. It will also reduce production of two models. TM shares were down 4% by midday trading.
Last week, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) posted a quarterly loss and lowered its guidance. But as interest in alternative energy continues to grow, analysts polled by Thomson Financial are still looking for good things from solar energy concerns scheduled to report earnings this week.
Strong growth at Trina Solar Ltd. (NYSE: TSL) in the third quarter prompted it to lift its guidance back in October. Analysts expect the Chinese company to post profits that are 76.3% higher than a year ago, or $1.18 per share on revenues of $268.4 million (+225.0%). Though Trina Solar missed estimates in the second quarter, analysts on average recommend buying TSL. Shares are down 81.4% from a year ago and trading near an all-time low.
Earnings of rival LDK Solar Co. Ltd. (NYSE: LDK) are expect to have risen 47.9% to $0.71 per share on revenues of $486.7 million (+206.6%). Also based in China, LDK has not missed estimates in recent quarters; in fact, it blew past expectations in the second quarter. Yet the consensus recommendation is to hold LDK. Like Trina Solar, LDK's shares are trading near an all-time low; the share price has fallen 50.0% in the past year.
Analysts anticipate third-quarter earnings for Canadian Solar Inc. (NASDAQ: CSIQ) to be a whopping 96.3% higher than a year ago, or $0.54 per share on revenues of $248.0 million (+154.5%). The company easily topped estimates in the previous quarter. ReneSola Ltd. (NYSE: SOL) and Suntech Power Holdings Co. Ltd. (NYSE: STP) are also expected to report earnings growth of 29.7% ($0.37 per share) and 23.8% ($0.42 per share), respectively. All three of these stocks reached 52-week lows last week, and all are considered buys.
Costco (NASDAQ: COST), the shopping club that competes with BJ's (NYSE: BJ) and Wal-Mart (NYSE: WMT), reported earnings for the fourth quarter on Wednesday. Sales did well, rising 13% to $22.6 billion. On an adjusted basis, excluding a litigation charge, the bottom line came in at $0.92 per share, and according to this source, that is one penny below expectations. Excluding the effect of gasoline inflation, comparable sales increased 6%.
For the most part, I think Costco held up well during the quarter. Yes, the warehouse club didn't wow the Wall Street analysts this time around. But comps were pretty decent for the quarter, and the top-line performance was acceptable, all things considered. Membership-fee revenue went up by 22%, which was cool.
This doesn't mean that Costco won't have a tough time going forward. As the economy worsens (and it will), Costco is going to face intense competition for the attention of the consumer's cash and credit cards. Keep in mind, though, that Costco has some good brand equity when it comes to discount shopping. The company's image is of a place where people can buy in bulk and get great deals. In a bad market environment, consumers may flock to Costco to save money. So the company might do okay (on a very relative basis) during the crisis.
Oppenheimer upgraded shares of Cree (NASDAQ: CREE) to Outperform from Perform as they believe LEDs are beginning to gain traction in general lighting applications.
Jefferies upgraded Constellation Energy (NYSE: CEG) to Hold from Underperform following the acquisition by MidAmerican Energy. The company's target was increased to $25 from $20.
RBC upgraded the Banking sector to Overweight from Underweight following the governments "massive assault" on the financial crisis. RBC believes government actions that include the potential creation of a Resolution Trust Corporation, the creation of federal insurance for money market fund investors and the ban on short selling will result in higher bank stock prices through year end; Wilmington Trust (NYSE: WL), KeyCorp (NYSE: KEY) and Pacific Capital Bancorp (NASDAQ: PCBC) were upgraded to Sector Perform from Underperform.
Oracle (NASDAQ: ORCL) was raised to Buy from Neutral at Piper.
UBS upgraded Murphy Oil (NYSE: MUR) to Neutral from Sell.
Gap (NYSE: GPS) was upgraded to buy from Neutral at Goldman Sachs.
Analyst downgrades:
Deutsche Bank downgraded shares of Thomson Reuters (NASDAQ: TRIN) to Sell from Buy as they believe uncertainty in the financial sector will hinder growth.
Piper cut MIPS Technologies (NASDAQ: MIPS) to Neutral from Buy as they believe estimates are at risk following the departure of ChipIdea's co-founder. The company's target was lowered to $3.70 from $8.
Jefferies downgraded GSI Commerce (NASDAQ: GSIC) to Hold from Buy on valuation as they view the risk/reward less compelling following the recent rally.
Host Hotels (NYSE: HST) was downgraded at Baird to Neutral from Outperform.
Jefferies initiated Abercrombie & Fitch (NYSE: ANF) with an Underperform rating and $38 target and thinks the company's sales and margins are at risk with negative comp trends getting worse.
Cantor believes Lawson Software (NASDAQ: LWSN) has a powerful franchise while the stock trades at a 33% discount to peers. Shares were assumed with a Buy rating and $8 target.
Stanford started Mentor (NYSE: MNT) with a Buy rating and $32 target and thinks the company is poised to benefit from growing global demand for products and services that make people look younger and more attractive.
Scripps Networks (NYSE: SNI) was initiated at UBS with a Neutral rating and $43 target.
BMO Capital initiated Costco (NASDAQ: COST) and BJ's Wholesale (NYSE: BJ) with Market Perform ratings and a $72 target and $42 target, respectively.
Isle of Capri (NASDAQ: ISLE) was initiated at Goldman with a Sell rating and $6 target.
BJ's Wholesale Club (NYSE: BJ - option chain) shares are falling today despite reporting second-quarter profit that beat estimates and announcing a share buyback. This is possibly because discretionary item spending slowed. 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 BJ or similar companies like COST.
This morning, BJ opened at $38.60. So far today the stock has hit a low of $37.11 and a high of $38.98. As of 12:45, BJ is trading at $37.99, down $2.69 (-6.6%). The chart for BJ looks neutral and S&P gives BJ a neutral 3 STARS (out of 5) hold ranking.
For a bearish hedged play on this stock, I would consider an October 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 7.5% return in two months as long as BJ is below $45 at October expiration. BJ's would have to rise by more than 18% before we would start to lose money.
BJ hasn't been above $45 at all in the past year and has shown resistance around $43 recently.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in BJ.
Some of the country's largest retail chains had good June sales, benefitting from consumers looking for a place to spend their tax rebates, but this was not the case for higher-priced department stores. Retailers offering big discounts were among the privileges ones as consumers chose to stay away from high prices.
Consumers spent on the basics, looking for bargains, boosting sales at some companies like Wal-Mart (NYSE: WMT), but resulting in losses for the others like Nordstrom (NYSE: JWN) and American Eagle (NYSE: AEO). This confirmed that retailers will face further weak demand even during the back-to-school shopping season, and more deep discounts will be needed.
As June is considered a key month for sales, merchants were hoping for a "stimulus" effect from tax rebates, despite worries tied to soaring gasoline and food costs. However, only companies offering cheaper gas like Wal-Mart, Costco (NASDAQ: COST) and BJ's Wholesale Club (NYSE: BJ) saw their dreams accomplished. Thus, Wal-Mart came with June sales growth of 4.3%, Costco reported a 9% increase in June same-store sales, while BJ's Wholesale saw a growth of 16.5%.
MOST NOTEWORTHY: ExxonMobil, Susquehanna and BJ's Wholesale were today's noteworthy upgrades:
Bernstein upgraded shares of ExxonMobil (NYSE: XOM) to Outperform from Market Perform to reflect the company's best of industry returns and high credit rating, which they feel makes for a safe investment in the current environment.
Keefe Bruyette upgraded shares of Susquehanna (NASDAQ: SUSQ) to Market Perform from Underperform on valuation and believes the company is unlikely to have to raise capital.
JP Morgan raised BJ's Wholesale (NYSE: BJ) to Overweight from Neutral citing improvement in the company's ability to convert free trial customers to paid members and strong June sales, which could result in EPS upside for Q2-Q4.
OTHER UPGRADES:
J.M. Smucker (NYSE: SJM) was lifted to Buy from Hold at Deutsche Bank.
France Telecom (NYSE: FTE) was upgraded to Overweight from Neutral at HSBC.
MOST NOTEWORTHY: BJ's Wholesale, Affiliated Managers and Yahoo! were today's noteworthy downgrades:
Citigroup downgraded shares of BJ's Wholesale (NYSE: BJ) to Hold from Buy on valuation and views a takeout as less likely given the current credit market conditions.
Wachovia downgraded shares of Affiliated Managers (NYSE: AMG) to Market Perform from Outperform as they believe credit quality concerns and record commodity prices will hinder the company's recovery in equity flows.
Thomas Weisel downgraded Yahoo! (NASDAQ: YHOO) to Underweight from Market Weight based on visibility into fundamentals and another potential reorganization that will likely be met with skepticism.
OTHER DOWNGRADES:
Third Wave (NASDAQ: TWTI) was cut to Neutral from Outperform at Baird.
PetSmart (NASDAQ: PETM) issued its Q1 earnings numbers on Wednesday, and the market didn't take too kindly to them. At the time of this writing, the shares were down in after-hours trading by over 3%. I can kind of see why.
Revenues did okay, rising 9% to $1.2 billion. Earnings per share, however, dropped like a rock. Last year, the company booked $0.78 per diluted share; this year, the company did $0.32 per diluted share. However, investors need to realize that there was a gain on an investment in the previous year's quarter that skewed results; backing out the $0.47 per-share benefit gives an earnings number of $0.31 per diluted share in Q1 2007. So, the real earnings growth was rather tepid, and this might explain to some degree why there was a bit of a sell-off after the news, even though, according to Briefing.com, PetSmart beat bottom-line expectations by a penny and did exceed on the top-line as well.
Guidance for Q2 was also an issue, as Briefing.com seemed to indicate that management's growth expectations are not precisely what Wall Street was looking for. For the full year, however, PetSmart is looking to do about what Wall Street wants. If management hits the full-year earnings range of somewhere between $1.51 and $1.59 per share, then the P/E ratio on the stock is around 14. Sure, that isn't expensive, but I don't know if I want to enter a company such as this in the kind of environment we find ourselves in. Yes, pets are important and will be taken care of, but people might cut down on pampering them to excess. Plus, there's a lot of competition out there for your pet dollars. Wal-Mart (NYSE: WMT), Costco (NASDAQ: COST), BJ's (NYSE: BJ), and every supermarket in the country all vie for a slice of the pet market.
The Wall Street Journal reports that BJ's Wholesale Club (NYSE: BJ) reported a 26% rise in net income. Its earnings of 29 cents a share beat analysts' expectations by a penny. And as consumers go on their crash recession diet, BJ's is likely to continue to exceed expectations. I would not be surprised if its stock keeps rising.
That's because results are growing faster than had been expected. The Journal reports that BJ's revenue climbed 12% to $2.31 billion. Earlier this month, BJ's said net sales increased 12% to $2.26 billion, as same-store sales rose 9.6%, with gasoline sales contributing 3.9 percentage points to the rise. And BJ's raised its EPS guidance by six cents to $2.04 to $2.14 a share. The mean estimate was $2.06 a share.
BJ's joins two beneficiaries of consumers' recession diet -- Wal-Mart Stores (NYSE: WMT) and TJX Co's (NYSE: TJX) -- caused by the rising price of gasoline coupled with flat income and collapsed housing values. After all, if you can't borrow against your house and your credit cards are maxed out, where are you going to turn to keep your family functioning?
MOST NOTEWORTHY: Kohlberg Capital, ClickSoftware and Liberty Property Trust were today's noteworthy initiations:
JMP Securities started shares of Kohlberg Capital (NASDAQ: KCAP) with an Outperform rating and $14 target. The firm believes Kohlberg Capital's alliance with Kohlberg and Company allows Kohlberg Capital to take advantage of considerable expertise. JMP Securities believes Kohlberg Capital has an attractive risk/reward ratio.
Roth Capital initiated ClickSoftware (NASDAQ: CKSW) with a Hold rating and $3.60 target and expects EPS pressure from the depreciating dollar near-term.
Liberty Property Trust (NYSE: LRY) was initiated with a Hold rating at Stifel, citing lack of internal earnings divers and fair valuation.
OTHER INITIATIONS:
Oppenheimer initiated VisionChina Media (NASDAQ: VISN) with a Perform rating and $25 target.
Merrill assumed MGM Mirage (NYSE: MGM) with a Neutral rating.
BJ's Wholesale Club Inc. (NYSE: BJ) shares are rising today after reporting this morning that its fourth-quarter profit rose to $50.2 million on strong January sales and lower costs. The company posted earnings of 80 cents per share on revenue of $2.48 billion, topping analysts' predictions for earnings of 74 cents a share on sales of $2.46 billion. BJ's also said it expects first-quarter same-store sales to rise 4 to 6%. 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 BJ.
After hitting a one-year high of $39.15 in July, the stock hit a one-year low of $26.36 in January. BJ opened this morning at $35.04. So far today the stock has hit a low of $34.62 and a high of $37.17. As of 12:20, BJ is trading at $36.00, up $2.72 (8.2%). The chart for BJ looks neutral and improving while S&P gives BJ a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $30 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 6.4% return in just one and a half months as long as BJ is above $30 at April expiration. BJ's would have to fall by more than 15% before we would start to lose money.
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Big 3 CEOs drive to Washington to suck up to Congress
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
