MOST NOTEWORTHY: Fiserv, Arbitron and Anadarko Petroleum were today's noteworthy upgrades:
JMP Securities upgraded Fiserv (NASDAQ: FISV) to Outperform from Market Perform citing a reversal of the Bank of America in-house risk, potential re-branding initiatives, and relative pricing stability.
Bear upgraded Arbitron (NYSE: ARB) to Outperform from Peer Perform citing PPM earnings growth potential, strong industry position, defensive nature of shares, and it views the company as an acquisition target.
Lehman raised Anadarko Petroleum (NYSE: APC) to Overweight from Equal Weight citing relative valuation and strong U.S. gas exposure.
OTHER UPGRADES:
Goldman added Wal-Mart (NYSE: WMT) to its Conviction Buy List.
Goldman Sachs cut its view of U.S. department stores to Neutral from Attractive. Specifically, the broker downgraded J.C. Penney (NYSE: JCP) and Nordstrom Inc. (NYSE: JWN) to Neutral from Buy after its commodity team upped 2008 oil price forecasts to $149 a barrel. Still, Goldman upgraded TJX Cos. (NYSE: TJX) to Buy from Neutral and removed Kohl's Corp. (NYSE: KSS) from its conviction-buy list in favor of Wal-Mart Stores Inc. (NYSE: WMT).
By now I'm getting confused with all the deals Apple Inc. (NASDAQ: AAPL) is signing with wireless operators to sell the iPhone in different countries around the world. I believe the past two weeks we heard of at least two deals, including one with a S.Korean company. Today, French wireless operator Orange said it has signed a deal to sell its iPhone in the Middle East, Africa and several European countries. Orange will be the exclusive iPhone provider in Belgium and Romania. It seems that by now Apple's got the world covered.
General Motors Corp. (NYSE: GM) is apparently considering launching its Chevrolet brand in South Korea. In its attempt to stay ahead of fast growing Toyota (NYSE: TM), GM will try to capture a larger share of S.Korea's growing market for imported cars.
Retailer Macy's (NYSE: M) first fiscal quarter wasn't that bad, at least in terms of the analyst game. The company, which competes with mall colleagues such as J.C. Penney (NYSE: JCP) and Sears (NASDAQ: SHLD), reported net income of 2 cents per diluted share from continuing operations. The denizens of Wall Street thought the company would lose 2 cents, so management came ahead in this regard by four pennies. Bravo!
However, does this news excite me? Not necessarily. Macy's needs a little help in its sales department. First, the overall top line declined almost 3%, coming in at $5.7 billion. Second, and perhaps even more telling, same-store sales were weak during the quarter, decreasing by 2.6%. And then there's the issue of cash flow. Operational cash flow from continuing operations was excellent compared with last year's quarter since $21 million was generated this time around as opposed to $370 million being used last time around. Nevertheless, when you take into account capital spending, no free cash flow was left over in the first quarter. And cash has been decreasing on the balance sheet. Oh, and gross margin went down, too.
I wasn't too taken by Macy's current earnings report, and I'm not putting the company on my list of investment ideas right now, even though the stock closed up yesterday on the news (heck, the company didn't repurchase any shares last quarter and stated that it didn't see any more share repurchases coming for the rest of the year, so apparently the stock isn't on management's ideas list, either). I think there might be better retail investments out there, such as Wal-Mart (NYSE: WMT) or Target (NYSE: TGT). Yes, the retailer may have strong associations with Donald Trump and Martha Stewart, but I will not be blinded by such celebrity value.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
Wal-Mart Stores, Inc. (NYSE: WMT) made a splash in recent years by opening health clinics in its Supercenter locations to give those who could not afford medical insurance a cheap way to get medical services. As always, though, the retailer hoped that those who visited in-store clinics would hang around and do some shopping as well.
In 2008, retail clinics have seemed to shut their doors in states like New York, Nevada and Indiana. Overall, 69 clinics in 15 states have given up the ghost, including those located inside Wal-Mart stores.
What's going on here? Is the strategy backfiring? Even one of the largest proponents of in-store retailer clinics, CVS Caremark Corp. (NYSE: CVS), indicated that it is slowing down its retail in-store clinic plans.
Wal-Mart (NYSE: WMT) does not want to be known as a place where there are products that could hurt little kids. It is bad for public relations and thus bad for business. So the world's largest retailer is going to set standards for toys that are much tougher that those of the U.S. government.
According toThe Wall Street Journal, Wal-Mart does not just want the toys to be manufactured more safely. The paper writes, "The initiative also encourages suppliers to mark children's products with 'traceability information', including the factory in which the goods were made. About 80% of the toys sold in the U.S., including those marketed by U.S.-based toy makers, are manufactured in China."
Wal-Mart is a little late to the party. The threat of lead and other toxins has been causing trouble for retailers for over a year. Several of the company's competitors already have similar programs in place. And Wal-Mart sources a lot of inventory in China, so it may not want to be seen as leading the pack in a public relations war with the People's Republic.
The news also begs the question of why Wal-Mart was not inspecting the toys on its own. Of course, that would be expensive.
As is almost the case ahead of some key data announcement, investors tend to be looking for direction. Indeed, stock futures were mildly lower early Wednesday morning as the Street awaits CPI reading on inflation. Also in focus this morning is housing after a reading on foreclosures surged.
Already on Tuesday investors seemed nervous as U.S. stocks finished mixed on Tuesday. Retail sales, Wal-Mart results, Hewlett Packard's acquisition of EDS and Federal Reserve Chairman Ben Bernanke's speech on the markets affected stocks with the Dow ending 44 points, or 0.34% lower, the S&P 500 nearly flat as it was down half a point, or 0.04%, and the Nasdaq Composite ending 6 points, or 0.27%, higher.
This morning, stocks will likely get a clearer direction after April's Consumer Price Index report due out at 8:30 a.m. EDT. Economists, according to Briefing.com expect CPI to rise 0.3% in April, while core CPI, which excludes the volatile food and energy prices, is estimated to be up 0.2% in April. Investors want the report to allow the Fed to keep interest rates as they are so as to bolster the dollar, and hence commodities, somewhat.
Speaking of the dollar and commodities, though, oil keeps trading on its own set of "rules," it seems. Overnight, oil set yet another record, shrugging off gains in the dollar. The record, near $127 a barrel, was due to concerns that Iran may cut production. Oil has retreated since as the reports may have been overblown. This morning, at 10:30 a.m. EDT the weekly release of U.S. fuel inventories is due. Meanwhile, congress voted Tuesday to challenge President Bush to temporarily halt the daily shipment of thousands of barrels of oil into the government's emergency reserve.
In economics, inferior goods are defined as goods that are less in demand as consumers get richer but more in demand as consumers get poorer -- which of course happens when the economy slows down. Inferior goods are often the basic goods and services such as bus rides, potatoes, instant noodles and so on. And with increased demand, the price of such goods, unless regulated, can actually increase in bad times. A recent example of this is the increase in the price of rice (although other forces were at work there as well).
Well, recently we've seen a trend in retail that showcases this clearly -- discount retailers have been performing well relative to most other retailers. When retailers reported same-store sales for the month of April, Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT) and Costco (NASDAQ: COST) outdid their less fortunate counterparts as they have likely taken customers away from other retailers.
The trend that started a few months ago, with car sales (definitely a normal, not an inferior good) in the U.S. softening overall, has continued and even deepened as consumers have less disposable income after inflation and gas money is taken into account. With credit hard to come by, they have turned to cheaper alternatives. To wit, today Wal-Mart -- my "inferior retailer" -- reported that first-quarter profits rose 6.9%. Conversely, Liz Claiborne (NYSE: LIZ) -- the "normal retailer" -- swung to a first-quarter net loss.
To be fair though, it's the top line that matters if I'm looking at consumers' changing habits and there WMT saw a net 10.2% sales increase while LIZ's sales grew by much less during the quarter, 4.9% -- actually, not that bad. Even AnnTaylor Stores Corp. (NYSE: ANN) raised its forecast Monday. Indeed, somehow retail -- excluding auto sales of course -- has managed to hold up quite well recently despite market conditions as today's report indicates. Including autos, though, retail sales declined in April.
Wal-Mart Stores, Inc. (NYSE: WMT) reported a 7% lift in first quarter profit this morning, as the world's largest retailer explained that bargain-seeking customers and heavy international growth gave it a boost in the most recent quarter. Net income rose to $3.02 billion from $2.82 billion in the year-ago quarter as revenue soared to $95.3 billion for the quarter.
The oldest trick in the book once again favored Wal-Mart's coffers -- uncertainty in the economy among record-high gas prices and many food staples brought even more shoppers into the aisles of Wal-Mart looking for lower prices. Wal-Mart explained its profit spike by saying that in response to tightening credit markets, insanely-high gas prices and the worse housing slump seen in over a quarter century, customers were "trading down" to shop at Wal-Mart. During an economic slowdown, it's a nice position to be in.
What this means is that Wal-Mart is completely, absolutely and totally seen in the U.S. as the "low price" destination for, well, everything and anything retail. This movement to placate the higher-end shopper at Wal-Mart will continue to go forward, but price is 100% king at this retailer and always will be. Wal-Mart also saw international stores in Brazil, China and other locations help boost its share of international sales 22% during the Q1 period from the year-ago quarter. Could Wal-Mart shares see $60 this week -- the first time they will have hit that number (splits adjusted)? Watch for it.
U.S. stock futures fell Tuesday morning even after (or perhaps because) Wal-Mart reported a 7% profit rise, slightly above analyst estimates. But investors also awaited several economic indicators due out today as well as speeches from several of the Federal Reserve members.
U.S. stocks finished the day with strong gains Monday thanks to a drop in crude oil futures and several deal speculations that hit the Street. The Dow industrials went up 130 points, or 1.02%, the Nasdaq Composite was up 42 points, or 1.76%, and the S&P 500 finished the day 15 points, or 1.10%, higher.
At 8:30 a.m. EDT April export and import prices as well as retail sales data are due. Economists expect retail sales to have declined 0.2%, and excluding autos, they expect sales to have increased 0.2% in the month. The difference in the two gauges isn't surprising as higher gasoline prices were bound to put consumers off buying cars. At 10:00 a.m. EDT, March business inventory levels are due.
But other than raw data, seven Fed members are also scheduled to give speeches, including one from Fed Chairman Ben Bernanke in Atlanta on the central bank's liquidity measures.
Apple Inc. (NASDAQ: AAPL) was the big winner among only four that had appreciated. The following indicates commonly used metrics for tracking and comparing stocks.
Reviewing the stocks in order of lowest to highest P/E ratio (TTM):
It is interesting to note that only two of the eight have a below market P/E ratio, while only two are average. On the other hand, four are double the average and beyond, which leads me to believe the overall market consensus is that it is still very early in the game for these stocks and their futures are yet to be determined. The P/E ratios of the four are also the most volatile as are the stock prices.
TheStreet.com's Jim Cramer says FedEx exposed three market fictions with its news on Friday.
Sometimes you have to wonder why some stocks just don't stay down after bad news.
Take FedEx (NYSE: FDX) (Cramer's Take). Earlier this year, the stock shed about 10% of its value when it forecast worse-than-expected earnings, citing lower volumes and higher fuel costs. It then proceeded to rally 25% from that dismal forecast even as oil went up dramatically and business in the U.S., particularly retail business, got softer and softer!
Now we get pretty much a simple extension of what the company said last near the end of March, and people are acting surprised and furiously dumping the stock.
FedEx cuts to a couple abiding fictions in this market. The first is that all valuations are cheap, so it is OK to buy them. FedEx has long-term growth of 10% and sells at 14 times earnings, but I question both the growth and the multiple as being too high in a world where energy just won't quit. But that brings us to the second fiction: People have been buying this stock with the idea that oil just has to level off somewhere. Considering it didn't, how could anyone be surprised at this news? And the third fiction? The turn in the economy is right around the corner.
Welcome to the 60th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.
In this Wal-Mart Weekly, I'll continue my column from last week and take a look at another of Wal-Mart Stores, Inc.'s (NYSE: WMT) annual shareholder meeting proposals.
Last year, I covered Wal-Mart's annual shareholder's meeting live from the show floor last year, where all 11 shareholder proposals were easily and soundly defeated. Will it be the same this year? We'll find out in about three weeks. Last week I covered something very pertinent to the season -- political contributions. This week, it'll be something more close to the heart of many individual -- and institutional -- shareholders: executive compensation.
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
Analysts surveyed by Thomson Financial expect earnings growth, compared to the same period in the previous year, from Urban Outfitters (NASDAQ: URBN) to be 22.7% to 22 cents per share, from Wal-Mart Stores (NYSE: WMT) to be 9.3% to 75 cents per share, and from TJX Companies (NYSE: TJX) to be 7.5% to 40 cents per share.
Analysts expect earnings declines from the previous year from JC Penney (NYSE: JCP) by 52.9% to 49 cents per share, from Kohl's (NYSE: KSS) by 34.4% to 42 cents per share, and from Nordstrom (NYSE: JWN) by 18.3% to 49 cents per share.
In the case of Abercrombie & Fitch (NYSE: ANF), analysts expect earnings to remain flat, year over year, at 65 cents per share.
And then there's Macy's (NYSE: M), which is expected to swing to a loss of 2 cents per share, compared to a profit of 16 cents a year ago.
The sample size may be too small to define any significant trends, but the numbers do suggest that analysts expect profit declines to be deeper than profit growth, and that consumers may be more likely, given the current state of the economy, to buy clothes at Wal-Mart or TJ Maxx than at Nordstrom or Abercrombie.
The coming results will reveal if those expectations are correct.
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MOST NOTEWORTHY: Fiserv, Arbitron and Anadarko Petroleum were today's noteworthy upgrades:
Retailer 
Wal-Mart
As is almost the case ahead of some key data announcement, investors tend to be looking for direction. Indeed, stock futures were mildly lower early Wednesday morning as the Street awaits CPI reading on inflation. Also in focus this morning is housing after a reading on foreclosures surged. 
In economics, 
About a month ago I posted 
The earnings season continues to roll on, and next week's results offer a peek at the state of fashion retailing, as a variety of companies -- from the discount to the upscale, from the hip to the pedestrian -- are scheduled to report earnings.
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
