Market Wrap For January 22: Earnings Season Continues To Come In Mixed
Wednesday marked another day of mixed trading as investors and traders continue to find little clarity from the quarterly results released so far.
With the markets being a "mixed bag" major indices ended the day little changed with the Dow ending slightly in the red and both S&P 500 and Nasdaq ending the day slightly in the green.
- The Dow lost 0.25 percent, closing at 16,373.34.
- The S&P 500 gained 0.06 percent, closing at 1,844.86.
- The Nasdaq gained 0.41 percent, closing at 4,243.00.
- Gold lost 0.43 percent, trading at $1,236.50 an ounce.
- Oil gained 1.88 percent, trading at $96.76 a barrel.
- Silver lost 0.50 percent, trading at $19.77 an ounce.
News of Note
MBA Mortgage Applications rose 4.7 percent compared to 11.9 percent last week.
ICSC Retail Store Sales declined 1.9 percent week over week, compared to a decline of 1.0 percent last week.
Redbook Chain Store Sales rose 3.1 percent year over year compared to 2.9 percent increase last week.
According to Morgan Stanley, lower gold prices may boost demand from China but won't be sufficiently enough to reverse the metal's tumbling prices. The analysts have a 2014 price target of $1,160 per ounce and 2015 target of $1,138.
The Bank of Canada maintained its benchmark overnight lending rate at one percent. The Bank noted that “inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance.” The loonie has sunk to new multi-year lows at $0.9062.
The Bank of Japan has left its key interest rate unchanged at 0.1 percent and maintained its program of expanding its monetary base by 60 to 70 trilling yen a year (around $670 billion.)
The Bank of England kept its interest rates unchanged at 0.5 percent and sees no need to raise the rates if its 7 percent unemployment target is achieved. Unemployment currently stands at 7.1 percent.
Equities-Specific News of Note
Analysts at RBC Capital Markets downgraded Travelers (NYSE: TRV) to Outperform from Top Pick with a price target lowered to $98 from a previous $100. The analysts noted the downgrade is due to a red margin improvement as the P&C insurance pricing environment slows. Shares lost 0.52 percent, closing at $84.56.
Analysts at Goldman Sachs downgraded Mosaic (NYSE: MOS) to Sell from Neutral with a price target lowered to $35 from a previous $41. The analysts noted that their cautious tone is due to a negative outlook for corn and soybean prices over the next year that will pressure farmer economics and 2014 acreage potential. The analysts noted “with Mosaic currently discounting $360-$370/mt K prices in 2015, our view, and down only 8 percent from the break-up of BPC in late July, we believe shares already reflect an overly optimistic medium-term price recovery given our S/D forecasts.” Shares lost 1.14 percent, closing at $47.77.
Analysts at Drexel Hamilton downgraded Intel (NASDAQ: INTC) to Hold from Buy with a price target decreased to $26 from a previous $30. The analysts noted that the company's server chip business is losing out to cloud solutions which have “visibly slowed high margin data center CPUs.” Shares lost 1.09 percent, closing at $25.31.
Analysts at Sterne Agee downgraded Dollar Tree (NASDAQ: DLTR) to Neutral from Buy with a lowered price target of $56 from a previous $63. The analysts noted that comparable-store sales could fall short of expectations during the fourth quarter as many customers had to deal with higher heating bills resulting in less money to spend on discretionary items. Shares lost 0.77 percent, closing at $53.14.
Analysts at Bernstein issued a cautious note on Starbucks (NASDAQ: SBUX) prior to the company's quarterly results. The analysts noted they “wouldn't be surprised to see a deceleration from the trends that we've seen in the last couple of quarters.” The analysts added that they don't “think it will be a huge slowdown” Shares lost 0.07 percent, closing at $73.60.
Analysts at Morgan Stanley said that Delta Air Line (NYSE: DAL) could see record level margins of 12 percent only to crease until at least 2016. The analysts noted that the company has “the best structure the industry has ever experienced, the most conservative capacity rebound the industry has ever experienced, and an airline macro goldilocks scenario based on the view that fuel prices are likely to trend flat/down while US GDP is upwardly biased.” Shares hit new 52 week highs of $32.92 before closing the day at $32.84, up 2.37 percent.
Yesterday LogMeIn (NASDAQ: LOGM) announced that it will discontinue its free service and is forcing members to upgrade to a paid version or lose all access within seven days. Analysts at Maxim said the move is an "incremental positive" and could potentially drive greater subscription revenue. Shares hit new 52 week highs of $36.68 before closing the day at $35.61, up 1.92 percent.
Analysts at Deutsche Bank released a note titled “No near-term relief” following IBM's (NYSE: IBM) less-than impressive results last night. The analysts noted that the company needs to demonstrate stability in hardware and an improvement in key emerging market countries. Analysts at JPMorgan noted that the company might need to alter its 2015 target of earning an EPS of $20 a share forcing them to cut their price target to $175. Shares lost 3.28 percent, closing at $182.25.
Carl Icahn said that he has bought an additional $500 million worth of Apple (NASDAQ: AAPL) over the last two weeks. The famed activist investor now holds over $3 billion worth of shares. Icahn has stated (again) that the company needs to do more with its cash hoard. Icahn said that the company's board “is doing great disservice to shareholders.” Shares gained 0.44 percent, closing at $551.51.
Facebook (NASDAQ: FB) begin testing a mobile ad network as it will work directly with publishers and advertisers instead of a 3rd party ad-serving platform. Shares lost 1.71 percent, closing at $57.51.
European regulators have approved AstraZeneca's (NYSE: AZN) Xigduo treatment for Type 2 diabetes. Shares hit new 52 week highs of $65.48 before closing the day at $65.39, up 0.60 percent.
Target (NYSE: TGT) is set to lay off 475 employees at its corporate headquarters in addition to ending health coverage for part time employees. The company is attempting to improve its cost-cutting efforts. Shares hit new 52 week lows of $58.75 before closing the day at $58.98, down 0.37 percent.
At the World Economic Forum meeting in Davos, Marissa Mayer, CEO of Yahoo! (NASDAQ: YHOO) said that by the end of the year the company “will have more mobile traffic than PC traffic.” Shares gained 1.67 percent, closing at $40.18.
VMWare (NYSE: VMW) has agreed to acquire AirWatch, a provider of mobile-management and security products in a $1.45 billion deal. Shares gained 1.18 percent, closing at $98.51.
Amazon.com (NASDAQ: AMZN) denied a previous report indicating that the company plans to launch an online pay-TV service. Shares hit new 52 week highs of $408.06 before shedding gains and closing the day at $404.54, down 0.62 percent.
David Einhorn's Greenlight Capital has initiated “medium size positions” in both Anadarko Petroleum (NYSE: APC) and BP (NYSE: BP). Shares of Anadarko gained 3.12 percent, closing at $83.72 while BP gained 1.05 percent, closing at $49.04.
Winners of Note
This morning, Brinker International (NYSE: EAT) announced its second quarter results. The company reported an EPS of $0.59, beating the consensus estimate of $0.58. Revenue of $704.39 million beat the consensus estimate of $699.49 million. Comparable restaurant sales grew 0.8 percent in the quarter as the company managed to increase sales despite price increases. Shares hit new 52 highs of $50.74 before closing the day at $49.72, up 6.49 percent.
Analysts at Sterne, Agee & Leach marinated a Buy rating and increased the price target on Cree (NASDAQ: CREE) to $76 from a previous $72 following the company's second quarter results yesterday which topped estimates. Analysts at Canaccord Genuity shared similar positive sentiments and noted that the company is well positioned to take a strong share of the LED market. Shares gained 7.16 percent, closing at $67.33.
Analysts at FBR maintained an Outperform rating and raised their price target on FireEye (NASDAQ: FEYE) to $85 from a previous $48. The analysts noted that their internal checks indicate the company is poised to gain major market share over the coming years following its recent acquisition of Mandiant. Shares gained 6.18 percent, closing at $73.73.
VisionChina Media (NASDAQ: VISN) announced a strategic deal with Baidu (NASDAQ: BIDU). Under the agreement, VisionChina will promote Baidu gaming products across its digital television advertising networks across the country's buses and subways. Shares of VisionChina hit new 52 week highs of $36.71 before closing the day at $28.15, up 16.37 percent. Bidu gained 1.00 percent, closing at $174.43.
Analysts at Piper Jaffray said that their social media tracking shows a high demand for Lions Gate's (NYSE: LGF) upcoming film Divergent. The analysts noted that the film can bring in $150 million in the domestic office and another $120 million internationally. Shares gained 5.70 percent, closing at $31.69.
Vringo (NASDAQ: VRNG) has won a patent suit against Google (NASDAQ: GOOG). A U.S. court ruled that the company is entitled to “ongoing royalties” from Google and a small handful of other tech companies. Shares of Vringo hit new 52 week highs of $4.14 before closing the day at $3.81, up 21.73 percent while Google hit new 52 week highs of $1,167.59 before closing the day at $1,165.02, up 1.32 percent.
Decliners of Note
Last night, Advanced Micro Devices (NYSE: AMD) announced its fourth quarter results. The company reported an EPS of $0.06, in-line with the consensus estimate. Revenue of $1.59 billion beat the consensus estimate of $1.54 billion. The company issued weak guidance and expects its first quarter sales to drop by 16 percent. Analysts at Susquehanna noted that the company has “provided uninspiring results and guidance, and we still fail to see a path toward a sustainable profitability.” The analyst reiterated a Neutral rating and $4 price target. Shares lost 11.99 percent, closing at $3.67.
This morning, Coach (NYSE: COH) released its second quarter results. The company announced an EPS of $1.06, missing the consensus estimate of $1.11. Revenue of $1.42 billion fell short of the $1.49 billion consensus estimate. North American sales fell nine percent in the quarter to $983 million as comparable store sales fell 13.6 percent. International sales rose two percent to $425 million. The company said that it will invest in new products later this year and plans to increase its retail presence by nine percent. Management admitted that it is losing market share to rival Michael Kors (NYSE: KORS). Shares of Coach lost 6.03 percent, closing at $49.38 while Michael Kors gained 3.30 percent, closing at $79.75.
Earnings of Note
This morning, Textron (NYSE: TXT) released its fourth quarter results. The company announced an EPS of $0.60, beating the consensus estimate of $0.59. Revenue of $3.51 billion beat the consensus estimate of $3.44 billion. Shares hit new 52 week highs of $39.24 before closing the day at $38.00, up 5.26 percent.
This morning, United Technologies (NYSE: UTX) released its fourth quarter results. The company announced an EPS of $1.67, beating the consensus estimate of $1.53. Revenue of $16.8 billion fell short of the $16.51 consensus estimate. The company intends to buy back $1 billion worth of shares in the coming year and spend the same amount on acquisitions. Shares hit new 52 week highs of $118.20 before closing the day at $116.12, up 0.98 percent.
This morning, Freeport McMoRan (NYSE: FCX) released its fourth quarter results. The company announced an EPS of $0.68, missing the consensus estimate of $0.80. Revenue of $5.88 billion came in short of the consensus estimate of $6.39 billion. The company said that it will “defend its rights” in Indonesia against a new export tax and that management feels “positive” that the matter could be resolved. Shares lost 2.10 percent, closing at $34.52.
After the market closed, Netflix (NASDAQ: NFLX) released its fourth quarter results. The company reported an EPS of $0.79, beating the consensus estimate of $0.64. Revenue of $1.18 billion beat the consensus estimate of $1.17 billion. The company added 2.33 million subscribers in the U.S above the consensus estimate of around 2.05 million. Shares surged higher by 16.41 percent, trading at $388.49 prior to the company's post earnings conference call.
After the market closed, SanDisk (NASDAQ: SNDK) released its fourth quarter results. The company reported an EPS of $1.71, beating the consensus estimate of $1.58. Revenue of $1.73 billion beat the consensus estimate of $1.70 billion. Shares gained 0.76 percent, trading at $72.74 just prior to the company's post earnings conference call.
After the market closed, eBay (NASDAQ: EBAY) released its fourth quarter results. The company reported an EPS of $0.81, beating the consensus estimate of $0.80. Revenue of $4.53 billion missed the consensus estimate of $4.50 billion. Following the results, Carl Icahn nominated two of his employees to eBay's board of directors. Shares surged higher by 7.74 percent, trading at $58.62.
Quote of the Day
"We also expect further moderate weakening in the following two years as the global economic recovery continues to gain traction, increasing the risk of higher interest rates, especially," - Morgan Stanley analysts Peter Richardson and Joel Crane in their 2014 and 2015 gold forecast note.
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