The earnings crunch begins in earnest this coming week, with companies from Johnson & Johnson (NYSE: JNJ) and PepsiCo Inc. (NYSE: PEP) to Southwest Airlines Co. (NYSE: LUV) and Harley-Davidson Inc. (NYSE: HOG) scheduled to report results for the quarter just ended. But with the ongoing turmoil in the markets, much attention is on the tech and financial sectors. This week will provide plenty to mull over on both counts.
Wall Street expectations for tech stocks are fairly optimistic. Analysts surveyed by Thomson Financial are looking for chip maker Altera Corp. (NASDAQ: ALTR) and software/service company iGate Corp. (NASDAQ: IGTE) to be the sector's biggest earnings gainers of the week. Altera is expected to report earnings of 30 cents per share (up 33.3% from a year ago) on revenue of $355.1 million. Altera had previously forecast flat sales for the quarter, and shares fell to a 52-week low last week. iGate is expected to report earnings of 14 cents per share (up 42.9%) on revenue of $55.6 million. India-based iGate recently spun off its Mastech consulting services. Shares are down 45.0% in the past three months, and also reached a new 52-week low last week.
San Jose-based Novellus Systems Inc. (NASDAQ: NVLS), on the other hand, is expected to report that net income tumbled 90.4% from a year ago to 4 cents per share, on revenue of $245.6 million. Novellus fell to a 52-week low early last week, and shares are down 44.5% year to date.
TheStreet.com's Jim Cramer says without the Paulson plan, every component is in trouble. Let's take a look.
Without the Paulson plan, or if the plan is so watered down and delayed, I have been saying all bets are off and we could be in for a huge swoon. How huge?
I like to sit down and noodle on the actual components of the Dow Jones Industrial Average to give you a real sense of what can go wrong. And there is so much going wrong. The credit markets are vanishing, the earnings are vanishing and the only hope is a plan that ignites credit markets, forces money off the sidelines and gets this economy and the worldwide economy moving again.
Not long ago, I postulated that this market is literally repealing all of the moves since the Brazil-Russia-India-China emergence that gave us better markets to sell into than just the U.S. With the collapse of Chinese growth -- they have simply ceased to be importers since the summer -- the inflation in India, the war in Russia and a U.S.-led slowdown in Brazil (although that remains a robust market) BRIC is more like having a brick around your neck than a wind at your back.
Meanwhile, the peak in energy and the collapse of the financial system have left both of those groups in disarray with valuations simply too difficult to pin down, so you retreat to worst-case scenarios where you can at least find some terra firma -- mainly where stocks were last time things were this bad.
Goldman upgraded shares of BP Plc (NYSE: BP) to Buy from Neutral on valuation as they believe the recent pullback provides an attractive entry point.
VF Corp. (NYSE: VFC) was raised to Outperform from Neutral at Credit Suisse citing its acquisition platform and international growth. The company's target was increased to $100 from $88.
Deutsche Bank upgraded shares of Tenet Healthcare (NYSE: THC) to Buy from Hold and increased its target to $8.50 from $7 to reflect increased confidence in the company's ability to beat expectations over the next 12 months and reduce its net debt.
US Steel (NYSE: X) was raised to Sector Outperformer from Sector Performer at CIBC.
Stock futures were lower this morning as investors digested the decline in commodity prices and awaited a slew of economic readings. Data on employment, manufacturing and auto sales will be reported during the morning and throughout the day. At 2:00 p.m., the Federal Reserve's Beige Book, which gives an overall picture on the economy will be released.
Coca-Cola Co. (NYSE: KO) said it is offering $2.4 billion for China Huiyuan Juice Group Ltd., triple Huiyuan's market value. This is Coke's largest acquisition by value to date in China and gives the company a leg in the fast-growing and dynamic Chinese juice market. Coke also said that it expects to buy back a total of $1 billion of its stock for the full year. The Boeing Co.'s (NYSE: BA) workers are prepared to vote Wednesday. Union members are scheduled to cast two ballots: one regarding Boeing's latest offer, which union leaders are recommending to reject, and another on whether to begin a strike. Results of the vote are expected Wednesday night.
More information is coming out regarding Korea Development Bank interest in Lehman Brothers (NYSE: LEH). According to reports in The Chosun Ilbo, South Korea's largest mass-circulation daily, state-owned KDB has made a proposal to acquire 25% of U.S. Lehman for as much as 6 trillion won ($5.3 billion). HSBC Holdings (NYSE: HBC) and an unnamed Chinese bank are said to be vying with the KDB for the Lehman stake.
The Summer Olympics are only days away and what the Chinese had hoped would be their coming out party to celebrate all that is good, may instead become quite the opposite.
The air pollution in Beijing is so bad that even reducing automobile traffic by 50% has not helped much. China is now considering a 90% reduction according to news reports. Athletes are staying in other countries until the games begin so that they may train somewhere they can breathe. There are also reports that many athletes involved in stamina events will be forced to wear masks to protect themselves from the particulates in the air.
Now Reuters is reporting that "Some International Olympic Committee officials cut a deal to let China block sensitive websites despite promises of unrestricted access, a senior IOC official admitted on Wednesday."
So the world media will not be able to do their jobs in a manner they are accustomed to. But who are we actually referring to? Western media, of course, because half the world still limits access to information to some degree.
After hitting a one-year high of $82.50 in October, the stock hit a one-year low of $58.87 on Tuesday. UTX opened this morning at $64.50. So far today the stock has hit a low of $62.58 and a high of $65.31. As of 12:45, UTX is trading at $63.82, up 2.71 (4.4%). The chart for UTX looks bearish and steady, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $50 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 just 4 months as long as UTX is above $50 at November expiration. UTX would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
UTX hasn't been below $58 at all in the past year and has shown support around $59 recently. This trade could be risky if the US military efforts in the Middle East slow down in the next few months, but even if that happens, it is tough to imagine military spending really decreasing by a significant amount.
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 UTX.
Nokia Corp. (NYSE: NOK) shares are up over 7.4% in premarket trading after the world's largest maker of handsets said second-quarter profit fell 61% to $1.75 billion, or 46 cents per share, while sales rose 4% to $20.87 billion. Excluding items, Nokia's profit rose 8% to $2.18 billion. Nokia beat estimates of earnings of 56 cents per share on $20.05 billion in revenue, according to Thomson Financial. The mobile phone maker slightly raised its forecast for the mobile phone industry, saying volume would grow 10% or more in 2008.
Continental Airlines (NYSE: CAL) are up again this morning after climbing 38% Wednesday with the rest of the airline stocks. Continental swung to a second-quarter loss, hurt by record high fuel prices and weakening economic conditions. Still the losses of $3 million, or 3 cents per share, or excluding one-time items totaled $25 million, or 25 cents per share, beat expectations of a loss of 49 cents per share.
Yum Brands (NYSE: YUM) shares are down 4.3% in premarket trading after it reported a second-quarter profit of $224 million, or 45 cents a share. Revenue rose to $2.65 billion from $2.37 billion a year ago. While this beat estimates, and while the company raised its earnings growth forecast for the full year to 12% from 11%, investors were concerned about rising food costs which hurt profit margins in the second quarter.
It seems that Apple Inc. (NASDAQ: AAPL)'s new 3G iPhone was sold out in Germany after less than a week. Deutsche Telekom AG's T-Mobile division sold 15,000 iPhones and it's not clear when Apple will be able to deliver more iPhones for the German market, Financial Times Deutschland reported.
I know it doesn't matter at all. Right now we are so stuck on the banking problems and on the companies bleeding from higher energy prices that nobody cares about all of this cash, which will be used to shrink equity. They won't care because the banks, brokers and homebuilders, and the hobbled companies that use oil, have to issue so much equity that you can't see the effect of the equity shrinkage. But it will eventually matter. It has to matter that Deere has taken out 10% of its stock in the last four years. It does matter that Black & Decker (NYSE: BDK) (Cramer's Take) has eliminated almost 20% of its equity. Emerson's taken out 5%, same with Boeing (NYSE: BA) (Cramer's Take). There's just a huge amount of equity being shrunk.
FedEx (NYSE: FDX) may be in talks to buy its rival European rival TNT, according to a report from the Financial Times. TNT shares have jumped 25% in Europe.
General Electric Co. (NYSE: GE) announced Monday it will supply parts for Gulfstream Aircraft Corp.'s G650 business jet in a deal worth potentially more than $100 million. Separately, GE said it would develop with Safran SA a new line of fuel efficient jet engines to compete with United Technologies Corp. (NYSE: UTX) Pratt & Whitney.
Apple Inc. (NASDAQ: AAPL) may have sold as many as 425,000 of its new 3G iPhones in the first three days after the handset made its debut, in line with projections and despite serious technical and activation problems. Apple and AT&T (NYSE: T) sold a combined 225,000 in the U.S. Gene Munster of Piper Jaffray & Co. predicts Apple will sell 4.08 million this quarter.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
While some companies may be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it's appliance business and adding more to it's portfolio of aircraft and engine capability should be a good move. The Wall Street Journal (subscription required) reported today that GE hopes to improve its competitive position against Pratt & Whitney.
A response from a Pratt & Whitney spokesman played down the increased competition and said that although the company takes this GE move seriously it has a 45-year history producing small engines and holds a solid position in the market place. This type of comment is to be expected and has some validity, but that does not make it good news for P&W.
P&W is a division of another major giant industrial conglomerate United Technologies (NYSE: UTX). Both GE and UTX stocks were up in early morning trading today.
UPDATE: GE closed at $26.91 up $0.40 (1.51%). UTX closed at $61.05 up $1.35 ( 2.26%).
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GE.
TheStreet.com's Jim Cramer says recent downgrades are killing whole industries, and they're coming at a terrible time.
You can't lose autos and aerospace. Yet that's what's happening. The devastating aerospace downgrade by Goldman yesterday had pin action galore, wrecking everything from United Tech (NYSE: UTX) (Cramer's Take) and Parker-Hannifin (NYSE: PH) (Cramer's Take) to BE Aerospace (NASDAQ: BEAV) (Cramer's Take). It took the whole frame down with it and made everything toxic. And it happens at a terrible time. It isn't like Honeywell (NYSE: HON) (Cramer's Take), which with a few days left in the quarter can come out defending itself. Goldman rolled a perfect strike.
One of the reasons that big newspapers like The New York Times are doing badly is that they often cover stories long after other media. They like to do long analysis pieces that look back on news. The efforts are usually a waste of time.
The paper decided to run a piece called "Wall Street's Fading Crush On G.E." According to the article, "These days, it's hard to find much love on the Street for what was once the bluest of blue chips."
Memo to The New York Times: Thank you for nothing.
The sentiment on Wall Street turned against General Electric (NYSE: GE) months ago. Not only did it miss earnings, but it became increasingly clear that the company was not rushing to dump underperforming assets like its industrial division.
Over the past five years, while GE shares are flat, the stock of another large U.S. conglomerate, United Technologies (NYSE: UTX) are up over 90%.
The Times may not have gone far enough in its analysis. Beyond being out of favor, GE is now a dog of a stock. Without a major change of direction, its share price is not going to recover.
Douglas A. McIntyre is an editor at 247wallst.com.
How the mighty have fallen, at least in the stock market. GE (NYSE: GE) trades near a 52-week low at $31.
Now, short sellers have added insult to injury. The short interest in GE has moved up 11 million to 68.7 million between May 15 and May 30. That percent increase is almost as high as the jump in the short interest at US Air (NYSE: LCC).
The fact that so many shares are bet that GE will fall further is extraordinary. The company still holds one of the best credit ratings of any corporation in the US. Its infrastructure business, the firm's largest division, continues to do remarkably well.
But investors are assuming that GE's industrial, medical and financial operations could have more bad quarters ahead of them.
Shares in rival conglomerate United Technologies (NYSE: UTX) have far outperformed GE during the last year.
That says a mouthful.
Douglas A. McIntyre is an editor at 247wallst.com.
"Dividend growth has become increasingly scarce on Wall Street," says says Chuck Carlson, an expert on dividend reinvestment plans. In his The DRIP Investor he looks at two stocks boosting their payouts.
"For the first time in five years, the number of companies in 2007 boosting their dividends declined nearly 6% from the previous year, according to Standard & Poor's. And the slowdown in dividend growth continued in the first quarter of 2008.
"The first quarter marked the seventh consecutive three-month period of year-over-year declines in the number of companies raising dividends. Through the first three months of this year, 19% fewer companies raised dividends than in the year-earlier quarter.
"Even more alarming, 83 companies decreased their dividends during the fi rst quarter, according to S&P. That's up from just 19 in the same period in 2007 and is the highest number of dividend decreases since 1991.
"Nevertheless, there are still plenty of companies willing to boost their dividends, and you can now buy such companies at bargain prices.
The earnings crunch begins in earnest this coming week, with companies from Johnson & Johnson (NYSE: JNJ) and PepsiCo Inc. (NYSE: PEP) to Southwest Airlines Co. (NYSE: LUV) and Harley-Davidson Inc. (NYSE: HOG) scheduled to report results for the quarter just ended. But with the ongoing turmoil in the markets, much attention is on the tech and financial sectors. This week will provide plenty to mull over on both counts.
.gif){kind=logo}
Stock futures were lower this morning as investors digested the decline in commodity prices and awaited a slew of economic readings. Data on employment, manufacturing and auto sales will be reported during the morning and throughout the day. At 2:00 p.m., the Federal Reserve's Beige Book, which gives an overall picture on the economy will be released.
The Summer Olympics are only days away and what the Chinese had hoped would be their coming out party to celebrate all that is good, may instead become quite the opposite.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
Is a second stimulus check up ahead?
Coke (KO) moving up nicely following Q3 earnings
Will Lehman bankruptcy drop a $400 billion shoe on October 21st?
