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:
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In 2005, CKE Restaurants Inc. (NYSE: CKR) outraged both social conservatives and lovers of music at the same time when its Carl's Jr. chain hired Paris Hilton to shill its new Spicy Burger. It set a new standard of tastelessness that will be difficult to equal.
Conservatives -- most Americans actually -- find the fact that Paris Hilton is famous at all to be a offensive. Her main claim to fame comes from her appearance in a now-infamous sex tape. The appeal of her one-time hit show TheSimple Life eluded me, but hey, I was not the target demographic. I am a 40-year-old married guy so I can't speak to her numerous other enterprises, such as the perfume Heiress. Her single "Stars Are Blind" was not as awful as I thought it would be, but maybe I have gone tone deaf listening to too many Elmo songs. Parents of toddlers will understand.
Here's a quick recap of some additional earnings reports on Wednesday.
Beaverton, Ore.-based Nike Inc. (NYSE: NKE) said strong growth overseas helped boost its fourth-quarter profit by 12% to $490.5 million, or 98 cents per share. Analysts polled by Thomson Financial expected the company to earn 96 cents per share for the quarter. Shares fell more than 5% in after-hours trading to $62.15.
CKE Restaurants Inc. (NYSE: CKR) said its first-quarter profit climbed 8% to $16.6 million, or 31 cents per share, helped by a small increase in same-store sales at Carl's Jr. restaurants. Revenue fell 3% to $466.2 million. Analysts polled by Thomson Financial expected profit of 27 cents per share on revenue of $465.5 million. Shares fell 5 cents to $12.25 in after-hours trading.
Red Hat Inc. (NYSE: RHT) said its fiscal first-quarter profit rose 6.6% to $17.3 million, or 8 cents per share. Adjusted earnings were 18 cents per share. Revenue rose 32% to $156.6 million. Analysts polled by Thomson Financial on average predicted a profit of 18 cents per share on revenue of $153 million. Shares fell 19 cents in after-hours trading to $22.11.
General Mills Inc. (NYSE: GIS) said its fourth-quarter profit dropped 17% to $185.2 million, or 53 cents per share. Adjusted earnings were 73 cents per share, which met Wall Street expectations. Sales increased 13% to $3.47 billion beating expectations. The company reaffirmed its guidance for the full year. Shares fell almost 2% to $61.19.
In the battle of the fast food restaurants, it's hardly ever about taste or service or quality: it's all about perception (and as my former car salesman boss says, perception is reality). So when I saw the news this week about how CKE Restaurants (NYSE: CKR) restaurants, Hardee's and Carl's Jr., have agreed to start purchasing a very small percentage of their pork and eggs from cage-free animals, I was wowed at the headlines. "Cage-free eggs!" an email from a colleague read.
Why is this the funnest news all month? Because of the very famous pin-up girls involved in the dispute. Paris Hilton is, after all, famous for her extremely sexy Carl's Jr. ads (I'd venture to say they are the pinnacle of her sordid career). Alicia Silverstone has made headlines with her racy PETA ads that were pulled off the air thanks to their nearly-naked nature. So in the cage match between Paris Hilton and Alicia Silverstone, I could have called it: smart Alicia whooped Paris' lingerie-clad booty with a (slightly happier) hen.
While People For the Ethical Treatment of Animals attracts a lot of flack (not to mention a South Park episode) for its perceived "militancy", the organization should be commended for its latest coup. According to the Associated Press, CKE Restaurants (NYSE: CKR) will begin purchasing eggs and pork from suppliers who do not keep their livestock in cages or crates. The concessions may seem relatively modest, but CKE is just the second chain to adopt these standards after Burger King (NYSE: BKC) made similar changes in March. The chain will:
MOST NOTEWORTHY: CKE Restaurants (CKR), Capella Education (CPLA), IAC/InterActiveCorp (IACI), Liberty Media (LINTA) and BWAY Holding (BWY) were today's noteworthy initiations:
JP Morgan started CKE Restaurants (NYSE: CKR) with a Neutral rating, citing near-term margin concerns.
Barrington believes Capella Education (NASDAQ: CPLA) is one of the fastest growing companies within its group in every aspect including enrollment, earnings and revenue.
Stifel started IAC/InterActiveCorp (NASDAQ: IACI) with a Buy rating, believing there is a 60% chance of a material event occurring within the next 6 months. Stifel believes QVC is the best interactive retailing operator given its 22% EBITDA margins and 16% operating margins.
Banc of America initiated BWAY Holding (NYSE: BWY) with a Neutral rating, citing a balanced risk/reward. JP Morgan started shares of BWY with an Overweight rating on valuation...
In another indication that healthier premium beverages are supplanting soft drinks, Coca Cola (NYSE: KO) has agreed to pay Glaceau, the maker of Vitaminwater, for $4.2 billion in cash and stock.
While it's not exactly a cheap purchase, I think it makes a lot of sense for Coke. Vitaminwater has had huge growth of late, and that looks likely to continue. With sales of soft drinks flat or even declining, it needs something to drive revenue growth.
This should also be seen as good news for Berkshire Hathaway (NYSE: BRK.A), a major Coke shareholder. Chairman Warren Buffett is regularly seen drinking Cherry Coke, especially at annual meetings but, as he gets older and investors worry about who will succeed him, a switch to a more healthful, vitamin-filled, lower-calorie beverage could extend his tenure at the helm of Berkshire.
Shares of Coke were up on news of the deal, and the price tag could be used to assign a value to other next-generation beverage companies. It makes Hansen Natural (NASDAQ: HANS) look interesting, with its market cap of around $3.6 billion.
Encouraged by sales of its Angus beef burgers in southern California, McDonald's Corp. (NYSE: MCD) is planning to expand its test marketing of the premium burgers to New England.
McDonald's comes late to the Angus burger trend. Rivals Burger King Holdings, Inc. (NYSE: BKC), Hardees and Carl's Jr. -- the latter two part of CKE Restaurants, Inc. (NYSE: CKR) -- have been selling the premium burgers for years. In fact, Hardees has just announced a new addition to its menu, a patty melt style Thickburger, also made with Angus beef.
The new burgers are part of McDonald's ongoing efforts at revitalization. Those efforts have included the introduction of new beverage choices, such as iced coffee, which is also expected to spread throughout the U.S. soon. Another part of that effort is a new advertising campaign, emphasizing career opportunities at McDonald's -- no doubt to try to change its image as a source of low-paying, dead-end jobs.
MOST NOTEWORTHY: CKE Restaurants (CKR), Cardinal Health (CAH), eBay (EBAY) and CA Inc (CA) topped today's noteworthy initiation list today:
Nollenberger believes the Hardee's franchise is entering a period of accelerated growth and initiated shares of CKE Restaurants (NYSE: CKR) with a Buy rating and $27 target.
Goldman views Cardinal Health (NYSE: CAH) as a as a high quality, focused franchise with strong fundamental outlook driven by margin expansion and improvements in non-drug wholesale businesses and restructuring efforts, reinstating its Buy rating on the company.
American Technology initiated eBAY Inc (NASDAQ: EBAY) with a Buy rating and $43 target, believing the company is the top play on growth of U.S. e-commerce and they expect upside to numbers tonight.
Needham believes CA Inc (NYSE: CA) Inc remains in transition as it continues to work on the repackaging of its vast product array into five solution sets and started the company with a Hold rating.
OTHER INITIATIONS:
Lazard initiated F5 Networks Inc (NASDAQ: FFIV) with a Buy rating and $100 target.
Citigroup started Clearwire Corp (NASDAQ: CLWR) with a Hold rating and $23 target.
It's upper management shakeup time at Big Beverage. Only a few weeks after the announcement that Pepsi's CEO was leaving "to spend more time with family," we learn that Coke's North American president is heading up up and away. Donald R. Knauss has been with The Coca-Cola Company (NYSE:KO) for 12 years, and before that worked at all the big names in packaged goods, from Procter & Gamble to Frito-Lay.
While it's said [WSJ, subscription required] that Knauss "stabilized" the North American division, launching products like Coke Blak and Tab Energy and regaining market share from Pepsi, he's been lately dealing with a federal lawsuit filed by 55 U.S. bottlers -- and soft drink sales are still stagnant.
The bigger news than "Donald Knauss is leaving" seems to be that he's going somewhere, a major U.S. company, as chairman and CEO. What? Who? I'll throw a couple of possibilities out there:
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Last week's preview
This post is part of our 
While People For the Ethical Treatment of Animals attracts a lot of flack (not to mention a South Park episode) for its perceived "militancy", the organization should be commended for its latest coup.
Encouraged by sales of its 
It's upper management shakeup time at Big Beverage. Only a few weeks after the announcement that 
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