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.
Tech stocks are following financials into the toilet. Yesterday, Microsoft (NASDAQ: MSFT), the world's largest software company, said it was taking a look at hiring. That is probably code for the firm saying it plans to cut or level out expense growth.
According to Reuters, Microsoft said, "Given the current economic environment we are taking the prudent step of reviewing our hiring plans and will make some adjustments as appropriate."
There had been some hope that technology spending would be close to immune to a slowing economy. Recent earnings from Oracle (NASDAQ: ORCL) confirmed that. But, the rapid deteriorating of GDP improvement and employment are leading many analysts to think that economic conditions have gotten much worse in the last two weeks.
In just five days, shares of IBM (NASDAQ: IBM) are off over 12%. Shares in Hewlett-Packard (NYSE: HPQ) are down 8% over the same period.
Tech has been one of the rapid growing sectors in the economy over the past two years. If hiring stops for these companies, or if the industry goes into a cycle of layoffs, it could deepen the recession very quickly.
Douglas A. McIntyre is an editor at 247wallst.com.
Oracle has tumbled over the past month or so, and if those in the know are still selling at $3 less than recent August prices, then that is ringing some alarm bells for me. Granted, insider activity is not a perfect indicator, since he might have had needed cash for some reason, but if Ms. Catz thought the stock would be rising in the next few weeks, then she probably would have waited to sell, right? 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 ORCL.
This morning, ORCL opened at $20.19. So far today the stock has hit a low of $19.55 and a high of $20.19. As of 12:15, ORCL is trading at $19.78, down $0.53 (-2.6%). The chart for ORCL looks bearish and S&P gives ORCL a very positive 5 STARS (out of 5) strong buy ranking.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $21 range.
Oracle (NASDAQ: ORCL) reported earnings (pdf) on Thursday after the market closed. For the first quarter, the software company saw a top-line increase of 18%, with revenues coming in at $5.3 billion. On an adjusted basis, earnings per share grew 32% to $0.29 per share. Oracle beat expectations by 2 cents.
Moving to the statement of cash flows, I see nice growth there as well. Net cash from operations increased almost 20% to $3.2 billion. And the operating margin on an adjusted basis was nothing less than a delight as it went up by 350 basis points. That was a stellar increase, and the press release said that, at 40%, it was a record for the company. As far as I can tell, Oracle is doing a superb job of delivering some solid fundamentals for its shareholders. In fact, in the after-hours session on Thursday following this report, the company's stock traded up by nearly 7%. This morning, it is up 12% in pre-market trade.
I thought management did a great job in the quarter. But broken record that I am, I'll say that, if I had to buy in this sector, I'd probably first think of Microsoft (NASDAQ: MSFT), or maybe even IBM (NYSE: IBM). Consider that both Microsoft and Oracle have traded over the past 52 weeks in, relatively speaking, tight ranges. I'd rather get a quarterly dividend from a quality tech stock in this environment than just put my money down in anticipation of only a capital gain. It's just the way I'm thinking right now.
Disclosure: I don't own any company mentioned; positions can change at any time.
I talk to quite a few small business owners. And just a year ago, things looked pretty good.
But with the sudden credit crunch -- and slowing economy -- things have certainly turned for the worst. Unfortunately, I know a variety of people who have had to shut down their businesses. Hey, even mega companies, like Lehman Brothers (NYSE: LEH), are having a hard time staying afloat.
Well, this is the topic in a piece in the New York Times. Basically, it looks like many small business owners are looking for alternatives, such as full-time jobs (if they can find them) or going back to school.
Actually, this should be no surprise. Running a small business is extremely difficult and time-consuming. And, because of the lower margins, it doesn't take much for a profit to become a loss.
Moreover, some of the biggest problems are in ailing sectors, like housing, construction, finance, travel, and so on. Something else: rising energy and commodities prices are making things even worse.
No doubt, things look pretty glum. But keep in mind that some of the greatest businesses emerge from such times. After all, just look at Microsoft (NASDAQ: MSFT) and Oracle (NASDAQ: ORCL). These companies started during the mid 1970s, when the U.S. economy was mired in stagflation.
In other words, if you have a great idea for a business -- and want to take some risks -- then give it a shot.
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:
This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.
"Technically, Oracle (NASDAQ: ORCL) is now set up nicely in a base for a breakout," says Leo Fasciocco, a technical analyst who specializes in stocks breaking out above previous resistance levels.
In his Ticker Tape Digest, the newsletter advisor explains, "ORCL is in a good spot to be accumulated for a breakout, supported by favorable earnings prospects. And as a big cap play, it is most suitable for conservative investors."
"Oracle, based in Redwood City, California, sells a wide range of enterprise software solutions, including databases, middleware, and applications. With annual revenues of $22.4 billion, ORCL is one of the largest software companies. Its updates and product support are the most profitable segment of its operations. It accounts for 46% of revenues.
"The company has an active acquisition program that is a fundamental component of its strategy. ORCL has spent more than $28 billion in acquisitions the last four fiscal years.
"The stock's long-term chart shows a powerful run up to 40 during the 2000 bull market. It then went south with the stock market. It has since been working its way back. Short-term, the stock rallied from 18 to 23 and has formed a cup-and-handle base. That type of pattern is sometimes found with big caps. The stock is now set up nicely in a base for a potential breakout.
With concerns over recession, turmoil in the financial sector, fear of rising rates, high market volatility and a rising aversion to risk, many investors have been avoiding technology stocks.
Investors have feared that these economic headwinds will dampen both consumer spending for technology products and reduced capital expenditures for technology in the corporate sector.
Despite these concerns, some of the newsletter industry's leading advisors are looking beyond the current malaise and seeing longer-term value in some of the tech sector's leading players. They believe that much of the "bad news" is already reflected in the price of the shares, with little recognition being given to their longer-term potential.
For those willing to go against the crowd and buy, as they say, "while blood is running in the street," we offer a six-pack of technology stocks that the some top advisors considers to be among their favorite ideas.
According to independent tech research firm 451 Group, SAP (NYSE: SAP) has been trying to sell off its TomorrowNow division since January. Unfortunately, there were no bidders. As a result, SAP has decided to shut down the business.
SAP purchased TomorrowNow in 2005. It looked like a smart deal. After all, the company developed systems to make it easier to use alternatives to Oracle (NASDAQ: ORCL)'s maintenance customers (known as the Safe Passage Program).
So why the dearth of interest for TomorrowNow? Well, Oracle filed a lawsuit against the company in March 2007. The allegation was that TomorrowNow made improper downloads from Oracle's servers.
No doubt, such a thing can be scary for any possible suitor.
The irony is that TomorrowNow customers – which amount to about 225 – will probably have no choice but to return to Oracle.
After hitting a one-year low of $18.18 in February, the stock hit a one-year high of $23.57 in June. ORCL opened this morning at $20.89. So far today the stock has hit a low of $20.65 and a high of $21.20. As of 1:15, ORCL is trading at $21.14, up 37 cents(1.8%). The chart for ORCL looks bearish and steady, while S&P gives the stock its highest 5 Stars (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $18 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 7.1% return in just two months as long as ORCL is above $18 at September expiration. Oracle would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
ORCL hasn't been below $18 at all in the past year and has shown support around $20 recently. This trade could be risky if the company's earnings (due out in mid September) come out before expiration and disappoint, but even if that happens, this position could be protected by the support the stock might find at its year low, which is just above $18.
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 owns and controls positions in ORCL and IBM.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
I've said it before: the second quarter is going to be the inverse of the first. Expectations going in were simply too high.
What I find interesting is that Oracle (NASDAQ: ORCL), Red Hat (NYSE: RHT) and Research In Motion (NASDAQ: RIMM) have all taken down guidance due to the sluggishness they're starting to see in their businesses.
What the Street seems to be ignoring is that the dollar has been crushed for over a year now, which means that the currency tailwind is only getting weaker as the year drags on. If one uses $1.55 euro per dollar as a benchmark, the second-quarter effect was a 14% year-over-year currency tailwind.
In the third quarter, that drops to 10%; in the fourth, it will drop to 5%. Add in macroeconomic headwinds -- along with the fact that credit markets have been pushed back into a state of mild panic -- and it's a surefire recipe for a very tumultuous back half of the year.
I'm looking hard for reasons to be optimistic, but they seem to be thin on the ground. In the information technology (IT) sector, at least, we'll likely see a meaningful budget flush at the end of the year - if only because they'll be cut in a big way starting in 2009. This means that IT managers, if they even think they might need anything over the next year or so, need to use or lose whatever's left in their 2008 budgets come the fourth quarter.
This will create an environment where people will be calling the bottom for IT in the fourth quarter - but it's more likely to be the last hurrah before the bottom drops out.
The Dow Jones Industrial Average is down 150 points (at 10:15 a.m.). I guess that it was to be expected as we woke up to news that Goldman Sachs (NYSE: GS) downgraded investment banks. Wall Street is also worried about the outlook for tech stocks after both RIM (NASDAQ: RIMM) and Oracle (NASDAQ: ORCL) reported quarterly results Wednesday, giving a tepid outlook.
Then, final revision of first quarter GDP were released an hour before the open, and while growth was revised upward to 1% from an anemic 0.6% original estimate, the components weren't very encouraging. Consumer spending, which accounts for 70% of GDP, grew by 1.1%, the smallest gain since the second quarter of 2001, which was during the last recession. Also, corporate profits after taxes fell 7.8%, a higher decline than previously estimated. Housing, as measured by residential fixed investment plunged by 24.6%.
Also, looking at inflation, the price index for gross domestic purchases, a closely watched measure of inflation, rose at a 3.6% rate, up 0.1 percentage point from the preliminary estimate. Excluding food and energy, the price index was up 2.3%, which is above the Fed's preferred range of around 1.5% to 2% for that index.
One bright spot, as it has been awhile now, is that exports rose 5.4%, which was much better than the estimate of 2.8 percent in May.
Moving to the labor markets, weekly initial claims, which were also reported at the same time, were unchanged. But -- and a big But it is -- the better indicator, four-week average of new jobless claims, was at the highest level since October 2005 in the aftermath of Hurricane Katrina.
Yup, that pretty much sums up Oracle Corp. (NASDAQ: ORCL)'s recently delivered quarterly results. Strong. So strong, one could forget there is a slowdown in economic activity. So strong, no one remembers now Oracle's previous quarter scare (that the weak economy indeed would affect it and tech stocks). So strong, it has surpassed International Business Machines (NYSE: IBM) to become the second-largest software company in sales. It is no wonder then that the stock climbed 1.86% in after-hours trading to $22.97. It closed at $22.55.
By the numbers, Oracle's profit jumped 27% to $2.04 billion, or 39 cents a share, but excluding acquisition costs and some other expenses, profit rose to 47 cents a share. Revenue rose 24% to $7.28 billion. Oracle beat analysts' estimates on both counts. And this is just the tip of the iceberg; the results showed strength and improvement in many areas:
New software sales in the U.S. grew 22% and overall sales in the Americas, where the U.S. dominates, grew 18% after declining last quarter. Doesn't look like companies are cutting too much spending on software, does it? Keep in mind, growth in the region was indeed slower.
The segment that competes with SAP jumped 36% - a good example of Oracle's ability to bounce back.
Sales of new software licenses climbed 27% - it's amazing how Oracle managed to turn the trend on this number that concerned investors so much in the previous quarter. If that's not a good sign for future sales, what is? And if that doesn't give confidence in management and strategy, what does?
Operating margin for the quarter was 48% - better than Microsoft (NASDAQ: MSFT)'s, and that says it all.
The company, known for its acquisition strategy, closed its $8.5 billion purchase of BEA Systems Inc. in April. The acquisitions didn't just allow Oracle to grow to its second place, but gave it a diversity of products that helps it with sales and crossover sales.
One caveat: This quarter has always been known to be Oracle's best one. Still, the numbers don't lie, and this is one company that has been more than consistent.
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Analyst upgrades: 
Tech stocks are following financials into the toilet. Yesterday, 
I talk to quite a few small business owners. And just a year ago, things looked pretty good.
and 
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Last week's preview
With concerns over recession, turmoil in the financial sector, fear of rising rates, high market volatility and a rising aversion to risk, many investors have been avoiding technology stocks. 
According to independent tech research firm 
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
The Dow Jones Industrial Average is down 150 points (at 10:15 a.m.). I guess that it was to be expected as we 
Yup, that pretty much sums up 
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?
