Well, seems like Lowe's Companies, Ic. (NYSE: LOW) did much better than expected during the third quarter. And I was apparently too pessimistic in my earnings preview. The call was for $0.28 per share. The home-improvement retailer beat expectations by $0.05 per share, according to Thomson Reuters estimates. Hey, I tip my hat to management.
But I wouldn't buy the stock just now (unless, of course, you have a very long-term horizon, are willing to ride out the bear market, and intend on improving your cost basis through dollar-cost-averaging). My reasoning is simple: total sales increased only 1.4%, and same-store sales decreased nearly 6%. It's that bad drop in the comps that really has me worried. All retailers are suffering through lousy comps right now, and I think sales are destined to remain weak.
Yet, the market seems to be saying something else to me. Lowe's saw its shares rise over 4% on Monday, on good volume, and on a bad day for the major indexes, too. Is the market saying that all the bad news is priced in? You know, I understand the earnings game and how the market loves it when a business beats estimates, and certainly a $0.05 beat is cool, but I'm not sure that better prices are ahead for those who follow Lowe's and its stock. Consumers just won't be spending enough to justify the buying seen in Lowe's equity yesterday.
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.
Lowe's (NYSE: LOW), a chain that sells products related to home improvement for do-it-yourselfers and competes with Home Depot (NYSE: HD), is set to report earnings for the third quarter on Monday, November 17. The expectation is for $0.28 per share. If management hits that number, which its shareholders are praying it does at the very least, then that would represent a 35% drop in per-share income. At this point, investors are becoming numb to things like 35% drops in per-share income, aren't they? Ah, the wonders of a bear market.
Lowe's beat in the previous two quarters according to AOL Finance, but all bets are currently off as far as I'm concerned. Retail is awful, consumer confidence just felt the poke of the Grim Reaper's index finger and is dying a slow death, and I'd have to assume that people haven't done much to improve their homes during the past quarter. With all the headlines talking about job losses and the like, putting up new cabinets in the kitchen is probably far down on the consumer's list of priorities. The actual numbers for the quarter won't matter so much. Even if Lowe's beats by a penny, it's the outlook Wall Street will be dissecting. And that won't be good, will it? Everyone's outlook is cautious at the very best. At the very least, management will be doing what it can in terms of preserving the margins. I'm sure there will be talk about cost-cutting and efficiencies during the conference call. Let me tell you, management is going to need a lot of efficiency initiatives going forward in this cataclysmic climate. And I hope they have their cash-flow statement working at an optimum level.
Sears Holding Corp. (NASDAQ: SHLD) may have enough capital to get the inventory it needs for its stores during holiday season, but the chain now needs to worry about whether its potential customers will have access to credit.
According to Bloomberg News,Home Depot (NYSE: HD), Sears, "and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing."
For a company struggle as much as Sears, that much damage to sales could cause the company to close hundreds of stores and put tens of thousand of people out of work. Along with all of its brands, Sears has 3,800 stores and 337,000 employees. If its average store loses close to 10% of sales, weaker ones in the states hardest hit by the recession could lose 15% or 20%.
Sears might offer more credit to customers, but it risks that a large part of them will default or delay payments as the economy gets worse.
The Sears problem is an especially good example of what happens when a large economy goes into a flat spin. As revenue at companies drops due to falling consumer spending, those firms have to layoff workers to make ends meet. Those workers, in turn, are no longer consumers and their loss of spending power hurts GDP even more.
Sears is a weaker retailer then some, and the chances that it will have to downsize to survive are very high.
Douglas A. McIntyre is an editor at 247wallst.com.
This post is part of a feature on companies and products that our bloggers think are in need of a makeover.See all 26.
When Kmart bought Sears to become Sears Holdings Corp (NASDAQ: SHLD) it seemed like a perfect match. Here were two retail titans of the 1970s who had completely missed the boat of modern big box retailers. Instead of trying to sell dowdy clothes, Sears could have concentrated on hardware and become Home Depot (NYSE: HD). Instead of selling dowdy everything with surly service, Kmart could have become Wal-Mart (NYSE: WMT).
Now what both stores need is a makeover. They need to become that bright, wide-aisle store that people love to shop at because they find neat things they didn't know they needed. Heck, if the Kmart in my neighborhood could just manage to keep its shelves stocked and not hire the surly, it would be a step up.
Both Kmart and Sears know they have trouble, but it just may be too late to make the changes. Kmart already went through bankruptcy and closed about 300 stores. They even came up with a bright, open store prototype with wide, well-lit aisles. But then they couldn't afford to really roll it out, says Shopping Centers Today. And many think they didn't close enough bad stores.
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.
Amid an unprecedented decline in the housing market and a significant slowdown in consumer spending, Home Depot (NYSE: HD) is in the unenviable position of being a housing-dependent retailer. Not surprisingly, analysts are skeptical ahead of the company's second-quarter earnings report, which is slated to hit the Street next Tuesday, August 19, ahead of the opening bell.
According to Thomson Financial, analysts are expecting HD to report a profit of 61 cents per share for the recently concluded quarter. During the past year, the company's performance in the earnings spotlight has been mixed. First Call reports that Home Depot has exceeded earnings estimates in two of the past four quarters, and fallen short of the Street's mark in the other two reporting periods. Its second-quarter report a year ago was one of the upside surprises; HD beat expectations by five cents per share last August.
However, it doesn't look like brokerage firms are banking on another Street-beating quarter. There have been 3 downward revisions to HD's estimated annual earnings, compared to just 1 upward revision (per First Call). Meanwhile, the average 12-month price target on the shares is $29.53. This target is a premium of 8.6% to the stock's closing price Thursday, but it represents a discount of more than 23% to HD's current annual high. In other words, analysts' expectations for the stock are rather low.
Today was a volatile day in the markets as stocks started out flat to slightly positive early on, went negative, but then came back throughout the day. Traders had no real economic numbers, but oil trading under $115 and gold down another 3% has traders cheering beyond any lagging economic numbers.
Amazon.com Inc. (NASDAQ: AMZN) rose sharply in today's final minutes. An analyst at Citigroup noted that the company could sell as many as 380,000 units of its Kindle e-book reader this year, which could in turn increase its Audible subscriptions and could raise its e-book sales. Shares were up over 9% at $87.86 in today's final minutes.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Home Despot below in the comments.
One of the most unfortunate of company nicknames that I have ever been witness to, is the distasteful tag of homage that has been bestowed upon Home Depot Inc. (NYSE: HD). Even more disconcerting than the nickname itself, is the fact that it was bestowed on the company not from outside sources, but from within the company's own hierarchy. "Home Despot" is a name that shall long remain the legacy of one well-jettisoned corporate executive. Home Despot is the name that distinctly belongs to Bob Nardelli, a man who took his own personal neuroses and bound a great corporation with them.
I could feel the effects of the Home Despot when I entered one of the company's retail locations in my neighborhood. Though the store was always tidy and quiet, it had a tight and smothering feel to it. Associates were always available to show me where specific merchandise was, but they were never friendly or engaging. They always seemed afraid to get involved. It was quite a stark contrast to the Menard's store where I definitely preferred to shop. At that store I always felt welcome, and it always felt like things were going on.
I have moved away from the Home Depot store since then, so I can't say if the effects of the Home Despot still linger there. I can however, say that the name itself still does. It's an unfortunate reality that negative nicknames often have a tendency to hang around far longer than the good ones do. I can only hope that the man who gave spawn to the concepts that deserved that nasty title, took with him all the negative sentiment such a name entails. Home Depot never deserved such a negative association, and I think that Bob Nardelli never deserved Home Depot.
The Home Depot (NYSE: HD) shares are trying to find their way today as investors digest Federal Reserve Chair Ben Bernanke's testimony on the state of the economy before the Senate Banking Committee. Investors are worried that inflation and weakness in credit markets will continue to drag down the economy and were less than impressed by this morning's PPI numbers. 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 HD.
After hitting a one-year high of $40.75 last July, the stock has hit a new one-year low today. This morning, HD opened at $21.39. So far today the stock has hit a low of $20.76 and a high of $21.69. As of 12:10, HD is trading at $21.47, down $0.06 (-0.3%). The chart for HD 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 a November bear-call credit spread above the $27.50 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 11.1% return in four months as long as HD is below $27.50 at November expiration. Home Depot would have to rise by more than 26% before we would start to lose money. Learn more about this type of trade here.
Bed Bath & Beyond (NASDAQ: BBBY) reported Q1 earnings on Wednesday, and Trey Thoelcke highlighted the numbers in this earnings-recap piece. Shares rose substantially in the after-hours trading session yesterday, jumping over 8%, and as I reviewed various earnings reports last night, I found myself drawn to the retailer's stock performance. I haven't been a huge fan of Bed Bath & Beyond as of late, so I figured I should take a look at the earnings release to see if there's anything here that would change my opinion.
Unfortunately, there isn't. Sales may have grown 6%, and expectations may have been beaten by $0.03, but net income still dropped over 20% to $0.30 per diluted share. Cash flow from operations declined 44% to $65.8 million. And same-store sales were very anemic, rising only 0.8%.
I choose, in this case, to focus on those figures. I also consider the fact that Bed Bath & Beyond does not pay a dividend, and that we are in an awful economic environment, both from a consumer and stock-market standpoint. This is not the stock I'd want to face the recession with, and I don't necessarily find it to be a big value right now. When it comes to retail, I am more likely to look at Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I'd even consider a Home Depot (NYSE: HD) or a Lowe's (NYSE: LOW). All of these stocks pay dividends and have better brand equities and more attractive prospects. Bed Bath & Beyond certainly didn't deliver an earnings bomb, but I'm still not inclined to put money here.
Disclosure: I don't own any company mentioned; positions can change at any time.
Because a long, holiday weekend can be a great time to pause and reflect -- to take a step back and look at the bigger picture -- here are some highlights from BloggingStocks a year ago today: May 25, 2007.
In his Wall Street Strategies, the leading advisor -- and well-known panelist for Fox Business News -- explains, "The debate on which is a better investment, Home Depot or Lowe's, is now at a crossroads following the release of 1Q08 earnings results from each firm.
"As expected, both companies reported year on year earnings decreases as slowing home remodeling spend weighed on comparable store sales.
"Back in 2005-2007, Lowe's was hot the investment choice relative to Home Depot, with many citing its stronger operating margins and friendlier store shopping environment. Although Lowe's is still attracting higher income customers as a result of solid merchandise offerings and customer service, in our view one should crunch the numbers.
"When they do, it will become prevalent that Home Depot is the stronger investment in the niche at this time. The company has been ahead of the game with respect to Lowe's in drastically reducing capital expenditures and store operating outlays.
"Moreover, it has taken the fight back to its smaller rival in the area of customer service and product presentation. In our opinion, play the underdog card and look to invest in Home Depot in upcoming months given more attractive valuation."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
Well, seems like Lowe's Companies, Ic. (NYSE: LOW) did much better than expected during the third quarter. And I was apparently too pessimistic in my earnings preview. The call was for $0.28 per share. The home-improvement retailer beat expectations by $0.05 per share, according to Thomson Reuters estimates. Hey, I tip my hat to management. 
Last week, 
This post is part of a feature on companies and products that our bloggers think are in need of a makeover. 
Rival home improvement chains 
Today was a volatile day in the markets as stocks started out flat to slightly positive early on, went negative, but then came back throughout the day. Traders had no real economic numbers, but oil trading under $115 and gold down another 3% has traders cheering beyond any lagging economic numbers. 
This post is one in a series on prominent company nicknames. 
"Which is the better buy among the leading home retailing stocks -- 
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