Last week's preview raised the question of whether consumers were turning to comfort foods in these uncertain times, specifically in terms of second quarter earnings of Campbell Soup (NYSE: CPB) and Krispy Kreme (NYSE: KKD). Campbell's strong earnings growth topped expectations, while Krispy Kreme narrowed its loss, though it fell short of estimates.
This coming week should bring reports from more food-related companies, from cereal maker General Mills and food packager CongAgra to grocery chain Kroger, to the parent companies of restaurants Cracker Barrel, Olive Garden, Red Lobster, Carl's Jr., and Hardees. Also look for reports from tech-related companies such as Oracle, Adobe, and Palm, as well as from financials Morgan Stanley and Goldman Sachs, and from economic bellwether FedEx.
Here's what analysts surveyed by Thomson Financial are expecting from some of the companies reporting earnings this week, as compared to their results from the same period of last year:
Carnival (NYSE: CCL) is scheduled to report Q2 EPS on June 19. CCL closed at $36.22 Monday, near 54-month low. CCL June 35 straddle is priced at $2.35. CCL July option implied volatility of 41 is above its 26-week average of 36 according to Track Data, suggesting larger price movement.
Circuit City (NYSE: CC) is scheduled to report Q1 EPS on June 19. CC closed at $4.31 Monday. CC June 5 straddle is priced at 90c cents. CC over all option implied volatility of 78 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
After hitting a one-year high of $52.10 in October, the stock hit a one-year low of $36.10 in March. This morning, CCL opened at $39.29. So far today the stock has hit a low of $38.95 and a high of $39.81. As of 12:55, CCL is trading at $39.12, down $1.19 (-3.0%). The chart for CCL looks deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a June 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 an 8.7% return in two months as long as CCL is below $45 at June expiration. Carnival would have to rise by more than 15% before we would start to lose money. Learn more about this type of trade here.
After hitting a one-year high of $52.10 in October, the stock hit a one-year low of $36.10 last month. CCL opened this morning at $41.06. So far today the stock has hit a low of $41.06 and a high of $43.00. As of 11:50, CCL is trading at $42.70, up $2.22 (5.5%). The chart for CCL looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $35 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 7 weeks as long as CCL is above $35 at May expiration. Carnival would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: Atmel, Skyworks, Alcatel-Lucent, Parexel and Map Pharma were today's noteworthy initiations:
Kaufman Bros. initiated Atmel (NASDAQ: ATML) with a Buy rating and $6 target, as they believe the company's increasing focus around its core microcontroller business can drive an improved growth and profitability profile going forward and would be buyers at current levels.
The firm also started shares of Skyworks (NASDAQ: SWKS) with a Buy rating and a $10 target, as they like the company's balanced customer positioning and find the stock attractively valued at current levels.
JP Morgan initiated Alcatel-Lucent (NYSE: ALU) with an Overweight rating and believes the risks are more than fully priced into shares at current levels.
Parexel (NADSAQ: PRXL) was initiated with a Neutral rating at Broadpoint, as they believe the company's improved execution is already priced into shares.
Deutsche Bank finds shares of Map Pharmaceuticals (NASDAQ: MAPP) attractively valued given the opportunity from the company's two late stage product candidates, UDB and Tempo Migraine. The firm started shares off with a Buy rating and $19 target.
MOST NOTEWORTHY: Select newspaper stocks and Dolan Media were today's noteworthy initiations:
Banc of America initiated six stocks in the newspaper sector with Neutral ratings: Gannett (NYSE: GCI) was started with a $51.50 target, citing a lack of clarity into the company's acquisition strategy; New York Times (NYSE: NYT) was started with a $21 target, reflecting a lack of clarity into the company's acquisition strategy; E.W. Scripps (NYSE: SSP) was started with a $43 target, as the firm feels the company's Interactive division is a "big question mark" that could drag down company growth; McClatchy Co (NYSE: MNI) was started with a $26 target, as the firm is positive longer-term, but sees downside risk to 2007 consensus estimates; Lee Enterprises (NYSE: LEE) was initiated with a $19.50 target; Gatehouse Media (NYSE: GHS) was started with a $12.50 target.
Dolan Media (NYSE: DM) was initiated with an Outperform rating and $24 target at Piper Jaffray. Piper believes DM's Q3 guidance is conservative given the default rates in July and August and notes the company processes defaults in two of the three highest default rate states. Dolan Media was also started with a Buy rating and $26 target at Merrill Lynch and with a Buy rating and $28 target at Craig-Hallum.
OTHER INITIATIONS:
Think Equity assumed coverage of Intel Corporation (NASDAQ: INTC) and Micron Technology (NYSE: MU) with an Accumulate rating and $26 target and a Buy rating and $18 target, respectively.
Hurricane Dean's presence in the Western Caribbean has forced over a dozen cruise ships to quickly change their itinerary towards the eastern side of the Caribbean this week. The storm, currently moving as a Class Three hurricane through the Yucatan peninsula, has affected Carnival Corp. (NYSE: CCL) the most.
According to the company's site, as of Sunday, August 18th, the itineraries of over ten Carnival ships have been altered, forcing them to dock in Eastern ports-of-call or cancel a part of their stay. CruiseCritic.com has reported that a dozen of Carnival's ships were impacted from Dean. The company could not be reached for comment. Only three Royal Caribbean Cruises Ltd (NYSE: RCL) ships needed to steer clear of the storm.
Despite many weather stations calling Jamaica "Ground Zero" all weekend, the island nation received a glancing blow on Sunday. Gene Sloan of USAToday's "The Cruise Log" reported today that Royal Caribbean will be the first to test Jamaica's waters on Wednesday, as originally scheduled. Carnival's spokesman Vance Gulliksen told Sloan their line expects to resume calls in Jamaica next week and plans to return to the Caymans as early as later this week, but is "awaiting final confirmation."
The major question is the impact of Dean on Cozumel and other Mexican ports on the Yucatan Coast. Check out CruiseCritic.com's Hurricane Zone for an updated list of the damage reports.
MOST NOTEWORTHY: Micron Technology (MU), Halliburton Co (HAL), Visual Sciences (VSCN) and Shaw Group (SGR) fill today's noteworthy upgrade list:
ThinkEquity upgraded shares of Micron Technology (NYSE: MU) to Buy from Accumulate, citing strength in the PC market. The firm believes Micron is well positioned to benefit from the potential secular uptrend in the DRAM market over the next 12 months.
Credit Suisse upgraded shares of Halliburton (NYSE: HAL) to Outperform from Neutral citing solid cyclical fundamentals, which should offset overly negative perceptions.
JMP Securities upgraded Visual Sciences (NASDAQ: VSCN) to Market Perform from Underperform based on the potential acquisition.
Citigroup upgraded shares of Shaw Group (NYSE: SGR) to Buy from Hold to reflect the company's robust backlog growth and changes in management...
JP Morgan upgraded shares of Advance Auto Parts to Neutral from Underweight citing increased confidence in the company's turnaround efforts.
Solectron was upgraded to Neutral from Underperform at Credit Suisse to reflect the company's acquisition by Flextronics International (NASDAQ: FLEX).
Carnival was upgraded to Strong Buy from Outperform and Royal Caribbean was upgraded to Outperform from Market Perform at Raymond James.
OTHER UPGRADES:
BHP Billiton Ltd (NYSE: BHP) was upgraded to Buy from Hold at Citigroup on valuation and their expectations for higher commodity prices.
Matrix USA upgraded shares of Callaway Golf Company (NYSE: ELY) to Hold from Strong Sell, as the firm believes growing demand for new products is driving positive fundamental trends.
Lehman upgraded Dow Chemical (NYSE: DOW) to Overweight from Equal Weight, citing the potential for an accretive acquisition of buyback.
MOST NOTEWORTHY: Shutterfly (SFLY) tops today's list of initiations. JP Morgan, Jefferies and Piper Jaffray initiated Shutterfly today.
The group of firms believe Shutterfly, Inc. (NASDAQ:SFLY) is positioned to be the dominant play in the photo-based personal publishing space, which allows for premium pricing.
OTHER INITIATIONS:
Bank of America initiated Leisure stocks today:
Bank of America would buy cruise line stocks as they believe the worst is over. As such, the broker initiated Royal Caribbean Cruises (NYSE:RCL) and Carnival Corp. (NYSE:CCL) with Buy ratings.
The firm is also bullish on the video game cycle and initiated Activision, Inc. (NASDAQ:ATVI) and THQ Inc. (NASDAQ:THQI) with Buy ratings, Electronic Arts (NASDAQ:ERTS) and Take Two (NASDAQ:TTWO) with Neutral ratings, and recommends buying Activision and THQ Inc today.
Bank of America would stay out of toy stocks at current levels due to valuation, and initiated Hasbro, Inc. (NYSE:HAS) and Mattel, Inc. (NYSE:MAT) with Neutral ratings.
They are also cautious on powersport companies and initiated Harley-Davidson (NYSE:HOG) and Brunswick Corp. (NYSE:BC) with Neutral ratings. The bank also started Polaris Industries (NYSE:PII) with a Sell rating.
Last week's preview
Carnival 
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Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
