Last week, Bank of Montreal (NYSE: BMO), one of Canada's oldest and largest banks, reported growth in its fiscal fourth-quarter earnings. But it may be the only one that does, as at least two of the Canadian banks scheduled to report fourth-quarter numbers this week have already released preliminary results that warn of lower earnings due to debt write-downs and trading losses.
Analysts surveyed by Thomson Reuters expect Toronto-based Canadian Imperial Bank of Commerce (NYSE: CM) to post earnings 42.6% lower than a year ago, or $1.28 per share. CIBC beat estimates by a penny in the third quarter, but missed by a penny in the period before that. The bank faces a class-action lawsuit related to investments in collateralized debt obligations consisting of U.S. subprime mortgages. Shares have climbed 20.7% from a recent 52-week low of $39.52, but are down 37.8% in the past three months.
Toronto Dominion Bank (NYSE: TD), Bank of Nova Scotia (NYSE: BNS), and Royal Bank of Canada (NYSE: RY) are expected to report more modest earnings declines of $1.01 per share, $0.73 per share, and $0.83 per share, respectively. All three Toronto-based banks topped estimates in the third quarter. Toronto Dominion and RBC have recently announced plans to offer shares in order to raise capital. Toronto Dominion and Scotiabank have been trading near 52-week lows, and their share prices are down around 39% in the past three months. But only Toronto Dominion has a consensus buy recommendation from analysts.
Hormel Foods (NYSE: HRL) closed at $28.44 Tuesday. HRL is scheduled to report Q4 EPS on November 25. HRL overall option implied volatility of 41 is above its 26-week average of 30 according to Track Data, suggesting larger price movement.
Sanderson Farms (NYSE: SAFM) closed at $27.49 Tuesday. SAFM filed a $1 billion shelf registration for common and preferred shares on October 9 on the anticipation of using the proceeds to fund acquisitions. SAFM November option implied volatility of 91 is above its 26-week average of 58 according Track Data, suggesting larger price movement.
Pilgrim's Pride (NYSE: PPC), the largest chicken company in the U.S., closed at $1.40 Tuesday. PPC announced on October 27 lenders have agreed to provide continued liquidity under credit facilities. PPC December option implied volatility is at 239 according to Track Data, suggesting large price fluctuations.
Smithfield Foods (NYSE: SFD), a processor of packaged meats, closed at $9.49 Tuesday. SFD November option implied volatility of 166 is above its 26-week average of 88 according to Track Data, suggesting larger price movement.
Tyson (NYSE: TSN) closed $8.05 Tuesday. TSN is scheduled to report Q4 EPS on November 11. TSN November option implied volatility is at 133, December is at 124; above its 26-week average of 54 according to Track Data, suggesting larger price fluctuations.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Keefe Bruyette upgraded shares of AllianceBernstein (NYSE: AB) to Outperform from Market Perform as they find AB's risk/reward attractive given its attractive long-term business model. Wachovia upgraded Watson Pharma (NYSE: WPI) and Teva Pharma (NASDAQ: TEVA) to Outperform from Market Perform citing valuations and positive drivers for generics that include patent expirations and market share expansion.
UBS raised Lloyds TSB Group (NYSE: LYG) to Neutral from Sell on expected pricing power following the HBOS (OTC: HBOOY) acquisition.
Otter Tail (NASDAQ: OTTR) was upgraded to Outperform from Neutral at Baird.
GFI Group (NASDAQ: GFIG) was upgraded at Citigroup to Hold from Sell.
Merrill upgraded Logitech (NASDAQ: LOGI) to Neutral from Underperform.
Analyst downgrades:
JP Morgan downgraded shares of Lloyds TSB Group to Underweight from Neutral on capital concerns and believes the HBOS acquisition is not in the best interest of shareholders.
Stephens downgraded Universal Truckload (NASDAQ: UACL) to Equal Weight from Overweight on valuation and concerns about a slowdown in the flatbed sector. The firm's target remains $28.
Rising commodities prices led both Smithfield Foods Inc. (NYSE: SFD), the nation's largest pork producer and processor, and poultry producer Sanderson Farms Inc. (NASDAQ: SAFM) to report quarterly losses on Tuesday.
Smithfield Foods said it lost $12.6 million, or 9 cents per share, in its fiscal first quarter due in part to a $20.1 million write-down in the value of commodity contracts. The Smithfield, Va.-based company had reported a profit of $54.6 million, or 41 cents per share, a year ago.
Revenues rose 20% to $3.14 billion in the quarter. Analysts surveyed by Thomson Reuters had forecast a loss of 4 cents per share on $2.87 billion in sales.
In addition to hurting from high costs for such ingredients as grain and fuel, Smithfield also faces an oversupply of meat on the market, which is keeping prices for pork lower. To help push prices up, meat producers such as Smithfield have announced intentions to cut supply.
Shares of Smithfield fell 88 cents, or 3.7%, to $22.71 in morning trading. That's up from a 52-week low of $16.61 in early July, but shares have fallen about 21% since the beginning of the year.
Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year.
MOST NOTEWORTHY: Citizens Republic Bancorp, Hess Corp and Sanderson Farms were today's noteworthy upgrades:
Keefe Bruyette upgraded shares of Citizens Republic Bancorp (NASDAQ: CRBC) to Outperform from Market Perform on valuation following yesterday's sell-off, which they attribute in part to its removal from the Dow Jones Select Dividend Index. Shares were also raised to OUtperform from Perform at Oppenheimer following the sell-off.
Goldman upgraded Hess (NYSE: HES) to Buy from Neutral citing the company's leverage to higher oil prices. The firm said oil is likely to hit $150-$200/bbl in the next 6-24 months.
Stephens upgraded shares of Sanderson Farms (NASDAQ: SAFM) to Overweight from Equal Weight as they expect industry fundamentals to improve in FY09.
OTHER UPGRADES:
Baird raised Stellent (NASDAQ: STEL) to OUtperform from Neutral.
Friedman Billings upgraded Preferred Bank (NASDAQ: PFBC) to Market Perform from Underperform.
Agco (NYSE: AG) was upgraded at Goldman to Buy from Neutral.
Lehman upgraded SLM Corp (NYSE: SLM) to Overweight from Equal Weight.
MOST NOTEWORTHY: PSS World Medical (PSSI), Rockwell (ROK), Open Text (OTEX), Sanderson Farms (SAFM) and Mentor (MNT) were today's noteworthy upgrades:
PSS World Medical (NASDAQ: PSSI) was upgraded to Outperform from Neutral at Robert W. Baird. Baird said the quarter was impacted by one-time items and that core operations remain strong while private label, home care and HCIT initiatives may contribute to substantial margin improvement.
Friedman Billings added Rockwell Automation (NYSE: ROK) to its Top Picks list based on valuation and growth drivers.
Merrill Lynch upped shares of Open Text Corporation (NASDAQ: OTEX) to Neutral from Sell. Kaufman Brothers upgraded shares of the stock to Buy from Hold with a $27 target to reflect the company's better-than-expected Q4 results.
Sanderson Farms Inc (NASDAQ: SAFM) was upgraded to Strong Buy from Strong Sell on valuation and accelerating sales of the company's poultry products.
The firm upgraded shares of Mentor Corporation (NYSE: MNT) to Buy from Sell given the company's good performance and low risk.
OTHER UPGRADES:
Cache Inc (NASDAQ: CACH) was upgraded to Buy from Neutral with a $19 target at First Albany and to Outperform from Market Perform at Piper Jaffray.
Gabelli upgraded shares of Diageo (NYSE: DEO) to Buy from Hold.
RBC Capital Markets raised shares of Knology Inc (NASDAQ: KNOL) to Outperform from Sector Perform.
Goldman Sachs upgraded shares of Maxygen Inc (NASDAQ: MAXY) to Neutral from Sell.
MOST NOTEWORTHY: RealNetworks, Inc (RNWK), The Boeing Co (BA), L-3 Communications Holdings (LLL) and Research in Motion (RIMM) were some of today's most notable upgrades:
Jefferies upgraded RealNetworks, Inc (NASDAQ: RNWK) to Hold from Underperform with an $8 target on valuation.
JP Morgan raised The Boeing Co (NYSE: BA) and L-3 Communication Holding's (NYSE: LLL) rating to Neutral from Underweight citing valuation.
Yesterday's "China Effect" on the U.S. markets have created a buying opportunity in Research in Motion Ltd; ThinkEquity upgraded shares of Research in Motion Ltd (NASDAQ: RIMM) to Buy from Accumulate with a $165 target.
OTHER UPGRADES:
Ciena Corp (NASDAQ: CIEN) was upgraded to Overweight from Neutral at JP Morgan.
Wachovia upgraded Fresh Del Monte Produce inc (NYSE: FDP) to Market Perform from Underperform based on an improving banana outlook and cost environment.
Citigroup upgraded Nestle (OTC: NSRGY) to Buy from Hold to reflect the company's improved cash flows.
Bear Stearns upgraded BEA Systems Inc (NASDAQ: BEAS) to Peer Perform from Underperform.
Stephens upgraded Sanderson Farms Inc (NASDAQ: SAFM) to Overweight from Equal Weight with a $35 target.
Last week, Bank of Montreal (NYSE: BMO), one of Canada's oldest and largest banks, reported growth in its fiscal fourth-quarter earnings. But it may be the only one that does, as at least two of the Canadian banks scheduled to report fourth-quarter numbers this week have already released preliminary results that warn of lower earnings due to debt write-downs and trading losses.
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