Friedman Billings upgraded Synovus (NYSE: SNV) to Market Perform from Underperform on valuation following the recent weakness. BASF (OTC: BASFY) and Akzo Nobel (OTC: AKZOY) were upgraded to Buy from Neutral at UBS on valuation and believes cash flows can cover the company's dividend.
JP Morgan upgraded H.B. Fuller (NYSE: FUL) to Overweight from Neutral citing benefits from lower raw material costs.
CA, Inc (NASDAQ: CA) was added to Goldman's Conviction Buy List.
Goldman removed Boeing (NYSE: BA) from the Conviction Sell List.
WABCO Holdings (NYSE: WBC) was upgraded to Buy from Hold at KeyBanc.
Analyst downgrades:
Oppenheimer downgraded Giant Interactive (NYSE: GA) to Perform from Outperform following the company's Q3 results as they believe a recovery of revenue from ZT Online will take longer than expected.
Friedman Billings cut Walter Industries (NYSE: WLT) to Market Perform from Outperform as they believe the decline in steel demand will pressure met coal prices. The company's target was lowered to $30 from $53.
Citigroup downgraded shares of Atlas Pipeline (NYSE: AHD) Holdings to Sell from Hold as they believe the company could potentially be in violation of its debt covenants as early as Q1. The company's target was lowered to $4 from $31.
Oracle (NASDAQ: ORCL) was removed from Goldman's Conviction Buy List.
Dover (NYSE: DOV) and Emerson Electric (NYSE: EMR) were downgraded to Underweight from Neutral at JP Morgan.
Harley-Davidson (NYSE: HOG) did not have a great third quarter. If you check out the motorcycle-maker's press release, you'll see that management puts all the bad data right in the lead paragraph, with no spin whatsoever. Revenues: down almost 8% to $1.4 billion. Net income on a dollar basis: down 37% to about $167 million. The bottom line on a diluted per-share basis: down close to 34%, coming in at $0.71. Down, down, down.
And is it surprising? No. Consumers aren't really looking for that second chopper these days, I don't think. Although Harley-Davidson is built to leverage the midlife crisis that many men go through when they reach middle age, I doubt that the crisis many middle-aged men are going through currently is purely life-related. I'd be willing to bet it is a crisis based on a hellishly large loss of confidence in the security of their golden years fueled by the declining total value of their retirement accounts. In a world where companies like Ford (NYSE: F) and General Motors (NYSE: GM) are having a hard time moving inventory, you can bet that it's not a walk in the park for a manufacturer of motorcycles.
I've never used a motorcycle before in my life and don't know much about the vehicles, but I recognize that Harley-Davidson, Inc. (NYSE: HOG) is an American icon whose product represents an aspirational brand. Even so, the company and its stock finds itself on hard times. The company's latest earnings report is reflective of the current economic malaise.
The first paragraph of the Q2 release tells me almost all I need to know. Revenues declined almost 3% to $1.57 billion. Net profit on a dollar basis dropped sharply by 23%, coming in at $222.8 million. Diluted earnings per share decreased by nearly 17% to $0.95. These numbers are not good. Also, in terms of cash flow, cash was used to fund operations for the first six months of the fiscal year as opposed to being generated. Yet another negative.
As I write this, Harley-Davidson's stock is up well over 7%. Am I impressed? Not enough to buy. Undoubtedly some of this rise can be attributed to the retreat in oil futures. But do I believe the economy will now be nice to Harley-Davidson? Not yet. The company, like General Motors Corporation (NYSE: GM) and Ford Motor Company (NYSE: F), will still have a rough time selling things that require fuel to run. According to this article, Harley-Davidson did better than expected, but that's little comfort to me. You can make an argument that the stock is cheap, but at the very least, anyone interested in buying it (again, I'm not) better wait till the euphoric rally of the day has faded.
Disclosure: I don't own any company mentioned; positions can change at any time.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
Harley-Davidson (NYSE: HOG) is recently down 71 cents to $35.88, near five-year low.
HOG is expected to report Q2 EPS on July 17.
HOG call option volume of 1,129 contracts compares to put volume of 5,082 contracts. HOG July option implied volatility of 61 is above its 26-week average of 40 according to Track Data, suggesting larger price risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
After hitting a one-year high of $66.00 last April, the stock hit a one-year low of $34.17 in March. This morning, HOG opened at $36.47. So far today the stock has hit a low of $35.34 and a high of $36.47. As of 12:40, HOG is trading at $35.80, down $1.26 (-3.4%). The chart for HOG looks bullish but deteriorating, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $40 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 five weeks as long as HOG is below $40 at May expiration. Hershey would have to rise by more than 12% before we would start to lose money. Learn more about this type of trade here.
HOG hasn't been above $40 by more than a little bit since January and has shown resistance around $39 recently. This trade could be risky if the company's earnings (due out on Thursday) are a positive surprise, but even if that happens, this position could be protected by resistance HOG might find just above $40, where the stock has topped out a few times in the past three months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in HOG.
When last I looked at Harley-Davidson (NYSE: HOG) in 2007 the stock was trading a lot higher. I argued at the time that there was value in this quality company and investors should take a look. Others liked the company, but wisely said there was plenty of time to wait because profits would be coming down with the slowing economy.
Some commented that HOG was over-priced in the high $40's even though it had come down from it's 52-week high of $66 per share. It was trading at a sizable 26% discount when I posted Chasing Value: Harley-Davidson (HOG) profits down 15% -- beats Wall St. last November at $48.95. Having closed yesterday at $39.39 it is now down over 40%.
Many of the brightest minds in my circles feel the economy will not pick up significantly for another 18 months and that we will have fits and starts in between then and now. There does not appear to be any urgency to acquiring stocks that will be dependent on economic recovery to turn for the better. However, HOG might be one to dollar cost average into over time if you believe it will not turn into General Motors or fade like Levi Strauss.
It is currently paying over a 3% dividend yield and unlike other companies Harley has been raising it recently, not lowering it. The P/E ratio of 10 which is projected to hold going forward, the ROE over 36 which is substantial and the ROIC over 20 are more than respectable.
I have not heard even a whisper doubting its superior quality of management and they seem to have put any labor issues to rest as well. I thought there was value in HOG a few months ago so I have to believe the story is even better today with international markets growing and all types of motorcycles being considered for those trying to stretch their gas dollars.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of HOG.
The market continues to extend yesterday's rally, following an agreement by U.S. leaders to a stimulus plan to avoid a major slowdown in the country's economy, but motorcycle giant Harley-Davidson Inc. (NYSE: HOG) shares are in the red after posting a deep decline in its quarterly profit.
Harley-Davidson reported this morning a drop of 26.3% in its fourth-quarter profit, following weak motorcycles sales in the United States. The American market is its biggest and most important market.
Jim Ziemer, the company's chief executive, blames the "challenging" retail environment for the company's disappointing profit which fell to $186.1 million, or 78 cents per share. Harley-Davidson posted a net income of $252.4 million, or 97 cents per share in the same period a year ago. The results came in short of analyst estimates for a profit of 82 cents per share.
Harley-Davidson (NYSE:HOG) announced its third quarter earnings this morning, and they reflected the slack in demand the company warned us about last month. For the quarter, net income fell to $265 million from $312.7 million in the same quarter of 2006, and diluted EPS was $1.07, compared to $1.20 in 2006. Analysts surveyed by Thomson Financial had expected earnings of $1.05
U.S. sales fell by 2.5%, but international sales, up 8.8%, helped keep the drop in overall world sales to only 0.2%. For the year, the company now expects to ship 332,000 bikes, down 4% from 2006. EPS is also expected to finish 4-6% behind 2006 totals of $3.93, quite a swing from the 4-% growth the company projected in its 2nd quarter report.
Harley-Davidson Financial Services revenue fell, as might be expected, in step with the decline in sales, lagging 10.4% from a year earlier.
One bright note in the report is that, while the company's sales for the first nine months of 2007 were off 4.7%, the overall sales of heavyweight motorcycles, the class in which most of H-D's bike fall, was off 4.4%. This suggests that the company is not losing market share to its competition.
After writing two recent articles and having received many comments supporting the Harley-Davidson (NYSE: HOG) value proposition, I wanted to add one more important point for investors who are not convinced there is value in the stock. Even if those who believe that Harley's best days are behind it are correct in their discussion points, it does not follow that the stock is priced correctly at the moment. Case in point -- GM.
I think that one of the most important things to consider when buying a stock is whether the the market has got it right. Most of the time the short term answer is that the stock is not priced correctly and General Motors (NYSE: GM) is a good example of that. Last year, in 2006, GM was the best performing stock in the Dow Jones Industrial Average. In the first quarter of 2006, you could have purchased shares for under $20. By the third quarter, GM had reached $36 a share, an 80% increase, and this year it has reached $38 share.
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Analyst upgrades: 
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
Harley-Davidson
When last I looked at 
The market continues to extend yesterday's rally, following an agreement by U.S. leaders to a stimulus plan to avoid a major slowdown in the country's economy, but motorcycle giant 
Harley-Davidson
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