Market Wrap For January 28: Markets Snap Losing Streak, Apple Tumbles
U.S. stocks reversed its multi-day losing streak as investors found enough positives in Tuesday's earnings to end the Dow's five day losing streak.
The FOMC began its first day of a two-day meeting. The Wall Street Journal's Jon Hilsenrath believes that the central bank will reduce its bond-buying program by another $10 billion to $65 billion a month.
- The Dow gained 0.57 percent, closing at 15,928.75.
- The S&P 500 gained 0.61 percent, closing at 1,792.49.
- The Nasdaq gained 0.35 percent, closing at 4,097.96. Gold lost 0.70 percent, trading at $1,254.50 an ounce.
- Oil gained 1.64 percent, trading a $97.29 a barrel.
- Silver lost 1.05 percent, trading at $19.58.
News of Note
- ICSC Retail Store Sales rose 0.2 percent week over week compared to a decline of 1.9 percent last week.
- December Durable Goods fell 4.3 percent, below the 1.6 percent expected.
- Redbook Chain Store Sales rose 3.2 percent year over year, compared to a 3.1 percent gain last week.
- S&P Case-Shiller Home Price Index rose 0.9 percent month over month, ahead of the 0.8 percent expected.
- January Consumer Confidence read 80.7, higher than the consensus estimate of 79.0.
- January Richmond Fed Manufacturing Survey read +12, below the 13.0 forecast.
- The Reserve Bank of India unexpectedly increased its key policy repo rate by 25bps to eight percent. Inflation read 9.9 percent in December and the bank is projecting the country's CPI to remain high.
Equities-Specific News of Note
Analysts at Wells Fargo maintained an Outperform rating on Groupon (NASDAQ: GRPN) with a price target of $13 to $14. The analysts noted “"We believe the profitability (or lack thereof) of Groupon Goods is a key investor concern, but we are beginning to see a clearer path to profitability based on a number of key initiatives, including the company's acquisition of flash sale retailer ideeli, and the development of a private label division at Groupon, which we recently found in an online job posting." Shares gained 5.15 percent, closing at $10.52.
Analysts at Jefferies increased their price target on Google (NASDAQ: GOOG) to $1,300 from a previous $1,150 ahead of the company's fourth quarter results on Thursday. The analysts noted "We are looking for a solid 4Q print from Google on Thursday. Our street-high estimates reflect our belief that Google's core search business was firing on all cylinders during the qtr. This expectation is supported by positive data from Google's ad partners in addition to our own proprietary PLA study and solid traffic trends.” Shares gained 1.98 percent, closing at $1,123.01.
Analysts at Stifel dissected data from the NHTSA regarding 2013 recalls. The analysts concluded “This year's recall for Tesla was a safety measure to replace at-home plugs for charging Model S batteries. Given the small number of units in the recall, we assume it is an immaterial event for the company.” Shares gained 5.16 percent, closing at $178.38.
Analysts at Barclays upgraded Maxim Integrated Products (NASDAQ: MXIM) to Overweight from Equal Weight with a price target raised to $35 from a previous $28. The analyst noted that “"(1) we have gained further confidence that MXIM's content in the Samsung GS5 is increasing with a Bio Sensor win and additional building block sockets; and (2) we see additional opportunities in Mobile with new products (Bio Sensor, Audio, Touch, MEMs) to return the Consumer to growth.” Shares gained 4.69 percent, closing at $29.93.
Herbalife (NYSE: HLF) is the subject of an investigation by the Canadian Competition Bureau. The CCB will be investigating allegations the company is operating pyramid schemes and offering perspective recruits false income claims. Shares lost 2.35 percent, closing at $62.56.
Amazon.com (NASDAQ: AMZN) is reportedly set to launch a “a dedicated games and entertainment device this year priced below $300." Shares gained 2.09 percent, closing at $394.37.
Honda (NYSE: HMC) said that it has built more vehicles in the U.S. to sell in the domestic market than it imported from Japan. Separately, Toyota (NYSE: TM) will cut back vehicle production in Japan by 15 percent before a big hike in the national sales tax kicks in. Shares of Honda lost 0.05 percent, closing at $38.06 while Toyota gained 0.62 percent, closing at $117.75.
J.C. Penney (NYSE: JCP) amended its poison pill, lowering the threshold at which the provision kicks to 4.9 percent from a previous ten percent. The company argued that the move will help itself protect tax benefits over the coming years. shares lost 1.38 percent, closing at $6.42.
Martin Marietta Materials (NYSE: MLM) has agreed to acquire Texas Industries (NYSE: TXI) for $2.7 billion. The combined company will have a valuation of $8.5 billion and the transaction will be immediately accretive to Martin Marietta's EPs in 2014. Shares of Martin Marietta gained 3.75 percent, closing at $106.63 while Texas Industries gained 2.89 percent, closing at $73.61.
Abercrombie & Fitch (NYSE: ANF) revealed that its CEO Mike Jeffries has lost his position as chairman. Arthur Martinez, former CEO of Sears will assume the position of chairman. Shares gained 4.77 percent, closing at $36.26. Casablanca Capital has amassed a 5.2 percent stake in Cliffs Natural Resources (NYSE: CLF) and intends to wage an activist battle against management. The hedge fund wants the iron-ore miner to split itself up into two companies. The first being a company comprised of international assets that will be spun off to shareholders. The company's domestic assets should be converted into a master limited partnership (MLP) structure. Casablanca said that under its proposals, shares could be valued at $53. Shares were up over 14 percent pre-market but gave up most of the gains to close the day at $19.81, up 2.11 percent.
Winners of Note
Analysts at Deutsche Bank said that Melco Crown (NASDAQ: MPEL) should be bought on dips. The analysts said that concerns over a potential $500 million default of a trust loan in China as well as fears of a Chinese economic slowdown are overblown. The analysts noted "Macau has evolved from VIP to mass. VIP now only account for 20-40% of the six operators' EBITDA. We currently assume VIP revenue to grow 14% in 2014. But even if the VIP market contract by 15% in 2014, our sensitivity analysis shows that only 6-12% of EBITDA will be at risk. Hence, we feel last week's 9-15% price correction has already reflected the potential risks." Shares gained 6.15 percent, closing at $40.88.
Kraton Performance Polymers (NYSE: KRA) said that it has entered in an agreement to acquire the styrenic block copolymer operations of LCY Chemical, a Taiwanese based firm. Kraton expects the deal to be accretive to earnings on an operating basis by $0.75 to $0.80 in the first full year of operation. Analysts at Goldman Sachs said that "We believe that this merger makes strategic sense and should also strengthen KRA's balance sheet and cash flow metrics. The combination of KRA's innovative R&D and LCY's cost-effective manufacturing base with closer geographical proximity to faster-growing Asian markets makes sense.” Shares surged 15.57 percent, closing at $24.72.
Analysts at Stifel upgraded Vulcan Materials (NYSE: VMC) to Buy from Hold with a $69 price target. The analysts noted “On a go-forward basis we see an improved residential and non-residential environment, a generally more stable funding environment, and positive inflection in construction backlogs helping drive the recovery in the aggregates space. We believe 2014 will mark an inflection point for aggregate demand and believe industry conditions will allow mid- to high-single digit volume growth over the next several years." Shares gained 5.94 percent, closing at $61.49.
This morning, D.R. Horton (NYSE: DHI) released its first quarter results. The company reported an EPS of $0.36, beating the consensus estimate of $0.29. Revenue of $1.64 billion beat the consensus estimate of $1.45 billion. Home sales rose 33 percent to total $1.63 billion with an average sales price of $275,600. "Housing market conditions continue to improve across most of our operating markets, and our weekly sales pace has accelerated in January" and that "We are well-positioned to capture demand in the spring selling season with a solid balance sheet, an increased community count, a robust finished lot supply and a strong inventory of homes available for sale." Shares surged 9.84 percent, closing at $23.00.
Netflix (NASDAQ: NFLX) is in talks with several entertainment companies to gain streaming licensing rights for several European countries including France and Germany. Shares hit new 52 week highs of $407.41 before closing the day at $406.77, up 6.70 percent.
This morning, American Airlines Group (NYSE: AAL) released its first quarter results. The newly formed airline reported an EPS of $0.59, beating the consensus estimate of $0.55. Revenue of $9.98 billion beat the consensus estimate of $9.9 billion. The company said that fuel costs and maintenance-related expenses moderated. CEO Doug Parker said “early returns on our merger are very positive.” Shares hit new 52 week highs of $32.20 before closing the day at $31.96, up 5.90 percent.
This morning, AK Steel (NYSE: AKS) released its fourth quarter results. The company announced an EPS of $0.09, beating the consensus estimate of $0.05. Revenue of $1.46 billion beat the consensus estimate of $1.40 billion. The company reported a higher shipment which compensated for a four percent decline in average selling price per ton. AK Steel's largest competitor, U.S Steel (NYSE: X) lost money for the seventh time in nine quarters as shares traded today in opposite directions. Shares of AK Steel gained 18.70 percent, closing at $7.11 while U.S. Steel lost 0.43 percent, closing at $25.34.
Decliners of Note
After disappointing many investors with poor iPhone sales and guidance, many analysts reacted to Apple's (NASDAQ: AAPL) earnings. Analysts at Raymond James, Oppenheimer downgraded shares to Outperform and Hold, respectively. Goldman Sachs said that the second quarter guidance Apple offered is a “hefty setback” as the analysts maintained a Buy rating but lowered their price target to $610 from $635. Analysts at Morgan Stanley maintained an Overweight rating and said that the company's new products coming out in 2014 should boost shares. Analysts at JPMorgan maintained an Overweight rating and while acknowledging the negative issues, recommends buying shares in today's weakness. Separately, Carl Icahn tweeted that he had purchased another $500 million worth of shares bringing his stake in the $4 billion range. Shares lost 7.99 percent, closing at $506.50.
This morning, Corning (NYSE: GLW) released its fourth quarter results. The company reported an EPS of $0.29, beating the consensus estimate of $0.27. Revenue of $2 billion beat the consensus estimate of $1.97 billion. The company announced that it “expects LCD glass price declines to be higher than previous quarters” as some contracts signed in 2012 require the company to match prices offered by its rivals. Shares lost 6.15 percent, closing at $17.10.
Analysts at Chardan Capital downgraded Himax (NASDAQ: HIMX) to Neutral with a $12 price target. The analysts noted that the company won't come out a winner after Google launches its Google Glasses. The analysts noted “Most investors appear to be waiting eagerly for the launch of Google Glass and several other head mount displays, many of whom, could feature HIMX's LCoS Microdisplays. However, in the absence of compelling applications, we believe many of these products are unlikely to witness mass adoption” Share lost 6.88 percent, closing at $13.54.
Rent-A-Center (NASDAQ: RCII) announced its fourth quarter earnings yesterday. The company announced an EPS of $0.25, significantly below the consensus estimate of $0.74 a share. Revenue of $769.6 million missed the consensus estimate by $22.52 million. The company said that its profit miss was due to several unexpected operating expenses, such as claims paid under its self-funded health insurance program, an adjustment to on-rent merchandise reserves, and severance payable to former executives of the company. Shares hit new 52 week lows of $24.02 before closing the day at $24.30, down 22.17 percent.
Earnings of Note
This morning, DuPont (NYSE: DD) released its fourth quarter results. The company announced an EPS of $0.59, beating the consensus estimate of $0.55. Revenue of $5.27 billion beat the consensus estimate of $5.20 billion. The company's net profit doubled to $185 million. The company also announced a $5 billion share repurchase program, of which $2 billion worth of shares will be purchased in 2014. Shares lost 1.11 percent, closing at $59.57.
This morning, Ford (NYSE: F) released its fourth quarter results. The company reported an EPS of $0.31, beating the consensus estimate of $0.29. Revenue of $36.3 billion beat the consensus estimate of $35.4 billion. The company maintained its cautious outlook for 2014. Shares gained 0.06 percent, closing at $15.72.
This morning, Pfizer (NYSE: PFE) released its fourth quarter results. The company reported an EPS of $0.56, beating the consensus estimate of $0.53. Revenue of $13.6 billion beat the consensus estimate of $13.35 billion. The company repurchased $4.6 billion of shares in the quarter and $16.3 billion for the full year. The company expects its 2014 EPS to fall within a range of $2.20 to $2.30 versus the consensus estimate of $2.28. Shares gained 2.56 percent, closing at $30.42.
After the market closed, Electronic Arts (NYSE: EA) released its third quarter results. The company announced an EPS of $1.26, beating the consensus estimate of $1.23. Revenue of $1.57 billion missed the consensus estimate of $1.66 billion. Shares were trading lower by 6.31 percent at $23.30 going in to the company's post earnings conference call.
After the market closed, Yahoo! (NASDAQ: YHOO) released its fourth quarter results. The company announced an EPS of $0.46, beating the consensus estimate of $0.38. Revenue of $1.22 billion beat the consensus estimate of $1.20 billion. Shares were trading lower by 5.10 percent at $36.27 going in to the company's post earnings conference call.
Quote of the Day
Just bought $500 mln more $AAPL shares. My buying seems to be going neck-and-neck with Apple's buyback program, but hope they win that race.
— Carl Icahn (@Carl_C_Icahn) January 28, 2014
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