On Thursday, Marriott International Inc. (NYSE: MAR) said its third-quarter earnings fell 28% and warned of deteriorating conditions for 2009, and Constellation Brands Inc. (NYSE: STZ) posted a loss of nearly $23 million in its fiscal second quarter due to charges to reduce operations in Australia.
For the quarter ended Sept. 5, Marriott's net income slipped to $94 million, or 26 cents per share. Excluding a $29 million tax planning charge, adjusted income from continuing operations totaled $123 million, or 34 cents per share. Revenue rose 1% to $2.96 billion.
Analysts surveyed by Thomson Reuters had expected earnings of 32 cents per share on revenue of $2.95 billion.
Marriott said its revenue per available room declined in North America, and timeshare sales evaporated due to the tight credit market and cutbacks in business and consumer spending.
The Bethesda, Md.-based hotel company lowered its full-year 2008 earnings guidance to $1.62 to $1.68 per share, from its previous guidance of $1.77 to $1.88 per share. Analysts had forecast 2008 profit of $1.78 per share. For 2009, Marriott said the outlook is uncertain, but it expects the environment to remain challenging. Marriott said it will focus on cash flow by trimming investments and share repurchases.
Marriott shares fell $1.34, or 5.3%, to $23.74 Thursday. The stock price is down 30.5% year to date.
U.S. stock futures were flat to lower Thursday morning following the senate approval of its version of the $700 billion bailout package. Meanwhile, the Federal Reserve said it was considering a rate cut. Following all the economic data released Wednesday indicating the U.S. is in a recession, this isn't surprising. The ECB is also meeting today to consider its move. Today, the Labor Department will report weekly initial jobless claims and the Commerce Department will release August factory orders. Regulators also extended the ban on short-selling shares of some 800 financial companies.
UBS (NYSE: UBS), which has been hard hit by the credit crisis, said Thursday it expects to return to profit in the third quarter after four quarters of losses. The bank has substantially reduced its exposure to U.S. commercial and residential mortgages. The bank wrote down more than $40 billion and raised close to $30 billion.
Mosaic (NYSE: MOS) shares are down about 20% in pre-market trading after it missed analyst estimates when it reported its fiscal first-quarter earnings.
Marriott International (NYSE: MAR) was expected to report earnings of 32 cents a share in the third quarter. The company reported 34 centsearnings per share excluding an 8 cents adjustment.
Even if the national headlines weren't already providing enough focus on the economy, plenty of economic data is due out as the month and the quarter wind down. U.S. economic data scheduled to be released this week include:
JMP Securities upgraded Vertex Pharma (NASDAQ: VRTX) to Outperform from Market Perform following better-than-expected interim data for telaprevir.
Lazard Capital upgraded shares of Biogen Idec (NASDAQ: BIIB) to Buy from Hold on valuation after their physician survey indicated solid sales growth in the company's MS franchise.
Calyon upgraded Data Domain (NASDAQ: DDUP) to Add from Neutral based on positive channel checks and valuation.
Goldman added Buckeye GP (NYSE: BGH) to the Conviction Buy List.
Alcatel-Lucent (NYSE: ALU) was upgraded to Hold from Sell and Ericsson (NASDAQ: ERIC) was raised to Hold from Reduce at WestLB.
Keefe Bruyette upgraded Cowen Group (NASDAQ: COWN) to OUtperform from Market Perform.
Analyst downgrades:
Deutsche Bank downgraded shares of Lloyds TSB Group (NYSE: LYG) to Sell from Hold as they believe loan loss risk will outweigh synergies from the acquisition of HBOS (HBOOY).
Citigroup downgraded shares of National Financial Partners (NYSE: NFP) to Hold from Buy and removed the stock from the Top Picks Live List after the company announced July and August revenues and said pressure continues. The firm lowered their target to $20 from $28.
Banc of America upgraded shares of Pepsi Bottling (NYSE: PBG) to Buy from Neutral on valuation as they expect better leverage in FY09 and believe an overly bearish outlook is priced in. The company's target was raised to $37 from $35.
Goldman upgraded Washington Mutual (NYSE: WM) to Neutral from Sell and said Q3 results were worse than expected but not as bad as the decline in shares suggests. The analyst said WaMu's capital and reserves appear stable and that the company might be able to avoid another capital raise. WaMu's target was raised to $4 from $5.
Greenhill & Co (NYSE: GHL) was raised to Outperform from Market Perform at Wachovia.
F5 Networks (NASDAQ: FFIV) was upgraded at JP Morgan to Overweight from Underweight.
Jefferies downgraded PharmaNet Development (NASDAQ: PDGI) to Underperform from Buy following the lowered guidance as they believe the company's execution and cost control problems have not been solved. The company's target was lowered to $15 from $27.
JP Morgan downgraded shares of Ericsson (NASDAQ: ERIC) to Underweight from Neutral to reflect their weak outlook for the company's Sony Ericsson (NYSE: SNE) handset unit.
Deutsche Bank downgraded shares of Danaher (NYSE: DHR) to Hold from Buy on valuation and concerns about the company's FX exposure.
Best Buy (NYSE: BBY) was cut to Neutral from Buy at UBS.
Portugal Telecom (NYSE: PT) was lowered to sell from Neutral at UBS and to Underweight from Neutral at JP Morgan.
Jefferies initiated Massey Energy (NYSE: MEE) with a Buy rating and $80 target. The firm expects substantial margin improvement, free cash flow, and earnings growth with eastern utility coal inventory levels under pressure and a robust export and met coal market.
William Blair started BioMarin Pharmaceutical (NASDAQ: BMRN) with an Outperform rating. The firm expects strong EPS growth during 2008-2010, thinks the company's pipeline is underappreciated by the Street, and feels expectations have been reset to a reasonable level.
Friedman Billings initiated the Lodging sector with a Market Weight rating, starting InterContinental Hotels (NYSE: IHG) and Marriott (NYSE: MAR) with outperform ratings and targets of $16 and $34, respectively, and Starwood Hotels (NYSE: HOT) with a Market Perform rating.
Citigroup initiated Diamond Offshore (NYSE: DO) with a Buy rating and $126 target.
After hitting a one-year high of $75.29 last July, the stock has hit a new one-year low today. This morning, HOT opened at $36.81. So far today the stock has hit a low of $35.23 and a high of $36.82. As of 12:05, HOT is trading at $35.77, down 1.63 (-4.4%). The chart for HOT looks bearish and steady, 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 November bear-call credit spread above the $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 a 6.4% return in four and a half months as long as HOT is below $50 at November expiration. Starwood would have to rise by more than 39% before we would start to lose money. Learn more about this type of trade here.
HOT as been above $50 as recently as late May but has shown resistance around $39.50 recently. This trade could be risky if the company's earnings (due out on 7/24) are a positive surprise, but even if that happens, this position could be protected by resistance HOT might find at its 200-day moving average, which is currently around $50 and falling. Brent Archer is an options analyst and writer at Investors Observer.
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 HOT or MAR.
First the good news. While analysts had been expecting to see the company show earnings of 49 cents a share, the company was actually able to come in higher, with 51 cents per share. However, despite showing 2 cents better than expected, this still represents an 11% drop in earnings from continuing operations.
With so much uncertainty around the company going into this morning's earnings report, you may assume that beating its number by 2 cents would have the stock moving higher in premarket trading. Well, you would be wrong. The stock is actually trading down a little more than 6% following the news.
Boeing (NYSE: BA) shares lost more than 2.2% in premarket trading after saying its second-quarter results will include a charge of about 22 cents a share. Boeing still expects per-share profit of $5.70 to $5.85 in 2008 and $6.80 to $7 in 2009.
Wachovia (NYSE: WB) named Treasury Undersecretary Robert Steel chief executive on Wednesday after a nearly six-week search for a new leader. It also said it may lose $2.6 to $2.8 billion during the second quarter.
Yahoo Inc. (NASDAQ: YHOO) said it would open a new search tool Thursday called "Build Your Own Search," or BOSS. Yahoo! will share its technology with third-party developers in hope their creativity could help it preserve its independence by regaining some lost ground in the lucrative Internet search advertising market. Two specialty search services, Hakia and Me.dium, already have agreed to participate in the BOSS program.
Apple Inc. (NASDAQ: AAPL) is opening its online App Store for iPhone software on Thursday. The App Store will let iPhone users choose from over than 500 software applications to download, including games, educational programs, mobile commerce and business productivity tools. Some say the store is a far more important development than the iPhone 3G, as it could make the iPhone's operating system dominant among its competitors.
The earnings season was officially launched last night with Alcoa Inc. (NYSE: AA) reporting better than expected numbers, and tomorrow we are going to see another big name, Marriott International (NYSE: MAR) report its second quarter numbers.
The company is due to report its current earnings prior to the market open, and going into tomorrow's report analysts are looking to see the company show 49 cents per share on $3.15 billion in revenues. The housing slump over the past year has definitely been hurting hotel operators, so it will be interesting to see what kind of quarter Marriott is able to show to its investors.
The last time the hotel chain released its quarterly numbers was back on April 17, when it matched analyst estimates for its first quarter with 33 cents per share. The stock made a brief rally following the release, but over the past month has been in a solid downward trend.
The new quarter brings with it a new earnings season. While the earnings crunch doesn't begin in earnest until the following week, Alcoa as usual helps kick things off this coming week.
One of the world's leading producers of aluminum, Pittsburgh-based Alcoa Inc. (NYSE: AA) is scheduled to report second-quarter results Tuesday after market close. Analysts surveyed by Thomson Financial on average expect the company to report net income of 68 cents per share on revenue of $7.4 billion. That's down 16% from EPS a year ago. Alcoa has missed estimates in two of the past five quarters -- by four cents in the previous quarter. Analysts have recommend buying AA for more than 90 days. Shares have fallen 10.3% year to date, but the long-term EPS growth forecast is 21.6%.
Beverage distributor Pepsi Bottling Group Inc. (NYSE: PBG) is scheduled to report its second-quarter results Tuesday morning. Analysts are looking for earnings of 75 cents per share, up 6.6% from the same period of the previous year, on revenue of $3.6 billion. PBG has offered up positive surprises recently, by a penny in the previous quarter. However, analysts recommend holding PBG, and have for more than 90 days. The long-term EPS growth forecast is 9.1%, which is better than the industry average. Shares have fallen 27.6% year to date.
MOST NOTEWORTHY: Hotels, Continental AG and VNUS Medical were today's noteworthy downgrades:
Oppenheimer downgraded shares of Marriott International (NYSE: MAR), Intercontinental Hotels (NYSE: IHG) and Choice Hotels (NYSE: CHH) to Perform from Outperform to reflect recent weakness in the leisure segment and expectations for weakening transient business travel.
Societe Generale downgraded shares of Continental AG (OTC: CTTAY) to Sell from Buy on valuation, as they recommend taking profits following the recent rally.
Piper downgraded shares of VNUS Medical (NASDAQ: VNUS) to Neutral from Buy on valuation following the company's patent victory.
OTHER DOWNGRADES:
Goldman removed China Netcom (NYSE: CN) from the Conviction Buy List.
For the quarter ended Sept. 5, Marriott's 
U.S. stock futures were flat to lower Thursday morning following the 
Even if the national headlines weren't already providing enough focus on the economy, plenty of economic data is due out as the month and the quarter wind down. U.S. economic data scheduled to be released this week include:
.gif){kind=logo}
The earnings season was officially launched last night with 
The new quarter brings with it a new earnings season. While the earnings crunch doesn't begin in earnest until the following week, Alcoa as usual helps kick things off this coming week..gif){kind=logo}
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
