Market Wrap For February 21: Markets End The Week On A Negative Note
U.S. stocks finished the week slightly lower as investors gave today's poor housing data a slack, and blame it on the weather.
“Investors are willing to cut the market some slack because of the weather; I'm keeping my fingers crossed that the economy heats up as the weather warms up,” Jack Ablin, chief investment officer at BMO Private Bank told CNBC.
The Nasdaq index managed to bank its third straight weekly gain as both the Dow and S&P 500 saw relatively small losses.
- The Dow lost 0.19 percent, closing at 16,103.30.
- The S&P 500 lost 0.19 percent, closing at 1,836.25.
- The Nasdaq lost 0.10 percent, closing at 4,263.41.
- Gold gained 0.60 percent, trading at $1,324.80 an ounce.
- Oil lost 0.56 percent, trading at $102.17 a barrel.
- Silver gained 0.67 percent, trading at $21.83 an ounce.
News of Note
January Existing Home Sales read 4.62 million, below the 4.65 consensus of 4.65 million.
S&P has cut Ukraine to CCC from CCC+ while maintain a negative outlook. The rating agency said that it is likely the government will default given the deteriorating political situation which “puts the government's capability to meet debt service at an increasing risk.”
Equities-Specific News of Note
Several analysts commented on Hewlett-Packard's (NYSE: HPQ) following its quarterly results last night. Analysts at Citi reiterated a Buy rating on Hewlett-Packard with a $40 price target. The analysts noted “While EPS was helped by a few pennies from other items such as more IP and real estate sales, one should expect such a major turnaround story to contain a few items that will be the push-back for those that are negative to focus on. But investor and analyst concerns about weak cash flow and that it could drop to below $1 billion and maybe as low as $500m were unfounded as HP reported cash flow from operations of $3 billion which was even above our street high estimate of $2 billion.” Separately, analysts at Goldman Sachs raised their price target to $21 from a previous $17 but maintained a Sell rating as they believe secular pressures across key segments will force a reset in earnings power, compressing the valuation. Shares hit new 52 week highs of $30.70 before erasing gains and closing the day at $29.80, down 1.29 percent.
Analysts at Stifel downgraded Wal-Mart (NYSE: WMT) to Hold from Buy while removing its $83 price target. The analysts noted “WMT is making significant investments in e-commerce and small stores against a background of low expectations but we see strategic risks (pricing), political risks (wages and FCPA), growing macro pressures, ramping investments and slowing dividends, all during a frictional period of management transitions” and that “we think to really reset model, WMT may just have break well below the 5.9-6.1% OM range over the past 5 years – due to price investment (GM) and store investment (operational improvement and wage issues in the public debate).” Shares lost 0.54 percent, closing at $73.12.
Analysts at Drexel Hamilton initiated coverage of Freescale (NYSE: FSL) with a Buy rating and $26 price target. The analysts noted “The company has a strong foundation of advanced IP knowledge and an understanding of system-on-chip technologies that have allowed them to develop market-leading products in sensing, analog and RF technologies. Now, however, the company has brought in corporate leadership familiar with the market and capable of leading the company into a brighter future, with 50-year-old Greg Lowe now serving as President and CEO, while even more seasoned Dan McCranie serves as a non-executive Chairman, presenting a formidable combination. Lowe, who left Texas Instruments after 28 years with the company, the last of which were spent running TI's key analog products division, has been with Freescale since June of 2012. After now just more than a year-and-a-half on the job, Lowe's vision is beginning to push Freescale to a higher level. Shares hit new 52 week highs of $23.29 before closing the day at $22.70, up 0.98 percent.
Royal Bank of Scotland (NYSE: RBS) is planning to shed 20,000 to 30,000 jobs as part of a shift in corporate strategy to focus on U.K. retail and commercial lending while cutting its international operations and investment banking divisions. Shares gained 0.17 percent, closing at $11.94.
The EMA's Committee for Medicinal Products for Human Use has issued a positive opinion recommendation for Teva Pharmaceuticals' (NASDAQ: TEVA) DuoResp Spiromex. Final approval from the European regulators is due in the next few months. Shares gained 0.52 percent, closing at $48.45.
Verizon (NYSE: VZ) has officially completed its $130 billion purchase of Vodafone's (NYSE: VOD) 45 percent stake in Verizon Wireless. Verizon will issue 1.27 billion shares to Vodafone and pay the remainder in cash. Vodafone said it will return $23.9 billion of the cash to shareholders. Shares of Verizon lost 1.70 percent, closing at $47.30 while Vodafone hit new 52 week highs of $39.57 before closing the day at $39.00, up 0.67 percent.
Exxon Mobil (NYSE: XOM) said that it had replaced 103 percent of its 2013 production by adding proved oil and gas reserves totaling 1.6 billion boe. The company also boosted its 2013 year-end liquids component of its 25.2 billion boe in global reserves to 53 percent last year, the highest proportion in a decade. Shares lost 0.35 percent, closing at $95.04.
Speaking at the Consumer Analyst Group of New York, Coca-Cola (NYSE: KO) said that emerging markets such as India and China still have upside, despite currency risks. Shares lost 0.33 percent, closing at $37.18.
The New York Department of Financial Services previously halted a deal for Wells FargoOcwen. (NYSE: OCN) Today, Inside Mortgage Finance reported that advisors close to Ocwen said they expect the sale to be approved by the end of March. CNBC on the other hand reported "that report is completely and utterly false," citing a source close to the matter. Shares of Ocwen gained 5.27 percent, closing at $37.52.
Ariad Pharmaceuticals (NASDAQ: ARIA) has given Alexander J. Denner a seat on the company's board. Denner is the chief investment officer and founding partner of activist investor firm Sarissa Capital and the firm owns a 6.22 percent stake in the company. Shares gained 1.60 percent, closing at $8.87.
Honda's (NYSE: HMC) Accord sedan was the best-selling car of 2013 according to HIS Automotive. Honda sold 368,089 Accords to beat out second place Toyota (NYSE: TM) with its Camry sedan that sold 342,007 units. Shares lost 0.06 percent, closing at $36.14.
Vishop (NYSE: VIPS) has purchased a 23 percent stake in Chiense cosmetics maker Ovation for $55.8 million. Shares lost 3.56 percent, closing at $109.99.
According to Reuters, private equity firm Cerberus Capital is in advanced talks to acquire Safeway (NYSE: SWY) in a leveraged buyout deal. The private equity firm already owns the Albertsons chain and could create synergies by combining the two companies. Shares hit new 52 week highs of $37.70 before closing the day at $36.85, up 4.33 percent.
LyondellBasel (NYSE: LYB) said that the U.S. Justice Department will not prosecute the company for potential foreign bribery law violations. Shares lost 0.16 percent, closing at $85.66.
Under Armour (NYSE: UA) will design speed skating suits for the U.S. Olympic team in 2018 despite the company's suits being blamed for poor performance by U.S. skaters in Sochi. Shares hit new 52 week highs of $114.22 before closing the day at $112.67, up 5.11 percent.
Google (NASDAQ: GOOG) acquired Spider.io, an click fraud prevention startup. Spider.io is intended to uncover click fraud stemming from malware and will be added to Google's DoubleClick unit. Shares finished unchanged at $1,204.10.
Apple (NASDAQ: AAPL) acquired Burstly, a developer of mobile app testing platform and management solution for in-app ads. Shares lost 1.10 percent, closing at $525.29.
Philip Morris (NYSE: PM) filed for an automatic shelf registration statement with the SEC, giving the company the right to issue debt securities. Shares lost 0.93 percent, closing at $78.97.
AMD (NYSE: AMD) will sell around $600 million worth of 6.75 percent senior notes due 2019. The company will use the processed to buy back up to $425 million worth of six percent convertible senior notes due 2015 and $200 million worth of 8.125 percent convertible senior notes due 2017. Shares gained 0.14 percent, closing at $3.69.
Winners of Note
This morning, Strayer Education (NYSE: STRA) reported its fourth quarter results. The company announced an EPS of $1.32, beating the consensus estimate of $0.98. Revenue of $124.08 million beat the consensus estimate of $119.32 million. The company's net loss for the quarter was $19.0 million compared to a net income of $16.6 million in the same quarter last year. The company implemented a restructuring during the fourth quarter which resulted in a charge of approximately $55 million and is expected to reduce annual operating expenses by $50 million beginning in 2014. Shares surged 37.88 percent, closing at $47.17.
Brookdale Senior Living (NYSE: BKD) is merging with its peer Emeritus. (NYSE: ESC) As part of the deal, Emeritus shareholders will receive 0.95 shares of Brookdale common stock for each Emeritus share they own. Based on yesterday's closing price, the deal values Emeritus at $28.59 a share. Shares of Brookdale hit new 52 week highs of $32.38 before closing the day at $30.55 while Emertius surged 35.18 percent, closing at $29.01.
Barnes & Noble (NYSE: BKS) has received an offer from G Asset Management to purchase 51 percent of the company for $22 a share. Alternatively, G Asset Management proposed buying a 51 percent stake in the Nook division at a $5 per share valuation. The investment firm believes that “substantial shareholder value” could be unlocked if the Nook segment was separated from the company's main unit. Shares gained 5.42 percent, closing at $17.69.
Decliners of Note
Several analysts commented on Groupon (NADSAQ: GRPN) following its quarterly results last night. Analysts at RBC downgraded shares to Underperform from Sector Perform with a price target lowered to $7 from a previous $11. The analysts noted their reason for downgraded was due to “our dramatically reduced estimates and our valuation framework point to valuation downside; 2) North America and International Billings trends are showing greater weakness than expected; 3) Active Customer and Billings Per Customer trends are softening; 4) NA Local Billings (what we view as the company's key segment) showed only 2% Y/Y growth in Q4; and 5) We view GRPN's goal of becoming the “starting point for (all) Mobile Commerce” to be excessively ambitious and undermining of the company's potential to win the Local Commerce/Services market.” Analysts at Bank of America maintained a Neutral rating but lowered the price target to $11 from a previous $13. The analysts noted “Groupon remains a company in transition, moving from daily deal company to a destination marketplace with very high mobile exposure. While the company has a big potential opportunity ahead, we think a turnaround may be choppy and could take longer than expected by the Street.” Shares plummeted 21.83 percent, closing at $8.03.
Last night, Blucora (NASDAQ: BCOR) reported its fourth quarter results. The company announced an EPS of $0.40, beating the consensus estimate of $0.39. Revenue of $167.3 million beat the consensus estimate of $158.26 million. The company issued guidance and sees its first quarter revenue to be $213 million to $222 million below the consensus estimate of $223.7 million. The company guided its EPS to be $1.06, below the consensus estimate of $1.15. Blucora disclosed that it is only partially renewing its search/advertising agreement with Google's AdSense for three years. AdSense will no longer be delivered to Blucora's mobile users. Shares lost 8.21 percent, closing at $19.80.
American Apparel (NYSE: APP) continued to decline today as lawyers continue to work on options for the company that faces serious debt issues. Shares hit new 52 week lows of $0.55 before closing the day at $0.6199, down 6.08 percent.
Last night, Cabot Oil & Gas (NYSE: COG) reported its fourth quarter results. The company announced an EPS of $0.18, in-line with the consensus estimate. Revenue of $487.46 million beat the consensus estimate of $475.78 million. Shares initially spiked higher when the company announced that its natural gas production rose 56 percent year over year and output of oil, condensate and natural gas liquids rose 34 percent. Shares turned negative after company executives say they haven't been able to take full advantage of natural gas prices climbing to recent highs due to cold weather. The company indicated that throughout the first two months of 2014, the prices it has realized from its Marcellus Shale assets have been $0.60 to $0.65 below New York Mercantile settlement prices. Shares lost 8.17 percent, closing at $36.07.
Earnings of Note
This morning, Charter Communication (NASDAQ: CHTR) reported its fourth quarter results. The company announced an EPS of $0.35, beating the consensus estimate of $0.22. Revenue of $2.14 billion missed the consensus estimate of $2.16 billion. Net income for the quarter totaled $39 million, compared to a net loss of $73 million in the same quarter last year, marking the first time since 2010 Charter posted a quarterly profit. Shares lost 5.13 percent, closing at $125.08.
This morning, Dish Network (NASDAQ: DISH) reported its fourth quarter results. The company announced an EPS of $0.64, beating the consensus estimate of $0.41. Revenue of $3.54 billion missed the consensus estimate of $3.59 billion. Net income for the quarter totaled $288 million, compared to a net income of $209 million the company reported in the same quarter last year. During the post earnings conference call, management expressed concerns, but aren't going in to panic mode over a potential Comcast and Time Warner combination. Shares hit new 52 week highs of $59.95 before closing the day at $57.92, up 1.49 percent.
This morning, Fannie Mae (OTC: FNMA) reported its fourth quarter results. The company announced revenue of $6.98 billion, beating the consensus estimate of $5.27 billion. Net income for the quarter totaled $6.5 billion, bringing its full year net income to $84 billion which will allow the company to pay the Treasury $7.2 billion in dividends in March. Fannie Mae will return $121.1 billion to the Treasury after drawing $116.1 billion. Shares lost 0.30 percent, closing at $3.28 on the OTCBB market.
Quote of the Day
“Spend some time this weekend on home improvement; improve your attitude toward your family.” – Bo Bennett
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