After an intense week of economic data, markets will come up for air next week as the Christmas holidays reduce the market moving data.
Focus will shift from the US to political and social troubles in Europe and Africa.
Fighting in South Sudan and labor protests in Libya are not expected to slow down for the holidays, which will continue to boost oil prices. In Ukraine, protestors have pitched tents and settled in for the long haul, vowing to continue their rallies through the holidays until President Viktor Yanukovych is removed from office.
Key Earnings Reports
Next week will be a quiet week for earnings releases, with only a small number of companies reporting. CalAmp Corp (NASDAQ: CAMP) will be one of the few companies expected to report.
CalAmp is expected to report EPS of $0.19 on Monday, December 23. In mid-October, the analysts at FBR Capital had an Outperform rating on CalAmp with a price target of $29.00. Analyst Scott Thompson said FBR believes the company has been underrated and that the company has good growth prospects.
“Our bullish thesis on CalAmp is straightforward: We believe that the consensus underestimates the near- to intermediate-term EPS impact of the initiatives in which CalAmp is involved, and we believe that the stock's valuation has room to expand given peers' current valuation levels and growth profiles. We encourage growth investors to take note of this opportunity that is outside the normal purview of most communications equipment investors, as the stock is likely to outperform many of the handset and data networking names over the next several quarters”
Following a visit with CalAmp’s management in November, Northland Capital Markets gave the stock an outperform rating and raised their price target from $25 to $28.
Analyst Michael Latimore explained, “We visited with management last week and came away believing diverse, high-growth, present M2M opportunities continue to exist for the company. Wireless Matrix sales initiatives, UBI, fleet management and international are highlight”
Next week’s economic calendar will be thin with the Christmas holidays. Asian data will be the star as Japan is set to release a host of data which will paint a better picture of the nation’s economy. With the country’s sales tax hike heavy on investors’ minds, most will look to the data for clues about whether or not the Japanese economy will be able to shoulder a tax increase next year.
Markets Closed for Christmas
Partnership with Foxconn
BlackBerry announced that it will be working with Foxconn on new smartphone following a lengthy discussion for a partnership.
“While the partnership with Foxconn represents a new model for production of Blackberry devices, it also represents a significant change, an important change, in our model for managing working capital,” the company's CEO John Chen said. “Under this new partnershp, Foxconn will jointly develop and manufacture certain new Blackberry devices and manage the inventory associated with those products,” he added.
Foxconn will take over the hardware design of new devices while BlackBerry will continue to provide software technology. The two companies will collaborate jointly on distribution channels.
BlackBerry is set to release its first joint product in March or April, codenamed Jakarta.
“It's going to be very, very competitive, and we're starting with the Indonesian markets,” Chen explained. “We have another maybe six or seven different markets that we identified, that we would like to take these devices to,” he added.
The company announced that it has a total of 80 million users on the instant messaging platform following the release of an app for Android iOS devices. 60 percent of those active users are using it daily, which is higher than the 50 percent Chen believes is the daily usage rate for Instagram users.
Chen noted that fiscal 2015 will see the company investing and building out more features and channels which could provide “some reasonably good revenue in about FY16” from the messaging services.
The company's balance sheet, according to management's statement, “remains very strong.” Cash increased in the quarter to $3.2 billion, up from $2.6 billion last quarter. This reflects the $1 billion convertible debenture that was completed in November. The company also received a “significant” tax refund in the quarter.
The road to profitability
Chen noted that the company has adopted a new vision which includes the Foxconn deal which helps the company reduce purchasing obligations and inventory clearing costs.
By the end of fiscal 2015 the company will become cash flow positive and profitable, according to Chen's remarks.
“And so you should be looking at it towards the end of fiscal year '15, sometime early in fiscal year '16 as our targeted date for that to become hopefully a positive number, but at least not a negative number,” said Chen.
Benzinga's Newsdesk reached out to several analysts for their insights.
One analyst highlighted the 35 percent short interest in shares of BlackBerry (and the sharp gains these traders have seen over the last few months) and suggested the Foxconn news shows -- if nothing else -- a pulse within BlackBerry managers.
The same analyst believes shorts may be viewing the Foxconn deal as an indication managers are attempting to make moves. He hinted at a relief rally Friday as the bad results are now out.
Most analysts pointed at a likely squeeze in the name on Friday leading to a more than 10 percent gain in share prices before noon.
Walgreen Co. (NYSE: WAG) held its first quarter 2014 earnings call on Friday.
First Quarter Results:
Summary of Earnings Call:
Major indices received a boost in Friday's trading activity following a better than expected third quarter GDP. The surprising economic data is yet another key data that may suggests that the economy is healthy enough and could handle the Fed's recent decision to taper its bond buying program.
In a statement, Boston Fed Chief Eric Rosengren noted “I, too, expect the economy to continue to improve, and my forecast is for real GDP to grow at a rate close to 3 percent next year. Like the Committee, my assessment has brightened in recent months. But, by the same token, I do not yet have sufficient confidence in this outlook to risk the removal of any monetary accommodation at this time.”
News of Note
Third Quarter GDP increased 4.1 percent, above the 3.6 percent consensus.
Third Quarter Corporate Profits rose $39.2 billion, higher than the previous reading of $38.3 billion.
December Kansas City Fed Manufacturing Survey came in at -3.0 compared to a previous reading of +7.0 in November.
Yesterday's Federal Reserve balance sheet showed that the central bank's assets reached a record $4.01 trillion.
The Bank of Japan has left its key interest rate at 0.1 percent and maintained its commitment to expand the monetary base by 60 to 70 trillion Yen a year.
The S&P has cut its EU long-term credit rating to AA+ from a previous AAA due to an “overall weaker creditworthiness of the EU's 28 member states.” Outlook remained at stable and doesn't affect the ratings of individual countries.
Chinese stocks suffered its ninth consecutive session of declines, the worst run since 1994. Borrowing remains difficult despite the central bank's recent emergency cash injection yesterday of 200 billion yuan (approximately $33 billion.)
Equities-Specific News of Note
Analysts at Credit Suisse upgraded Carnival (NYSE: CCL) to Outperform from a previous Neutral rating following the company's strong earnings report which included an EPS beat of $0.04. The analysts placed a $43 price target on shares. Shares gained 2.13 percent, closing at $38.86.
Analysts at JPMorgan admitted defeat in rating 3M (NYSE: MMM) with a previous Underweight rating and upgraded shares to Neutral. The analysts changed perspective came as a result of the company's recently announced dividends, share buyback and future guidance. Shares hit new 52 week highs of $138.09 before closing at $137.06, up 0.48 percent.
Analysts at Credit Suisse named Chevron (NYSE: CVX) as a top energy pick for 2014. The analysts noted the company could be active in its M&A and acquire a top E&P (exploration and production) firm such as PDC Energy, (NASDAQ: PDCE) Diamondback Energy (NASDAQ: FANG) and EOG Resources (NYSE: EOG). Chevron lost 0.36 percent, closing at $122.78. PDC Energy gained 2.59 percent, closing at $53.40, Diamondback Energy gained 1.89 percent, closing at $50.74 and EOG Resources gained 1.84 percent, closing at $168.37.
Analysts at Cleveland Research noted a positive read of J.C. Penney's (NYSE: JCP) December sales trends including an improved comparable store sales trends. Shares gained 4.52 percent, closing at $8.32.
Analysts at Citigroup downgraded Transocean (NYSE: RIG) to Sell from Neutral with a $40 price target as part of a negative call on the entire offshore drilling services sector. The analysts noted that pricing power is beginning to erode in the sector. Shares lost 0.31 percent, closing at $47.01.
Analysts at Goldman Sachs downgraded Domino's Pizza (NYSE: DPZ) to Neutral from Buy based on valuation reasons and that the Pizza chain's global growth potential is already factored into the share price. Shares gained 0.36 percent, closing at $68.93.
Analysts at Credit Suisse reiterated an Outperform rating on Bristol-Myers Squibb (NYSE: BMY) following its divestiture of its diabetes JV stake. The analyst raised its price target to $60.00 from a prevous $56.00. Shares lost 0.74 percent, closing at $53.44.
Fastenal (NASDAQ: FAST) announced that it does not expect to report a positive fourth quarter. The company said it will likely miss analysts EPS expectations due to weakness in heavy manufacturing and lower than expected gross margins. The company is expected to announce results on January 17. Shares lost 4.94 percent, closing at $45.64.
Sprint (NYSE: S) is allegedly involved with up to six banks to work out financing proposals for a potential bid of T-Mobile USA (NYSE: TMUS). Shares of Sprint hit new 52 week highs of $9.87 before closing at $9.85, up 6.60 percent while shares of T-Mobile USA also hit new 52 week highs of $31.13 before closing at $31.00, up 4.69 percent.
2014 is a “must win” for PepsiCo (NYSE: PEP) in India. In a letter to employees, the company's Indian chief told employees that the company “cannot afford to lose a day” and called for “relentless execution” as it battles Coca-Cola (NYSE: KO) to gain market share in one of the fastest growing markets worldwide. Shares of Pepsi gained 0.32 percent, closing at $81.92 while Coca-Cola gained 0.45 percent, closing at $40.04.
Winners of Note
Last night, a Jazz Pharmaceuticals (NASDAQ: JAZZ) subsidiary is set to offer $57 per share for Gentium (NASDAQ: GENT). The deal gives Jazz Defitelio, which will be “highly complementary to the company's experience in and focus on orphan diseases in the area of hematology/oncology.” Analysts at Brean Capital increased its price target on Jazz to $171 following the acquisitions. Shares of Jazz hit new 52 week highs of $126.84 before closing at $123.91, up 8.01 percent. Gentium gained 2.82 percent, closing at $57.22, a slight premium above the offer price.
Oracle (NASDAQ: ORCL) announced it will acquire Responsys (NASDAQ: MKTG) in a $1.5 billion deal which values shares at $27.00. The move is seen as a strategic initiative as Oracle is loking to compete against competitors such as Salesforce.com. (NYSE: CRM) Shares of Responsys gained 40.34 percent, closing at $27.40 while Oracle lost 0.63 percent, closing at $36.37. News of the acquisition in the field also sent shares of Constant Contact (NASDAQ: CTCT) to new 52 week highs of $31.34 before closing the day at $30.60, up 6.84 percent.
Ambarella (NASDAQ: AMBA) announced it will be working with Google (NASDAQ: GOOG) on a “new class of wearable cameras” for the Helpouts application and services. The two companies will join together at the Consumer Electronics Show to demonstrate the wearable camera. Shares of Ambarella hit new 52 week highs of $28.83 before closing the day at $27.94, up 11.45 percent.
Ariad Pharmaceuticals (NASAQ: ARIA) said that the FDA has approved a revised USPI and a REMS for Iclusig. The move “allows immediate resumption of its marketing and commercial distribution” as the drug was suspended in October. Shares gained 16.49 percent, closing at $6.43.
Analysts at RBC Capital Markets initiated coverage of Nimble Storage (NASDAQ: NMBL) with an Outperform rating and $40 price target. The analysts noted the company's shares represents an extremely attractive price to performance ratio that makes the company a potential M&A target. Shares hit new 52 week highs of $39.49 before closing at $37.50, up 5.78 percent.
Decliners of Note
CarMax (NYSE: KMX) reported its third quarter results this morning. The company's EPS of $0.47 came in below the consensus estimate of $0.48. Revenue of $2.94 billion came in above the consensus estimate of $2.89 billion. The company noted that it saw a tightening of the credit terms offered by its subprime providers. Shares lost 9.37 percent, closing at $48.08.
Earnings of Note
BlackBerry (NASDAQ: BBRY) announced its third quarter results this morning. The company's EPS of a loss of $0.67 came in higher than the consensus estimate of a loss of $0.43. Revenue of $1.2 billion missed the consensus estimate of $1.58 billion. The company announced a new strategic partnership with Foxconn to manufacture future smartphones. Shares of BlackBerry initially fell 6 percent in pre-market trading but reversed these losses as investors saw what some analysts deemed as a sign of life at the company. Shares finished the day higher by 15.52 percent, closing at $7.22.
Walgreens (NYSE: WAG) announced its first quarter results this morning. The company's EPS of $0.72 was in line with estimates. Revenue of $18.3 billion came in ahead of the consensus estimate of $17.98 billion. The company noted that traffic increased 0.2 percent and the average basket size was 2.2 percent higher compared to the previous year. Shares gained 3.76 percent, closing at $59.08.
Quote of the Day
"However, the company is financially strong, has a broad and trusted product portfolio to work with, a talented employee base and a new leadership team dedicated to implementing our new road map." - BlackBerry's CEO John Chen during the company's conference call today.
Cole Wilcox, the portfolio manager, CEO and CIO of Longboard Asset Management, has an interesting way to play the decline in commodities and emerging market currency prices.
His strategy: invest in the dry bulk sector.
"What's happening all over the world is a huge glutton of commodities [are] coming into the market from emerging market countries that…are kind of over-producing commodities in a weak economy, trying to put stuff out there in the marketplace," Wilcox told Benzinga.
Wilcox said there has been a lot of demand from emerging markets to export a "tremendous amount of raw material commodities around the world."
"For consumers of commodities in China, the relative cost of importing commodities from other places has gone down relative to domestic producers," he added.
Dry bulk shipping companies are an essential part of that effort, as they are needed to transport the commodities from an emerging market (such as Latin America) to another region.
"As emerging market currencies continue to go down, and the need and demand for continuing to export large amounts of increased production and [the need to] move those commodities, you have the need for dry bulk shipping cargo containers to move stuff around," Wilcox explained.
Even so, some investors may be unwilling to budge. After all, dry bulk companies took a beating over the last few years; who's to say they'll perform any better in the future?
Wilcox has faith in the sector, but he is most interested in DryShips (NASDAQ: DRYS). While the stock has fallen well below its all-time high (DryShips traded above $120 a share in October 2007), the company is trying to crawl its way back to the top. Year-to-date, DryShips is up more than 127 percent.
"The stock and the sector, it got destroyed over the last five years," said Wilcox. "There was a huge amount of consolidation. [Companies] went out of business. And now you're getting into this supply/demand, this equilibrium, where you can see a huge move in the stock to the upside -- re-pricing for the upside."
Wilcox is also intrigued by the fact that George Soros recently invested in the sector, including DryShips.
"If you look at the people who are in the trade right now -- George Soros took a significant position across the whole [smattering] of the dry bulk shipping cargo companies in the last quarter," said Wilcox. "So some of the best macro minds are…long this position and it's a great opportunity to have a rise to the upside."
Wilcox said that he likes DryShips because it is "probably the best brand in the investment world."
"It had a huge move back in 2007 -- kind of in the bull market commodity," he added, noting that traders are very aware of the stock.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
Analysts Comment on BlackBerry's (NASDAQ: BBRY) weak third quarter 2014 results.
BlackBerry reported third quarter adjusted EPS of $0.67 vs $0.43 estimate. EPS were down 205% from the same quarter last year. Revenue was reported at $1.19B versus the estimate of $1.58. The company also noted that sales were down 56% year-over-year. Despite these poor results, BlackBerry said that 4.3 million smartphones were sold through to end customers. In addition, the company announced a five-year deal with Foxconn, expecting non-cash pretax charges $4.6 billion. Blackberry reported that they are focused on turning profitability in FY16.
MKM Partners analyst Michael Genovese maintained a Neutral rating on BlackBerry and increased the price target from $6.00 to $6.75. MKM commented on his confidence in the new management and the company's progress in lowering opex and reducing inventories and purchase commitments.
Genovese commented, “We are maintaining our Neutral rating following weak 3QFY14 results and the brief but frank strategy discussion by new CEO John Chen. Hardware units and revenues, Service revenues, GMs and EPS all badly missed our estimates. We are also negative on BlackBerry's commitment to remain in the Hardware business, as evidenced by its new 5-year strategic agreement with Foxconn, although the new arrangement will likely provide financial benefits compared to the present mode of Hardware production.”
Evercore analyst Mark McKechnie was also optimistic following the press release. McKechnie maintained an Equalweight rating and raised the price target from $6.50 to $7.00. The analyst is optimistic on John Chen's focus on highly secure enterprises and comprehensive reorganization plan, including the outsourced handsets to Foxconn. Evercore has a concern with the “fundamental conflict” between hardware and services as BlackBerry competed with Google's Android in devices and Apple's iOS.
RBC analyst Mark Sue was not as hopeful following the earnings report. Sue commented that BlackBerry's results were “worse than depressed expectations” and the “lack of clear strategy” will weigh on shares. The analyst added that the recognized smartphone shipments of 1.9 million missed RBC estimate of 3.3 million and noted that the cash burn implies more future layoffs.
BlackBerry closed at $6.25 on Thursday. Shares of BlackBerry were up as much as 17.4% following the report on the Foxconn partnership.
The Wall Street Journal reports some major shippers including Amazon.com (NASDAQ: AMZN), Avon Products (NYSE: AVP) and Walgreen Co (NYSE: WAG). are increasingly turning to smaller shippers such as Eastern Connection and Pitt Ohio LLC to handle lucrative ground deliveries.
The smaller shippers are stealing market share from UPS and FedEx by offering lower prices and faster service in some areas of the country.
Eastern Connection reportedly undercut UPS and FedEx by 20% to 40% for door-to-door, next day ground shipment from Boston to New York by using its own fleet of vans. Eastern can offer shipment to Ohio by handing off packages to Pitt Ohio LLC which offers a similar service in Ohio.
The smaller shippers are threat to UPS, because they're taking a large share of e-retail package shipments. Ground package shipments by online retailers are the biggest growth area in the delivery business.
The smaller shippers are also better placed to provide same-day and next-day delivery, which is considered to be the next frontier for online retail.
Amazon.com is one of the main customers for the smaller retailers. It is using them for its Prime two-day delivery service, which is sent out from regional distribution centers. Amazon.com and eBay (NASDAQ: EBAY) are also developing their own branded package delivery services.
The effect of this competition on UPS and FedEx share price is not clear yet.
TeamHealth Holdings (NYSE: TMH), one of the nation's largest providers of outsourced physician staffing solutions for hospitals, announced the acquisition of the operations of Professional Anesthesia Services, LLP. Based in Omaha, Neb., Professional Anesthesia Services' physicians and certified registered nurse anesthetists manage more than 18,000 cases annually through anesthesia management services for Bergan Mercy Medical Center and three ambulatory surgery centers.
"We share TeamHealth's commitment to quality, efficiency and exceptional patient care," said Thomas Buglewicz, MD, chairman of Professional Anesthesia Services. "By partnering with TeamHealth, we will have the necessary resources and infrastructure to better serve our hospital and surgery center partners and the patients and families of the Omaha community."
"Professional Anesthesia Services has established a reputation for quality and service in the Omaha market," said Elliott Wohlner, MD, president, West Division of TeamHealth Anesthesia. "We are proud to have providers of this caliber join our group."
"We are pleased to welcome the providers of Professional Anesthesia Services to TeamHealth," said Oliver Rogers, president of TeamHealth Hospital Based Services. "We share the group's commitment to its clients and to delivering high-quality anesthesia management services to the Omaha community."
About TeamHealth TeamHealth (Knoxville, Tenn.) (NYSE: TMH) is one of the largest providers of outsourced physician staffing solutions for hospitals in the United States. Through its 18 regional locations and multiple service lines, TeamHealth's more than 9,700 affiliated healthcare professionals provide emergency medicine, hospital medicine, anesthesia, urgent care, specialty hospitalist and pediatric staffing and management services to more than 860 civilian and military hospitals, clinics, and physician groups in 46 states. The term "TeamHealth" as used throughout this release includes Team Health, Inc., and all of its related entities, divisions, subsidiaries and affiliated physicians and physician groups. For more information about TeamHealth, visit www.teamhealth.com.
Toward the end of trading Friday, the Dow traded up 0.64 percent to 16,282.95 while the NASDAQ surged 1.31 percent to 4,111.77. The S&P also rose, gaining 0.76 percent to 1,823.90.
BlackBerry posted a quarterly loss of $4.4 billion, or $8.37 per share, versus a year-ago profit of $9 million, or $0.02 per share. Its adjusted loss came in at $0.67 per share.
Its revenue dropped to $1.2 billion from $2.7 billion. However, analysts were estimating a loss of $0.44 per share on revenue of $1.59 billion. BlackBerry also entered into a five-year strategic partnership with Foxconn to develop and manufacture phones.
Equities Trading UP
Red Hat (NYSE: RHT) shot up 14.58 percent to $56.25 as the company reported better-than-expected third-quarter results.
Shares of Jazz Pharmaceuticals Public Limited Company (NASDAQ: JAZZ) got a boost, shooting up 7.77 percent to $123.65 after the company announced its plans to buy Gentium SpA (NASDAQ: GENT) for around $1 billion.
Textron (NYSE: TXT) was also up, gaining 13.05 percent to $36.82 after news broke that the company was nearing a $1.4 billion deal with Beachcraft.
Equities Trading DOWN
Shares of TIBCO Software (NASDAQ: TIBX) were down 11.83 percent to $21.58 on Q4 results. Analysts at UBS downgraded the stock from Buy to Neutral.
Swift Transportation (NYSE: SWFT) was also down, falling 6.83 percent to $21.95 after the company released some poor guidance after the close on Thursday.
In commodity news, oil traded up 0.09 percent to $99.13, while gold traded up 1.15 percent to $1,202.70.
Silver traded up 0.77 percent Friday to $19.41, while copper rose 0.39 percent to $3.31.
European shares were higher today. The Spanish Ibex Index gained 0.23 percent, while Italy's FTSE MIB Index climbed 0.77 percent. Meanwhile, the German DAX surged 0.74 percent and the French CAC 40 jumped 0.41 percent while U.K. shares gained 0.39 percent.
The U.S. economy expanded at an annual pace of 4.1% in the third quarter, versus a prior reading of a 3.6% growth. However, economists were expecting a growth of 3.6%.
The Kansas City Fed manufacturing index declined to -3.00 in December, versus a prior reading of 7.00. However, economists were expecting a reading of 6.00.
More changes on tap for General Motors (NYSE: GM), as the auto-maker wraps up an historic month.
The company appointed Juergen Keller as executive director for sales and marketing at GM's European subsidiary, Adam Opel AG. Keller, most recently Opel's director of international operations, will succeed Matthias Seidl.
The news is the latest headline-maker for GM – which recently emerged from U.S. government bailout and appointed its first female CEO. The company also announced a major shake-up in its European operations – selling off its stake in France's PSA Peugeot Citroen while ending the sale of the Chevrolet brand in Europe, to bolster GM's Opel and Vauxhall brands there.
All these changes, however, are reportedly making executives at Opel very uneasy. According to a Reuters report, Opel was relying on GM's partnership with Peugeot “to develop a common platform to help revamp its range of small cars...and drive its market share back above six percent in Europe, compared with a high of more than 10 percent a decade ago.”
Motor Authority reports that Opel lost $1.8 billion last year – and has lost more than $18 billion over the past 15 years. The website notes that, earlier this year, GM committed $5.2 billion to help Opel develop new powertrains and models – and is working on Opel's expansion into the growing Russian car market. German supermodel Claudia Schiffer has also been signed up for a new Opel ad campaign.
But analysts say it will take some time to revamp both Opel's image and its aging line of products.
"If you have a weak brand, your cars need to be twice as compelling to persuade clients to switch and to grow sales," Metzler Bank auto analyst Juergen Pieper told Reuters. "Merely developing cars which are 'as good' is not enough. Clients will stick with the brand they already like."