Supervalu (NYSE: SVU), whose competitors include Kroger (NYSE: KR), Safeway (NYSE: SWY), and Wal-Mart (NYSE: WMT), reported results for its fiscal second quarter. Net sales unfortunately didn't budge much at all. They came in essentially flat at $10.2 billion. Earnings per share on an adjusted basis were $0.61. According to this article, the expectations were for $0.69 per share. So, as can be seen, Supervalu lost the analyst-expectations game by a wide margin. Last year's adjusted earnings were $0.64 per share. Not only are those numbers disappointing, but comps saw a decrease of over 1%. And the gross margin suffered as well.
So, we have an earnings miss, flat revenue growth, and a decline in the bottom line. What does all that add up to in terms of market reaction? The stock sees a bid. At the time I began writing this piece, it was up 2.5%. As I found with Kroger, the market may be looking at supermarket businesses as defensive plays. Of course, at the time I covered Kroger, that company's numbers were a lot better than Supervalu's.
However, last time I checked the stock before sending this piece in, it was becoming more volatile along with the market, moving from green to red in quick succession. Given the weak data, I can't say that I'd be considering Supervalu right now. It is true that people will continue to shop at supermarkets even during economic downturns, but I'd rather look at something the supermarket sells as opposed to the supermarket itself to get defensive. I'd rather align my portfolio with the stronger brand equity of perhaps a Kraft (NYSE: KFT) or a Procter & Gamble (NYSE: PG) than a Supervalu.
Disclosure: I don't own any company mentioned; positions can change at any time.
When a stock comes in with earnings under analyst estimates, it usually gets punished. But in today's market any positive news is enough to keep shares in the green, and that is what we are seeing today with Safeway (NYSE: SWY) which is up strongly despite missing estimates for its third quarter.
First, let's get the bad news out of the way. Going into this morning's earnings announcement, analysts had been looking for earnings of 47 cents per share, but the company's actual earnings missed by a penny, with a reported 46 cents a share. With today's market environment, that in and of itself could have been enough to send shares crashing, but instead the stock is actually trading up 5.6% to $23.00, and earlier in the day was up as high as $23.75. Sounds crazy, but there is some good news to follow.
What the market is really interested in now is a company's forward looking estimate. Here the company showed real strength, and stood by its full year forecast of $2.25 to $2.35. Revenues during its third quarter were also strong, as the company showed revenues of $10.17 billion, verses estimates of $10.08 billion.
Alcoa Inc. (NYSE: AA) kicks off the new earnings seasons when it reports third quarter results on Tuesday. The Pittsburgh-based aluminum producer, which celebrated its 120th anniversary with the launch of its website, is expected to post a profit of 54 cents per share, down 15.6% from the same quarter of last year, on revenue of $7.2 billion, down 2.1%. While Alcoa has tended to fall short of estimates in recent quarters, in the second quarter it did offer a positive surprise of almost 3%. Its long-term earnings per share growth forecast is 14.8%, a little less than the S&P 500, and analysts polled by Thomson Financial on average recommend buying Alcoa, and have for more than 90 days. Shares reached a new 52-week low last week, and are down 48.9% from a year ago.
General Electric Co. (NYSE: GE) is also expected to report a slip in earnings this week. Analysts anticipate that the conglomerate will post a third-quarter profit of 45 cents per share, down just 6.3% from a year ago, on revenue of $47.7 billion, which is up 12.1%. GE has tended to eke out small positive surprises in recent quarters, by less than 1% in the second quarter. GE's long-term earnings per share growth forecast is only 11.0%, which is less than the sector average and the S&P 500. The consensus recommendation has recently swung to hold GE, but Warren Buffett has bought in to the tune of $3 billion. GE also reached a new 52-week low last week as the markets tumbled. GE shares are down 48.1% from a year ago.
TheStreet.com's Jim Cramer says these stocks will be killed today, and attentive investors can get them on the cheap.
Oh my, Costco (NASDAQ: COST) (Cramer's Take). I didn't expect that one. That's the best -- it's a shocker. I can't recall how many years it has been since I have seen the words "well below" and "Costco" together.
You can see how it happened: Costco held out. They didn't raise prices. Almost everyone else is raising prices and many are losing customers -- look at Safeway (NYSE: SWY) (Cramer's Take) or Supervalu (NYSE: SVU) (Cramer's Take). But two held out: Costco and Wal-Mart (NYSE: WMT) (Cramer's Take).
When you lump in the ridiculous price hikes that Costco had to take in its gasoline business, you see that it simply wasn't making much money selling anything.
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%)
Though the quarter is winding down, there are still earnings reports to come, including Walgreen Co. (NYSE: WAG) and Kroger Co. (NYSE: KR). Both companies are expected to report profit growth this coming week.
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided positive surprises in four of the past five quarters -- by two cents in the previous quarter.
Based in Deerfield, Ill., Walgreen is the largest drug store chain in the U.S. in terms of sales, and has more than 6,200 stores in the U.S. and Puerto Rico. In the past year, the company's revenues were $53.7 billion and its net income totaled $2.0 billion. Its long-term EPS growth forecast is 14.0%, which is less than the retail industry average, as well as less than that of rival CVS Caremark (NYSE: CVS). The consensus recommendation of analysts has recently shifted from hold to buy Walgreen.
The share price is up 4.0% since the beginning of the year, and up from 11.6% from a year ago. It trades at a P/E ratio of 20.68. Shares closed Friday at $41.35.
Private equity giant Blackstone Group (NYSE: BX) and leading grocery chain Kroger Co. (NYSE: KR) are scheduled to report earnings this week. Here's a quick peek at them ahead of results.
Blackstone went public in 2007 and has yet to beat earnings estimates. When the company reported third-quarter results back in November, earnings came to 21 cents per share, well below the consensus forecast of analysts polled by Thomson Financial of 30 cents, as well as the previous quarter's earnings of 46 cents (its first report after the IPO). For the current quarter, analysts expect only 19 cents per share, and $1.47 for the year.
The analysts' consensus recommendation is to buy Blackstone, with 3 of 8 analysts rating it a strong buy. Shares have fallen since the IPO to a low of $14.16 last week, but closed Friday at $14.58.
For news about Blackstone that could influence the earnings results, see BloggingStocks' Blackstone coverage.
Shares in supermarket chain Safeway (NYSE:SWY) dropped 7% yesterday setting up investors with an interesting investment opportunity. The stock is off more than 25% from its' 52-week high. Investors were spooked about a slowdown in same store sales. I think investors need to take a second look at the company.
With an economic slowdown, many consumers will turn to home made food as opposed to eating out. This will be a big benefit to the supermarket. Another catalyst for the stock is that, unlike other food retailers like restaurants, they are able to pass on rising costs to the consumer. This will help keep their bottom line from dropping.
At these levels for investors looking for an inflation protected portfolio, you may want to take a look at Safeway.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no positions in any stock mentioned as of 2/22/08.
Among companies reporting quarterly earnings on Thursday were Safeway Stores Inc. (NYSE: SWY), the largest food retailer in North America, and Newmont Mining Corp. (NYSE: NEM), one of the world's largest gold producers.
Despite ongoing efforts to upgrade the image of its stores, Safeway, which reported that fourth-quarter earnings in-line with the consensus estimates of analysts surveyed by Thomson Financial, also reported that same-store sales slowed.
The quarterly earnings came to $301.1 million, or 68 cents per share, for the period that ended December 29, down 2% from $307.9 million, or 69 cents per share, in the same quarter of 2006, when tax benefits lifted results. Excluding that gain, earnings per share would have climbed by more than 11%. Fourth-quarter revenue rose 7% to $13.36 billion, which beat the analysts' average estimates.
Despite signs of a slowdown, the fourth quarter capped Safeway's most profitable year since 2001. The company earned $888.4 million, or $1.99 per share, on sales of $42.3 billion, compared to earnings of $870.6 million, or $1.94 per share, on revenue of $40.2 billion in 2006. For 2008, Safeway forecast earnings of $2.25 to $2.35 per share, in-line with analysts' expectations.
Safeway shares fell more than $3 in morning trading, reaching a new 52-week low of $28.80.
The market's choppy/consolidating pattern (or perhaps worse) continues, with several unknowns weighing on the minds of investors. It goes without saying then, that in this market defensive stocks represent a prudent addition to almost any portfolio. The grocery store sector is a dependable defensive, and in this category, Safeway is worth a review.
Safeway Inc. (NYSE: SWY) is one of North America's largest grocery store chains, with more than 1,700 stores, primarily in the West, Midwest, and Mid-Atlantic United States. Safeway also operates the Vons, Dominick's Finer Foods, Carr-Gottstein (Alaska), Genuardi's, and Randall's Food Market Chains (Texas). SWY also has an international presence via ownership of about 125 Casa Ley food/variety stores in Mexico.
Other positives: Safeway has struck the right balance between its high quality/wide selection Safeway stores and Safeway supercenters: the former, via remodeling, better reflect middle-income customers' needs, and the later have displayed solid traffic. This winning formula leads many analysts to conclude that Safeway should be able to build on its 8% grocery store sector market share.
The risks? Analysts are keeping an eye on intensifying competition: wholesale operations and warehouses represent the biggest threat, as they boast comparable economies of scale.
The First Call mean rating for SWY is: Hold [15 firms]. Mean 2008 target: $39.00 [high: $42, low: $34].
Stock Analysis: Safeway is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from SWY's shares. Sell/Stop Loss if you were to purchase shares in this company: $23.
Supervalu (NYSE: SVU), whose competitors include Kroger (NYSE: KR), Safeway (NYSE: SWY), and Wal-Mart (NYSE: WMT), reported results for its fiscal second quarter. Net sales unfortunately didn't budge much at all. They came in essentially flat at $10.2 billion. Earnings per share on an adjusted basis were $0.61. According to this article, the expectations were for $0.69 per share. So, as can be seen, Supervalu lost the analyst-expectations game by a wide margin. Last year's adjusted earnings were $0.64 per share. Not only are those numbers disappointing, but comps saw a decrease of over 1%. And the gross margin suffered as well. 
When a stock comes in with earnings under analyst estimates, it usually gets punished. But in today's market any positive news is enough to keep shares in the green, and that is what we are seeing today with 
Alcoa Inc.
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 
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided 
Blackstone went public in 2007 and 
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