After hitting a one-year high of $27.99 in December, the stock hit a one-year low of $18.05 in January. INTC opened this morning at $23.85. So far today the stock has hit a low of $23.76 and a high of $24.29. As of 12:15, INTC is trading at $24.16, up $0.40 (1.7%). The chart for INTC looks bullish and deteriorating slightly, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $21 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.7% return in just two months as long as INTC is above $21 at July expiration. Intel would have to fall by more than 13% before we would start to lose money. Learn more about this type of trade here.
Macy's (NYSE: M), which was forecast to report a loss of a penny a share in the first quarter, said the difficult retail environment hurt sales and it incurred costs from a restructuring. The loss came to $59 million, or 14 cents a share, compared with a profit of $36 million, or 8 cents a share, a year earlier. (As the numbers are quite fresh, it's possible they include one-time item not yet sorted out and not comparable to analyst expectations.)
John Deere (NYSE: DE) said its second-quarter profit rose 22%. Deere experienced increased demand for its farm equipment, as crop prices kept rising, posting an 18% increase in sales. Profit for the quarter jumped to $763.5 million, or $1.74 per share, a penny below analyst estimates. From premarket early action, it seems shares of DE might start much lower.
Freddie Mac (NYSE: FRE) also reported this morning, saying its first quarter loss widened to $151 million as the U.S. housing market worsened. Somehow, though, the results were not as poor as expected and FRE's loss of 66 cents a share beat estimates of a 92 cents a share loss. FRE's shares are up over 6% in premarket trading.
Still on earnings, last night Whole Foods (NASDAQ: WFMI) and Electronic Arts (NASDAQ: ERTS) reported results. Shares of WFMI are plunging nearly 9% in premarket trading as the organic grocery chain reported a worse-than-forecast 13% profit fall.
Electronic Arts (NASDAQ: ERTS) shares are also declining over 2.8% in premarket trading after the suitor of Take-Two Interactive (NASDAQ: TTWO) reported a widening quarterly loss and a disappointing outlook.
On Tuesday, microchip equipment maker Applied Materials Inc. (NASDAQ: AMAT) reported a drop in its fiscal second quarter earnings due in part to a glut of flash memory chips, and organic and natural food retailer Whole Foods Market Inc. (NASDAQ: WFMI) also said second quarter profits fell, due to integrating its Wild Oats acquisition.
Applied Materials posted earnings of $302.5 million, or 22 cents per share, for the quarter ended April 27, compared with a profit of $411.4 million or 29 cents per share in the same period a year ago. Its adjusted net income came to 24 cents per share, beating the average analyst forecast of 22 cents, according to Reuters estimates.
Second-quarter revenue fell to $2.15 billion from $2.53 billion in the previous year. Analysts on average had expected revenue of $2.13 billion.
Shares fell 1.3% after the news but rose 2.7% in after-hours trading to $20.40.
Whole Foods reported that sales surged 28% in the second quarter to $1.87 billion, from $1.4 billion in the previous year. But net income fell 13% to $40 million, or 29 cents per share, in the quarter ended April 13; the acquisition of rival Wild Oats cost it 6 cents per share.
Analysts polled by Thomson Financial had predicted a profit of 30 cents per share on revenue of $1.89 billion.
Shares of Whole Foods fell $2.94, or 8.7%, to $30.70 in after-hours trading.
Even in these uncertain times, there are stocks that have far better odds of outperforming than others. Yup, for a minute, just forget about all the different industries, economic guessing games, earnings-valuation time lags and the rest of the market randomness that makes stock picking so difficult and "market gurus" so ineffective. Focus instead on the incredibly telling stock charts of these companies:
The Wall Street Journal takes an amusing look at the results of SEC efforts to require more detailed and meaningful disclosure about executive pay. Referring to Applied Materials (NASDAQ: AMAT), the Journal reports that "this year, it expanded by 76% the word count of its proxy's compensation section. In all, the compensation section contains 16,245 words -- twice the length of the U.S. Constitution and its 27 Amendments -- along with 10 formulas, 10 tables and 155 percent signs."
The result is a document that's incredibly confusing, full of formulas like this one:
Weighted Score = (Performance Measure 1 x Weight as Percentage) + (Performance Measure 2 x Weight as Percentage).
But in a way, we shouldn't be surprised. Applied Materials has paid its executives millions in compensation, but its stock price is lower than it was in 2001!
The reason that such long pay disclosures are required is that there is no particularly reasonable way to explain why top executives were paid millions while shareholders lost money. To use the random walk analogy, it's like trying to ask a drunk staggering around in a field why he's walking in the path he's walking. He's drunk! It can't possibly make sense.
If a company needs 16,245 words to explain why it paid its executives the amount it paid them, they're most likely full of crap.
Applied Materials Inc. (NASDAQ: AMAT) shares are rising after the market has gotten some positive news for companies connected to LCD TVs. Circuit City (NYSE: CC) CEO Philip Schoonover predicted in an interview with the AP that 2008 will see high growth in TV sales as a result of the FCC's mandate that broadcasters switch to digital format in February 2009. This could be good news for AMAT, which makes equipment to fabricate thin film transistor LCDs for televisions. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMAT.
After hitting a one-year high of $23.00 in August, the stock hit a one-year low of $16.13 in January. AMAT opened this morning at $20.28. So far today the stock has hit a low of $20.23 and a high of $20.45. As of 12:15, AMAT is trading at $20.35, up 26 cents (1.3%). The chart for AMAT looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $16 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make an 11.1% return in just four and a half months as long as AMAT is above $16 at July expiration. Applied Materials would have to fall by more than 21% before we would start to lose money.
AMAT hasn't been below $16 at all in the past year and has shown support around $19 recently. This trade could be risky if the economic situation continues to worsen, but even if that happens, this position could be protected by the support the stock might find at its 50-day moving average, which is around $18 and rising.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AMAT or CC.
Semiconductor equipment maker Applied Materials said that its fiscal first-quarter profit declined as revenue fell due to the challenging global market for its products. Sales fell 8% to $2.09 billion from $2.28 billion in the same period of 2006. The company earned $262.4 million, or 19 cents per share, down 35% from $403.5 million, or 29 cents per share.
Excluding restructuring costs and other items, adjusted earnings were $345 million, or 25 cents per share. Analysts polled by Thomson Financial had expected a profit of 20 cents per share on sales of $2.01 billion.
Shares of Applied Materials rose Tuesday and Wednesday $3.10, or about 17%, to close at $19.91. Shares have been climbing from the 52-week low of $16.13 in mid January.
General Motors Corp. (NYSE: GM) posted a fourth-quarter loss of $722 million, or $1.28 a share , after a year-earlier profit on rising costs in North America. Sales fell to $47 billion. For 2007, it posted a record net loss of $38.73 billion, or a loss of $68.45 per share. GM, eager to lower wages is offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers. GM shares are down 3.3% in premarket trading.
Teva Pharmaceutical (NASDAQ: TEVA), reported fourth-quarter earnings rose 24% to $570 million, or 69 cents a share, beating estimates of 66 cents per share. Sales grew 13% to $2.58 billion from $2.28 billion. Still, TEVA shares are down nearly 1.7% in premarket trading.
Time Warner (NYSE: TWX) was upgraded at UBS from Neutral to Buy. Shares are up over 1.1% in premarket trading.
AMAT is scheduled to report Q1 EPS after the market close on February 12.
Deutsche Banc says: "Expecting stronger F1Q08 results, weaker outlook." DBAB has a Hold rating and a $19 price target on AMAT.
AMAT February straddle 18 is priced at $1.10. AMAT March option implied volatility of 42 is above its 26-week average of 36 according to Track Data, suggesting larger movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Stocks futures were lower this morning, indicating stocks could continue yesterday's bearish mood ahead of CPI report today as well as several other key indicators. Meanwhile, investors remain concerned about the credit markets, with General Electric, Barclays and possible UBS the most recent companies to announce losses. A slowdown in the tech sector has also been a concern lately after several companies warned with Applied Materials adding its own warning just yesterday. Rising oil prices, which has caused the late selling in Wednesday's session, is another concern.
Yesterday, U.S. stocks ended lower as rising crude-oil prices had the bears taking profit in the technology sector. The Dow industrials fell 76 points, or 0.57%, the S&P 500 lost 10 points, or 0.71%, and the Nasdaq Composite dropped 29 points, or 1.1%.
The economic calendar is full today:
At 8:30 a.m., October CPI and core CPI will be released with expectations standing at 0.3% and 0.2% increases respectively, same as the month before.
At the same time, weekly initial jobless claims will be reported as well as November NY Empire State Index, which is expected to decline.
At noon, November Philadelphia Fed index is due and is also expected to show a decline.
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