Security News Highlights

11/4/2014

People in the U.S. went to the voting polls today. History investors need not wait for the midterm ballots to be counted. Wall Street will most likely continue its winning streak. [mailmunch-form id=”2562″] The Dow Jones Industrial Average (DJIA) rose 18 points (0.1%) to 17,384, the S&P 500 Index lost 6 points (0.3%) to 2,012, and the Nasdaq Composite declined 15 points (0.3%) to 4,624. In moderate volume, 824 million shares were traded on the NYSE, and 1.9 billion shares changed hands on the Nasdaq.

WTI crude oil declined $1.59 to $77.19 per barrel, wholesale gasoline was $0.04 lower at $2.08 per gallon, while the Bloomberg gold spot price increased $1.58 to $1,167.21 per ounce.

Oil closed below $80 in Nymex for the first time since 2012 after Saudi Arabia cut prices for crude sold to the U.S. This is good for the Consumer but not so much for the oil companie’s profits margins. Stocks are struggling Tuesday from a one-two punch of falling oil prices and renewed fears of a global slowdown.

Oil prices fell sharply for a second straight session Tuesday on signs that the Organization of the Petroleum Exporting Countries is unlikely to cut production to push prices higher. Prices are down about 25% from mid-June highs, as growing supplies, particularly in the U.S., and weak demand has weighed on the market.

The Dow Jones Transportation Average added 0.4% with airlines leading the way after Delta Air Lines (DAL 42.32, +1.71) reported strong October metrics. However, the sector could not pull away from its flat line as growth concerns weighed on machinery stocks like Caterpillar (CAT 98.61, -1.61) and Joy Global (JOY 52.00, -0.31).

If the drop in prices continues, drilling and extraction activity will weaken, which would hurt not only the energy industry but the states which dominate that industry.

Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 87.04. [mailmunch-form id=”2562″]
Yen fall to its lowest level against the Dollar since 2007. The yen’s slide rattled shares of some non-Japanese exporters in Asia on Monday, with South Korean car makers hit particularly hard on worries that rivals in Japan will gain a pricing edge in global markets.

Some of the most active Stocks were Alibaba Group, Bank of America, Sprint, Office Depot, Facebook, Apple, Intel, Microsoft, Level 3 Communications, XIV, Groupon, and Micron Technology.

The following are some companies that reported earnings:

Alibaba (BABA) released its first financial report since going public in the U.S. in September. And while revenue blew the doors off– jumping 54% from last year– profit in the second quarter was in line with estimates. Yahoo (YHOO) owns about a 16% stake in Alibaba
After the bell, shares of TripAdvisor (TRIP.O) dropped 13.9 percent to $72.08 following the release of its results.

American International Group Inc. (AIG $53) reported adjusted 3Q earnings-per-share (EPS) of $1.21, versus the $1.09 consensus estimate of analysts surveyed by FactSet, as net premiums written rose 3.0% year-over-year (y/y) to $9.0 billion, compared to the $8.8 billion that the Street had projected. Additionally, the insurer announced that it increased its stock repurchase program by an additional $1.5 billion. Shares traded lower as analysts described some of the underlying components of the report as mixed.

Dish Network Corp. (DISH $63) posted 3Q EPS of $0.31, below the $0.39 that the Street had anticipated, with revenues rising 4.8% y/y to $3.7 billion, roughly inline with analysts’ forecasts. The company said its pay-TV average revenue per user improved y/y, while its total customers decreased and the subscriber churn rate increased slightly compared to the same period a year ago. DISH was lower.

Alibaba Group Holding Ltd. (BABA $106) announced fiscal 2Q earnings ex-items of $0.45 per share, mostly inline with analysts’ projections, with revenues growing 53.7% y/y to $2.7 billion, topping the $2.6 billion that the Street had estimated. This was the Chinese ecommerce company’s first earnings report since going public and shares were nicely higher.

CVS Health Corp. (CVS $85) achieved 3Q profits ex-items of $1.15 per share, two cents north of the Street’s estimates, as revenues advanced 9.7% y/y to $35.0 billion, above the $34.7 billion that analysts had expected. The company raised the lower end of its full-year earnings outlook. Shares of CVS are modestly lower despite the results.

Sprint Corp. (S $5) reported a fiscal 2Q loss of $0.19 per share, wider than the $0.06 per share shortfall that analysts had projected, with revenues increasing 9.5% y/y to $8.5 billion, below the $8.6 billion that the Street had anticipated. The company continued to lose subscribers and lowered its full-year earnings outlook, while announcing that it will eliminate 2,000 more jobs. Shares were sharply lower.

Priceline Group Inc. (PCLN $1,098) announced 3Q profits ex-items of $22.16 per share, above the $21.08 that the Street had estimated, as revenues rose 25.0% y/y to $2.8 billion, roughly inline with analysts’ expectations. However, the online travel booking site issued softer-than-expected 4Q earnings guidance, citing a very competitive marketplace and a mixed macroeconomic backdrop, particularly in Europe, and shares finished markedly lower.
Axiall beats by $0.11, beats on revs (AXLL) : Reports Q3 (Sep) earnings of $0.72 per share, excluding non-recurring items, $0.11better than the Capital IQ Consensus Estimate of $0.61; revenues rose 6.0% year/year to $1.27 bln vs the $1.16 bln consensus.
Sanchez Energy beats by $0.03, reports revs in-line (SN) : Reports Q3 (Sep) earnings of $0.23 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $0.20; revenues rose 120.1% year/year to $207.35 mln vs the $208.67 mln consensus.

Twenty-First Century Fox Inc. and Activision Blizzard Inc. are among the stocks expected to see action in the extended session Tuesday as the companies report quarterly results.

Fox (NWS) is expected to report fiscal first-quarter earnings of 37 cents a share on revenue of $6.24 billion, according to analysts polled by FactSet.

Activision (ATVI) is estimated to report third-quarter earnings of 13 cents a share on revenue of $1 billion.
TripAdvisor Inc.(TRIP) is forecast to post third-quarter earnings of 60 cents a share on revenue of $349.2 million
EOG Resources Inc.(EOG) is seen posting third-quarter earnings of $1.30 a share on revenue of $4.31 billion.
Liberty Media Corp. (LMCA) is projected to report third-quarter earnings of 25 cents a share on revenue of $1.19 billion.
Diamondback Energy Inc.(FANG) is slated to report third-quarter earnings of 61 cents a share on revenue of $133.9 million.

Discovery Communications Inc.(DISCA) (DISCK) said its quarterly profit rose but still lowered its full-year revenue outlook.
Michael Kors Holdings Ltd.(KORS) projected a disappointing outlook for the current quarter, which includes the holiday shopping season, overshadowing its relatively robust quarterly results.
Priceline Group Inc.(PCLN) released earnings and revenue projections for the current quarter that were well below Wall Street estimates.
Sprint Corp.(S) reported its second straight quarterly loss Late Monday, the company announced job cuts.
Herbalife Ltd. (HLF) reported its quarterly profit fell 92% late Monday.
CVS Health Corp.(CVS) released better-than-expected third-quarter earnings Tuesday morning but shares were down slightly in recent trading.

Foot Locker (FL 53.63, -2.54) also weighed, falling 4.5% after announcing CEO Ken Hicks will be replaced by Richard Johnson. Homebuilders also pressured the sector with the iShares Dow Jones US Home Construction ETF (ITB 23.92, -0.26) ending lower by 1.1%.

Archer Daniels Midland Co.(ADM) said it earned an adjusted 81 cents a share in the third quarter, ahead of 73 cents a share forecast by analysts in a FactSet survey.
Expeditors International of Washington Inc.(EXPD) on Tuesday reported its third-quarter per-share earnings rose 18% to 53 cents a share.
Alibaba Group Holding Ltd.(BABA) reported mixed results with profits falling 39% due to “share-based compensation,” the company said. Still, shares moved higher as market watchers appeared to be heartened by the company’s user-growth rate.

Apple Inc. (AAPL) will issue about $3.5 billion in bonds to take advantage of some of the lowest interest rates on record, and help fund its massive stock-repurchase program, according to the Wall Street Journal. The new eight-year notes will have a yield of about 1.1%, while the 12-year paper will yield roughly 1.7%.  On its stock, Apple pays a quarterly dividend of 47 cents, for a yield of 1.72%. That beats the expected yield on the new eight-year notes by a mile, and may well exceed the yield on the 12-year debt.  Meanwhile, Apple’s stock trades for 14.3 times the consensus 2015 earnings estimate of $7.65 and for 13 times the consensus 2016 EPS estimate of $8.43, among analysts polled by FactSet. That compares with 15.6 and 13.9 for the S&P 500 (SPX), respectively.

Investors in Apple’s stock can be bullish, given the outsized demand for the newest iPhones. Net income in the latest quarter rose 13% to $8.47 billion, and earnings per share were up 20% to $1.42, reflecting a 6% decline in the diluted share count, brought about by the buybacks. Apple said that, as of Sept. 27, it still had $22.1 billion in stock repurchases left out of its $90 billion program.
So investors can look forward to EPS growing at a faster pace than earnings. Sales of new and updated products and services — a larger iPhone 6 and iPhone 6 Plus, the Watch and new content deals, such as the one with Walt Disney Co. (DIS) — are poised to keep the party going.
Back to the bonds: Apple’s stock promises growth and income, while the new euro-denominated debt offers only income, requiring a long-term commitment because the eventual increase in interest rates will push down the market value of the notes.