The focus of last week's preview was on oil and energy companies, and we saw that big oil had a good week, reporting better-than-expected results and record profits driven by high prices in the third quarter. Energy-related companies are well represented again this week and expectations in general remain high.
Early in the week, analysts surveyed by Thomson Financial anticipate that the big earnings gainers will include EOG Resources Inc. (NYSE: EOG), Anadarko Petroleum Corp. (NYSE: APC), and Cimarex Energy Co. (NYSE: XEC), which are expected to post profits of $2.24 per share (up 64.7% from a year ago), $1.48 per share (up 52.7%) and $2.26 per share (up 61.1%) respectively. All three of them have offered positive surprises in recent quarters, and analysts on average recommend buying EOG and Anadarko. Other expected big earnings gainers early in the week include Forest Oil Corp. (NYSE: FST), Pioneer Natural Resources Co. (NYSE: PXD), Comstock Resources Inc. (NYSE: CRK), and MasterCard Inc. (NYSE: MA). The earnings of phosphates producer Innophos Holdings Inc. (NASDAQ: IPHS) are expected to have risen 92.3% to $3.37 per share. Innophos beat estimates in the previous quarter by a whopping 210%, and analysts have been impressed with Innophos's lack of debt and pricing gains despite the slowing economy, so, on average, they recommend buying IPHS.
Also early in the week, analysts expect Goodyear Tire & Rubber Co. (NYSE: GT), Kaiser Aluminum Corp. (NASDAQ: KALU), and Oshkosh Corp. (NYSE: OSK) to report that their profits fell 52.9% to $0.33 per share, 45.1% to $0.67 per share, and 41.2% to $0.67 per share, respectively. These companies have tended to beat estimates in recent quarters, and the consensus recommendations of analysts are to buy them. However, PMI Group Inc. (NYSE: PMI), one of the largest private mortgage insurance providers in the U.S., is expected to take another hit as the housing slump drags on. The California-based company is expected to have widened its net loss from $1.04 per share a year ago to $2.43 per share in the most recent quarter. Its shares are down 84.5% from a year ago, and have been trading recently near their 52-week low.
The shares of Orbitz Worldwide, Inc. (NYSE: OWW) are skidding all over the charts today following the company's second-quarter earnings release. Orbitz confessed to a net loss of $5 million, or six cents per share, much improved from its year-ago loss of $32 million. Revenue for the recently concluded quarter inched 1% higher to $231 million.
While the results were better than the same quarter in 2007, analysts were looking for an even smaller loss of three cents per share on more robust revenue of $234 million.
Gross bookings increased 4% to $3 billion, thanks to a little help from overseas -- international bookings rocketed 41% higher, compared to a 1% slump in domestic bookings. Orbitz's international business now accounts for 23% of its revenue, up three percentage points from the year prior.
Despite the challenges facing Orbitz, president and CEO Steven Barnhart professed his enthusiasm about some new initiatives to drive growth. Specifically, the travel firm is launching a new "Price Assurance" functionality, and the company just entered a multi-year partnership with Microsoft (NASDAQ: MSFT) to serve as the online provider for MSN.com's travel portals. Barnhart said these initiatives "will accelerate our domestic growth in the second half of the year and help offset any impact from current economic and travel industry uncertainty."
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are Time Warner Inc. (NYSE: TWX), Cisco Systems Inc. (NASDAQ: CSCO), News Corp. (NYSE: NWS), and Whole Foods Market International (NASDAQ: WFMI). Let's take a look at which companies Wall Street analysts are expecting to be among the top earnings gainers and decliners this week.
Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.
Priceline.com (NASDAQ: PCLN) is an online travel agency. It offers a range of services, including airline tickets, hotel rooms, car rentals, vacation packages and cruises, as well as destination and travel insurance services. The company operates a Name Your Own Price system, which allows users to make offers for travel services at prices they set. It also markets fixed-price travel products and offers various online financial services. Expedia (NASDAQ: EXPE) is a major competitor.
The firm pleased investors last week, when it reported Q1 EPS of 76 cents and revenues of $403.20 million. Analysts had been expecting 60 cents and $377.17 million. Gross travel bookings increased 76% yr/yr, a result above company guidance of 60-65%. Pro forma gross profit rose 74.7% yr/yr, versus guidance of 55-60%. Management predicted FY08 EPS of $5.25-$5.65 ($5.12 consensus).
priceline.com Inc. (NASDAQ: PCLN) shares are trading higher after the company announced on Friday that it has agreed to a one-year partnership with Chinese classified information search engine Kooxoo.com. Under the deal, PCLN will gain data access to over 8,000 hotels in China, which could give it a leg up in international bookings over competitors Expedia (NASDAQ: EXPE) and Orbitz (NYSE: OWW). 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 PCLN.
After hitting a one-year low of $52.00 last March, the stock hit a one-year high of $129.24 in February. PCLN opened this morning at $119.48. So far today the stock has hit a low of $119.04 and a high of $128.75. As of 12:30, PCLN is trading at $127.87, up $9.24 (7.8%). The chart for PCLN looks bullish and steady, while S&P gives the stock its lowest 1 Star (out of 5) strong sell rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $70 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. This particular trade will make a 6.4% return in just four months as long as PCLN is above $70 at July expiration. Priceline would have to fall by more than 46% before we would start to lose money.
PCLN hasn't been below $70 since August and has shown support around $110 recently. This trade could be risky if the US economy gets even weaker in the coming months, but even if that happens, this position could be protected by the support the stock might find just above $90 from its 200 day moving average.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in PCLN, EXPE, or OWW.
Priceline.com (NASDAQ: PCLN) is an online travel agency. It offers a range of services, including airline tickets, hotel rooms, car rentals, vacation packages and cruises, as well as destination and travel insurance services. The company operates a Name Your Own Price system, which allows users to make offers for travel services at prices they set. It also markets fixed-price travel products and offers various online financial services. Expedia (NASDAQ: EXPE) is a major competitor.
The firm pleased investors earlier in the month, when it reported Q4 EPS of 96 cents and revenues of $334.9 million. Analysts had been expecting 84 cents and $329.3 million. In discussing the solid quarter, the CEO emphasized continued momentum in growth of gross bookings. International growth accelerated to 113% year over year and the domestic growth rate increased 24% sequentially. Management also guided Q1 EPS to 50-60 cents (53 cent consensus) and FY08 EPS to $4.80-$5.10 ($4.90 consensus).
The holiday season may have just begun, but the earnings season continues. Here are some highlights of this past week's earnings coverage from BloggingStocks:
In this day of record-high fuel costs and erratic airline fares, it's important to have a reliable travel agent. For some, it's the online wonder of Priceline.com (NASDAQ: PCLN), which offers traditional online-travel aids as well as a name-your-own-price service. Which, by the way, never works for me. I guess no one wants to accept $150 for a weekend trip from St. Louis to Seattle.
Anyway, Priceline has benefited from the nation's needy travelers, as evidenced by its third-quarter profit figures, released after the close on Thursday. The firm said third-quarter net income reached $104.4 million, or $2.27 per share, up dramatically from year-ago results of $47.8 million, or $1.05 per share. Excluding items, PCLN banked $1.58 per share, 30 cents above the $1.28 expected on Wall Street.
Revenue rose 33% during the 3-month reporting period to $417.3 million. This was 7.7% higher than analysts' consensus target of $387.5 million.
PCLN officials credited the building profit to success at the Booking.com site (the firm's European brand), as well as domestic growth. In after-hours action, PCLN is showing a gain of 12.85 points, or more than 15%. A move of this magnitude in regular trading on Friday would lift the stock to a new 52-week high and put it a chip-shot away from the psychologically important 100 level.
The establishment of online travel sites finally allowed consumers the luxury of being able to compare available services. The outfit that really set the pace, though, was the one that also let folks haggle over the price.
Priceline.com (NASDAQ: PCLN) is an online travel agency. It offers a range of services, including airline tickets, hotel rooms, car rentals, vacation packages and cruises, as well as destination and travel insurance services. The company operates a Name Your Own Price system, which allows users to make offers for travel services at prices they set. It also markets fixed-price travel products and offers various online financial services. Expedia (NASDAQ: EXPE) is a major competitor.
The firm pleased investors earlier in the month, when it reported Q2 EPS of $1.11 and revenues of $355.9 million. Analysts had been expecting 90 cents and $354.2 million. In discussing the solid quarter, the CEO emphasized a 93% gross bookings growth rate at the firm's Booking.com hotel reservation service. Management also guided Q3 EPS to $1.21-1.31 ($1.07 consensus), FY07 EPS to $3.50-3.65 ($3.10 consensus) and Y07 gross travel bookings to $4.50-4.65 billion ($4.10-4.25B previous estimate). Susquehanna Financial, Stifel Nicolaus and Banc of America Securities subsequently declared the stock a "buy."
Although he calls the stock "much-maligned," Mark Skousen has issued a buy on Priceline Incorporated (NASDAQ:PCLN), which he says is "coming back with a vengeance."
The editor of Forecasts & Strategies explains: "There's probably no larger group of stocks that fit the turnaround mode than technology, especially the 'dot com' companies that were decimated by the tech wreck in the early 2000s.
"One such stock is Priceline.com, the online travel agency that allows customers to 'name their own price.' Its service offers retail airline tickets, hotel reservations, car rentals, vacation packages, destination services, cruises trips, and travel insurance.
"And the company's strategy is working. Priceline yesterday reported that its fourth-quarter earnings more than tripled from the prior year. It earned $13.2 million, or 33 cents a share, compared to $3.8 million, or 9 cents a share, in the fourth-quarter of 2005.
"Revenue rose 28% to $260 million in fourth quarter 2006, compared with $203.9 million in the year-ago quarter. Profit margins at Priceline are at 6% and rising."
Skousen recommends buying Priceline.com at market and setting a protective stop of $42. And for those familiar with options and willing to take greater risks, he suggests that you consider buying the July $50 calls.
Steven Halpern's TheStockAdvisors.com provides a free, daily overview of the latest stock ideas from the nation's leading financial newsletters.
The focus of last week's preview was on oil and energy companies, and we saw that big oil had a good week, reporting better-than-expected results and record profits driven by high prices in the third quarter. Energy-related companies are well represented again this week and expectations in general remain high.
In this day of record-high fuel costs and erratic airline fares, it's important to have a reliable travel agent. For some, it's the online wonder of 
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