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.
Rival home improvement chains Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW) are scheduled to report quarterly results this week. Not surprisingly, given the ongoing housing slump, analysts surveyed by Thomson Financial on average expect both companies to post earnings lower than in the same period a year ago. For Home Depot, that's 61 cents per share, down 20.8%, and for Lowe's, 56 cents per share, down 16.4%. Meanwhile, cabinet maker American Woodmark Corp. (NASDAQ: AMWD), for whom Home Depot and Lowe's are major distributors, is also expected to report lower earnings: 11 cents per share, down 67.6%.
The presidential campaigns have prompted much discussion of energy policy and alternative energy sources. Some solar-energy-related concerns are scheduled to report this week, and expectations seem to be high. Trina Solar Ltd. (NYSE: TSL) is expected to report 81 cents per share earnings, up 67.9%; ReneSola Ltd. (NYSE: SOL) is expected to post earnings of 32 cents per share, up 62.5%; and Suntech Power Holdings Co. (NYSE: STP) is expected to have earnings of 32 cents per share, up 21.9%. Even China Sunergy Co. Ltd. (NASDAQ: CSUN) is expected to have swung to a profit of 3 cents per share, from a per-share loss of 14 cents a year ago.
Clothing retailer The Bon-Ton Stores (NASDAQ: BONT) reported 4Q and FY2007 results that were not at all impressive. Investors bid up the stock almost 12% to just under $6 per share on crummy numbers. Go figure!
The good news is the bad news could be worse. Many retail sectors got hammered late in 2007. Bon-Ton Stores was no exception. 4Q2007 net income was down $13.2 million. FY2007 net income was down substantially as well. Same-store sales, an important number in retail, declined by 3.6%. Total sales were off by 8.9%. Gross margins decreased by $50.8 million. Credit card finance earnings declined. In fact, the only upward trending number in the earnings release was inventory markdowns. How can CEO Bud Bergren state, with a straight face, that Bon-Ton Stores will maintain its "strong financial position?"
The near-term future for clothing retailers does not look encouraging. Bon-Ton Stores forecasts same-store sales in the negative 1-2% range, with gross margins predicted to remain the same as in FY2007, and those margins declined. Lease related interests went up in FY2007 but should remain flat in 2008. The company hopes to generate at least $50 million, not to be used to expand but to pay down long-term debt. FY2008 diluted EPS is forecast in the 20 to 45 cents range. It may take most of 2008 before clothing retailers become attractive investment options again.
A former Royal Bank of Canada (NYSE: RY) trader alleged that some employees "miss-marked" bonds to increase profits at the New York office's investment banking unit, the Wall Street Journal reported.
The WSJ also reported that private-equity firm J.C. Flowers & Co is in talks with UK lender Northern Rock, but has not confirmed it will launch a bid for the troubled firm wrapped up in the subprime meltdown.
OTHER PAPERS:
The New York Times reported Merrill Lynch & Co Inc (NYSE: MER) CEO Stanley O'Neal contacted Wachovia Corporation (NYSE: WB) CEO G. Kennedy Thompson last week to discuss the possibility of a merger between the companies, according to inside sources; Merrill's board has reportedly started considering candidates to replace him.
The Times also reported that designer Tommy Hilfiger agreed to sell his biggest clothing line exclusively at Macy's Inc (NYSE: M). Under the agreement, Mr. Hilfiger would remove his clothing lines from stores like The Bon-Ton Stores Inc (NASDAQ: BONT) and Dillard's Inc (NYSE: DDS).
Also lending to the department store's woes, competitor Bon-Ton Stores Inc (NASDAQ: BONT) warned on Wednesday that the company would likely miss 2007 earnings estimates. If you think that these factors are enough to weigh down J. C. Penney's stock over the next few months, then now could be a good time to take a look at a bearish hedged trade on JCP.
MOST NOTEWORTHY: Lululemon (LULU) and Worthington (WOR) were today's noteworthy initiations:
RBC Capital views Lululemon (NASDAQ: LULU), which IPO'd today, as unique opportunity to participate in an early stage, retail growth story, starting shares with an Outperform rating and $23 target.
Worthington (NYSE: WOR) is likely to continue to have headwinds in the near-term, according to CIBC; They believe shares could be a takeover target, initiating shares with a Sector Performer rating and $24 target...
OTHER INITIATIONS:
Bon-Ton Stores (NASDAQ: BONT) was initiated with a Neutral at First Albany.
William Blair started shares of Capella Education (NASDAQ: CPLA) with an Outperform rating.
Warner Music Group (NYSE: WMG) was reinstated with a Neutral rating at Goldman Sachs.
Trying to catch falling knives is a tough and dangerous game. The floor is falling every day in the stock and many times, investors allow their egos to prevent them from making the right decision. But even though that's the case, I sometimes still choose to make the move if I believe it's clear that fear has taken over in the emotions of investors and the stock is clearly undervalued. As the often-quoted Warren Buffett saying goes, "Be fearful when others are greedy and be greedy when others are fearful." Often the best types of investments are those made against the crowd, or contrarian.
However, I think the stock is a very interesting buy at these levels for a couple reasons. It looks cheap, insiders are buying, and it has an interesting pool of owners, among other things.
MOST NOTEWORTHY: Lockheed Martin (LMT), CastlePoint Holdings, Ltd (CPHL) and OraSure Technologies, Inc (OSUR) were today's notable upgrades:
Matrix USA started Lockheed Martin (NYSE: LMT) with a Strong Buy rating, believing steady demand from defense spending and communications systems is allowing the company to continue to build impressive fundamental trends.
Piper believes CastlePoint'sHoldings Ltd (NASDAQ: CPHL) relationship with Tower Group allows it immediate access to a high quality book of business, strong relationships in the industry and the ability to efficiently place capital overnight. Piper Jaffray stated shares of CastlePoint with an Outperform rating and a $20 target.
Lazard started Orasure Technologies Inc (NASDAQ: OSUR) with a Buy rating and $12 target based on new production launches and new CDC HIV testing guidelines...
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. 
Rival home improvement chains 
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