Retail giant JC Penney (NYSE: JCP) reported its first quarter numbers this morning, and reported that the current economic environment led to a pretty hefty 50% drop in its net income.
The company stated that the cut back in consumer spending was to blame for the drop in net income, and predicted that the tough times were far from over. In its earnings report, the company estimated that the difficult times could easily last for the remainder of the year.
Despite the 50% drop in income, and poor business outlook for the rest of the year, the stock is actually in the green today, as traders have pushed shares of the retailer up 1.7% to $45.01, up $0.76. The reason... the company was able to beat Wall Street estimates.
Whole Foods Market (NASDAQ: WFMI) shares are falling after the company posted a second-quarter profit of $40 million, or 29 cents a share, below analysts' estimates of 30 cents per share. Growth has slowed for WFMI, which company executives are blaming on the slowing economy. 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 WFMI.
After hitting a one-year high of $53.65 in October, the stock has hit a new one-year low today. This morning, WFMI opened at $30.17. So far today the stock has hit a low of $28.96 and a high of $30.21. As of 12:10, WFMI is trading at $29.37, down $4.27 (-12.7%). The chart for WFMI looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $37 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 three months as long as WFMI is below $37 at August expiration. Whole Foods would have to rise by more than 26% before we would start to lose money. Learn more about this type of trade here.
Shares of agricultural equipment maker Deere & Co. (NYSE: DE) have been plunging in early trading more than 6% despite posting a rise for its second-quarter profit, as its earnings per share were a bit shy of analysts' estimates. In addition, the company warned about further higher costs threats.
For the quarter, the world's largest manufacturer of agricultural machinery reported that its profit surged 22% to $763.5 million, lifted by soaring crop prices that increased international demand for agricultural equipment. The company posted earnings of $1.74 a share, slightly missing analysts' predictions for earnings of $1.75 per share in the quarter.
The agricultural equipment maker also announced a respectable 18% jump in revenues to $8.1 billion. Revenue during the period was helped by a 47% increase in overseas sales that benefited from the weak U.S. dollar. Analysts had forecast a lower revenue of $7.6 billion, according to Reuters Estimates.
On Tuesday, microchip equipment maker Applied Materials Inc. (NASDAQ: AMAT) reported a drop in its fiscal second quarter earnings due in part to a glut of flash memory chips, and organic and natural food retailer Whole Foods Market Inc. (NASDAQ: WFMI) also said second quarter profits fell, due to integrating its Wild Oats acquisition.
Applied Materials posted earnings of $302.5 million, or 22 cents per share, for the quarter ended April 27, compared with a profit of $411.4 million or 29 cents per share in the same period a year ago. Its adjusted net income came to 24 cents per share, beating the average analyst forecast of 22 cents, according to Reuters estimates.
Second-quarter revenue fell to $2.15 billion from $2.53 billion in the previous year. Analysts on average had expected revenue of $2.13 billion.
Shares fell 1.3% after the news but rose 2.7% in after-hours trading to $20.40.
Whole Foods reported that sales surged 28% in the second quarter to $1.87 billion, from $1.4 billion in the previous year. But net income fell 13% to $40 million, or 29 cents per share, in the quarter ended April 13; the acquisition of rival Wild Oats cost it 6 cents per share.
Analysts polled by Thomson Financial had predicted a profit of 30 cents per share on revenue of $1.89 billion.
Shares of Whole Foods fell $2.94, or 8.7%, to $30.70 in after-hours trading.
After hitting a one-year low of $24.81 in August, the stock hit a one-year high of $46.25 in December. This morning, FOSL opened at $34.46. So far today the stock has hit a low of $33.33 and a high of $35.65. As of 1:15, FOSL is trading at $33.98, down $3.27 (-8.8%). The chart for FOSL looks bullish and deteriorating slightly, while S&P gives the stock a bullish 4 Stars (out of 5) Buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 6.4% return in four and a half months as long as FOSL is below $45 at September expiration. Fossil would have to rise by more than 33% before we would start to lose money. Learn more about this type of trade here.
Toll Brothers (NYSE: TOL) shares are falling today after the company announced Q2 preliminary earnings this morning down 30% from a year ago and that it expects more "challenging times" ahead. However, the stock might be getting some support from another part of the statement that indicated TOL is looking to use some of its available capital to make acquisitions at cheap prices. 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 TOL.
After hitting a one-year high of $31.15 almost a year ago, the stock fell much of 2007 to hit a one-year low of $15.49 in January. This morning, TOL opened at $23.25. So far today the stock has hit a low of $22.66 and a high of $23.67. As of 12:45, TOL is trading at $23.00, down $0.37 (-1.6%). The chart for TOL looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 4.2% return in six weeks as long as TOL is below $27.50 at June expiration. Toll would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.
Nissan Motor Corp. (NASDAQ: NSANY), Japan's third-largest automaker, announced this morning higher fourth quarter profit, but forecast a decline in profit for the current year, blaming an unfavorable rising yen and soaring material costs.
Nissan Motor announced that its profit during the quarter jumped 67% to 137.6 billion yen ($1.3 billion). And its income figures were definitely something to cheer about. During its fourth quarter last year, the company had a profit of 82.2 billion yen. Excluding one-time "fifth-quarter" numbers, the company's earnings figures would have showed a surge of 95%.
Despite the positive results, the automaker isn't optimistic about its future earnings and issued a gloomy outlook. The company expects net income for the current year to drop 30% to 340 billion yen ($3.3 billion), which is below the 368 billion yen that analysts at Factset Research predicted. Nissan cited unfavorable currency exchange, higher commodity and energy prices, and increased material expenses.
XM Satellite Radio (NASDAQ: XMSR) shares are up after the company reported that its subscriber base grew 9.33 million subscribers in March, up from 7.9 million a year earlier. This comes despite the company reporting a first-quarter loss of $129.3 million, or 42 cents per share, this morning, worse than analysts' predictions of a 39 cents per-share loss. If you think that the stock 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 XMSR.
After hitting a one-year high of $16.44 in December, the stock hit a one-year low of $9.62 in January. XMSR opened this morning at $11.90. So far today the stock has hit a low of $11.70 and a high of $12.41. As of 12:30, XMSR is trading at $12.40, up $0.60 (5.1%). The chart for XMSR looks bearish and improving slightly, while S&P gives the stock a bearish 2 Stars (out of 5) Sell rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $10 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 11.1% return in just ten weeks as long as XMSR is above $10 at July expiration. XM would have to fall by more than 18% before we would start to lose money.
XMSR hasn't been below $10 by more than a few cents in the past year and has shown support around $11.60 recently. This trade could be risky if something about the XM-Sirius (NASDAQ: SIRI) deal goes wrong, but even if that happens, that position could be protected by support the stock might find just above $10, where it has bounced quite a few times over the past year.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in XMSR or SIRI.
Shares of wireless carrier Sprint Nextel Corp. (NYSE: S) are plunging after the company reported a large first quarter loss this morning. The company posted stronger-than-expected adjusted earnings, but this was not enough to reassure investors who pushed the stock down more than 3%.
Sprint Nextel posted a quarterly loss of $505 million, or 18 cents per share, compared with a loss of $211 million, or 7 cents, in the same period a year ago. Its quarterly numbers were dragged down by losses of more than 1 million subscribers and severance charges. However, excluding one-time charges, the company would have earned 4 cents. Analysts had expected earnings on that basis of only 2 cents per share, according to Thomson Financial. Revenue tumbled 7.5% to $9.3 billion, well below expectations of $9.4 billion.
But when Sprint reports its first-quarter results tomorrow, analysts polled by Thomson Financial expect the company to report earnings of a mere penny per share, down from the same period in 2007 when it earned 18 cents per share, and from the previous quarter's 21 cents per share. The company has beat quarterly estimates over the past year -- by 17.3% in the fourth quarter -- and it certainly has plenty of room to best analysts' low expectations for this past quarter.
Overland Park, Kansas-based Sprint Nextel operates a nationwide digital wireless network with more than 50 million subscribers. In the past year, Sprint's revenues were $40.1 billion. The company's long-term EPS growth forecast is 8.22%, which is less than the 8.67% of rival Verizon (NYSE: VZ) and the S&P 500. The consensus recommendation of analysts continues to be to hold Sprint.
Shares closed Friday at $9.39, up from a 52-week low of $5.48 in March, but still well off the 52-week high of 23.42 last June.
For news that could influence these results, see BloggingStocks' Sprint coverage.
Analysts surveyed by Thomson Financial expect Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio Holdings (NASDAQ: XMSR) to report narrower losses for the first quarter. Both companies are scheduled to report Monday morning.
Sirius is expected to report a loss of 7 cents per share, compared to the same period in 2007 when it lost 10 cents per share, and the previous quarter when it lost 11 cents per share. The company has provided positive surprises in the past few quarters.
New York-based Sirius boasts 8.3 million subscribers and is the radio home of Howard Stern and Martha Stewart. In 2007 the company agreed to acquire rival XM Satellite Radio. In the past year, Sirius's revenues were $922 million. Its EPS growth forecast for the year is 19.47%, which is much better than its industry average. The consensus recommendation of analysts remains to buy Sirius.
The stock has fallen 3.87% in the past year and closed Friday at $2.73.
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
Analysts surveyed by Thomson Financial expect earnings growth, compared to the same period in the previous year, from Urban Outfitters (NASDAQ: URBN) to be 22.7% to 22 cents per share, from Wal-Mart Stores (NYSE: WMT) to be 9.3% to 75 cents per share, and from TJX Companies (NYSE: TJX) to be 7.5% to 40 cents per share.
Analysts expect earnings declines from the previous year from JC Penney (NYSE: JCP) by 52.9% to 49 cents per share, from Kohl's (NYSE: KSS) by 34.4% to 42 cents per share, and from Nordstrom (NYSE: JWN) by 18.3% to 49 cents per share.
In the case of Abercrombie & Fitch (NYSE: ANF), analysts expect earnings to remain flat, year over year, at 65 cents per share.
And then there's Macy's (NYSE: M), which is expected to swing to a loss of 2 cents per share, compared to a profit of 16 cents a year ago.
The sample size may be too small to define any significant trends, but the numbers do suggest that analysts expect profit declines to be deeper than profit growth, and that consumers may be more likely, given the current state of the economy, to buy clothes at Wal-Mart or TJ Maxx than at Nordstrom or Abercrombie.
The coming results will reveal if those expectations are correct.
Retail giant JC Penney (NYSE: JCP) reported its first quarter numbers this morning, and reported that the current economic environment led to a pretty hefty 50% drop in its net income. 
Shares of agricultural equipment maker 
Shares of wireless carrier 
Sirius is expected to report a loss of 7 cents per share, compared to the same period in 2007 when it lost 10 cents per share, and the previous quarter when it lost 11 cents per share. The company has provided 
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
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