Market Wrap For January 21: Dow Hit by Earnings; S&P And Nasdaq End The Day Positive
Markets ended the day mixed with the S&P 500 ending a two day losing streak. The Dow ended the day slightly in the negative as several Dow components failed to fully satisfy investor expectations with their earnings today.
Investors also digested the latest commentary coming from the Wall Street Journals' “Fed insider” Jon Hilsenrath. Hilsenrath said that the Fed could reduce its monthly bond purchases to $65 billion from $75 billion during the FOMC meeting next week.
- The Dow lost 0.27 percent, closing at 16,414.44.
- The Nasdaq gained 0.67 percent, closing at 4,225.76.
- The S&P 500 gained 0.28 percent, closing at 1,843.80.
- Gold lost 0.85 percent, trading at $1,241.30 an ounce.
- Oil gained 0.69 percent, trading at $95.24 a barrel.
- Silver lost 1.94 percent, trading at $19.91 an ounce.
News of Note
Mohamed El-Erian has resigned as CEO and co-CIO of Pimco, effective in March.
Analysts at Goldman Sachs issued guidance on Iron ore and predicts “the sunset of the Iron Age starts in 2014” with prices expected to fall to $108 a ton in 2014 and $80 a ton in 2015.
Equities-Specific News of Note
Analysts at both Credit Suisse and Pacific Crest came out this morning with Street-high price targets of $1,450 on Google (NASDAQ: GOOG). The analysts at Credit Suisse noted that their near term checks point to a healthy growth, consistent with the first three quarters of 2013. The analysts at Pacific Crest noted that the tech company should reported a “solid” fourth quarter due to strong results from search. Shares hit new 52 week highs of $1,164.00 before closing the day at $1,163.63, up 1.14 percent.
Analysts at JPMorgan upgraded Bloomin' Brands (NASDAQ: BLMN) to Overweight from Neutral with a price target raised to $26 from a previous $25. The analysts favored the company following a meeting with management. According to the analysts “the tone of the meeting was positive with Bloomin' comp drivers, major margin initiatives, and now recently-consolidated Brazil JV business helping the company generate 17 percent average annual EPS growth F14/F15.” Shares gained 3.69 percent, closing at $22.75.
Analysts at Sterne Agee upgraded shares of Gap (NYSE: GPS) to Buy from Underperform with a price target raised to $44 from a previous $38. The analysts noted that the retailer stood out as an out-performer during the holiday season. The analysts also noted that the company has several investor friendly options at its disposal including buybacks that can improve its bottom line even further. Shares gained 2.55 percent, closing at $38.25.
Analysts at Credit Suisse downgraded 3D Systems (NYSE: DDD) to Neutral. The analysts noted that the company's earnings are likely to be lowered and disappoint investors given higher research and development costs, marketing expenses and the company's recent Xerox (NYSE: XRX) transaction. The same analysts took a bullish stance on Stratasys (NASDAQ: SSYS) and upgraded shares from Neutral to Outperform. The analysts noted that shares are undervalued relative to 3D Systems given the two companies operate in the same market. Shares of 3D Systems lost 5.41 percent, closing at $85.63 while Stratasys gained 2.40 percent, closing at $123.45.
Analysts at Bank of America downgraded Exxon Mobil (NYSE: XOM) to Neutral from Buy with a price target lowered to $106 from a previous $110. The analysts noted that the company will lose roughly 190K boe/day at Groningen and UAE. The loss essentially wipes out the company's planned growth of 4 percent in 2014. Shares lost 0.69 percent, closing at $98.48.
Analysts at ISI Group downgraded Lululemon (NASDAQ: LULU) to Neutral from Strong Buy. The analysts noted that the company's plans to transform the company to a global lifestyle brand may be stalling. According to the analysts “we believe the company's slowing ‘brandsformation' is magnifying the negative effects of the product quality hiccups, supply chain issues, management changes, and negative PR.” Shares hit new 52 week lows of $46.50 before reversing losses and closing the day at $47.85, up 0.76 percent.
Analysts at JPMorgan downgraded SolarCity (NASDAQ: SCTY) to Neutral from Overweight with a $68 price target. The analysts noted that “fundamentals remain construction; the firm is doing an excellent job of reducing the cost of finance, expanding market research and increasing efficiency; however, at this price level some of the exogenous risks come into focus including rising interest rates, competition and growing opposition to distributed solar from utilities.” Shares gained 0.04 percent, closing at $75.14.
According to a report by Search Engine Land, Expedia (NASDAQ: EXPE) has lost 25 percent of its search visibility in Google according to Search Metrics. Expedia has seen some controversy over its SEO practices and according to the Search Engine Land blog, Google is punishing Expedia in the search results. Shares lost 4.27 percent, closing at $67.67.
Analysts at Cowen downgraded shares of Target (NYSE: TGT) to Underperform with a price target lowered to $47 from a previous $66. The analysts noted that the company is likely to suspend its buyback program which was a “key support for the stock.” The analysts views do not take in to account the financial damage the company will have to deal with from its recent data breach. The analysts explained “we don't know how much money we're talking about, but it's a lot.” Shares hit new 52 week lows of $58.80 before closing the day at $59.20, down 1.73 percent.
Starboard is joining Barrington Group in its criticism of Darden Restaurants' (NYSE: DRI) proposed spin-off of Red Lobster. Starboard Value wrote “we believe a [separation] of Red Lobster as currently conceived could destroy substantial value” and that such a move could be “potentially even worse for shareholders than the status quo.” The company responded “we have completed a comprehensive evaluation of alternatives” and that it is moving ahead with its plans to continue with a Red Lobster spin-off. Shares lost 0.37 percent, closing at $50.77.
SAP (NYSE: SAP) released 2014 guidance and expects an operating profit of 5.8 billion euros, below the 6.06 billion euro consensus. The company has also pushed back its profitability targets by two years as it shifts to cloud based services. Shares lost 1.07 percent, closing at $81.44.
Agrium (NYSE: AGU) issued downside guidance for its fourth quarter this morning. The company sees its EPS coming in at the bottom end of its prior guidance of $0.80 to $1.25. The consensus estimate stands at $0.96 a share. Shares gained 0.02 percent, closing at $93.90.
Barron's featured a positive article on Dean Foods (NYSE: DF) over the long weekend. The article mentioned that shares could rise by more than 30 percent in a potential buyout scenario and management is in a strong position to receive an attractive bid. Shares gained 2.70 percent, closing at $17.47.
Barron's also featured a positive article on GameStop (NYSE: GME) noting that shares have an upside potential of 20 percent or more. The article noted that GameStop has no debt on its balance sheet and $5 per share in cash. Shares gained 1.49 percent, closing at $38.21.
Tesla (NASDAQ: TSLA) announced it expanded its Supercharger network in Europe. Shares gained 3.92 percent, closing at $176.68.
Intel (NASDAQ: INTC) has agreed to sell its online TV unit to Verizon (NYSE: VZ) for an undisclosed sum. Verizon will obtain the unit's intellectual property rights. Shares of Intel lost 1.01 percent, closing at $25.59 while Verizon lost 1.40 percent, closing at $47.67.
Anheuser-Busch (NYSE: BUD) announced it will buy South Korean's largest brewer Oriental Brewery for $5.8 billion. Shares gained 2.25 percent, closing at $103.75.
Nelson Peltz is set to join the board of directors of Mondelez International (NASDAQ: MDLZ). Peltz has been vocal over his desire to see Pepsi (NYSE: PEP) spin off its snack business and acquire Mondelez. CNBC's Andrew Ross Sorkin tweeted that Peltz won't push his for a merger or acquisition. Shares of Mondelez lost 2.27 percent, closing at $34.45 while Pepsi gained 0.88 percent, closing at $82.92.
Canadian listed Osisko Mining is set to recommend to its shareholders to reject Goldcorp's (NYSE: GG) C$2.6 billion (or $5.95 a share) takeover offer. Osisko said that the offer “significantly undervalues” its assets. Shares of Osisko closed at $6.47 yesterday, well above Goldcorp's offer. Shares gained 1.90 percent, closing at $23.61.
Decliners of Note
Cnooc (NYSE: CEO) announced yesterday it is aiming for a production increase of 4.3 percent in 2014, well below its 6 percent to 10 percent annual growth target. Shares lost 5.38 percent, closing at $168.70.
Analysts at JPMorgan downgraded FireEye (NASDAQ: FEYE) to Neutral from Overweight but raised the price target to $75 from a previous $64. The analysts positioned stems from a valuation call and noted that FireEye has risen 96 percent since December 12 compared to only 5 percent gain for the NASDAQ composite index. Shares lost 5.61 percent, closing at $69.44.
Winners of Note
Dan Loeb's Third Point has assumed a $1.3 billion stake in Dow Chemical (NYSE: DOW). The activist investor is urging the company to consider spinning off its petrochemical business into a standalone firm. Loeb wrote in a report where he disclosed his position “nearly 15 years ago, an investor could have purchased Dow shares for the same price that they trade at today.” Shares hit new 52 week highs of $46.70 before closing the day at $45.93, up 6.64 percent.
Analysts at JPMorgan is forecasting a tightening aluminum market and higher prices which bodes well for Alcoa (NYSE: AA). The analysts noted “given the pace and amount at which premiums have recently increased, it is clearly difficult to forecast for how long they will remain near current levels which we believe provide a significant amount of earnings support to Alcoa's primary aluminum smelting operations.” The analysts upgraded shares to Overweight from Neutral with a price target increased to $15 from a previous $9. Shares hit new 52 week highs of $12.31 before closing the day at $12.13, up 6.78 percent.
Over the long weekend, BlackBerry (NASDAQ: BBRY) announced that the Department of Defense will deploy 80,000 BlackBerry devices to its users. The company's market leading security features remains a focal point. Shares gained 9.36 percent, closing at $9.93.
Analysts at BMO Capital markets see “significant opportunity” for Tesaro (NASDAQ: TSRO) as shares were upgraded to Outperform from Perform with a price target raised to $46 from a previous $10. The analysts singled out that they see “significant opportunity within NCCN treatment guidelines” with sales of $400 million. Shares gained 13.35 percent, closing at $37.20.
Earnings of Note
Travelers (NYSE: TRV) released its fourth quarter results this morning. The company reported an EPS of $2.70, beating the consensus estimate of $2.16. Revenue of $6.73 billion beat the consensus estimate of $5.45 billion. The company benefited from lower catastrophe losses of $53 million in the quarter compared to $1.054 billion last year. The company repurchased $1 billion worth of shares in the quarter. Shares lost 1.70 percent, closing at $85.00.
Halliburton (NYSE: HAL) released its fourth quarter results this morning. The company reported an EPS of $0.93, beating the consensus estimate of $0.80. Revenue of $7.64 billion beat the consensus estimate of $7.56 billion. North American revenues slipped 1 percent from the previous quarter due to seasonal activity disruptions caused by weather. Shares lost 1.74 percent, closing at $49.78.
Verizon (NYSE: VZ) released its fourth quarter results this morning. The company reported an EPS of $0.66, beating the consensus estimate of $0.62. Revenue of $31.1 billion beat the consensus estimate of $31.02 billion. The company noted that it has added 1.7 million wireless subscribers, of which 1.6 million were postpaid. The company has a total of 102.8 million subscribers and the segment has seen its revenue grow 8.4 percent in the revenue. Shares lost 1.34 percent, closing at $47.70.
Delta Air Lines (NYSE: DAL) released its fourth quarter results this morning. The company reported an EPS of $0.65, beating the consensus estimate of $0.64. Revenue of $9.07 billion beat the consensus estimate of $9.03 billion. Higher fares and lower fuel costs help the company achieve strong results and expects to see “significant” margin expansion in the first quarter 2014. Shares hit new 52 week highs of $32.65 before closing the day at $32.08, up 3.25 percent.
Johnson & Johnson (NYSE: JNJ) released its fourth quarter results this morning. The company reported an EPS of $1.24, beating the consensus estimate of $1.20. Revenue of $18.4 billion beat the consensus estimate of $17.95 billion. The company benefited from domestic sales that rose 7.4 percent while international sales rose 2.4 percent. The company issued full year 2014 EPS guidance of $5.75 to $5.85 versus the consensus estimate of $5.85. Shares lost 1.08 percent, closing at $94.03.
Baker Hughes (NYSE: BHI) released its fourth quarter results this morning. The company reported an EPS of $0.62, beating the consensus estimate of $0.61. Revenue of $5.86 billion beat the consensus estimate of $5.8 billion. The company benefited from a 27 percent jump in revenue from Middle East and Asia Pacific and a 7.2 percent rise in revenue from the North American segment. Shares gained 4.78 percent, closing at $56.73.
Unilever (NYSE: UL) released its fiscal 2013 results this morning. Sales grew 4.3 percent to 49.8 billion euros. The company earned 1.58 euros a share, beating the consensus estimate of 1.53 euros a share. The company issued cautious guidance for 2014 as 57 percent of its sales come from emerging markets such as India and China. The company expects “ongoing volatility in the external environment” and as such the company is “positioning accordingly.” Shares gained 3.26 percent, closing at $41.13.
After the market closed, Cree (NASDAQ: CREE) released its second quarter results. The company reported an EPS of $2.64, beating the consensus estimate of $0.39. Revenue of $415 million beat the consensus estimate of $412.36 million.
After the market closed, IBM (NYSE: IBM) released its fourth quarter results. The company reported an EPS of $6.13, beating the consensus estimate of $6.00. Revenue of $27.7 billion came in short of the consensus estimate of $28.26 billion.
Quote of the Day
"Bond buying is one of two prongs in the Fed's strategy to boost the economy. The other is low interest rates, and Fed officials are once again debating how best to describe their plans for when they eventually begin raising short-term rates." - John Hilsenrath wrote in the Wall Street Journal on January 20.
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