The fall-off of Facebook shares can be traced to a number of things — whether or not they are legitimate. The first is that a some traders believe Morgan Stanley (NYSE: MS) and Facebook decided, at the last minute, to flood the market with stock to raise more money for the social network. There is a rumor that Morgan Stanley cut Facebook revenue forecasts right before the IPO. Major trading issues in the Nasdaq (NASDAQ: NDAQ) system, which delayed orders and rattled investors, might have been another cause. Two days before the IPO, General Motors (NYSE: GM) pulled its ads from Facebook. That seemed to be a bit of revenge, although no one can figure out why. And, perhaps most damaging, analysts attacked Facebook’s inability to make money on its mobile presence, which raised the question of its long-term viability as a growth company.

Zynga faced none of these problems. Its only trouble was being tethered to Facebook because it gets so much revenue from the social network. Facebook’s mobile strategy eventually could effect Zynga, but the balance of the long list of reasons Facebook shares declined really do not apply to the game firm. Zynga‘s shares may have fallen consistently since mid-April, but Wall St. had begun to warm to the company after its recent, better-than-expected earnings. Citigroup (NYSE: C) started coverage of the game firm with a “buy” and a $12 price target.

The Zynga share drop is no different from the reaction traders have when they sell Ford (NYSE: F) because of poor GM earnings, or drop Yum! Brands (NYSE: YUM) when McDonald’s (NYSE: MCD) announces poor earnings. As often as not, two companies in a related sector have very different financial results, for good reasons most of the time. GM has strong sales in China; Ford does not. Yum!’s operations in the U.S. do poorly; America is a stronghold for McDonald’s. Pairings like Walmart (NYSE: WMT) and Target (NYSE: TGT) or Lowe’s (NYSE: LOW) and Home Depot (NYSE: HD) are often not pairs at all. If they really were parallel in almost every way, management skills would make no difference to results.

Zynga and Facebook may trade as a pair, but they are not one.

Douglas A. McIntyre

The tale is similar to competitor that told by Home Depot Inc. (NYSE: HD) last week. The first quarter of this year got a boost from the warmer weather, which moved some sales into the first quarter and saw sales soften toward the end. Lowe’s reported EPS of $0.43, a penny above the consensus estimate on revenue of $13.2 billion, which also beat the consensus estimate of $12.99 billion.

Where Lowe’s stumbled was in its full-year guidance for EPS of $1.73-$1.83, compared with a prior analysts’ estimate of $1.87. That lower estimate is due in part to a 52-week fiscal year compared with a 53-week year that ended in early February 2012. Lowe’s noted that the extra week added $514 million to revenues and $0.05 to EPS in the fourth quarter of fiscal year 2012.

Like Home Depot, Lowe’s is concerned about the overall US economy:

We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control.

The company plans to open 10 new stores in the 2013 fiscal year and to increase same-store sales by 1%-3%. Same-store sales in the first quarter rose by 2.6% worldwide and 2.7% in the US.

The cautious outlooks from Home Depot and Lowe’s stem from continuing low housing prices which could encourage more buyers than remodelers. A recent survey by the National Association of Home Builders indicates that remodeling projects are up, particularly for bathrooms and kitchens. A majority of those projects are not aimed at increasing a home’s resale value, but geared for upgraded amenities. For the home improvement stores, they have to wonder if these kinds of projects will continue to increase or if those sales, too, were front-loaded due to warm weather.

Lowe’s shares are down about -6% in pre-market trading this morning, at $26.76 in a 52-week range of $18.07-$32.29. Shares of Home Depot are also down about -1.6% at $46.31 in a 52-week range of $28.13-$52.88.

Paul Ausick

Lightly followed Sears reported an adjusted EPS loss of -$0.31 for its first quarter, less than half the consensus (three analysts) estimate of an EPS loss of -$0.67. Revenue came in at $9.3 billion, compared with an estimate of $9.15 billion. On a GAAP basis, Sears posted EPS of $1.78.

The gains at Sears are almost entirely due to the dismantling of the company. The company sold $440 million worth of US and Canada leases during the quarter, and is continuing with its plan to spin-off the Outlet and Hometown stores in the third quarter for another gain of $400-$500 million. Sears also closed stores and is planning to spin-off to existing shareholders about 44% of its holdings in Sears Canada, leaving Sears Holdings with a 51% ownership share.

Walmart, far from dismantling itself, touts its 20% growth in operating income from its international operations. That includes its stores in Mexico — ahem. Walmart posted EPS of $1.09 versus an estimate of $1.04, and revenue of $112.3 billion versus a consensus estimate of $110.5 billion. On a constant currency basis, revenue totaled $111.2 billion. Currency transactions cost the company $800 million in the quarter. Walmart guided EPS for its second quarter at $1.13-$1.18, where the consensus had been $1.16.

At Walmart’s US division, operating income rose by 8.1% “due primarily to higher sales, aided by our price investment strategy, our continued focus on productivity and expense management. Walmart U.S. leveraged expenses for the quarter.” Walmart’s short-term borrowing at the end of the quarter totaled $5.8 billion, up from $4.05 billion in the first quarter and much higher than the $3.45 billion in short-term loans in the same period a year ago. The company plans to continue to “leverage expenses” in the coming quarter.

When Target Corp. (NYSE: TGT) reported earnings yesterday it, too, showed a nice gain but the stock price rose less than 1%. J.C. Penney Company Inc. (NYSE: JCP) got slaughtered yesterday for missing estimates, and Home Depot Inc. (NYSE: HD) took its lumps on Monday.

For different reasons, both Sears and Walmart expect to get a share price boost today. No such luck for Dollar Tree Inc. (NASDAQ: DLTR) which met both EPS and revenue forecasts, but guidance for the second quarter came up short, with EPS guided to $0.87-$0.93, below the consensus estimate of $0.95. Another super-discounter, Dollar General Corp. (NYSE: DG) is expected to post EPS of $0.60 on revenue of $3.82 billion when it reports results for its quarter ended in April.

Shares of Sears are up 7.6% in the pre-market this morning, at $54.75 in a 52-week range of $28.89-$85.90. Shares of Walmart are up about 3.5%, at $61.24 in a 52-week range of $48.31-$62.63. Dollar Tree’s shares are getting pummeled, down nearly -6% at $95.30 in a 52-week range of $59.90-$104.08.

Paul Ausick

Thomson Reuters has estimates of $1.04 EPS and $110.4 billion in revenue.  We worry that currency could be an issue, but that may be the case for this current quarter rather than the quarter-end of April.  Estimates for the coming quarter are $1.16 EPS and $115.31 billion.

Wal-Mart’s stock chart matters immensely here.  The 50-day moving average has acted as significant resistance and that level is currently $59.75.  As it turns out, %59.50 to $59.75 acted as the last floor in February after the prior breakout attempt failed.  It probably does not hurt that Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-B) just raised the stake considerably in Wal-Mart shares.

Options traders are not expecting much of a move on the earnings.  While expiration date is this Friday, the options trades only have an event-pricing of up to about $1.20 or so in either direction.  The stock fell $2.00 after the prior earnings report in February.

Analysts have not abandoned Wal-Mart and the current $59.20 or so price compares to a Thomson Reuters consensus target of $63.82 on the stock.  Wal-Mart yields 2.7% and the 52-week trading range is $48.31 to $62.63.

Keep in mind that Target Corporation (NYSE: TGT) has already report earnings and the stock is up only 0.7% in a late-day reaction.

Sears Holdings Corporation (NASDAQ: SHLD) is also set to report earnings on Thursday but the retailer under Eddie Lampert and friends is thinly followed by the analyst community.  Of the few estimates (literally three estimates) from Thomson Reuters we see a “consensus” of a loss at -$0.67 EPS on $9.15 billion in sales.  Sears shares are down 3.2% around $51.25 late on Wednesday ahead of the report and that is against a 52-week range of $28.89 to $85.90.  Keep in mind that Sears shares are down from $65.00 as recently as May 1 but the price the day before (April 30) was only $53.78.  Volatility rules the roost here, and maybe the short interest of 10.55 million shares too (over 8-days to cover ratio).

Another more broad issue is that The Home Depot, Inc. (NYSE: HD) stubbed its toe this week as the stock is down by more than 2% from its pre-earnings level.  Investors were hoping that it is doing better along with a slight housing recovery or bottoming-out.  Its stock was initially down about 3% closer to $48 after the earnings report against a 52-week trading range of $28.13 to $52.88.

Thursday is set up to be an interesting day for large retail earnings.  Wal-Mart could be a wild card in either direction.

JON C. OGG

Much smaller competitors Lumber Liquidators Holdings Inc. (NYSE: LL) topped both EPS and revenue estimates when it reported earnings a couple of weeks ago, as did Builders FirstSource Inc. (NASDAQ: BLDR). Lowe’s Companies (NYSE: LOW) reports earnings next week, and consensus estimates call for EPS of $0.42 on revenue of $12.98 billion.

With both Lumber Liquidators and Builders FirstSource coming in handily better than expected, estimates for Home Depot rose by a penny in the last week and were actually up $0.05 over the past 90 days. That’s why the disappointment today — a low bar had been raised and Home Depot couldn’t quite clear it.

The home fix-it stores could be in for more competition from home sales, particularly new home sales if the economy continues to improve. Sales of bank-owned homes rose in February and March though the inventory of these homes has been in decline.

New home sales rose sharply in February, but dropped again in March. Home sales are about half what analysts expect in a healthy home-buying market. Home prices continue to slide slightly in many parts of the country, which encourages buyers able to find financing and cash buyers. If home buying picks up a bit during the summer, the home remodeling stores may feel the crunch again.

Home Depot also said that it expects sales to rise 4.6% for the full year, which calculates out to full-year sales of about $73.6 billion versus the current estimate of $74.11. The company raised its full-year EPS guidance from $2.79 to $2.90, which includes the $0.03 one-time benefit from the first quarter. The consensus estimate had called for $2.91, so the company is still lagging here.

Shares in Home Depot are trading down about -4.5% in the pre-market, at $47.66 in a 52-week range of $28.13-$52.88.

Paul Ausick

The National Association of Home Builders reported that home builder confidence dropped to 25 from the prior month’s reading of 28 and that marked the first drop in seven months. Dow Jones was calling for a reading of 28 and Bloomberg was calling for a 1 point gain to 29 in April.

Here is where the problem is: the stronger interest from consumers has not matured into many more deals closing.  Buyers are still having trouble closing on a mortgage and some buyers are opting out ahead of a deal closing.  Investors also need to be aware that it takes a reading of 50 before the general consensus is that housing is considered favorable versus cautious and we are now going on six-years of the negative readings.

Lennar Corp. (NYSE: LEN) is down 1.6% at $25.69; KB Home (NYSE: KBH) is down 1.3% at $7.95; DR Horton Inc. (NYSE: DHI) is down 1.2% at $14.66; and PulteGroup, Inc. (NYSE: PHM) is down 1.3% at $8.43.  Toll Brothers Inc. (NYSE: TOL) is today’s standout stock with a gain of 2.5% at $23.51.

There is another problem here with the reading in that all three components of the index were lower.  Traffic was ratcheted down, as was current sales and future sales expectations.  Today’s news does need to be segregated from the entire housing market.  Builders are competing with existing home sales and with foreclosures or other distressed housing sales.

Mortgage rates are still close to record lows.  That cannot last forever and at some point you would have to ask what happens to the affordability if the 30-year mortgage rates rose 100 or 150 basis points.

To prove that the housing market may be fragmented despite the drop in builder sentiment, take a look at the retail segment: The Home Depot, Inc. (NYSE: HD) is up almost 1% at $51.45 and it hit a 52-week high of $51.80 today.  Lowe’s Companies, Inc. (NYSE: LOW) is up 0.7% at $31.90 and shares also hit a new year high as well.

Builders may be pessimistic, but they are competing with the existing home sales perhaps harder than ever now.

JON C. OGG

The following stocks have exhibited the strongest chart patterns: AutoZone Inc. (AZO); Chipotle Mexican Grill, Inc. (NYSE: CMG); The Home Depot, Inc. (NYSE: HD); Intel Corporation (NASDAQ: INTC); Intuitive Surgical, Inc. (NASDAQ: ISRG); Philip Morris International, Inc. (NYSE: PM); Red Hat, Inc. (NYSE: RHT); Sempra Energy (NYSE: SRE); Unitedhealth Group, Inc. (NYSE: UNH); and Whole Foods Market, Inc. (NASDAQ: WFM).

These names year to date have outperformed the S&P 500 by 12.92%.  During the month of April these particular stocks have risen an average of 0.66% while the S&P 500 has actually fallen by a rate of -3.31%.

As always, past performance is not indicative of future results.  These results for the strongest names are updated daily and stronger names do rotate daily into the composite of the top 10.

Currently the 10 stocks featured this week are not technically overbought, but they are approaching a overbought condition according to the methodology used by the Chartlabpro.com model.

The methodology from chartlabpro.com shows that a 5 rating is considered a Strong Buy and conversely a 1 is a Strong Sell.  As a reminder, Chipotle, Intel, Philip Morris International, and Unitedhealth Group are due to report quarterly earnings in the coming days.

Featured exclusively for 24/7 Wall St. by ChartLabPro.com.

The Home Depot, Inc. (NYSE: HD) shares are down 1.8% at $48.78; Lowe’s Companies, Inc. (NYSE: LOW) is now down 2.6% at $30.13. iShares Dow Jones U.S. Home Construction ETF (NYSE: ITB) is now down 3.7% at $14.29 on more than 1 million shares; SPDR S&P Homebuilders (NYSE: XHB) is down 2.8% at $20.74.

JON C. OGG

The unofficial closing bells put the DJIA down nearly 46 points to 13,124.62 (-0.35%), the NASDAQ rose more than 1 point (XXX%) to 3,075.32, and the S&P 500 fell -0.19% or nearly 3 points to 1,402.90.

There were several analyst upgrades and downgrades today, including Home Depot Inc. (NYSE: HD) reiterated ‘outperform’ and target price raised to $55 at Credit Suisse; LinkedIn Corp. (NYSE: LNKD) raised to ‘buy’ at Goldman Sachs; Micron Technology Inc. (NASDAQ: MU) started as ‘outperform’ at RBC; Royal Gold Inc. (NASDAQ: RGLD) raised to ‘outperform’ at National Bank; and Blackrock Inc. (NYSE: BX) cut to ‘equal weight’ at Morgan Stanley.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: Oracle Corp. (NASDAQ: ORCL) is down -2.2% at $29.45 (more coverage here and here); General Mills Inc. (NYSE: GIS) is down -0.4% at $38.59; Krispy Kreme Doughnuts Inc. (NYSE: KKD) is down -7.2% at $7.88 (more coverage here); SAIC Inc. (NYSE: SAI) is up 3.8% at $13.65; Daquo New Energy Corp. (NYSE: DQ) is down -7.5% at $2.58; and Fred’s Inc. (NASDAQ: FRED) is up 2.4% at $14.38.

Other standouts from today include the following stocks:

Baker Hughes Inc. (NYSE: BHI) is down 5.9% at $45.02. The oil field services firm cut its profit estimates for the current quarter. More coverage here.

LookSmart Inc. (NASDAQ: LOOK) is down -15% at $1.19 after posting a new 52-week low of $1.10 earlier today. The search network posted awful results today. More coverage here.

Origin Agritech Inc. (NASDAQ: SEED) is up more than 26% at $3.18. The modified seed maker jumped on a report that its GMO corn seed would be approved for use in China. More coverage here.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is up nearly 11% at $56.05. The coffee roaster signed a new deal with Starbucks Corp. (NASDAQ: SBUX). More coverage here.

Yingli Green Energy Holding Company Ltd. (NYSE: YGE) is down -10.3% at $3.83. The solar panel maker did not fare well in the anti-dumping suit brought against Chinese solar makers. More coverage here.

Stay tuned for Thursday. Federal Reserve Chairman Ben Bernanke, Fed Governor Daniel Tarullo, and Chicago Fed President Charles Evans are giving speeches. We have also noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – New unemployment benefits claims
• 10:00 a.m. – Federal Housing Finance Agency house price index
• 10:30 a.m. – EIA weekly natural gas storage report
• 1:00 p.m. – Treasury Inflation-Protected Securities (TIPs) auction
• 4:30 p.m. – Federal Reserve balance sheet and money supply

Your email address

subscribe

terms and conditions

Paul Ausick

Accenture plc (NYSE: ACN) Raised to Hold at Soc-Gen.

Allscripts Healthcare Solutions (NASDAQ: MDRX) Cut to Neutral at JPMorgan.

BlackRock Inc. (NYSE: BLK) Cut to Equal Weight at Morgan Stanley.

Focus Media Holding Limited (NASDAQ: FMCN) Raised to Overweight at JPMorgan.

Frontline Ltd. (NYSE: FRO) Cut to Underperform at Wells Fargo.

Home Depot Inc. (NYSE: HD) Reiterated Outperform and raised target to $55 at Credit Suisse.

Inergy L.P. (NYSE: NRGY) Started as Outperform at Credit Suisse.

Jarden Corporation (NYSE: JAH) named as Value stock of the day at Zacks.

Kinder Morgan. Inc. (NYSE: KMI) Raised target price to $36 from $32 at Credit Suisse.

LinkedIn Corporation (NYSE: LNKD) Raised to Buy at Goldman Sachs.

Loews Corporation (NYSE: L) named Bear of the Day at Zacks.

Micron Technology, Inc. (NASDAQ: MU) Started as Outperform at RBC.

OpenTable, Inc. (NASDAQ: OPEN) Raised to Buy at Benchmark.

Oracle Corporation (NASDAQ: ORCL) Raised estimates and maintained on Focus List at Credit Suisse.

Royal Gold, Inc. (NASDAQ: RGLD) Raised to Outperform at National Bank.

U.S. Bancorp (NYSE: USB) named as Bull of the Day at Zacks.

If you enjoyed the top analyst upgrades and downgrades, you can join our free email newsletter that includes analyst summaries each morning sent right to your inbox.  We also cover top issues such as IPOs, special financial exclusives, mergers and more. Sign up in the box below.

Your email address

subscribe

terms and conditions

JON C. OGG