Growth & Income Stock: McCormick & Company

McCormick & Company (MKC: 40.56 -0.08 -0.20%) continues to slowly grow as sales in the Americas remain steady while they heat up in China. MKC has surprised on estimates the last 4 quarters by an average of 6%.

McCormick manufactures spices, herbs, seasonings and flavoring for consumers, food manufactures and food service businesses. Founded in 1889, the company has a global reach through several brands.

The company has recently expanded its global presence when it announced, on June 29, that it signed an agreement to purchase a minority share in Eastern Condiments Private Limited, an Indian- based spice business.

McCormick will acquire 26% of the business at the cost of about $35 million. It is McCormick's second joint venture in India.

India is the world's largest consumer of spices. The acquisition is an attractive way to increase market share for the company in India and beyond. Eastern's products are exported to 15 other countries.

McCormick Surprised By 8.9% in the Fiscal Second Quarter

McCormick reported its fiscal 2010 second quarter results on June 24 and surprised by 4 cents on the Zacks Consensus. Earnings per share were 49 cents compared to 38 cents in the year ago period.

The earnings surprise wasn't much of a surprise because the company has met or beaten every quarter over the last 5 years. It's an impressive record.

Sales climbed 5% due to higher volume and product mix as well as favorable currency exchange rates. Chinese sales rose 18% and the Americas were solid. Only certain markets in Europe were weak in the quarter.

Both the Consumer and Industrial segments saw sales increases. The Industrial sales outpaced the Consumer, rising 7% compared to just 4%.

2010 Guidance At the Upper End of the Range

The company did not raise guidance for the full year but did say that it expects to be at the high end of its previous range of $2.49 to $2.54 per share.

The analysts are at the high end of the guidance with their estimates. The 2010 Zacks Consensus Estimate has moved to $2.53 from $2.51 per share in the last 60 days.

Fundamentals

Analysts expect 2010 earnings growth of 7.8% and a 5-year average earnings growth of 9.5%.

The company yields 2.6%, which is much higher than its industry, which pays, on average, no dividend at all.

McCormick & Company is a Zacks #2 Rank (buy) stock.

The stock has been hot in the last year and is now trading near a 2-year high.

Endo Pharma To Buy Penwest

In a bid to sustain and drive growth in the area of pain management, Endo Pharmaceuticals Holdings Inc. (ENDP: 29.15 +0.70 +2.46%) recently agreed to acquire drug developer Penwest Pharmaceuticals Co. (PPCO: 5.00 +0.03 +0.60%). Through this deal, Endo Pharma will gain full access to a painkiller that was being co-developed by the companies. The deal, worth approximately $144 million or $5.00 per share in cash, has been approved by the Boards of both companies.

The companies have been co-developing an extended-release version of Opana (Opana ER) for treating moderate to severe pain in patients in need of continuous opioid treatment.

Under the terms of the agreement, Endo will commence an all-cash tender offer shortly to purchase all the outstanding common stock of Penwest. The tender offer price of $5.00 per share represents a premium of 47% over the 30-day average of Penwest shares. The offer is expected to be completed in September this year.

Furthermore, Endo will buy any Penwest stock not purchased in the original tender offer through a second-step merger at the same price as in the tender offer. That process is expected to be completed during the fourth quarter of 2010.

Endo expects the deal to be accretive to its 2010 adjusted earnings (excluding special items) primarily due to a reduction in cost of goods sold. While Endo maintains its earlier 2010 revenue guidance range of $1.63 billion to $1.68 billion, it has raised its 2010 adjusted earnings projection in anticipation of the closure of the deal. The company now expects 2010 adjusted earnings in the range of $3.30 to $3.35 per share as opposed to the earlier view of $3.25 to $3.30 per share. However, Endo has trimmed its 2010 reported earnings (including special items) outlook to $1.89 - $1.97 because of charges associated with the merger.

Pain Pipeline Advances

The pipeline at Endo received a boost with the company filing a New Drug Application (NDA) with the US Food and Drug Administration (FDA) for a new extended-release formulation of oxymorphone. The new version is intended to bring relief to patients suffering from moderate to severe pain and requiring continuous opioid treatment for an extended period of time. The new formulation, co-developed with Grunenthal GmbH, is designed to reduce accidental misuse and deter certain methods of intended abuse.

The NDA submission is based on a non-clinical and clinical program, which showed that the crush-resistant version of oxymorphone addresses attempts to misuse or abuse the drug through means of breaking, crushing, extracting or making a powder of the product.

Forex Trading: US Dollar Gaining Ground; Analysts Uncertain About Why

US Dollar Gaining Ground; Analysts Uncertain about Why

With retail sales and consumer confidence figures expected from the United States later today, there is a high possibility that the greenback will experience a modest level of volatility before the market closes out for the weekend. If the figures come in line with the expected wave of positive news, the USD could go either way depending on which forces are actually in control of the market. If optimism is in charge, then positive figures will drive the USD higher. However, if risk aversion is the dominant theme, the USD could actually decline from a positive release as traders bail out of their USD safe-haven positions and move into riskier assets.

Economic News

USD - Which Market Force is Behind the USD's Rise?

Tuesday's Federal Open Market Committee (FOMC) statement on future monetary policy seems to have taken its toll on US dollar trading. The greenback has risen steadily against most of its primary currency rivals since the announcement was made that steps would be taken to correct the recent wave of bearishness.

The greenback has pared much of its recent losses to the euro, British pound, Canadian dollar, and Australian dollar. Against the euro, the USD changed direction, breaking its bullish channel, and went from 1.3333 to 1.2833. Similar gains were seen on the GBP/USD cross as well; currently trading at 1.5600, down from 1.6000.

While it appears that the statement released by the Fed's FOMC is the cause of the dollar's recent strength, there is a second explanation which many analysts are putting forth. Mainly, that global growth concerns have played an instrumental role in shifting investments away from the riskier assets and back into safe-havens. This is not a new story, considering it has been taking place frequently since the start of the financial crisis and recession back in 2007.

With retail sales and consumer confidence figures expected from the United States later today, there is a high possibility that the greenback will experience a modest level of volatility before the market closes out for the weekend. If the figures come in line with the expected wave of positive news, the USD could go either way depending on which forces are actually in control of the market. If optimism is in charge, then positive figures will drive the USD higher. However, if risk aversion is the dominant theme, the USD could actually decline from a positive release.

EUR - Euro's Decline Continuing as Risk Aversion Takes Hold

The euro has been in steady decline this week versus most of its currency counterparts. The sudden trading shift away from the 16-nation single European currency has many analysts debating the potential causes behind this movement.

The euro has fallen against the US dollar from 1.3333 towards 1.2860 since Tuesday. Against the British pound, we have seen a decline from 0.8355 to as low as 0.8200. Also, versus the Japanese yen the euro zone currency has gone from just below 114.00 to as low as 109.00, and currently trades at 110.40 after Japan's yen took a dive from statements made by the Japanese finance minister.

The question on the minds of many analysts now is whether this transition away from the euro represents a return of weakness to the euro zone - a type of resurgence of the Greek crisis from earlier this year - or just a rise in risk aversion as traders seek to put their assets into safer investments. Statements from the American Federal Reserve about monetary policy shifts has made many traders feel uneasy about future growth prospects and could explain the move back into safer investments.

With the euro zone primarily absent today's economic news, the euro shouldn't be much affected by today's events except indirectly. The US market appears to be the front-runner in today's market with a number of indicators carrying a traditionally heavy impact. Traders would be well advised to follow the opening of the US market since it will be releasing its retail sales and core retail sales figures at that time.

JPY - Japan's Finance Minister Hints at Possible Currency Manipulation

While the Japanese yen has been predominantly gaining on most of its currency rivals lately, it seems a sharp weakness struck the island currency today following statements from Japan's finance minister. It seems that a comment made to a reporter by Japanese Finance Minister Yoshihiko Noda put a level of unease in yen-trading as many are now speculating a further possibility of government intervention.

Noda's statement seemed to suggest that unnatural strengthening of the yen was looked upon as unfavorable and harmful to the Japanese economy. The message appears to have been interpreted as a comment that future market meddling may be in the works by the Bank of Japan (BOJ). As a result, traders have seen the JPY losing ground against most of its rivals in yesterday's and today's trading.

OIL - Crude Oil Price in Decline on Rising USD

The price of spot crude oil has been declining moderately for over a week as growth concerns continue to take their toll. The various market forecasts made by the United States, Europe and Australia have apparently put a damper on demand and pushed a number of traders out of riskier assets and back into safe-havens for the time being. The result has been a strengthening US dollar, and weakening commodity prices.

While the USD climbs in value, the commodities which are linked to the greenback will react in an opposite fashion; losing value as it becomes more expensive to purchase them. If the dollar continues its rise, either from risk aversion or market growth in the US, the price of commodities such as oil will undoubtedly continue their fall.

Technical News

EUR/USD

The pair continues to fall following a breach under the bullish channel that the pair had traded in. Yesterday the pair fell as low as 1.2775, just above the next support level at 1.2740. A bullish cross is forming on the daily chart's Slow Stochastic oscillator, indicating a move higher could be in store for the pair. The first resistance level for the pair rests at yesterday's high of 1.2930.

GBP/USD

Yesterday the pair fell as low as 1.5560, dropping below the 20-day moving average, but managed to close near the 50% Fibonacci retracement level from the high seen last August. Further drops in the price today may test the bullish trend line that has held since early June. Support for the pair comes in at 1.5450 followed by 1.5250.

USD/JPY

The pair has seen strong resistance near the price of 86.20 as the price has failed to close above this level all week. The Momentum (7) has pushed above the 100 level, indicating the next move may be to the upside with resistance at 87. Traders may want to cover shorts prior to the bullish move.

USD/CHF

Strong resistance for the pair is seen at 1.6050, the 61.8% Fibonacci retracement from the previous bullish trend that ended at a high in June. Support is found at the 78.4% Fibonacci retracement at a price of 1.0350. Traders may want to use this support level as a take profit target with the range trading that is taking place between these two levels.

The Wild Card

Oil

Spot crude oil prices have fallen dramatically from a recent high of $82.95 to test the support level at $75.50. A breach below this support line would then test the bullish trend line that began in late May. CFD traders will want to target the price of $74.50 today as close below this level would signal a shift in the long term trend.

A Dead Cat Bounce In The U.S. Stock Markets?

Thursday was another rough day in the markets as we continued the sell off.  The bulls managed a bounce but we could not break the resistance at the 50-day simple moving average of 1087.

The good news is we tested the 1087 resistance five times today but, we were unable to break it.  The more we can test the resistance, the more likely we are to break it.  The sentiment is different though and the bulls are very timid now.  The market environment is not stable at this moment.  Everywhere we look, we have bad macroeconomic news.  Doug Kass is still stating that we are going to have a revision in 2^nd Quarter GDP from 2.4% to possibly under 1% now.  That will prove to be significant weakness in our attempt at an economic recovery.

China isn't helping the situation at all either.  The slowdown in China was rumored at the beginning of the year and now the reports are indicating it surely is happening.  Is this the end of the world?  Absolutely not but, we can expect to see more bearish news during this historically slow season in the markets.  Can the markets bounce back from all the negative news?

The uglier the news becomes, the more likely we are to have another stimulus.  I'm not yet a believer we will create an actual stimulus that will truly help the economy but the markets will surely rally on it, possibly similar to the stimulus rally of 2009.  The reality is we need to start working with companies to see what we can do to help them feel comfortable hiring.  As I've stated before, tax incentives for hiring additional full-time employees every year is a step in the right direction.  As is, we can outsource to another country for cheap labor and/or use machines that surely don't require healthcare.  Outsourcing doesn't require healthcare expenses either.  Quality companies are obviously shrewd and will find ways to reduce labor costs for their shareholders to benefit from.  The problem is their shrewd tactics only hurt the economy further as unemployment remains high and many individuals continue to give up looking for jobs (and then are no longer counted in the unemployment rate upon giving up, so don't be fooled by the unemployment rate touted by the media…it should be higher).

These concerns have obviously made the bulls timid and the bears more confident.  The market has rolled over and I saw nothing today to indicate this was anything more than a dead cat bounce.  Technically speaking, we needed to break resistance at 1087 today.  Our failed attempts and lack of enthusiasm by the bulls have not given confidence to do any significant buying.  I've reduced all my current positions into the bounce today and initiated a few tracking positions in Cisco (CSCO: 22.05 +0.14 +0.64%), Ikanos Communications (IKAN: 1.13 +0.01 +0.89%), and GoIP Global (GOIG: 0.00 N/A N/A).  Outside of that, I'm mainly sitting in cash and waiting to deploy it.

I'm enticed to build a position in gold but I should have done that a few days ago.  With September being a historically strong month for gold, I may still be able to build a strong position at favorable prices.

NVIDIA Corp (NVDA: 9.27 +0.12 +1.31%) reported earnings after the close and as expected, they were terrible.  For the second quarter, NVDA posted non-GAAP earnings per share of $0.03 on revenue of $811 million.  This was well below estimates.  NVDA has been creating new 52-week lows lately so I was hopeful that the bad news was already priced in due to the early announcement that earnings would disappoint.  Immediately after reporting earnings, NVDA rallied about 8% before losing it all and settling back to even.  I'm still looking to build my position in NVDA over time as they have a serious amount of cash to work with but will be patient in doing so.

Friday's have typically been negative days to begin with and Monday we tend to gap-up but, with the new sentiment at hand, the trend could change quickly.  With plenty of economic news, retail sales, and consumer price index, we should have a highly volatile morning that will likely become very boring during the afternoon.  Any positive economic surprises should be met with some strong bullish behavior as expectations are already negative.

As always, do your own homework to see if you agree.  Have a good night and I'll see you in the morning.  Good luck out there.

Stock Market Rallies Thanks To Housing News

The market held up again into the After Hours. Some market watchers are attributing the rally today on improved month-over-month Housing starts numbers, but remember that June was one of the lowest in over a year, so I would not put much emphasis on those results. If the market can break upside resistance of 1100 on the SPX, the bulls could have some steam to challenge the beginning of the month highs. One note, PPI data showed today that inflation is in check and that global deflation is more of a concern at this stage in the economic cycle (it may be worth looking back at today's Midday and read up on the defensive sectors mentioned). Crude inventories are out tomorrow at 11:30 ET which could further pressure crude. See you Midday.

Stocks rallied Tuesday morning with help from earnings and merger news. Home Depot (HD: 28.31 +0.93 +3.40%) is leading the Dow Jones Industrial Average after the home improvement retailer reported better than expected profits. The world's largest retailer, Walmart (WMT: 51.02 +0.61 +1.21%), also moved higher on earnings. Meanwhile, two mergers were announced: BHP Billiton (BHP: 70.21 -1.73 -2.40%) is making a $39 billion bid for Potash (POT: 143.17 +31.02 +27.66%) and Reynolds said it was looking to buy Pactiv (PTV: 32.58 +1.66 +5.37%). The day's economic news was mixed. Data released early showed July housing starts improving less than expected (546K vs. 555K consensus) and separately, an in-line reading from the Producer Price Index (.2 percent) for July. Separate data released later showed industrial production up a better than expected 1 percent last month (vs. .6 percent consensus). At the end of the day, the focus seemed to be on the day's stock news and the Dow Jones Industrial Average sported a 104-point gain. The NASDAQ closed up 28.

Bullish Flow
Las Vegas Sands (LVS: 29.76 +0.90 +3.12%) saw heavy trading as shares notched a new 52-week high Tuesday. LVS moved up to $30.29 early and was recently up $1.05 to $29.91 amid the broad market rally and after Mad Money's Jim Cramer said late Monday that he's bullish on the casino operator. Meanwhile, options volume is running 2.5X the average daily, with 85,000 calls and 32,000 puts traded on the session. The August 30 and 31 calls are the most actives with 23,900 and 8,300 traded respectively. Looks like some short-term speculators are buying August call options and looking to play the new bullish momentum in the stock. August options expire at the end of this week.

Bullish flow was also detected in Intrepid Potash (IPI: 25.30 +1.34 +5.59%), Exxon Mobile (XOM: 60.82 +0.94 +1.57%), and BMC (BMC: 36.16 +1.08 +3.08%).

Bearish Flow
Scripps Networks Interactive (SNI: 42.52 +0.52 +1.24%) saw much more action than usual Tuesday. Shares of the Cincinnati cable television company are up 71 cents to $42.71 and 7,765 puts traded so far, which is 35X the normal and is also noteworthy because zero call options have traded in the name. The focus is on December 35 and 40 puts which have traded 3060X and 1520X respectively. With more than 95 percent of the volume traded at the asking price, the action looks like put buying and perhaps hedging activity on concerns about the outlook for the share price from now through mid-December.

Bearish flow also picked up in Pfizer (PFE: 16.27 +0.24 +1.50%), Gannett (GCI: 12.73 +0.13 +1.03%), and MEMC (WFR: 10.54 +0.17 +1.64%).

Index Trading
The CBOE Volatility Index (.VIX) is under pressure as the S&P 500 Index (.SPX) rallies 15.7 points Tuesday. After a five-day 20.7 percent rally last week, the market's "fear gauge" is down 10.3 percent since Friday. Trading in VIX options is brisk. 129K calls and 237K puts traded so far. The top trades are part of spread, in which and investor sold 50,000 August 25 puts at 65 cents to buy 50,000 September 24 puts at 75 cents each. This spread is probably a roll of VIX puts from one month to the next. VIX options expire on Wednesdays. In the case of August options, the expiration is tomorrow and today is the last day to trade before the contracts expire.

ETF Trading
Proshares Ultra Short Bond Fund (TBT) is up 32 cents to $32.87, as stocks rally and bonds lose some of their "flight-to-safety" bid. Treasury bonds have performed well lately and yields, which move opposite to price, have been falling amid weak economic data and increasing volatility across global equity markets. However, Tuesday, the benchmark ten-year Treasury lost 19/32nd and its yield rose to 2.65 from 2.57 percent on the day. TBT, which is a leveraged fund designed to move opposite to bond prices, is moving higher along with yields. Meanwhile, in the options market, 89,000 calls traded on the fund. Some investors have been buying these calls on concern that bond prices might give back some recent gains and that bond yields will begin to rise.

Hot Stock News: Hewlett-Packard, Bank of America, Research in Motion, Apple, Visa, JP Morgan, 3M, Genzyme, AIG

General Motors - Co. is expected to kickstart its return to the stock market this week by registering its intention to float as well as reporting is Q2 earnings. (Sunday Express)

 

UK

UK's biggest companies are carrying GBP 73bln pension deficit. (Telegraph) The total pension deficit of the FTSE 100 was an estimated GBP 73bln at the end of June, according to research by Pension Capital Strategies (PCS), a division of insurance broker Jardine Lloyd Thompson. That is a GBP 17bln improvement on a year earlier. However, "there has been a noticeable growth in the number of FTSE 100 companies where the pension scheme now represents a material risk to the business," PCS said. BT, British Airways and Invensys all have pension liabilities which are more than double their market value, at GBP 43bln, GBP 16.8bln and GBP 5.4bln respectively, PCS data shows. Only five companies in the FTSE 100 disclosed a pension surplus in their most recent accounts, the research revealed.

UK Banks - Vince Cable, the Secretary of State for Business, Innovation and Skills has warned that Britain's banking sector is still 'structurally dangerous' despite the country's five biggest banks reporting bumper GBP 15.5bln, half year profits and increased gross lending last week. Elsewhere, he said that a sale of state-owned bank shares would not happen until 2012 at the earliest. (The Independent)

BP (BP: 40.11 0.00 0.00%) - The first of two co. relief wells is expected to reach its stricken Gulf of Mexico well within days. Co. says August 15th is the current estimate of the most likely date by which the first relief well will intercept the MC252. Once the relief well arrives the damaged well will be injected with mud and cement from below, a process known as bottom kill.  This would mean the well is sealed at both ends, eliminating the risk of further leaks. (Sunday Express) Latest reports are that a test on the cementing operation needed to plug its troubled well in the Gulf of Mexico was successful. (WSJ) - Co. plans to finish drilling into the base of the Macondo well in the Gulf of Mexico this week so it can pump in mud and cement to permanently plug the source of the world's biggest accidental oil spill. (Sources)

- Co. says cost of the response to date amounts to approximately USD 6.1bln. (RTRS)

 

GlaxoSmithKiline (GSK: 37.40 0.00 0.00%) - Co.'s Chief Executive Office Andrew Witty says the environment for the pharmaceutical industry has become significantly more difficult and regulation more conservative. (Handelsblatt)

 

Vodafone - Essar Group, the co's partner in its Indian JV is understood to have met bankers in London and Mumbai to prepare for a multibillion USD floatation of its stake in the mobile phone business. (Observer)

 

HSBC (HBC: 53.13 0.00 0.00%) - Co. could seek a stock market listing in India as part of an increased focus on Asia, which it believes, will drive global growth and provide the bank with bigger profits. (Sunday Express)

 

RBS (RBS: 15.52 0.00 0.00%)/ Lloyds (LYG: 4.80 0.00 0.00%) - Cos. have been told by the Bank of England that they could be penalised by the European Union if the special funding program begun in the financial crisis were to be extended. (The Times)

 

RBS - Kohlberg Kravis Roberts has taken a leading role in providing GBP 300mln of mezzanine financing for the GBP 2bln buy-out of co.'s payment processing arm by a consortium of rival US private equity groups. (FT)

 

Astrazeneca (AZN: 53.41 0.00 0.00%) - Co. announces agreements in principle in Seroquel product liability litigation with attorney representing approximately 17,500 product liability claimants in the US for approximately USD 198mln. Co. says any provision would be disregarded in calculating Core earnings and, as such, the co.'s core earnings per share guidance for 2010 remains unchanged at USD 6.35 - USD 6.65. (RTRS)

 

Tesco - Co. is preparing to raise up to GBP 2bln from the bond market as it gears up for an assault on the UK financial services sector with a massive expansion of its fledging banking operation.  (Sunday Express)

 

Prudential (PRU: 59.23 0.00 0.00%) - Co.'s shareholders could pocket a 5% increase in their dividend payout on Thursday when co. reports its half-year results, according to JP Morgan analysts. Co. already reported a 26% rise in Q1 sales to GBP 807mln and new business profit up 27% to GBP 427mln. (The Independent) In other news, co. directors are this week expected to rebuff calls for a strategic revamp in the wake of the co's failed attempt to buy an Asian rival. Co. will announce a bumper set of interim results on Thursday and an increase in the group's dividend. (Sunday Times)

 

BAE Systems - The government has thrown its weight behind co. as the co. sets its sights on a GBP 10bln contract to supply India with Eurofighters Typhoons. (Sunday Express)

 

Anglo American/Lonmin - Co.'s are battling the South African government over its granting of mining rights to small, politically connected companies, amid concerns about rising investment risk in the country. (FT)

 

Old Mutual - Co. has sold its US life business to hedge fund Harbinger Capital for GBP 219mln in a deal that will help the co. pay down debt, as it jettisons businesses that hurt its financial position during the crisis. (FT)

 

Inmersat - Co. will invest USD 1.2bln in a new fleet of next generation satellites. (FT)

 

International Power - More than 360,000 small shareholders in co. look set for a windfall after it announces a GBP 14bln merger with French energy giant GDF Suez this week. The deal is expected to be announced on Tuesday. (The Mail on Sunday)

 

US

Despite staging a late reversal in the session equities finished lower, after the NFP failed to live up to the street estimates. The reversal saw the S&P 500 index, move above and more importantly close above its 200 DMA at 1115. The NASDAQ 100 outperformed its peers being lead by Research in Motion (%) after co. was said to be in talks with Saudi carriers to avoid a Blackberry ban. Given the risk aversion tone, defensive stocks outperformed throughout the session, with the Health Care sector finishing in solitude in positive territory in the S&P 500. Finally, at the closing bell DJIA closed down 0.20% at 10654, S&P 500 closed down 0.37% at 1122 and NASDAQ 100 closed down 0.11% at 1903.

 

Hewlett-Packard (HPQ: 42.33 0.00 0.00%) - Co. boosts forecast, sees Q3 EPS USD 1.08 vs. Exp. USD 1.07 and sees Q3 revenue USD 30.7bln vs. Exp. USD 29.99bln. Says Q3 hurt USD 0.02/share by charges on DOJ settlement and sees YR revenue USD 125.3-125.5bln. Co. sees Q4 adjusted EPS USD 1.25-1.27 and sees Q4 revenue about USD 32.5-32.7bln vs. Exp. USD 32.67bln. Elsewhere, Co.'s CEO resigned after a sexual harassment claim, co.'s investigation determined there was no violation of co.'s sexual harassment policy, however did determine that it found violations of co.'s standard of business conduct. (RTRS)

 

Bank of America (BAC: 13.63 0.00 0.00%) - Co. weighs sales and other options for proprietary trading desk. Sources say move is driven by Volcker rule and also says Goldman Sachs and Morgan Stanley also weigh changes to proprietary trading units. (WSJ)

 

JP Morgan (JPM: 39.17 0.00 0.00%) - According SEC, co. sees reduction in Tier-1 common ratio of 100-200BPS from Basel Committee capital proposals. (RTRS)

 

3M (MMM: 87.11 0.00 0.00%) - Co. announces positive results from randomized study of Zyclara. (theflyonthewall.com)

Genzyme (GENZ: 67.83 0.00 0.00%) - Market talk that Sanofi-Aventis will increase its USD 69 per share bid for co. hit the wires on late Friday. (Sources)

 

AIG (AIG: 40.19 0.00 0.00%) - Co. expects to clinch a sale of its consumer finance unit in the next few weeks and is looking to raise some USD 4bln in debt to reduce its reliance on federal aid, according to co.'s chief executive. (FT) In other news, co. said controls on Wall Street signed into law by President Barack Obama may force out the insurer to raise capital, undergo stress tests and limit bets on private equity funds (Sources)

 

Boeing (BA: 68.62 0.00 0.00%) - Saudi Arabia plans to buy co. F-15 fighter jets in a 10-year deal worth USD 30bln that will exclude some of the advanced weapons systems incorporated in the versions flown by the US Air Force. (WSJ)

 

Research in Motion (RIMM: 55.93 0.00 0.00%) - Co. and the Saudi Arabian telecom regulator reached an agreement to continue services in the Arab world's largest economy after agreeing to allow the regulator to monitor co.'s services. (Al-Arabiya) However, this will mean that co. will have to place a Blackberry server inside Saudi Arabia. (The Independent) Also, according to other reports, Kuwait is not planning to stop Blackberry services in the country. (Al-Rai)

Apple (NASDAQ:AAPL) - Mark Papermaster, co.'s senior vice president for iPhone engineering, is leaving the company, signalling a change in leadership after criticism erupted over the iPhone 4's unique antenna. (WSJ)

 

Visa (NYSE:V) - Co. may rise as growth in credit and debit-card usage offsets tighter regulation on fees. (Barron's)

Target (NYSE:TGT) - Co. may rise as its focus on higher-margin goods and cost-control efforts to boost earnings. (Barrons)

 

Europe

 

Commerzbank - Co. will have to pay interest on state aid it received because the lender will make a profit this year. (Handelsblatt)

SAP (NYSE:SAP) - Co. CFO say no price limit for acquisitions but focusing on organic growth. (Boersen-Zeitung)

Allianz - According to reports, co. could use its capital surplus for a dividend increase, however it will also need more capital for the upcoming "Solvency 2″ equity rules. Also large takeovers are unlikely until capital Solvency 2 rules are clear. (Boersen-Zeitung/FAZ)

Sanofi-Aventis - Market talk that co. will increase its USD 69 per share bid for Genzyme hit the wires on late Friday. (Sources)

Insurers - Low interest rates are hurting the insurance industry and may be causing unseen problems for some companies, the chief executive of Munich Re has warned as he urged central banks to return to a more orthodox rates policy as soon as possible. (FT)

Nokia (NYSE:NOK) - Co. is launching a new range of advanced smartphones as part of a strategy to claw back market share from rivals such as Apple. (Sunday Express)

Generali - Co. chairman eyes strong expansion in South America, but need time, capital. (RTRS)

Swisscom - According to reports co. is not planning sale of Fastweb. (Sonntagszeitung)

Swatch Group - Co. CEO would not rule out acquisitions. (Finanz und Wirtshaft)

 

Momentum Stock: Las Vegas Sands Corp.

Las Vegas Sands Corp. (LVS: 28.41 0.00 0.00%) just hit a new multi-year high after reporting an awesome 89% earnings surprise in late July, sending estimates soaring for this Zacks #1 rank stock.

Company Description

Las Vegas Sands Corp., together with its subsidiaries, develops multi-use, integrated resorts worldwide. The company was founded in 1988 and has a market cap of $19 billion.

With a big rebound in consumer spending taking hold after the economic collapse of 2008, discretionary industries like resort services and gambling are seeing big gains in revenue and income. That dynamic was on display on July 28 when Las Vegas Sands reported awesome Q2 results that handily beat expectations.

Second-Quarter Results

Revenue for the period was up 51% from last year to $1.06 billion. Earnings also came in strong at 17 cents, 89% ahead of the Zacks Consensus Estimate.

The strong quarterly results were driven by the opening of Marina Bay Sands in Singapore, which generated adjusted property EBITDA of $95 million and EBITDA margin of 44% in its first 65 days of operation.

The company also saw big gains out of China, where its majority owned subsidiary Sands China, Ltd. saw revenue jump 41% from last year to $1.04 billion.

Balance Sheet

Like many other companies, LVS continues to strengthen its balance sheet, with cash and equivalents up $1.28 billion from last year to $4.05 billion. Its total debt of about $10.5 billion is mostly in line with last year, with principal payments of $90 million scheduled for 2010 and $1 billion coming due in 2011.

Estimates

The good quarter sent estimates jumping higher, with the current year adding 27 cents to 66 cents and the next year adding 22 cents to 97 cents, a 48% growth projection.

Valuation

After the recent string of gains, the valuation picture does look a bit bloated, as shares trade with a forward P/E of 44X against its peer's average of 26X.

2-Year Chart

LVS recently hit a new multi-year high after rebounding from a key trend line that has been in play for most of the last year. Look for more support from the trend and previous breakout area on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new
 

How Will The U.S. Stock Market React To Fed News?

Monday was yet another reminder of last year's low volume rallies.  We ended today with the lowest volume of the year.  It seems volume has continued to decrease over the past few weeks and some of it may be very concerned bears and bulls alike waiting on the outcome of Tuesday's Fed meeting.

Last year saw a significant amount of upside on declining volume.  It will forever be known as the most unloved rally we've encountered in recent memory.  Could we be setting up for another one of these rallies?  I don't believe so unless we see another stimulus.  Tuesday will give us some insight into the possibility of another one.

While the markets may want a stimulus, I am against it.  We need job growth and I do not believe any stimulus this administration will create can provide that.  I believe we should be giving significant tax incentives to companies who hire salaried employees off the unemployment list rather than giving disadvantages in the form of higher healthcare expenses.  Why should companies start using their cash reserves when Ben Bernanke stated himself that the economy is "unusually uncertain?" These companies may need to use those reserves to help keep them afloat.  Will a stimulus change that?  I doubt it.

However, the market is disconnected from the economy.  The market can increase while the health of the economy fades further.  All the recent negative macroeconomic news has been turned positive by the bulls in the form of an anticipated stimulus.  The 2009 market rally is likely due to the stimulus and another rally could be due to a second stimulus.  The problem is we are already deep in debt and printing money we don't have.  This is certainly a path to inflation or possibly even the dreaded hyper-inflation.

I do not believe a second stimulus is guaranteed nor do I feel the need to predict.  As usual, I am reacting rather than predicting and currently I'm staying market neutral until the Fed news.  I reduced some of my positions today and will look for some quick intraday flips tomorrow before quickly going neutral once again into the afternoon Fed news.

I added positions in IntelliMedia Technology (NIV: 2.51 0.00 0.00%) and Orexigen Therapeutics (OREX: 5.32 0.00 0.00%) today as I liked both chart setups and NIV in particular had higher than normal volume.  I took some quick profits in NIV late today and will likely reduce more tomorrow before the Fed news and before their earnings report.  If OREX stays above $5, it will be making higher lows on its recent run-up, which is a very healthy chart setup.  I believe we still have more room to run with this FDA play.  However, with the Fed news tomorrow, I am not looking to make OREX or any of my positions larger just yet.  Patience is typically not a virtue I possess so I will have to stay extra focused and not force anything.

NVIDIA Corp (NVDA: 9.2425 0.00 0.00%) is still moving higher off its 52-week lows and I believe it still has much upside.  I've stated before, NVDA has significant amounts of cash and very little debt.  They have the resources to turn the company around and I believe the odds are in their favor of doing so.  If the Fed's news creates a bullish behavior, I will look to add to NVDA even though I am already up.

Orient Paper (ONP: 5.14 0.00 0.00%) is back on my watchlist as the audit will be completed soon and I foresee favorable results.  I'd like to see ONP dip under $5 to make it a very favorable risk/reward play but may take a nibble at current levels depending how the Fed news moves the market.  Another name I haven't discussed in a while that is back on my watchlist is GoIP Global (GOIG: 0.00 N/A N/A).  The chart is starting to come around once again and it may make a run in the near future, so I'm likely to start a small position if I can get in at favorable prices.  If we go bearish after the meeting, you can expect me to turn to my ProShares UltraShort S&P 500 (SDS: 31.29 0.00 0.00%) position and ride the move down.

As always, do your own homework to see if you agree.  Have a good night and I'll see you in the morning.  Good luck out there.

Mike

At the time of publication, Kudrna was long OREX, NVDA, and NIV but positions may change at any time.