Poor Office Depot (NYSE: ODP). Have you checked the price of the retailer's stock lately? It closed on Wednesday with a value of $2.10. It actually rose over 11% that day upon news of its third-quarter earnings. I can assure you that I wasn't buying the stock.
The numbers didn't tell the story of a company that would make a worthy addition to a stock portfolio hell bent on hanging tough during a market meltdown. Instead, the 7% revenue decrease and the loss per share, on an adjusted basis, of $0.01 relate a tale of a business that one should ignore. At least that's the way I see things. Comps in the North American retail division were horrible. The return on invested capital as calculated by management took a significant drop. Let's face it, Office Depot just isn't cutting it. Granted, the economy is wreaking havoc on the business, but come to think of it, I don't really have a good picture of what the brand is supposed to be about. Well, I know it's about office supplies, but why should I shop there as opposed to Staples (NASDAQ: SPLS) or OfficeMax (NYSE: OMX)? Good question, huh? Looks like the retailer needs to get the message out as to why the shopping experience at its locations is of a higher value compared to the office stores mentioned. For that matter, I'm sure a lot of people use Wal-Mart (NYSE: WMT) to pick up office supplies too. My point is that management needs to step up its game and create some better marketing programs for its stores. Be creative like Staples. That "easy button" device is turning into a cool cultural icon (well, I might be exaggerating, but I think it's creative, at any rate).
Earlier, I said "at least that's the way I see things" in terms of my opinion about the sad state of Office Depot, but I suppose I should point out that there are obviously a lot of investors out there who don't see a lot to love when it comes to this chain. The stock is down over 63% on the one-month period at the time of this writing. I see no reason to speculate on this business. The economy isn't getting better, and Office Depot just doesn't seem to be in a strong position. What will it take to turn things around? Like I say, in addition to hoping for an improved macro climate, come up with a better advertising campaign, build a more intense connection with the consumer. Office supplies are commodities, but shopping experience is not. That's the opportunity. Differentiating a brand from the competition based on things like customer service and an easy time of it at the checkout register is a traditional strategy in the retail industry. If Office Depot can offer something in that area, it should let me know about it. Since just about every retailer is struggling to keep the traffic coming into their chains, now is the time to exploit the other guy's weakened state and grab every customer possible.
Disclosure: I don't own any company mentioned; positions can change at any time.
Today and yesterday will go down in the history books as THE BAILOUT DAYS. The market was up sharply on record volume and short squeezes almost everywhere after the government bailout plans and the ban on short selling financial stocks. As the advance-decline line was massive with 85% NYSE stocks and 71% of NASDAQ stocks up on last look today, we wanted to mostly cover some of the ones which failed to chase the market. Here are today's unofficial closing bell averages: DJIA 11,385.51 +365.82; +3.32% NASDAQ 2,264.83 +65.73; +2.99% S&P500 1,250.90 +44.39; +3.68% 10YR T-Bond 3.769% +0.332% 52-week lows Top Analyst Upgrades Top Analyst Downgrades
The biggest winner of the troubled financial stocks in today's final minutes was American International Group (NYSE: AIG). There was no news from the company, it was all the bailout and barring of short sales in the stock. Its shares were up more than 57% at $4.24 in today's final minutes before the close.
As we wanted to focus on the stocks that lagged today, here is that list of key stocks....
Yahoo! Inc. (NASDAQ: YHOO) was down 4% at $20.02 in the final minutes before the close but shares had been down as low as $19.27 today. Its loss of search market share again hurt the stock and day traders pounded it early on.
Staples Inc. (NASDAQ: SPLS), a supplier of office products and a fierce competitor of both OfficeMax (NYSE: OMX) and Office Depot (NYSE: ODP), reported earnings for the fourth quarter yesterday. Excluding an extra calendar week, Staples saw its net sales rise by 8% to $5.3 billion and its diluted earnings per share rise by 15% to $0.47. For the full year, again excluding the extra week, net sales increased 9%; adjusted diluted earnings per share rose by 15%, coming in at $1.42. The full-year results included various adjustments related to tax issues, litigation, and stock compensation.
The numbers are okay, I suppose, but they don't necessarily make me want to jump into the stock. For one thing, same-store sales for North America declined 3% for the year (they did rise a modest 2% in Europe, however). For another, the stock is only yielding about 1.5% right now -- I'd wait for a bigger yield before thinking about Staples. Yes, it's true that the company increased its annual dividend by 14%, but I'll tell you something about that -- I am not a fan of annual dividends. I'd rather get my payout spread throughout the year.
Staples is a major brand in office supplies, and I do shop there. But nothing about this earnings report makes me want to check the retailer out any further, at least at this time. I'll have to see a few more quarters to see how the company handles the current economic malaise; for now, there are better ideas out there for one's investment dollars.
OfficeMax Inc. (NYSE: OMX) shares are trading higher this morning after the company reported a 24% rise in fourth-quarter profit, helped by lower costs and expenses. Excluding one-time items, OMX earned 65 cents per share, well above Wall Street forecasts of 52 cents per share. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on OMX.
After hitting a one-year high of $55.40 in last February, the stock hit a one-year low of $17.12 in January. OMX opened this morning at $23.87. So far today the stock has hit a low of $23.25 and a high of $24.90. As of 10:30, OMX is trading at $23.75, up $1.61 (7.3%). The chart for OMX looks bullish but deteriorating slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $17.50 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. This particular trade will make a 4.2% return in just two months as long as OMX is above $17.50 at April expiration. OfficeMax would have to fall by more than 26% before we would start to lose money.
OMX hasn't been below $17.50 by more than a few cents in the past year and has shown support around $23 recently. This trade could be risky if the US economy continues to worsen, but even if that happens, this position could be protected by the support the stock might find at its 50-day moving average, which is around $23.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in OMX.
While earlier this month, OfficeMax (NYSE: OMX) reported a solid third quarter due largely to cost-cutting and the weak dollar, office supply leader Staples' (NASDAQ: SPLS) third quarter report this week was more like that of second-place rival Office Depot (NYSE: OPD)'s third-quarter report last week. That is, profits and domestic same-store sales fell. However, Staples managed to beat expectations (low expectations though they were), sending share prices up after being dragged down with OfficeMax and Office Depot following their reports.
Staples reported Q3 net income of $274.5 million, or 38 cents per share, compared with $289.9 million, or 39 cents per share, in the same period last year. A $38 million charge from the settlement of an employee class-action suit shaved 4 cents per share from Staples' earnings, yet the latest quarter's profit was still 42 cents per share, beating the consensus EPS forecast of analysts surveyed by Thomson Financial, who had expected 40 cents per share.
As Office Depot executives did last week, Staples executives said they expect weak consumer spending due to the housing slump and credit market difficulties to continue into the new year. Yet so far Staples' share price has risen, from a 52-week low of $19.69 before the Q3 report, to close at $23.51 on Wednesday. That's about seven cents shy of halfway from that low back to the 52-week high of $28.00 from mid December of 2006.
The consensus forecast of analysts surveyed by Thomson Financial is for earnings of 48 cents per share for the fourth quarter (up from 46 cents a year ago), or $1.42 per share for the year (up from $1.28 a year ago). The consensus recommendation is to buy Staples, with forecast growth of 20.4 percent over the next three to five years.
This morning, office goods retailer Staples Inc. (NASDAQ: SPLS) reported its second quarter earnings results, matching analyst estimates for its most recent quarter. Analysts had been expecting to see the company earn 25 cents per share, and that was exactly what Staples came through with, as net income was $178.8 million.
While it is good to see the company hit analyst estimates, the stock is still going to be under some pressure this morning after offering a lower full year earnings growth forecast from its previous estimates. In earlier statements, the company had put forth full year guidance of somewhere in the range between 15% and 20% growth. Now the company is predicting that earnings will grow at "about" 15%.
In premarket, the stock is trading down 1.3%, dropping 31 cents to $23.00.
OfficeMax Inc. (NYSE: OMX) opened at $36.00. So far today the stock has hit a low of $35.61 and a high of $36.87. As of 11:00, OMX is trading at $35.98, up $0.87 (2.4%).
After hitting a one year high of $55.40 in February, the stock fell to a year low of $32.08 late last week. Shares rose yesterday following a better than expected earnings report, and the stock continues to climb today after JP Morgan upgraded OMX from neutral to overweight. Technical indicators for OMX are bearish 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 September bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 8.7% return in just seven weeks as long as OMX is above $30 at September expiration. OMX would have to fall by more than 16% before we would start to lose money.
OMX has not been below $30 at all in the past year and has shown support around $32.80 recently. This trade could be risky if OMX continues to slide, but after a positive earnings report yesterday, this stock could possibly see some upward momentum build.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in OMX.
Friedman Billings believes Symantec's (NASDAQ: SYMC) fundamentals are about to show significant improvement over the next year and upgraded shares to Outperform from Market Perform.
JP Morgan raised OfficeMax (NYSE: OMX) shares to Overweight from Neutral on valuation.
Qwest (NYSE: Q) was upgraded to Sector Outperformer from Sector Performer, expecting revenue growth to be driven by the improving enterprise business. JP Morgan added Qwest to its Focus List.
Metlife (NYSE: MET) was upgraded to Buy from Neutral at Merrill, based on valuation...
OTHER UPGRADES:
ValueClick (NASDAQ: VCLK) was upgraded to Sector Perform from Underperform at Pacific Crest.
Penn West (NYSE: PWE) was upgraded to Sector Perform from Underperform at RBC Capital.
Friedman Billings upgraded Cubic (AMEX: CUB) to Market Perform from Underperform.
Morgan Stanley upgraded shares of Jones Apparel (NYSE: JNY) to Equal Weight from Underweight.
Broadcom (NASDAQ: BRCM) was raised to Sector Outperformer from Sector Performer at CIBC.
The market spent most of the day in the red, but shot up in the last hour to close in the green. The NYSE had volume of 4.1 billion shares with 1,398 shares advancing while 1,906 declined for a gain of 18.55 points to close at 9,573.05. On the NASDAQ, 2.9 billion shares traded, 1,263 advanced and 1,810 declined for a gain of 7.6 to 2,553.87.
In options there were 9.0 million puts and 7.2 million calls traded for a put/call open interest ratio of 1.25. Bristol-Myers Squibb (NYSE: BMY) saw heavy volume on the December 32.50 calls (BMYLZ) with over 52,000 options trading. ALCOA Inc. (NYSE: AA) saw heavy volume on the August 47.50 calls (AAHW) with over 35,000 options trading. Valero Energy (NYSE: VLO) saw heavy volume on the August 75 calls (ZPYHO) with over 34,000 options trading. General Motors Corp. (NYSE: GM) saw heavy volume on the September 32.50 puts (GMUZ) with over 53,000 options trading.
The CBOE S&P 500 Volatility Index (NASDAQ: $VIX) saw heavy volume on the August 25 calls (VIXHE) with over 55,000 options trading. The CBOE Volatility Index is a measure of option volatility and effectively a fear index of the market. The VIX jumped from 15.00 area in the beginning of July to a recent reading of 23.67 (see chart). The index being up indicates that there is still fear in the market. The heavy call option activity at the 25 strike represents a bet that fear will increase or a large insurance policy against further market downturns.
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.
While the market plummeted 311 points today on loan worries; it is easy for people to forget the market is still up. Last week when the Dow broke 14,000; it was up 12.3% for the year. Now the market is up 8.1%. But are we really in a crisis? Market corrections are a normal part of the action and we will live through it. People celebrate when their favorite retail stores have a sale and drop prices; but when the stock market has a sale they panic.
The NYSE had volume of 4.2 billion shares with 313 shares advancing while 3,036 declined for a loss of 275.98 points to close at 9,654.38. On the NASDAQ, 3.5 billion shares traded, 553 advanced and 2,583 declined for a loss of 48.83 to 2599.34.
The options market saw about two and have time normal activity with 11.3 million puts and 8.6 million calls for a put call ratio of 1.3. A lot of this volume was on the indexes we usually ignore index option volume because it isn't that interesting by the PowerShares QQQ Trust ETF (NASDAQ: QQQQ) saw heavy volume on the August 50 calls (QQQHX) with over 109,815 options trading and the 49 calls (QQQHW) moved over 84,000 contracts. On the put side of things there were a lot of people buying insurance with the August 48 puts (QQQTV) moving 147,000 options trading and the August 49 puts (QQQTW) counted over 122,000 options traded. Apple Computer (NASDAQ: AAPL) saw heavy volume on the August 150 calls (APVHJ) with over 74,816 options trading as the stock moved up 6% today. General Motors (NYSE: GM) saw heavy volume on the January 40 calls (GMAH) with over 33,000 options trading.
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Mr. Kersten does own Office Depot Stock.
Yes, it's June already, and as the heat begins to rise, so does rumor rage. PACKETEER INC (NASDAQ: PKTR)
On the block? If some investors have their way it is. The developer of wide area network, or WAN, Application Optimization systems expects first quarter revenues to fall about 20% from the fourth quarter's $42.7M. Leading the insurgency is "activist investor" Elliott Associates which holds 6.3% of the shares. In a letter to the firm's board, Elliott wrote that the company has "proven unable" to take advantage of its "leading technology." Better to be in the arms of a bigger company? The vultures think so.
Quicker than you can strum your guitar, this number appears to be up. Up for sale. The information is coming faster than a high strung solo. Goldman Sachs Group Inc (NYSE: GS) is playing the lead. What an auction it will be. For the leading retailer of musical instruments, the stock disappoints, the direct response business is out of tune. A Goldman analyst reportedly said the company is a turnaround candidate, but may sell. Talk about blowing your own horn. We hear the LBOs are lined up right outside the Westlake Village headquarters in California. Everyone have a number?
How many pesetas, uh Euros, does it take to make about a billion dollars? Ask Spain's LaNetro Zed. That's about what some think they're offering to buy InfoSpace, the developer of tools and technology that helps "regular" folk find content and information on the Internet or on their mobile. Privately-held LaNetro Zed provides mobile phone content and services. What's the hook here that they'd pay that much? Access to the U.S. market, of course. The answer, by the way, is about 800M Euros. OFFICE DEPOT INC (NYSE: ODP)
If you just lined up $1B worth of borrowing, which could go up to $1.25B, what would you do with it? Buy something, maybe? Sound like a good idea? Well, that's what Office Depot just did, and may do. Now who are they going to buy? OfficeMax Inc (NYSE: OMX), maybe? Maybe. If true, then, along with Staples Inc (NASDAQ: SPLS), there would be just two biggies in retail office supplies, and the Depot would be number one.
And we're off! The stock has been on an upward trend for about a month. Volume is increasing. Sybase Inc (NYSE: SY) is in the lead to buy the phone browser and messaging company. What about Harbinger's push on the inside? Now it's BridgePort Networks in the pack. Will Openwave overtake it? The field is tightening. Others could move up and take the lead. No one knows for sure how this one gwill end, folks. What a finish it's going to be!
According to the Telegraph, citing Cadbury-Schweppes ADS (NYSE: CSG), two rival private-equity groups are preparing to bid for the U.S. beverages arm of the company, with bids in the GBP8B range.
The Times of India reported that Citigroup Inc (NYSE: C) is putting its captive business process outsourcing arm, which could be worth between $1B-$1.5B, on the block.
Today and yesterday will go down in the history books as THE BAILOUT DAYS. The market was up sharply on record volume and short squeezes almost everywhere after the government bailout plans and the ban on short selling financial stocks. As the advance-decline line was massive with 85% NYSE stocks and 71% of NASDAQ stocks up on last look today, we wanted to mostly cover some of the ones which failed to chase the market. Here are today's unofficial closing bell averages:
While earlier this month, 
This morning, office goods retailer 
The market spent most of the day in the red, but shot up in the last hour to close in the green. The NYSE had volume of 4.1 billion shares with 1,398 shares advancing while 1,906 declined for a gain of 18.55 points to close at 9,573.05. On the NASDAQ, 2.9 billion shares traded, 1,263 advanced and 1,810 declined for a gain of 7.6 to 2,553.87.
While the market plummeted 311 points today on loan worries; it is easy for people to forget the market is still up. Last week when the Dow broke 14,000; it was up 12.3% for the year. Now the market is up 8.1%. But are we really in a crisis? Market corrections are a normal part of the action and we will live through it. People celebrate when their favorite retail stores have a sale and drop prices; but when the stock market has a sale they panic. .gif){kind=logo}
Yes, it's June already, and as the heat begins to rise, so does rumor rage..gif){kind=logo}
Closing Bell: Stocks slump as AMD, AT&T, GM and Merck decline
Global Q&A: A rocky road, but profits ahead
Could oil go as low as $40?
