Earnings Season Preview Thru Tough Economic Reality
Weekly same-store sales growth dips to near limbo, rising just 0.3% in the last measured period. Corporate earnings gets a mixed preview, with upgrades contrasting with early trouble from first reporter Alcoa.
(Stocks in this article: NYSE: BEN, NYSE: HOV, NYSE: TOL, AMEX: OHB, NYSE: M, NYSE: JCP, NYSE: WMT, Nasdaq: COST, NYSE: TIF, NYSE: SKS, NYSE: MS, NYSE: C, NYSE: NYX, NYSE: AXP, NYSE: BK, NYSE: JNS, NYSE: AMD, NYSE: GS, NYSE: LDK, NYSE: AA, Nasdaq: DELL, NYSE: MSM, Amsterdam: TOM2.AS, Nasdaq: AAPL, AMEX: DIA, AMEX: SDS, Nasdaq: QQQQ)
ICSC Same-Store Sales Continue Trend
Weekly same-store sales continued a disturbing trend in the most recent reporting period. For the week ended April 5, 2008, same-store sales at chain stores across the country rose only 0.3%, which stands as the most depressing report in recent history. Unfortunately, however, it's not far off last week's number. Sales rose just 0.5% last week and only 1.0% the week before. After a bit of an illusory move higher in February, reality is back to slap us in the retail face.
Even so, the federal government's tax rebates seem set to reach America just in time, and this could hold off major consumption impact to the economy long enough for the Federal Reserve and Treasury's efforts to renew economic growth. If we avoid deep recession, some credit and maybe apologies will have to be offered to Ben Bernanke, Hank Paulson and even George Bush and our Congress. However late they were in reacting, and however to blame the government may be for lax regulation in the first place, they attacked the problem with veracity once they identified it. Now all we have to worry about is the fishtail of economic volatility that is yet to come. The possibility of inflation catching fire soon and sending our economy out of the Fed's control is a very real and concerning issue. If that happens, we'll re-prepare the hangman's noose for Bernanke and crew.
(Stocks in this article: NYSE: BEN, NYSE: HOV, NYSE: TOL, AMEX: OHB, NYSE: M, NYSE: JCP, NYSE: WMT, Nasdaq: COST, NYSE: TIF, NYSE: SKS, NYSE: MS, NYSE: C, NYSE: NYX, NYSE: AXP, NYSE: BK, NYSE: JNS, NYSE: AMD, NYSE: GS, NYSE: LDK, NYSE: AA, Nasdaq: DELL, NYSE: MSM, Amsterdam: TOM2.AS, Nasdaq: AAPL, AMEX: DIA, AMEX: SDS, Nasdaq: QQQQ)
ICSC Same-Store Sales Continue Trend
Weekly same-store sales continued a disturbing trend in the most recent reporting period. For the week ended April 5, 2008, same-store sales at chain stores across the country rose only 0.3%, which stands as the most depressing report in recent history. Unfortunately, however, it's not far off last week's number. Sales rose just 0.5% last week and only 1.0% the week before. After a bit of an illusory move higher in February, reality is back to slap us in the retail face.
Even so, the federal government's tax rebates seem set to reach America just in time, and this could hold off major consumption impact to the economy long enough for the Federal Reserve and Treasury's efforts to renew economic growth. If we avoid deep recession, some credit and maybe apologies will have to be offered to Ben Bernanke, Hank Paulson and even George Bush and our Congress. However late they were in reacting, and however to blame the government may be for lax regulation in the first place, they attacked the problem with veracity once they identified it. Now all we have to worry about is the fishtail of economic volatility that is yet to come. The possibility of inflation catching fire soon and sending our economy out of the Fed's control is a very real and concerning issue. If that happens, we'll re-prepare the hangman's noose for Bernanke and crew.
We'll get a look at individual retailer chain-store sales for March on Thursday. We continue to worry most about the department stores and those who fall in the no man's land between the best discounters and the highest end of luxury. That means if you must participate, stick with Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST), Tiffany's (NYSE: TIF) and Saks (NYSE: SKS), and avoid JC Penney (NYSE: JCP), Sears (Nasdaq: SHLD) and Macy's (NYSE: M) like the plague. But, you wouldn't be the first to do so, and valuations and price already reflect this reality. That means that any semblance of fault at WMT or the others would send them tumbling to the same fate as their brethren. Keep that in mind too!
Earnings Season Preview
With earnings season officially begun by Alcoa's (NYSE: AA) report last evening, the rest of the week's schedule is light. Next week actually gets things started for most of corporate America. Still, media focus is on earnings now, and so you can be sure the market's eye is on the corporate news flow as well.
Goldman Sachs (NYSE: GS) came out with what might be considered a courageous call, but actually looks to us like a wise one. Often times, news flow, general emotional market tendencies and trend take stocks in one direction based on expectations. These expectations are then discounted into stock prices at extreme, creating a contrarian opportunity heading into the enlightening earnings report or other anticipated event.
However, earnings reports still hold the risk of offering up worse news than is expected or even discounted into stock price. But, when Citigroup (NYSE: C) and friends are priced well short of their early concern-driven previous low points, opportunity seems there for the fearless to take. Shares that Goldman highlighted positively included Franklin Resources (NYSE: BEN), NYSE Euronext (NYSE: NYX), Morgan Stanley (NYSE: MS), American Express (NYSE: AXP), Bank of New York Mellon (NYSE: BK) and Janus (NYSE: JNS). We agree wholeheartedly with this analyst's reasoning, but his stock picks are his own.
If you're of superstitious nature, then you must be anxious about the first quarter earnings season. Perhaps a bad sign of things to come, Alcoa (NYSE: AA) reported cost pressures and dollar weakness cut its EPS in half when compared to the prior year period. Alcoa is perhaps the perfect representative of the market on the a whole, probably because of its cyclical characteristics.
Like the American market, Alcoa is well-positioned globally and is benefiting from global development. However, like American companies on the whole, Alcoa is seeing rising energy and raw materials costs impact its margins, and like most companies, it is seeking to pass price increase on to its customers. Finally, like all of us, Alcoa sees impact from the devaluation of the dollar. The company is emblematic of the troubles of the day.
Housing Takes a Step Back?
Looking at February data mind you, housing got a hit today. The National Association of Realtors published its Pending Home Sales Index, posting its lowest measurement on record. The index moved down 1.9% to 84.6, from a revised higher January reading. This news, which is based on contracts signed in February, is not as bad as major media is promoting (or is it demoting) today. Remember, we've seen other bad news from February reports, and we've seen upticks in March reports. When things are all said and done, regarding volume, February may prove to be the low-point for housing. Prices of course should continue to soften.
Remember, however, that the spring is a seasonally strong period for housing. Even so, we find ourselves in agreement with many louder voices, including Alan Greenspan, that we may finally be nearing some base for housing. We note, however, that this does not mean highly burdened home builders with big revolving debt loads can survive without discounted asset and land sales. We find ourselves eyeing Orleans Homebuilders (AMEX: OHB) and even Hovnanian Enterprises (NYSE: HOV) in this regard. Our favorite builder remains Toll Brothers (NYSE: TOL) because of its opportunistic land acquisitions, cost efficient construction processes and high-end clientele. The price movement of the three and their beta values this year and last seem to indicate, this is no secret.
Earnings Season Preview
With earnings season officially begun by Alcoa's (NYSE: AA) report last evening, the rest of the week's schedule is light. Next week actually gets things started for most of corporate America. Still, media focus is on earnings now, and so you can be sure the market's eye is on the corporate news flow as well.
Goldman Sachs (NYSE: GS) came out with what might be considered a courageous call, but actually looks to us like a wise one. Often times, news flow, general emotional market tendencies and trend take stocks in one direction based on expectations. These expectations are then discounted into stock prices at extreme, creating a contrarian opportunity heading into the enlightening earnings report or other anticipated event.
However, earnings reports still hold the risk of offering up worse news than is expected or even discounted into stock price. But, when Citigroup (NYSE: C) and friends are priced well short of their early concern-driven previous low points, opportunity seems there for the fearless to take. Shares that Goldman highlighted positively included Franklin Resources (NYSE: BEN), NYSE Euronext (NYSE: NYX), Morgan Stanley (NYSE: MS), American Express (NYSE: AXP), Bank of New York Mellon (NYSE: BK) and Janus (NYSE: JNS). We agree wholeheartedly with this analyst's reasoning, but his stock picks are his own.
If you're of superstitious nature, then you must be anxious about the first quarter earnings season. Perhaps a bad sign of things to come, Alcoa (NYSE: AA) reported cost pressures and dollar weakness cut its EPS in half when compared to the prior year period. Alcoa is perhaps the perfect representative of the market on the a whole, probably because of its cyclical characteristics.
Like the American market, Alcoa is well-positioned globally and is benefiting from global development. However, like American companies on the whole, Alcoa is seeing rising energy and raw materials costs impact its margins, and like most companies, it is seeking to pass price increase on to its customers. Finally, like all of us, Alcoa sees impact from the devaluation of the dollar. The company is emblematic of the troubles of the day.
Housing Takes a Step Back?
Looking at February data mind you, housing got a hit today. The National Association of Realtors published its Pending Home Sales Index, posting its lowest measurement on record. The index moved down 1.9% to 84.6, from a revised higher January reading. This news, which is based on contracts signed in February, is not as bad as major media is promoting (or is it demoting) today. Remember, we've seen other bad news from February reports, and we've seen upticks in March reports. When things are all said and done, regarding volume, February may prove to be the low-point for housing. Prices of course should continue to soften.
Remember, however, that the spring is a seasonally strong period for housing. Even so, we find ourselves in agreement with many louder voices, including Alan Greenspan, that we may finally be nearing some base for housing. We note, however, that this does not mean highly burdened home builders with big revolving debt loads can survive without discounted asset and land sales. We find ourselves eyeing Orleans Homebuilders (AMEX: OHB) and even Hovnanian Enterprises (NYSE: HOV) in this regard. Our favorite builder remains Toll Brothers (NYSE: TOL) because of its opportunistic land acquisitions, cost efficient construction processes and high-end clientele. The price movement of the three and their beta values this year and last seem to indicate, this is no secret.
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posted by The Greek | 12:25 PM
1 Comments:
What did Goldman do? I missed that? And you were vague in your commentary above.
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