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.
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) 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.
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.
Is Target just trying to keep up, or does it see a benefit in matching drug price cuts by its larger competitor? In response to the price cuts, Target said that it "understands the challenges guests are facing in the current economic environment." It probably planned to make these price cuts as soon as Wal-Mart did and gain the same kind of free PR that comes with such a drastic price reduction in something that millions of Americans now depend on.
But Target does not position itself as the "low price" leader like Wal-Mart does. Its marketing is more upscale, and so is the appearance of its stores -- even while carrying much of the same merchandise. So why is Target matching these prescription drug price cuts? Is it trying to take customers from Wal-Mart? Of course -- the two are fierce competitors even though marketing and merchandise presentation strategies are what I'd consider to be worlds apart. Sometimes, price is everything.
The cognitive dissonance confronting people who hate Wal-Mart (NYSE: WMT) but lament the cost of prescription drugs is growing stronger.
In a press release on Monday, the retailer announced that "Beginning today, Wal-Mart, Neighborhood Market and Sam's Club pharmacies will fill prescriptions for up to 350 generic medications at $10 for a 90-day supply." Wal-Mart is also adding adding $9 generic prescriptions for up to a 30-day supplies for drugs treating osteoporosis, breast cancer, menopause and hormone deficiency, in addition to a new "$4 OTC offering," consisting of more than 1,000 products available without a prescription priced at $4 or less.
According to Wal-Mart, roughly "95 percent of the prescriptions written in the majority of therapeutic categories are included in the $4 Prescription Program." In the less than three years since it launched its cheap prescription drugs initiative, Wal-Mart estimated that it has saved consumers over $1 billion on health care.
But wait, there's more! At 7:26 PM EDT, Target (NYSE: TGT) responded with a press release stating that "As part of its ongoing commitment to provide exceptional value to guests and consistent with prior practices, Target will reduce prices on its prescription and over-the-counter drug offerings, remaining competitively priced with Wal*Mart."
Like most price wars, this one looks to turn out well for cash-strapped consumers.
But a word to the wise: part of the reason Wal-Mart and Target are doing this is that they want you to wander around and shop while you wait for your medication. So if you use a big-box store's pharmacy, bring a book or magazine and pull up a chair -- the savings will be nullified if you walk out of there with a $4 prescription and $30 worth of crap you don't need.
Welcome to the 59th 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 week's Wal-Mart Weekly, I'll begin a multi-part column that takes a look inside some of Wal-Mart Stores, Inc.'s (NYSE: WMT) annual shareholder meeting proposals. As many of you may know, Wal-Mart's annual shareholder's meeting happens in early June, about a month from now.
I covered it live from the show floor last year, where all 11 shareholder proposals were easily and soundly defeated. Nothing new here, as Wal-Mart's board has a habit of glossing past many proposals that would give its shareholders a glimpse into its internal operations.
So, let's start off by looking at a shareholder proposal that asks for more public visibility into Wal-Mart's political donations. This is a great question for the retailer, and one would think that if Wal-Mart has nothing to hide, it would open the transparency book to answer this proposal. We'll only know in a month when the meeting actually happens, but we'll consider what the retailer could do in this column. Visit this link to get a rundown on Wal-Mart's SEC Form 14A for its upcoming shareholder's meeting, and then join me after the break.
Day one of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Management Advisory Committees meeting: Purdue Pharma's NDA for Oxycontin.
Anadarko Petroleum (NYSE:APC) to report Q1 earnings; conference call Tuesday at 10:00am.
Tuesday, May 6
Day two of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Mgmt Advisory Committees meeting: Cephalon's (NASDAQ:CEPH) sNDA for Fentora.
Molson Coors (NYSE:TAP) to report Q1 earnings; conference call at 12:00pm.
Wal-Mart Stores, Inc. (NYSE: WMT) has been trumpeting the fact for over a year now that it wants to get more higher-income shoppers into its locations to buy more higher-margin goods. Is it winning that strategy? Wal-Mart U.S. Chief Eduardo Castro-Wright indicated this week at a Lehman Brothers conference that not only is the retailer keeping its core base of low to mid-income shoppers, but it's recruiting more affluent ones too.
The reason? The economic downturn that's seeing energy and gas prices at their highest levels in decades plus the rising cost of food -- among other things. Castro-Wright said that while Wal-Mart is reaching more affluent customers at this point in time, the real zinger is that the retailer is in a position to keep them shopping at Wal-Mart once the economy improves. That's what Wal-Mart always wanted -- growing its long-term customer base.
The actual shopper demographic Wal-Mart is talking about here contains those shoppers making $55,000 to $70,000 per year (or more), of which February traffic increased 0.7% and increased 2.2% in March. Wal-Mart's old staple, low prices, seems to be the biggest hit with customers right now -- even though Wal-Mart dropped the "Always Low Prices" moniker into a more self-help motto like "Save Money. Live Better" last year. One large change I witnessed recently that's definitely geared towards the more affluent customer was the home electronics section, which resembled a high-end electronics store more than a big-box mass merchant.
Wal-Mart Stores, Inc. (NYSE: WMT) issued a pretty strong set of marching orders five years ago to its top 100 suppliers: adopt RFID in your business practice or suffer the consequences of doing less business with the world's top retailer. RFID was supposed to make logistics easier by allowing automated tracking and shipping of inventory as quick and efficient as possible. Out with the barcode, in with the radio microchip.
It hasn't quite worked out that way. Reportedly, "many" of the retailer's top 600 vendors use RFID "to some degree," but the startup costs can be easily felt by most of Wal-Mart's small suppliers. Outside of the "many" vendors who are using RFID, the rest many not "be using it at all." Apparently, Wal-Mart has backed down from the mandate that all vendors use RFID in their shipments to the retailer.
Wal-Mart is the only customer requiring RFID to be used in shipments. Is it worth the bother just to placate one customer? Well, Wal-Mart's RFID edict was launched at the birth of the technology. Prices and implementation were high, standards weren't in place and the RFID industry seemed completely fragmented. Of course, it's not that way now, but the damage may have already been done. Will Wal-Mart soon drop the requirement that its vendors implement RFID programs into their pallets and shipments? Might as well, since the retailer is really not enforcing its own rules.
.gif){kind=logo}
MOST NOTEWORTHY: Fiserv, Arbitron and Anadarko Petroleum were today's noteworthy upgrades:
Retailer 
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
