Last week, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) posted a quarterly loss and lowered its guidance. But as interest in alternative energy continues to grow, analysts polled by Thomson Financial are still looking for good things from solar energy concerns scheduled to report earnings this week.
Strong growth at Trina Solar Ltd. (NYSE: TSL) in the third quarter prompted it to lift its guidance back in October. Analysts expect the Chinese company to post profits that are 76.3% higher than a year ago, or $1.18 per share on revenues of $268.4 million (+225.0%). Though Trina Solar missed estimates in the second quarter, analysts on average recommend buying TSL. Shares are down 81.4% from a year ago and trading near an all-time low.
Earnings of rival LDK Solar Co. Ltd. (NYSE: LDK) are expect to have risen 47.9% to $0.71 per share on revenues of $486.7 million (+206.6%). Also based in China, LDK has not missed estimates in recent quarters; in fact, it blew past expectations in the second quarter. Yet the consensus recommendation is to hold LDK. Like Trina Solar, LDK's shares are trading near an all-time low; the share price has fallen 50.0% in the past year.
Analysts anticipate third-quarter earnings for Canadian Solar Inc. (NASDAQ: CSIQ) to be a whopping 96.3% higher than a year ago, or $0.54 per share on revenues of $248.0 million (+154.5%). The company easily topped estimates in the previous quarter. ReneSola Ltd. (NYSE: SOL) and Suntech Power Holdings Co. Ltd. (NYSE: STP) are also expected to report earnings growth of 29.7% ($0.37 per share) and 23.8% ($0.42 per share), respectively. All three of these stocks reached 52-week lows last week, and all are considered buys.
FL opened this morning at $16.40. So far today the stock has hit a low of $14.93 and a high of $16.50. As of 12:05, FL is trading at $15.57, up 0.29 (1.9%). The chart for FL looks neutral and S&P gives FL a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a January 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 8.7% return in five months as long as FL is above $10 at January expiration. Foot Locker would have to fall by more than 35% before we would start to lose money. Learn more about this type of trade here.
FL hasn't been below $9 at all and hasn't been below $10 for more than a few days in the past year. It has shown support around $14 recently. Brent Archer is an options analyst and writer at Investors Observer.
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 FL.
U.S. stock futures were higher this morning, pointing to a potential positive start on Wall Street. Investors this morning await Federal Reserve Chairman Ben Bernanke speech on financial stability scheduled for 10:00 a.m. from the Fed's annual retreat at Jackson Hole. In the face of recent financial turmoil, namely talk of a government bailout for Fannie and Freddie, as well as troubles at Lehman, Bernanke's speech will likely be today's highlight. Meanwhile, oil dropped a little from Thursday's advance.
Indeed, the Wall Street Journalreports that Freddie Mac (NYSE: FRE) "executives are sounding out private-equity firms and other investors about the possibility of buying new common or preferred shares in the mortgage company." But of course, investors are worries their investments in Freddie or Fannie Mae (NYSE: FNM) may be lost in case of a government bailout. Even Warren Buffett opined on the matter on CNBC this morning, saying he expects the government to take action to support troubled mortgage financiers.
Lehman Brothers (NYSE: LEH) is rebounding this morning after an analyst at Ladenburg Thalmann upgraded LEH to Buy Thursday, saying it is vulnerable to a hostile takeover.
Verizon Communications (NYSE: VZ) is close to an agreement with Google (NASDAQ: GOOG), according to the Wall Street Journal. Conceding they need help with search, the deal could make Google the default search provider on Verizon devices.
Rival home improvement chains Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW) are scheduled to report quarterly results this week. Not surprisingly, given the ongoing housing slump, analysts surveyed by Thomson Financial on average expect both companies to post earnings lower than in the same period a year ago. For Home Depot, that's 61 cents per share, down 20.8%, and for Lowe's, 56 cents per share, down 16.4%. Meanwhile, cabinet maker American Woodmark Corp. (NASDAQ: AMWD), for whom Home Depot and Lowe's are major distributors, is also expected to report lower earnings: 11 cents per share, down 67.6%.
The presidential campaigns have prompted much discussion of energy policy and alternative energy sources. Some solar-energy-related concerns are scheduled to report this week, and expectations seem to be high. Trina Solar Ltd. (NYSE: TSL) is expected to report 81 cents per share earnings, up 67.9%; ReneSola Ltd. (NYSE: SOL) is expected to post earnings of 32 cents per share, up 62.5%; and Suntech Power Holdings Co. (NYSE: STP) is expected to have earnings of 32 cents per share, up 21.9%. Even China Sunergy Co. Ltd. (NASDAQ: CSUN) is expected to have swung to a profit of 3 cents per share, from a per-share loss of 14 cents a year ago.
On February 1, 1960, in Greensboro, North Carolina, four African-American students sat down at a segregated lunch counter in a Woolworth's store. That touched off a series of sit-ins and boycotts that spurred the U.S. civil-rights movement.
Founded in 1879 in Lancaster, Pennsylvania, F.W. Woolworth stores were the epitome of the American five-and-dime discount retailers, and the company was one of the largest retail chains in the world through much of the 20th century.
By 1910 the company was successful enough to commission the Woolworth Building in New York City, the world's tallest skyscraper until the completion of the Chrysler Building in 1930.
Woolworth's became the model for many other five-and-dimes throughout the United States. Oddly enough, such discount stores were sometimes criticized for driving local merchants out of business, a charge that would later be leveled at big-box stores.
Collective Brands (NYSE: PSS), operator of Payless ShoeSource and owner of the Stride Rite brand, reported Q1 earnings on Wednesday. Revenues increased 28% to $932 million. Pretty cool increase. Adjusting earnings per share for a litigation charge and an inventory issue, net income came in at $0.71 per share versus the $0.59 per share booked a year ago.
That's decent growth, but there are a couple things to consider here. First, the top line wasn't fully organic, as it includes the Stride Rite acquisition (remember that Payless ShoeSource bought out Stride Rite and became Collective Brands). Second, same-store sales did not confirm any sort of underlying healthy trend. Comps declined a nasty 6.5%. So, even though earnings expectations were beat by a wide margin according to MarketWatch (analysts seemed to think the shoe concern would do about $0.56 per share), I'm not fully impressed.
And let's go back to that litigation thing. The earnings release discusses the risk involved with an unfavorable ruling vis-a-vis the retailer's battle with Adidas. That's another strike against the company for me. From a price-action perspective, Collective Brands' stock has been rather weak as of late, and it currently sits much closer to the 52-week low than it does to the 52-week high.
After hitting a one-year high of $23.60 in July, the stock hit a one-year low of $9.05 in January. FL opened this morning at $12.81. So far today the stock has hit a low of $12.81 and a high of $13.71. As of 12:05, FL is trading at $13.39, up $1.31 (10.8%). The chart for FL looks bullish and steady while S&P gives FL a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a November 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 a 13.6% return in just six months as long as FL is above $10 at November expiration. Foot Locker would have to fall by more than 24% before we would start to lose money. Learn more about this type of trade here.
FL hasn't been below $9 at all in the past year and has shown support around $11 recently. This trade could be risky if the economic malaise continues in the US, but even if that happens, that position could be protected by support the stock might find just above $10, where it bottomed out three times in the past few months.
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 FL.
Ubiquitous mall retailers Gap Inc. (NYSE: GPS) and Aeropostale Inc. (NYSE: ARO) both reported Thursday that their profits increased in the first quarter despite the weak economy.
San Francisco-based Gap said it boosted its earnings by tightly managing costs and inventory. Profit for the quarter ended May 3 rose 40% to $249 million, or 34 cents per share, from $178 million, or 22 cents per share, in the same period last year. However, revenue fell 5% to $3.38 billion as same-store sales fell 11%.
Analysts polled by Thomson Financial had predicted a profit of 30 cents per share on revenue of $3.42 billion.
The Gap reaffirmed its 2008 guidance of earnings between $1.20 and $1.27 per share, while analysts expect $1.25 per share.
Shares rose 22 cents, or 1.2%, to close at $18.29 Thursday, and climbed an additional 31 cents in after-hours trading.
With recession fears, housing market worries and credit concerns, retailers have been facing tough times over the past few months. But on the heels of these worries, shares of world's largest athletic shoemaker, Nike Inc. (NYSE: NKE), have been climbing today the most in almost nine months after announcing last night stronger-than-expected third-quarter profit.
The company said its quarterly profit surged 32% to $463.8 million, compared with $350.8 million a year earlier boosted by strong gains in Europe and Asia. The company posted earnings 92 cents a share, exceeding analysts' forecast for a quarterly profit of 80 cents a share.
The company's quarterly revenue grew by a respectable 16% to $4.54 billion. For this period, the athletic shoemaker counted strong sales for products lifted by the weak U.S. dollar. Analysts, on average, expected Nike's sales to be $4.36 billion, according to FactSet.
Athletic apparel retailer Foot Locker Inc. (NYSE: FL) reported that its fourth-quarter profit dropped 23% due to a shorter fiscal year and a drop in same-store sales. Net income fell to $87 million, or 56 cents per share, but after adjustments the company said it earned 23 cents per share in the latest quarter. Revenue fell 10% to $1.48 billion. Analysts polled by Thomson Financial had expected earnings of 44 cents per share on revenue of $1.48 billion.
The company said its same-store sales fell 7.8% percent in the quarter, and noted that the year-ago quarter included an extra week.
For the full year, profit fell 79% to $53 million, or 34 cents per share, from $251 million, or $1.60 per share, in the prior year. Full-year revenue dropped 4% to $5.44 billion from $5.75 billion in 2006.
Foot Locker shares fell 9 cents to close at $11.15, but rose to $11.30 in after-hours trading.
MOST NOTEWORTHY: BP PLC, Wells Fargo and Hibbett Sports were today's noteworthy downgrades:
Lehman downgraded shares of BP PLC (NYSE:BP) to Underweight from Equal Weight to reflect a lower share of profitability from the Azeri field in Azerbaijan.
Friedman Billings downgraded Wells Fargo (NYSE:WFC) to Underperform from Market Perform citing its consumer exposure and recent indications of consumer credit quality deterioration.
The firm also downgraded Hibbett Sports (NASDAQ:HIBB) to Market Perform from Outperform following the company's Q4 pre-announcement.
Last week, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) posted a quarterly loss and lowered its guidance. But as interest in alternative energy continues to grow, analysts polled by Thomson Financial are still looking for good things from solar energy concerns scheduled to report earnings this week. 
U.S. stock futures were higher this morning, pointing to a potential positive start on Wall Street. Investors this morning await Federal Reserve Chairman Ben Bernanke speech on financial stability scheduled for 10:00 a.m. from the Fed's annual retreat at Jackson Hole. In the face of recent financial turmoil, namely talk of a government bailout for Fannie and Freddie, as well as troubles at Lehman, Bernanke's speech will likely be today's highlight. Meanwhile, oil dropped a little from Thursday's advance.
Rival home improvement chains 
This post is part of a series on some of the most memorable 
Ubiquitous mall retailers 
With recession fears, housing market worries and credit concerns, retailers have been facing tough times over the past few months. But on the heels of these worries, shares of world's largest athletic shoemaker, .gif){kind=logo}
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