Market Wrap For February 25: Markets End The Day Relatively Flat
U.S. stocks fell on Tuesday as investors found a decline in consumer confidence as reason enough to keep stocks from moving higher.
The S&P 500 retreated from its record all time high set yesterday but took a run above the 1,850 level in the late morning. The all time high for the index is 1,852.91.
- The Dow lost 0.17 percent, closing at 16,179.66.
- The S&P 500 lost 0.13 percent, closing at 1,845.12.
- The Nasdaq lost 0.13 percent, closing at 4,287.59.
- Gold gained 0.13 percent, trading at $1,339.80 an ounce.
- Oil lost 0.80 percent, trading at $102.00.
- Silver lost 0.98 percent, trading at $21.83 an ounce.
News of Note
ICSC Retail Store Sales declined 0.6 percent week over week compared to a gain of 2.5 percent last week.
Redbook Chain Store Sales rose 2.9 percent compared to a 3.2 percent gain last week.
S&P Case-Shiller Home Price Index rose 0.8 percent month over month, in-line with expectation but lower than the previous reading of a gain of 0.9 percent. Year over year, the index rose 13.4 percent.
February Consumer Confidence read 78.1, lower than the consensus of 80.1.
February Richmond Fed Manufacturing Survey read -6, lower than the consensus of 13.
Japan intends to revive its nuclear energy program as a major source of electricity as part of its long-term energy strategy.
The price of a Bitcoin has plummeted more than ten percent after Mt. Gox, one of the largest trading exchanges appeared to have disappeared. The exchange's website has gone offline with all of its Tweets deleted. One rumor going around is that $350 million worth of Bitcoins have been stolen by hackers.
Equities-Specific News of Note
Analysts at Stifel initiated Delta Air Lines (NYSE: DAL) with a Buy rating and $40 price target. The analysts noted that Delta is a top pick give: “ (1) DAL's successful completion of a major acquisition (Northwest), (2) a well-balanced cash deployment strategy (dividend, share repurchase, debt reduction), and (3) management's willingness to think outside the box (Trainer acquisition, fleet strategy, hub closures.) Shares hit new 52 week highs of $33.50 before closing the day at $33.24, up 2.43 percent.
Analysts at Piper Jaffray maintained an Overweight rating on Electronic Arts (NYSE: EA) with a price target increased to $34 from a previous $33. The analysts noted “The Xbox One Titanfall bundle ($500) launching on March 11 (announced yesterday) represents a promotional discount and should help to expand Titanfall's attach rate, while adding a nice stimulant to Xbox One console demand. While we think the bundle represents a modest tailwind (500k incremental units to March), we think the real driver of Titanfall's sell-through performance will be the game's overall quality (expect strong metacritic above 85), the reception from the gaming community and the stability of the servers. We now expect Titanfall to sell-through an impressive 4m units during March.” Shares gained 0.54 percent, closing at $28.11.
Analysts at Pacific Crest maintained an Overweight rating on Baidu (NASDAQ: BIDU) with a price target unchanged at $195. The analysts noted “At current levels, Baidu is trading at a P/E multiple that is at a 30% to 35% discount to our estimate revenue growth for the company. We believe this implies that investors are building in margin declines for Baidu. While we do not have visibility on exactly when operating margins will stabilize, we do believe it could come as early as late 2014 or in 2015. We believe shares of BIDU could get a re-rating when margin stabilization does occur and view the current valuation as extremely attractive.” Shares lost 1.43 percent, closing at $170.07.
Wal-Mart's (NYSE: WMT) Mexican and Central American unit plants to spend $1.1 billion on improving its e-commerce technology, re-modelling stores and opening new outlets. The company continues to invest internationally to make up for softening U.S. sales. Shares finished the day unchanged at $73.35.
MGM Resorts (NYSE: MGM) said it will match its rival and invest heavily in Japan if the country legalizes gaming. MGM said it's prepared to spend $5 billion to $10 billion and will team up with a local partner. Shares of MGM Resorts lost 1.08 percent, closing at $27.54
The FDA has approved Bristol-Myers Squibb's (NYSE: BMY) Myalept drug for treating generalized lipodystrophy. Shares lost 1.16 percent, closing at $53.68.
Starbucks (NASDAQ: SBUX) said that it will bring more cold-pressed juices to parts of the Midwest as the company plans to roll out the Evolution Fresh brand nationally throughout the year. Shares lost 2.77 percent, closing at $70.55.
Chevron (NYSE: CVX) is considering a possible sale of some or all of its U.S. midstream business. Shares lost 0.74 percent, closing at $115.00.
LinkedIn (NYSE: LNKD) opened its beta Simplified Chinese language site. The company estimates it has around four million Chinese users on the English website but can broaden its reach to 140 million Chinese users. Shares gained 5.17 percent, closing at $209.90.
Microsoft's (NASDAQ: MSFT) senior management team was shuffled around. Stephen Elop will assume top ranks at the company's Devices & Studios unit, responsible for hardware and entertainment products. Julie Larson-Green has been running the unit since last year's reorganization will become “chief experience officer” for the company's Applications & Services unit, responsible for Office, Skype, Bing and other products. Shares lost 0.40 percent, closing at $37.54.
FireEye (NASDAQ: FEYE) is set to launch Managed Defense, a subscription service that compliments its already existing threat-prevention hardware and software. FireEye analysts will provide monitoring and incident response services for APT and zero-day attacks. Shares hit new 52 week highs of $82.30 before closing the day at $80.00, up 4.84 percent.
Elliot Management increased its buyout offer for Riverbed (NASDAQ: RVBD) by $2 a share to $21. Elliot Management said that talks have “yielded no indication hat the company understands the potential for a sale process to create a value-maximizing outcome.” Shares hit new 52 week highs of $21.19 before closing the day at $20.66, up 4.08 percent.
Rackspace (NYSE: RAX) has cancelled a presentation at an Oppenheimer cloud services conference next month, citing a scheduling conflict. Shares gained 3.42 percent, closing at $35.73.
Tim Horton's (NYSE: THI) outlined a five year strategy in which the company will add 800 locations include close to 300 in the U.S. Shares gained 0.65 percent, closing at $52.68.
General Electric (NYSE: GE) has launched a distributed-power business and plans to invest $1.4 billion in the newly created division over the next four years. The division combines three product lines which include Aeroderivative Gas Turbines, Jenbacher Gas Engines and Waukesha Gas Engines. Shares lost 0.08 percent, closing at $25.27.
Winners of Note
Analysts at Morgan Stanley maintained an Overweight rating on Tesla (NADAQ: TSLA) with a price target increased to $320 from a previous $153. The analysts noted “A successful Model S and X creates a 100% captive ecosystem for TSLA to begin serving the electric power generation and distribution market. Many firms are engaged in the grid storage ‘space race', the missing piece in the renewable energy puzzle. Include a post-GIGA Tesla in that hunt. Electric utility demand is a $0.4 trillion business in the US and $2 trillion globally. We est Tesla's 7.2m unit global fleet will contain the stored energy capacity of 443 GW, a figure exceeding the entire daily electricity consumption of Mexico.” Shares surged to new 52 week highs of $259.20 before closing the day at $248.18, up 14.03 percent.
This morning, Macy's (NYSE: M) reported its fourth quarter results. The company announced an EPS of $2.31, beating the consensus estimate of $2.17. Revenue of $9.2 billion missed the consensus estimate of $9.27 billion. Net income for the quarter totaled $811 million compared with $730 million in the same quarter last year. Comparable-store sales rose 1.4 percent in the quarter but the company noted that sales were poor in January given the harsh winter climate. In the month the company saw a seven to eight percent drop in comp sales. Shares hit new 52 week highs of $56.65 before closing the day at $56.25, up 6.01 percent.
Last night, Zulily (NASDAQ: ZU) reported its fourth quarter results. The company announced an EPs of $0.10, beating the consensus estimate of $0.04. Revenue of $257 million beat the consensus estimate of $225.47 million. Gross margins for the quarter fell 30 bps year over year to 26.6 percent but active customers doubled throughout 2013 to 3.2 million. The company issued guidance and expects its first quarter revenue to be $22 million to $235 million, above the consensus estimate of $222.9 million. For the full year, the company expects its revenue to be $1.1 billion to $1.15 billion, in-line with the consensus estimate of $1.11 billion. Shares hit new 52 week highs of $63.00 before closing the day at $58.26, up 35.99 percent.
InterMune (NASDAQ: ITMN) announced that its Pirfenidone treatment for the idiopathic pulmonary fibrosis has met primary and secondary endpoints in a Phase III trial. The treatment was previously rejected by the FDA in May 2010. During the trial, 16.5 percent of patients receiving the treatment suffered disease progression after 52 weeks of treatment versus 31.8 percent who took a placebo. Analysts at Baird believes that the company has set itself up as an ideal acquisition target for a larger pharmaceutical company. Shares flew to new 52 week highs of $38.73 before closing the day at $37.80, up 170.77 percent.
BlackBerry (NASDAQ: BBRY) received a great deal of attention at the Mobile World Conference. The company unveiled the Z3, a five inch touch screen smartphone and a new flagship QWERTY keyboard phone, the Q20. The company's CEO John Chen also hinted that the company will be opening to selling or spinning off its instant messaging service, BBM in the future. Shares gained 7.83 percent, closing at $10.60.
Various rumors circulated across news and trading desks that an activist investor is preparing to make a move and shake things up at GameStop (NYSE: GME). Shares gained 6.71 percent, closing at $38.47.
Decliners of Note
Last night, Vivus (NASDAQ: VVUS) reported its fourth quarter results. The company announced an EPS of -$0.17, beating the consensus estimate of -$0.40. Revenue of $44.05 million beat the consensus estimate of $28.2 million. Investors caught on quickly that the company only topped EPS forecasts because of a one-time licensing payment of $34.8 million. Analysts at Needham noted that management was disappointed with sales level as the company promised to outline “plans to improve physician and patient education as well as revenue/prescription in 2014.” Shares hit new 52 week lows of $5.77 before closing the day at $5.86, down 13.19 percent.
Last night, Tenet Healthcare (NYSE: THC) reported its fourth quarter results. The company announced an EPS of $0.43, beating the consensus estimate of $0.31. Revenue of $3.89 billion beat the consensus estimate of $3.87 billion. The company issued negative guidance and sees its first quarter EBITDA to be $350 million to $400 million, below the consensus estimate of $447 million. Full year 2014 EBITDA is estimated to be $1.8 billion to $1.9 billon, below the consensus estimate of $1.96 billion. Shares lost 8.55 percent, closing at $44.20.
This morning, Office Depot (NYSE: ODP) reported its fourth quarter results. The company announced an EPS of -$0.03, missing the consensus estimate of $0.04. Revenue of $3.5 billion missed the consensus estimate of $4.09 billion. Same-store sales for four percent in North America in the quarter while profit margin fell to 22.6 percent from 23.1 percent in the same quarter last year. Shares lost 8.79 percent, closing at $4.88.
Apollo Investment (NASDAQ: AINV) announced a public offering of 12 million shares of common stock with the net processed expected to be used to repay the firm's credit line. Shares lost 6.23 percent, closing at $8.58.
Earnings of Note
This morning, Toll Brothers (NYSE: TOL) reported its first quarter results. The company announced an EPS of $0.25, beating the consensus estimate of $0.19. Revenue of $643.7 million was in-line with expectation. Net income for the quarter totaled $45.6 million compared to $4.4 million in the same quarter last year. Units delivered increased 24 percent to 928 with an average home price increasing to $694,000 from $569,000 in the quarter. Shares lost 0.23 percent, closing at $38.25.
This morning, Home Depot (NYSE: HD) reported its fourth quarter results. The company announced an EPS of $0.73, beating the consensus estimate of $0.71. Revenue of $17.7 billion missed the consensus estimate of $17.92 billion. Comparable-store sales in the U.S. increased 4.4 percent in the quarter while comp sales rose 4.9 percent. The company noted that its total expenses fell four percent to $4.43 billion in the quarter. The company issued guidance and sees its full year 2015 EPS to $4.38, below the consensus estimate of $4.42 and sees revenue growing 4.8 percent to $82.59 billion, below the consensus estimate of $82.9 billion. Bottom line, investors focused on the company's performance during a tough weather period as shares gained 3.99 percent, closing at $80.98.
This morning, T-Mobile U.S. (NYSE: TMUS) reported its fourth quarter results. The company announced an EPS of -$0.03, beating the consensus estimate of -$0.14. Revenue of $6.83 billion missed the consensus estimate of $6.9 billion. During the quarter the company added 1.645 million subscribers, 869,000 of which were postpaid. Average revenue per user fell 2.9 percent quarter over quarter to $50.70 but the company said it is not in a price war and said it has not seen much impact from AT&T price changes. Shares lost 5.69 percent, closing at $30.47.
This morning, Ariad Pharmaceuticals (NASDAQ: ARIA) reported its fourth quarter results. The company announced an EPS of -$0.40, beating the consensus estimate of -$0.47. Revenue of $8.3 million beat the consensus estimate of $6.31 million. Net loss for the quarter totaled $74.2 million compared to a net loss of $60.5 million in the same quarter last year. The increase in the net loss is due to an increase in operating expenses of $21.6 million due to commercialization of its Iclusig drug. Shares gained 0.46 percent, closing at $8.67.
After the market closed, R.R. Donnelley & Sons (NYSE: RRD) reported its fourth quarter results. The company announced an EPS of $0.49, beating the consensus estimate of $0.38. Revenue of $2.75 billion beat the consensus estimate of $2.68 billion. Shares were trading higher by 6.50 percent at $20.00 following the earnings release.
After the market closed, First Solar (NASDAQ: FSLR) reported its fourth quarter results. The company announced an EPS of $0.89, missing the consensus estimate of $0.99. Revenue of $768 million missed the consensus estimate of $965.38 million. Shares were trading lower by 9.94 percent at $52.26 following the earnings release.
Quote of the Day
“I'm tired of cleaning up your s---“ – PIMCO's Mohammed El-Erian responding to Bill Gross when asked “I have a 41-year track record of investing excellence, what do you have?” Source: WSJ.
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