After hitting a one-year high of $82.50 in October, the stock hit a one-year low of $58.87 on Tuesday. UTX opened this morning at $64.50. So far today the stock has hit a low of $62.58 and a high of $65.31. As of 12:45, UTX is trading at $63.82, up 2.71 (4.4%). The chart for UTX looks bearish and steady, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $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. For this particular trade, we will make an 8.7% return in just 4 months as long as UTX is above $50 at November expiration. UTX would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
UTX hasn't been below $58 at all in the past year and has shown support around $59 recently. This trade could be risky if the US military efforts in the Middle East slow down in the next few months, but even if that happens, it is tough to imagine military spending really decreasing by a significant amount.
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 UTX.
Nokia Corp. (NYSE: NOK) shares are up over 7.4% in premarket trading after the world's largest maker of handsets said second-quarter profit fell 61% to $1.75 billion, or 46 cents per share, while sales rose 4% to $20.87 billion. Excluding items, Nokia's profit rose 8% to $2.18 billion. Nokia beat estimates of earnings of 56 cents per share on $20.05 billion in revenue, according to Thomson Financial. The mobile phone maker slightly raised its forecast for the mobile phone industry, saying volume would grow 10% or more in 2008.
Continental Airlines (NYSE: CAL) are up again this morning after climbing 38% Wednesday with the rest of the airline stocks. Continental swung to a second-quarter loss, hurt by record high fuel prices and weakening economic conditions. Still the losses of $3 million, or 3 cents per share, or excluding one-time items totaled $25 million, or 25 cents per share, beat expectations of a loss of 49 cents per share.
Yum Brands (NYSE: YUM) shares are down 4.3% in premarket trading after it reported a second-quarter profit of $224 million, or 45 cents a share. Revenue rose to $2.65 billion from $2.37 billion a year ago. While this beat estimates, and while the company raised its earnings growth forecast for the full year to 12% from 11%, investors were concerned about rising food costs which hurt profit margins in the second quarter.
It seems that Apple Inc. (NASDAQ: AAPL)'s new 3G iPhone was sold out in Germany after less than a week. Deutsche Telekom AG's T-Mobile division sold 15,000 iPhones and it's not clear when Apple will be able to deliver more iPhones for the German market, Financial Times Deutschland reported.
I know it doesn't matter at all. Right now we are so stuck on the banking problems and on the companies bleeding from higher energy prices that nobody cares about all of this cash, which will be used to shrink equity. They won't care because the banks, brokers and homebuilders, and the hobbled companies that use oil, have to issue so much equity that you can't see the effect of the equity shrinkage. But it will eventually matter. It has to matter that Deere has taken out 10% of its stock in the last four years. It does matter that Black & Decker (NYSE: BDK) (Cramer's Take) has eliminated almost 20% of its equity. Emerson's taken out 5%, same with Boeing (NYSE: BA) (Cramer's Take). There's just a huge amount of equity being shrunk.
FedEx (NYSE: FDX) may be in talks to buy its rival European rival TNT, according to a report from the Financial Times. TNT shares have jumped 25% in Europe.
General Electric Co. (NYSE: GE) announced Monday it will supply parts for Gulfstream Aircraft Corp.'s G650 business jet in a deal worth potentially more than $100 million. Separately, GE said it would develop with Safran SA a new line of fuel efficient jet engines to compete with United Technologies Corp. (NYSE: UTX) Pratt & Whitney.
Apple Inc. (NASDAQ: AAPL) may have sold as many as 425,000 of its new 3G iPhones in the first three days after the handset made its debut, in line with projections and despite serious technical and activation problems. Apple and AT&T (NYSE: T) sold a combined 225,000 in the U.S. Gene Munster of Piper Jaffray & Co. predicts Apple will sell 4.08 million this quarter.
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%)
While some companies may be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it's appliance business and adding more to it's portfolio of aircraft and engine capability should be a good move. The Wall Street Journal (subscription required) reported today that GE hopes to improve its competitive position against Pratt & Whitney.
A response from a Pratt & Whitney spokesman played down the increased competition and said that although the company takes this GE move seriously it has a 45-year history producing small engines and holds a solid position in the market place. This type of comment is to be expected and has some validity, but that does not make it good news for P&W.
P&W is a division of another major giant industrial conglomerate United Technologies (NYSE: UTX). Both GE and UTX stocks were up in early morning trading today.
UPDATE: GE closed at $26.91 up $0.40 (1.51%). UTX closed at $61.05 up $1.35 ( 2.26%).
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 GE.
TheStreet.com's Jim Cramer says recent downgrades are killing whole industries, and they're coming at a terrible time.
You can't lose autos and aerospace. Yet that's what's happening. The devastating aerospace downgrade by Goldman yesterday had pin action galore, wrecking everything from United Tech (NYSE: UTX) (Cramer's Take) and Parker-Hannifin (NYSE: PH) (Cramer's Take) to BE Aerospace (NASDAQ: BEAV) (Cramer's Take). It took the whole frame down with it and made everything toxic. And it happens at a terrible time. It isn't like Honeywell (NYSE: HON) (Cramer's Take), which with a few days left in the quarter can come out defending itself. Goldman rolled a perfect strike.
One of the reasons that big newspapers like The New York Times are doing badly is that they often cover stories long after other media. They like to do long analysis pieces that look back on news. The efforts are usually a waste of time.
The paper decided to run a piece called "Wall Street's Fading Crush On G.E." According to the article, "These days, it's hard to find much love on the Street for what was once the bluest of blue chips."
Memo to The New York Times: Thank you for nothing.
The sentiment on Wall Street turned against General Electric (NYSE: GE) months ago. Not only did it miss earnings, but it became increasingly clear that the company was not rushing to dump underperforming assets like its industrial division.
Over the past five years, while GE shares are flat, the stock of another large U.S. conglomerate, United Technologies (NYSE: UTX) are up over 90%.
The Times may not have gone far enough in its analysis. Beyond being out of favor, GE is now a dog of a stock. Without a major change of direction, its share price is not going to recover.
Douglas A. McIntyre is an editor at 247wallst.com.
How the mighty have fallen, at least in the stock market. GE (NYSE: GE) trades near a 52-week low at $31.
Now, short sellers have added insult to injury. The short interest in GE has moved up 11 million to 68.7 million between May 15 and May 30. That percent increase is almost as high as the jump in the short interest at US Air (NYSE: LCC).
The fact that so many shares are bet that GE will fall further is extraordinary. The company still holds one of the best credit ratings of any corporation in the US. Its infrastructure business, the firm's largest division, continues to do remarkably well.
But investors are assuming that GE's industrial, medical and financial operations could have more bad quarters ahead of them.
Shares in rival conglomerate United Technologies (NYSE: UTX) have far outperformed GE during the last year.
That says a mouthful.
Douglas A. McIntyre is an editor at 247wallst.com.
"Dividend growth has become increasingly scarce on Wall Street," says says Chuck Carlson, an expert on dividend reinvestment plans. In his The DRIP Investor he looks at two stocks boosting their payouts.
"For the first time in five years, the number of companies in 2007 boosting their dividends declined nearly 6% from the previous year, according to Standard & Poor's. And the slowdown in dividend growth continued in the first quarter of 2008.
"The first quarter marked the seventh consecutive three-month period of year-over-year declines in the number of companies raising dividends. Through the first three months of this year, 19% fewer companies raised dividends than in the year-earlier quarter.
"Even more alarming, 83 companies decreased their dividends during the fi rst quarter, according to S&P. That's up from just 19 in the same period in 2007 and is the highest number of dividend decreases since 1991.
"Nevertheless, there are still plenty of companies willing to boost their dividends, and you can now buy such companies at bargain prices.
According to this article at CNBC, industrial manufacturer Honeywell (NYSE: HON) doesn't see the current recession (or slowdown, if you believe recession is too harsh a term) hurting its plans all that much. Shareholders of the company should certainly rejoice at management's assertion that the company will still be able to deliver somewhere between $3.70 and $3.80 in earnings per share for 2008.
Reaffirmation is always a good thing in a market as tempestuous as this one has been. The question is, when you see a news item such as this, what actionable inference can you take from it? In other words, should you be looking at Honeywell? Investors should indeed perform some due diligence on the company, because based on the current price of the stock, Honeywell isn't overly pricey. Plus, the stock is really close to a 52-week high. I'm not the biggest fan of buying at 52-week highs, but for those who believe in trading via chart science, a stock near the top end of a range is oftentimes attractive since, in theory, a majority of the weak holders will be out of it by that point.
But being patient for a pullback is usually a virtue with any strong stock. And here's something else to consider. Competitor United Technologies (NYSE: UTX), which has a similar dividend yield to Honeywell, is further away from its 52-week high, but well off its 52-week low. Does that make UTX more attractive? Possibly. And Goodrich Corp. (NYSE: GR), while not having as high a dividend yield, is also not at a 52-week high. So while the reaffirmation bodes well for Honeywell, definitely kick the company's financial tires a bit before making any decision, and look around to similar companies that you might think are better values.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
Readers of this space know that selected defense contractors are my preferred plays, growing U.S. economy or not. (But let's hope it's a growing U.S. economy). And the reason for the defense contractor bullishness is obvious enough. The geopolitical climate can change, of course, but it looks like defense, national security and anti-terrorism efforts will remain at the top of the U.S.'s concerns, for the foreseeable future.
Further, when one can combine a defense contractor with an industrial play, including commercial aviation, the potential exists for superior return on equity. And with the above in mind, United Technologies is worth a review.
United Technologies (NYSE: UTX) is one of those handful of stocks in which you can buy 200 shares or 50 shares for your child's college fund, and then look back on it in 10 years and be very glad you did.
Here are some attributes: Leadership position in high-value-add sectors, substantial defense contracts, infrastructure/capital improvement businesses, technological leadership, diversification and operational balance, economies of scale, massive amounts of engineering talent, long history of steady earnings growth and dividend growth. The Reuters F2008/F2009 EPS consensus estimates for UTX are $4.88/$5.45.
TheStreet.com's Jim Cramer says that rebuilding from natural disasters can alter the growth picture for a country.
Is it Katrina all over again? Or is it bigger? Much bigger? That's what I am thinking about this Chinese earthquake.
Katrina distorted the U.S.'s growth pattern for more than a full year. The raw materials, the effort, the work, the reconstruction affected businesses from small-scale retail to refining and infrastructure.
We don't really know how China works, although a lot of people tell us they do. To me, the Chinese are always a day away from revolution or civil war and the trick of the government is to stay one step ahead of the posse. (Chinese hands will dispute that, but you have to appreciate that it takes a special skill to be wrong for more than a century and still maintain credibility.)
That means massive reconstruction: bricks, lumber, cement, steel and all the trimmings. Massive imports, not controlled by the Chinese and their little negotiation games like they play with iron and steel and coal. Just full-bore buying and something that could take growth for China back to the levels that everyone thought it couldn't absorb without more inflation.
TheStreet.com's Jim Cramer says there's some reason for caution, but no reason to get out of the market here.
There all right there. Don't you feel it? Hundreds of stocks at resistance. Hundreds have formed a nice base. The Transports and the Dow are moving in synch. The earnings period surprisingly great, with so many companies not stung by the raw costs. Three straight up weeks, with all the commodity stocks showing signs of rolling over; most at crucial "must hold" levels except for gold, which has already crashed, making the inflation case much dimmer in the eyes of the traders.
Yet, you simply can't read the papers. They are too awful. The cost to the consumers for everything from food to gasoline is humongous and going higher, according to all the food execs I had on last week. We are getting nowhere near a bottom in housing. The layoffs, while not significant in the Labor Report on Friday, sure seem endless. The two major presidential candidates from the Democratic side want to tax the oil companies into oblivion, the leaders of the last year. Exxon (NYSE: XOM) (Cramer's Take) blew the quarter. So did GE (NYSE: GE) (Cramer's Take).
Too far, too fast, based on those grim items.
To me, this is the first week since the Bear Stearns (NYSE: BSC) (Cramer's Take) bottom that I think seems aimless.
But perhaps there's a "split the difference" way to approach this week: options expiration.
United Technologies (NYSE: UTX) shares are trading higher today after the company reported a second-quarter profit of $1.28 billion, or $1.32 per share, beating analysts' estimates of $1.30 per share. UTX said demand was strong for its Otis elevators and fire and security equipment for the commercial construction sector. 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 UTX.
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