24/7 Wall St. » HOV

24/7 Wall St. Closing Bell (GS, APOL, KSS, SNDK, FDX, CMC, IPSU, PSMT, GBX, TXI, ACHC, KKD, RFMD, SABA, HOV)

Paul Ausick — Fri, 06 Jan 2012 21:08:02 +0000

Markets opened lower today and of the three major indexes, only the S&P 500 was able to break through to positive territory and stay there for most of the day. The DJIA stayed negative all day and the NASDAQ composite only briefly broke through to a gain. This morning’s encouraging report on non-farm payrolls and a drop in the unemployment rate didn’t have much positive effect, but things would like have been worse without the job gains. Two speeches by Federal Reserve Bank presidents stressed that policymakers need to do more about raising employment, and the comments were couched in terms that might indicate that the Fed is looking at raising the inflation target. Crude oil prices are mixed, with WTI crude at down -0.25% at $101.56 and Brent crude up 0.34% at $113.12. Gold was up only slightly, closing at $1,617.70.

The unofficial closing bells put the DJIA down nearly 56 points to 12,359.92 (-0.45%), the NASDAQ rose more than 4 points (0.16%) to 2,674.22, and the S&P 500 fell -0.25% or more than 3 points to 1,277.81.

There were several analyst upgrades and downgrades today, including Goldman Sachs Group Inc. (NYSE: GS) cut to ‘market perform’ at Wells Fargo; Apollo Group Inc. (NASDAQ: APOL) reiterated as ‘outperform’ and target price raised to $60 at Credit Suisse; Kohl’s Corp. (NYSE: KSS) cut to ‘hold’ at Argus; SanDisk Corp. (NASDAQ: SNDK) raised to ‘buy’ at Sterne Agee; and FedEx Corp. (NYSE: FDX) started as ‘outperform’ at Wells Fargo.

Earnings reports of note since markets closed yesterday include: Commercial Metals Co. (NYSE: CMC) is up more than 4% at $15.01; Apollo Group is up about 5.5% at $56.68, after posting a new 52-week high of $57.09 earlier today; Imperial Sugar Co. (NASDAQ: IPSU) is down nearly -6% at $3.32; PriceSmart Inc. (NASDAQ: PSMT) is down nearly -15% at $60.13; Greenbrier Cos. (NYSE: GBX) is up nearly 9% at $25.97; and Texas Industries Inc. (NYSE: TXI) is down more than -3% at $28.15.

Other standouts from today include the following stocks:

Acadia Healthcare Co. Inc. (NASDAQ: ACHC) is up nearly 19% at $11.60 after posting a new 52-week high of $11.81 earlier today. The healthcare services company agreed to pay $91 million to acquire three additional facilities in Arizona, Oklahoma, and Texas.

Krispy Kreme Doughnuts Inc. (NYSE: KKD) is up nearly 12% at $7.16. The doughnut maker recently opened its 10,000th store and the stock was upgraded to ‘overweight’ at Stephens with a target price of $8.50.

RF Micro Devices Inc. (NASDAQ: RFMD) is down more than -19% at $4.55 after posting a new 52-week low of $4.45 earlier today. The technology company warned that sales in the third fiscal quarter would be 10% lower than previously forecast.

EnerNOC Inc. (NASDAQ: ENOC) is down nearly -9% at $9.43. The energy services company’s revenues are threatened by a recent regulatory ruling.

Saba Software Inc. (NASDAQ: SABA) is up more than 15% at $8.54. The cloud software company lost less than expected in its most recent quarter and said that it would return to profitability in the second of the year.

Hovnanian Enterprises Inc. (NYSE: HOV) is up more than 10% at $1.73. The homebuilder’s stock is probably reacting to the remarks by two Fed presidents supporting additional lending and homebuilding.

Stay tuned for Monday. Atlanta Fed President Dennis Lockhart is giving a speech. Here are the noteworthy events on the schedule (all times Eastern):

11:30 a.m. – 3- and 6-month Treasury bill auctions
3:00 p.m. – Federal Reserve consumer credit report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ACHC, APOL, CMC, FDX, GBX, GS, HOV, IPSU, KKD, KSS, PSMT, RFMD, SABA, SNDK, TXI

24/7 Wall St. Closing Bell (T, FFIV, URBN, AMGN, BAX, CAG, GIS, NAV, SAFM, JEF, NKE, ORCL, TRGT, CIE, CSIQ, PBH, HOV, CVS)

Paul Ausick — Tue, 20 Dec 2011 21:06:30 +0000

US equity markets opened sharply higher this morning and have been able to sustain and even add to those gains throughout the day. Business and consumer confidence indexes in Europe were higher, giving an early boost to share prices. Then an unexpectedly large jump in new housing starts, especially multi-family dwellings, put an extra charge into investors. Proposed Federal Reserve rules governing big banks have had little impact on financial stocks, which are up about 4% in the late afternoon. Today’s auction of five-year Treasury went out at 0.880%, a record low yield. Crude oil is also sharply higher today, with WTI trading at $97.22/barrel, up more than 3.5%, and Brent is up 3.34% at $106.98. The US dollar has traded weaker all day today. Gold settled on the Comex up about 1.3%, at $1,616.80.

The unofficial closing bells put the DJIA up nearly 336 points to 12,101.92 (2.85%), the NASDAQ rose more than 80 points (3.19%) to 2,603.73, and the S&P 500 rose 2.98% or nearly 36 points to 1,241.22.

There were several analyst upgrades and downgrades today, including AT&T Inc. (NYSE: T) cut to ‘neutral’ at JPMorgan. Other ratings actions today include F5 Networks Inc. (NASDAQ: FFIV) cut from ‘perform’ to ‘underperform’ at Oppenheimer; Urban Outfitters Inc. (NASDAQ: URBN) raised from ‘outperform’ to ‘Top Pick’ at FBR Capital; Amgen Inc. (NASDAQ: AMGN) added to ‘Strong Buy List’ at Zacks; and Baxter International Inc. (NYSE: BAX) lowered from ‘Top Pick List’ to ‘outperform’ and target price lowered from $61 to $58 at RBC Capital Markets.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: ConAgra Foods Inc. (NYSE: CAG) is up 4% at $26.18; General Mills Inc. is down about -1% at $39.19; Navistar International Corp. (NYSE: NAV) is up nearly 7% at $39.05; Sanderson Farms Inc. (NASDAQ: SAFM) is down -4% at $48.66; and Jefferies Group Inc. (NYSE: JEF) is up more than 22% at $14.46. After markets close today we get earnings from Nike Inc. (NYSE: NKE) and Oracle Corp. (NASDAQ: ORCL). See our 360 coverage on Oracle here and coverage of the ConAgra and General Mills reports here.

Other standouts from today include the following stocks:

Targacept Inc. (NASDAQ: TRGT) is down more than -35% at $5.01, after posting a new 52-week low of $4.92 earlier in the day. The pharmaceutical maker’s anti-depressant drug, developed in conjunction with AstraZeneca plc (NYSE: AZN) has failed a late-stage trial.

Cobalt International Energy Inc. (NYSE: CIE) is up nearly 38% at $13.81. The oil & gas exploration company has signed a production-sharing agreement for a block offshore of Angola. Cobalt owns 40% of the project and is the operator.

Canadian Solar Inc. (NASDAQ: CSIQ) is up nearly 33% at $2.93. The solar panel maker has sold about 86 megawatts of generation to TransCanada Corp. (NYSE: TRP) for approximately $455 million.

Prestige Brand Holdings Inc. (NYSE: PBH) is up nearly 21% at $11.27. The drug and cleaning supplies company paid $660 million for a selection of nonprescription drugs from GlaxoSmithKline PLC (NYSE: GSK).

Hovnanian Enterprises Inc. (NYSE: HOV) is up more than 18% at $1.50. The home builder is riding the wave of good news about new housing starts.

CVS Caremark Corp. (NYSE: CVS) is up about 9% at $39.85, after posting a new 52-week high earlier of $39.86. The healthcare company raised fiscal year guidance and boosted its quarterly dividend by 30%, to $0.1625/share.

Stay tuned for Wednesday. The most widely anticipated report for tomorrow is due at 8:30 a.m. from the National Association of Realtors, which will be revising its new home sales data from 2007 forward. Lower sales of up to -13% are expected. Here are other noteworthy events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers Association purchase applications
10:30 a.m. – EIA weekly petroleum status report
1:00 p.m. – 7-year Treasury note auction

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AMGN, BAX, CAG, CIE, CSIQ, CVS, FFIV, GIS, HOV, JEF, NAV, NKE, ORCL, PBH, SAFM, T, TRGT, URBN

24/7 Wall St. Closing Bell (ZNGA, AAPL, SCCO, AMGN, DFS, RIMM, DRI, STEI, HOV, ZQK, ISTA, RRR, MRT, INHX, CRYP, CIE)

Paul Ausick — Fri, 16 Dec 2011 21:08:47 +0000

US equity markets opened solidly higher this morning, but began to lose momentum by mid-morning. From there it’s been a mostly downhill day with the DJIA creeping back to nearly flat with about an hour of trading left this week. The release of November’s CPI — flat and up just 0.1% excluding food and energy — made no impact on trading. The IPO of social game maker Zynga Inc. (NASDAQ: ZNGA) went out at $10/share, but appears to be headed for a lower finish by about -5%. The US dollar showed some muscle today, and Treasury yields were lower, keeping the appetite for risk under wraps. WTI crude rose about 0.3% to $94.16/barrel and Brent crude was up by the same percentage at $103.91. Gold closed at $1,598.60, up about 1.4%.

The unofficial closing bells put the DJIA down about 6 points to 11,862.68 (-0.05%), the NASDAQ rose more than 14 points (0.56%) to 2,555.33, and the S&P 500 rose 0.3% or more than 3.5 points to 1,219.40.

There were several analyst upgrades and downgrades today, including an “outrageous” prediction from the UK’s Saxo Bank that Apple Inc. (NASDAQ: AAPL) would lose half its value in 2012. Other ratings actions today include Southern Copper Corp. (NYSE: SCCO) restarted as ‘equal weight’ with a $35 target price at Morgan Stanley; Amgen Inc. (NASDAQ: AMGN) raised to ‘neutral’ with a target price of $57 at Goldman Sachs; and Discover Financial Services (NYSE: DFS) raised to ‘buy’ at Stifel Nicolaus. Research in Motion Ltd. (NASDAQ: RIMM) received a number of ratings changes this morning following an uninspired earnings report and delayed release of its new operating system software: shares cut to ‘market perform’ at BMO Capital Markets; maintained as ‘hold’ at Needham; maintained as ‘neutral’ at Credit Suisse; maintained ‘hold’ with lowered price target of $15 at Canaccord Genuity.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: Research in Motion Ltd. is down more than -11.5% at $13.38, after posting a new 52-week low of $13.12; Darden Restaurants Inc. (NYSE: DRI) is down -0.5% at $43.52; Steward Enterprises, Inc. (NASDAQ: STEI) is down more than -1.5% at $5.41; Hovananian Enterprises Inc. (NYSE: HOV) is down more than -4% at $1.29; and Quiksilver Inc. (NYSE: ZQK) is up more than 11% at $3.42.

Other standouts from today include the following stocks:

ISTA Pharmaceuticals Inc. (NASDAQ: ISTA) is up nearly 71% at $6.65. The eye-care drug company is the target of a hostile takeover bid from Valeant Pharmaceuticals International Inc. (NYSE: VRX) at a 68% premium to last night’s closing share price, or $6.50/share. More coverage here.

RSC Holdings Inc. (NYSE: RRR) is up more than 57% at $17.88, a new 52-week high. The construction and industrial equipment rental company is being acquired by competitor United Rentals Inc. (NYSE: URI) for $18/share, or about $1.9 billion in cash and stock.

Morton’s Restaurant Group Inc. (NYSE: MRT) is up nearly 33% at $$6.85. The steakhouse chain has agreed to an all-cash acquisition by privately held Landry’s Inc. at $6.90/share, for a total price of about $116.6 million.

Inhibitex Inc. (NASDAQ: INHX) is down more than -20.5% at $10.32. The biopharmaceutical firm is being hit with concerns over a new hepatitis C drug following the withdrawal of a rival drug discovered to impair liver function.

CryptoLogic Ltd. (NASDAQ: CRYP) is up more than 42% at $2.25, after posting a new 52-week high of $2.30 earlier today. The online gambling software maker is expected to get a takeover offer from Amaya Gaming Group (OTC: AMYGF) worth about $34.5 million.

Cobalt International Energy Inc. (NYSE: CIE) is up more than 21% at $10.90. The oil & gas E&P company was able to extend its lease on a deepwater rig from Transocean Ltd. (NYSE: RIG) that enables the company to continue exploring for two prospects offshore of Angola that the company believes may hold up to 2 billion barrels of crude.

Stay tuned for Monday. Richmond Federal Reserve Bank President Jeffrey Lacker is speaking in Charlotte, NC. Here are other noteworthy events on the schedule (all times Eastern):

10:00 a.m. – National Association of Builders housing market index
11:30 a.m. – 3- and 6- month Treasury bill auction
1:00 p.m. – Two-year Treasury note auction

Have a great weekend.

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AAPL, AMGN, CIE, CRYP, DFS, DRI, HOV, INHX, ISTA, MRT, RIMM, RRR, SCCO, STEI, ZNGA, ZQK

Are Homebuilders, Home Improvement Stores Coming Back? (NVR, TOL, PHM, HOV, DHI, BZH, HD, LOW)

Paul Ausick — Wed, 07 Dec 2011 17:31:20 +0000

Stocks in homebuilders have been down so low for so long that almost anything look like up. Recent earnings releases have indicated that new orders are improving, but much of the improvement is tenuous and could easily be wiped out by cancellations. We’ve reviewe six builders — NVR Inc. (NYSE: NVR), Toll Brothers Inc. (NYSE: TOL), PulteGroup Inc. (NYSE: PHM), Hovnanian Enterprises Inc. (NYSE: HOV), D.R. Horton Inc. (NYSE: DHI), and Beazer Homes USA Inc. (NYSE: BZH) — to see if there is any upside potential in these stocks, and included The Home Depot Inc. (NYSE: HD) and Lowe’s Cos. Inc.(NYSE: LOW), which may be better bets.

Among the six homebuilders, only NVR had a significant jump in its target price since mid-October. The median target price for NVR is now $765, up from $728, and the stock price as of about noon today is $682.57, for an upside potential of 12.1%. That’s not a grand number, but it’s the best in the sector. Target prices for PulteGroup, D.R. Horton, Hovnanian, and Beazer did not change and the target price for Toll Brothers rose just $0.15, from $21.50 to $21.65. Not a big display of confidence in the sector.

Home Depot’s median target price rose from $40.00 to $42.00, and the stock’s current price of $40.51 implies a potential gain of 3.7%. Lowe’s median target price rose from $23.00 to $26.00, and at the current price of $25.13 the implied gain is 3.5%. Even though now is not a particularly good season for home improvement projects, either one or both of these stores could easily push through the new targets.

While the target prices did not change for five of the homebuilders, all but NVR saw share price gains of more than 30% in the last six weeks, with PulteGroup shares gaining 51%. Home Depot and Lowe’s shares are up 16% and 19%, respectively, in the same period. These share price rises for homebuilders indicate more investor interest in these stocks, analysts’ lack of enthusiasm indicates that caution remains the best policy.

None of these builders pays a dividend, with the exception of Beazer which offers investors a dividend yield of 1.2%. Home Depot’s dividend yield is 2.9%, and Lowe’s offers a dividend yield of 2.3%.

For investors who believe they have to participate in this sector, Home Depot remains the best choice, with Lowe’s the best alternative. Building — and selling — new houses is still a risky business.

Paul Ausick

Filed under: Analyst Calls, Housing, Value Investing Tagged: BZH, DHI, HD, HOV, LOW, NVR, PHM, TOL

Expected Upside for Homebuilders and Home Improvement Companies (NVR, TOL, PHM, HOV, DHI, BZH, HD, LOW)

Paul Ausick — Mon, 17 Oct 2011 18:24:32 +0000

Our look at stock target prices focuses on homebuilders and home improvement stores today. It is not news that U.S. homebuilders have had a very tough few years. In the past five years, only one of the six builders we are looking at today has managed a share price gain. The companies began to falter in 2007 and the smallest five-year slide is more than 40%. That may be a new definition of awful.

Worse, there is not much expectation that the market will turn around, at least until 2013. More foreclosed homes coming on the market will continue to depress prices, and until inventories of unsold homes are cleared, there simply cannot be a significant recovery. The homebuilders we are looking at include NVR (NYSE: NVR), Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM), Hovnanian Enterprises (NYSE: HOV), D.R. Horton (NYSE: DHI) and Beazer Homes USA (NYSE: BZH).

Home improvement stores have also had to struggle over the past several years. Shares of Home Depot (NYSE: HD) and Lowe’s Companies (NYSE: LOW) are both lower today than they were five years ago.

Share prices were pegged at about noon today, and all data comes from Yahoo! Finance.

NVR has a median target price of $728.00 from four brokers. Shares are trading today at $620.99, for an implied gain of $107.01, or 14.7%. NVR’s forward P/E is 17.6 and the company does not pay a dividend. The stock’s 52-week trading range is $554.71 to $804.31, and at today’s price that is about 12% above its 52-week low and 23% below the 52-week high. NVR’s share price has risen about 12% since October 2006, and of all the homebuilders, it is the only one that can point to a gain over that period. The company’s consensus EPS estimate for 2011 has dropped from $28.02 to $26.45. There might be an opportunity here, but it is a pretty slim one.

Toll Brothers has a median target price of $21.50 from 14 brokers. Shares are trading today at $15.29, for an implied gain of $6.21, or 28.9%. Its forward P/E is 49.35 and the company does not pay a dividend. The stock’s 52-week trading range is $13.16 to $22.42, and at today’s price that is about 16% above its 52-week low and 32% below the 52-week high. Toll Brothers is expected to post EPS of $0.20 for its 2011 fiscal year ending this month — and that is up from an earlier EPS estimate of just $0.02. The company’s position at the luxury end of the market has been something of a prop to the share price, but the U.S. economy is not minting many new millionaires right now.

PulteGroup has a median target price of $6.50 from 15 brokers. Shares are trading today at $4.14, for an implied gain of $2.36, or 36.3%. PulteGroup’s forward P/E is 32 and the company does not pay a dividend. The stock’s 52-week trading range is $3.29 to $8.69, and at today’s price that is about 26% above its 52-week low and 52% below the 52-week high. PulteGroup was one of the 10 worst performing stocks in the recently completed quarter, losing 45% of its value. There is nothing about the homebuilding industry or PulteGroup’s recent performance that justifies the forward P/E ratio of 32. Hope is not a strategy.

Hovnanian Enterprises has a median target price of $1.38 from eight brokers. Shares are trading today at $1.20, for an implied gain of $0.18, or 13%. Hovnanian’s forward P/E is negative and the company does not pay a dividend. The stock’s 52-week trading range is $0.89 to $5.00, and at today’s price that is about 35% above its 52-week low and 76% below the 52-week high. Hovnanian is asking debt holders to exchange old notes for new ones carrying a lower interest rate and a longer term. The offer is scheduled to end next week. The company’s corporate debt rating is CC, just two notches above default. Debt holders are unlikely to ride to the company’s rescue.

D.R. Horton has a median target price of $13.00 from 14 brokers. Shares are trading today at $9.62, for an implied gain of $3.38, or 26%. Horton’s forward P/E is 19.3 and the company pays a dividend yield of 1.5%. The stock’s 52-week trading range is $8.03 to $13.50, and at today’s price that is about 59% above its 52-week low and 29% below the 52-week high. Horton is expected to post EPS for the quarter just ended of $0.14, and full-year EPS of $0.20 for the year ended in September. The consensus estimate for 2012 full-year EPS is $0.50. If the market is getting weaker, as many believe, the company has exactly no chance of meeting that 2012 number.

Beazer Homes USA has a median target price of $3.00 from seven brokers. Shares are trading today at $1.81, for an implied gain of $1.19, or 39.7%. Its forward P/E is negative and the company does not pay a dividend. The stock’s 52-week trading range is $1.35 to $6.23, and at today’s price that is about 12% above its 52-week low and 81% below the 52-week high. Beazer’s biggest trouble is that it is a builder of entry-level homes, the sector that is hardest hit by the number of foreclosed properties coming on the market. One thing that could help Beazer a little is that home owners have begun taking their houses off the market because they are unwilling to sell for the current low prices. Inventory is still high, but it was lower in September than in August.

Home Depot has a median target price of $40.00 from 22 brokers. Shares are trading today at $34.97, for an implied gain of $5.03, or 12.6%. Home Depot’s forward P/E is 13.14 and the company pays a dividend yield of 2.9%. The stock’s 52-week trading range is $28.13 to $39.38, and at today’s price that is about 24% above its 52-week low and 11% below the 52-week high. Research firm BuildFax reports thats home remodeling projects increased by 29% in August compared with August 2010. The firm attributes the increase to refinancing of existing homes at current low interest rates. With the peak remodeling season behind us for another year, this growth could begin to slow down.

Lowe’s Companies has a median target price of $23.00 from 20 brokers. Shares are trading today at $21.09, for an implied gain of $1.91, or 8.3%. Its forward P/E is 11.93 and the company pays a dividend yield of 2.7%. The stock’s 52-week trading range is $18.07 to $27.45, and at today’s price that is about 17% above its 52-week low and 23% below the 52-week high. Lowe’s announced this morning that it was closing another 20 stores across the U.S. and expects to take a charge of $0.17 to $0.20 against second-quarter EPS. About 1,950 employees will lose their jobs. Lowe’s performance has been weaker than Home Depot’s for a couple of years now, and this year the share price is about flat, compared with Home Depot’s share price gain of 15%.

Paul Ausick

Filed under: Analyst Calls, Economy, Housing Tagged: BZH, DHI, HD, HOV, LOW, NVR, PHM, TOL

Builders, Bankers Hit by Foreclosures (HOV, PHM, KBH, WFC, BAC, JPM)

Administrator — Thu, 13 Oct 2011 12:39:59 +0000

The number of foreclosures filed in the third calendar quarter of 2011 totaled 610,337, an increase of less than 1% from the second quarter and a drop of 34% from the same period a year ago. That’s not as good as it sounds. The data comes from RealtyTrac, which also notes that foreclosures dropped by 6% month-over-month in September and fell by 38% compared with September of 2010. The quarterly increase is being interpreted as a sign that foreclosure activity is picking up again as the robo-signing mess gets cleaned up.

Struggling homebuilders like Hovnanian Enterprises, Inc. (NYSE: HOV), PulteGroup, Inc. (NYSE: PHM), KB Home (NYSE: KBH), and others have a tough time competing on price with the thousands of foreclosed properties on the market in states like Nevada, California, Arizona, Michigan, and Florida. Big mortgage lenders like Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM) are not seeing a floods of buyers either, and even re-financings have slowed while interest rates are at their lowest level in decades.

In Nevada, where 1 house in 118 is in foreclosure, home prices actually rose in September by about 2.8%. The median price for a house in the Las Vegas area rose to $123,400, compared with $120,000 in August, but still 8.6% below the $135,000 median in September 2010.

Total sales in the Las Vegas area, including condos, houses, and townhomes, totaled 4,108 in September, down from 4,693 in August, but up from 3,603 in September a year ago. Unemployment is 14.2% in Las Vegas. So who’s buying?

Investors paying cash are the likeliest suspects. And about 45% of the sales in August were bank-owned properties. The Mortgage Bankers Association’s weekly mortgage application survey still shows that nearly 80% of all mortgage applications are seeking refinancing at the historically low interest rates available.

All those sales around Las Vegas are existing homes, not new homes. And the expectation is that as the robo-signing issues are resolved, more foreclosed properties will come on the market, not only in Las Vegas, but all over the country. New home builders don’t stand much of a chance.

Housing market research firm Clear Capital expects home prices to fall by -1.6% in the fourth quarter of 2011 and another -3.2% by the end of the first quarter of 2012. At least some of that pressure is due to the expected growth of foreclosed properties on the market.

And the banks? If you were a banker and a homeowner with a 6% mortgage came in and asked to re-finance at 4%, what would you say? If the homeowner was switching banks and has gold-plated credit, you might agree, but otherwise not likely. Given the headaches in the housing market, it wouldn’t be too surprising if all the big banks just decided to get out of the home lending business.

The housing market has seen its seasonal summer boomlet for this year. What’s left of this year won’t turn around a dismal year in the US housing market.

Paul Ausick

Filed under: Economy, Housing Tagged: BAC, HOV, JPM, KBH, PHM, WFC

Top Debt and Ratings Agency Actions (PKX, HOV, PENN, DRI)

Administrator — Wed, 05 Oct 2011 19:19:51 +0000

Today’s top debt rating story has to be the downgrade by Moody’s of Italian bonds by three notches, from ‘Aa2′ to ‘A2′, while keeping a negative outlook on the country’s debt. And the agency warned that the rating could fall further in the event long-term uncertainty over availability of liquidity from external sources — say, for example, Germany. Moody’s said in mid-September that it was reviewing Italy’s rating, and no one really expected a result much different from what the agency announced today.

Other significant ratings actions were taken on Korean steelmaker POSCO (NYSE: PKX), homebuilder Hovnanian Enterprises, Inc. (NYSE: HOV), gaming company Penn National Gaming, Inc. (NASDAQ: PENN), and dining company Darden Restaurants, Inc. (NYSE: DRI).

POSCO’s (NYSE: PCX) domestic Korean engineering and construction subsidiary Posco E&C received a downgrade on its long-term corporate credit from ‘BBB+’ to ‘BBB’ from Standard & Poor’s. The agency also put the company’s long-term corporate credit outlook at ‘negative’. S&P suggested that except for the parent company’s strength the rating could be lower. Weak demand for new housing in Korea coupled with the E&C company’s projected weakness in a soft foreign market for new building led to the downgrade.

Hovnanian Enterprises, Inc. (NYSE: HOV) received a downgrade of its corporate credit rating from ‘CCC’ to ‘CC’ from S&P. The agency also downgraded $1.6 billion in the company’s rated debt securities. The downgrades were due to an exchange offer from one of the company’s subsidiaries that S&P viewed as a ‘distressed exchange’ and “tantamount to a default.” The existing senior notes carry coupons ranging from 6.25% to 11.875% maturing in 2014-2017, and the exchange offer includes new 2% secured notes maturing in 2021. S&P said that if the company goes through with the exchange offer the agency will downgrade the corporate rating to ‘SD’ and the existing exchanged notes to ‘D’. Hovnanian shares posted a new 52-week low today of $1.05, and is trading at about $1.06, down -4.5%, in the late afternoon. The stock’s 52-week high is $5.00.

Fitch Ratings also placed Hovnanian on Rating Watch ‘Negative’ following the exchange offer.

Penn National Gaming, Inc. (NASDAQ: PENN) received an issue-level ratings upgrade on its subordinated debt from ‘BB-’ to ‘BB’ at S&P. The resort and gaming company has agreed to fund redemption of $250 million in 6.75% senior subordinated notes due 2015 with its new revolving $2.15 billion revolving credit facility. Penn’s shares are trading up more than 3%, at $35.19, in a 52-week range of $30.34-$44.29.

Darden Restaurants, Inc. (NYSE: DRI) received a ‘BBB’ rating on a proposed issuance of $350 million in senior unsecured notes due 2021 from Fitch Ratings. The rating outlook is ‘stable’. The new notes will rank equally with existing senior unsecured debt. Darden’s shares are trading up about 2.75%, at $43.17, in a 52-week range of $40.69-$53.81.

Paul Ausick

Filed under: Analyst Calls, Bonds Tagged: DRI, HOV, PENN, PKX

Top Analyst Upgrades & Downgrades (AMSF, BMY, BRCM, CBST, HOV, INTC, JNJ, KBH, LEN, LULU, MAKO, NFLX, ASGN, OKS, TSLA, TWX, YHOO, YOKU)

Administrator — Thu, 22 Sep 2011 12:14:37 +0000

These are some of this Thursday’s top analyst upgrades, downgrades, and initiations seen having an impact from Wall Street research calls.

Amerisafe, Inc. (NASDAQ: AMSF) named Bear of the Day at Zacks.
Bristol-Myers Squibb Company (NYSE: BMY) Raised to Buy at Goldman Sachs.
Broadcom Corporation (NASDAQ: BRCM) Raised to Market Perform at JMP Securities.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) Raised to Buy at BofA/ML.
Hovnanian Enterprises Inc. (NYSE: HOV) Cut to Underweight at JPMorgan.
Intel Corporation (NASDAQ: INTC) Raised to Buy at BofA/ML.
Johnson & Johnson (NYSE: JNJ) Cut to Neutral at Goldman Sachs.
KB Home (NYSE: KBH) Cut to Neutral at JPMorgan.
Lennar Corp. (NYSE: LEN) Raised to Buy at Citigroup.
Lululemon Athletica Inc. (NASDAQ: LULU) Started as Buy with $75 target at Argus.
MAKO Surgical Corp. (NASDAQ: MAKO) removed from Conviction Buy List at Goldman Sachs; this is one of the best performing stocks of 2011.
Netflix, Inc. (NASDAQ: NFLX) Raised to Neutral from Sell at UBS; Raised to Outperform at Wedbush.
On Assignment, Inc. (NASDAQ: ASGN) named the value stock of the day at Zacks.
ONEOK Partners, L.P. (NYSE: OKS) named Bull of the Day at Zacks.
Tesla Motors, Inc. (NASDAQ: TSLA) Started as Outperform at Robert W. Baird.
Time Warner. Inc (NYSE: TWX) Reiterated Outperform and $40 target at Credit Suisse.
Yahoo! Inc. (NASDAQ: YHOO) Raised to Buy at Stifel Nicolaus.
Youku.com Inc (NYSE: YOKU) Removed from Conviction Buy List at Goldman Sachs.

JON C. OGG

Filed under: Analyst Calls Tagged: AMSF, ASGN, BMY, BRCM, CBST, HOV, INTC, JNJ, KBH, LEN, LULU, MAKO, NFLX, OKS, TSLA, TWX, YHOO, YOKU

Counter-Take: Should Housing Really Be Recovering Yet? (ITB, XHB, KBH, HOV, DRI, LEN, TOL)

Administrator — Tue, 19 Jul 2011 14:37:16 +0000

This week is starting to look a bit different for housing and homebuilders and it is a serious matter in considering that the news of the world and the less recent housing data may be a bit too soon. The Commerce Department showed this Tuesday morning that homebuilders started work on 14.6% more homes to 629,000 units in June (seasonally adjusted).

Before we start calling this runaway home building, a gain of more than 30% was seen in apartment and multi-family construction. The single-family construction starts were up 9.4%, but that was still apparently the biggest boost in about two years. This is 453,000 starts on an annualized basis.

iShares Dow Jones US Home Construction ETF (NYSE: ITB) is up 2.6% at $12.45 and the 52-week range is $10.50 to $14.29. Shares were above $13.00 as recently as July 7.

SPDR Series Trust S&P Homebuilders (NYSE: XHB) is up 2.4% at $17.73 and the 52-week range is $13.59 to $19.21. Shares were above $18.60 as recently as July 7.

KB Home (NYSE: KBH) is up 3% at $9.51 and the 52-week range is $8.95 to $16.11; shares were above $10.00 as recently as July 12 and shares were above $12.00 as recently as late-June.

Hovnanian Enterprises, Inc. (NYSE: HOV) is up 3% at $2.27 and the 52-week range is $1.84 to $5.00.

D.R. Horton, Inc. (NYSE: DRI) is up 4.7% at $11.82 and the 52-week range is $9.72 to $13.50. Its shares were above $12.00 on July 7.

Lennar Corp. (NYSE: LEN) is up over 5% at $18.34 and the 52-week range is $11.93 to $21.54. Toll Brothers Inc. (NYSE: TOL) is up 2.8% at $21.18 and the 52-week range is $15.57 to $22.42. Both of these are much closer to highs than lows compared to many peers.

So, here is why we ask if this is too soon to count a real housing recovery… Building permits were up 2.5% while builders and real estate agents are effectively still competing with lower-priced existing homes, foreclosed and short-sale properties, plus that huge shadow inventory that banks have still held back. May’s new home sales were only 319,000 on an annualized basis, about half of what a normal market might be. Monday’s homebuilder sentiment came in above expectations at 15 for June, but 50 is the benchmark for a positive reading on that front.

Investors will often look to anything they can for a silver lining or a buying opportunity. The reality is that celebrating these figures right now is still a bit like taking your child to the store and saying he can have the pick of any gift at the store. It sounds great until that kid is old enough to realize that this is the dollar store.

The issues to consider in homebuilders are numerous. The important thing to consider is that these stocks are generally considered to be proxies for the actual market about one or even two quarters out. Investors buying today are not buying for news reports due in August, but they are buying for news coming out this fall and even in winter. If the stock market stabilizes, these can still run even in a cautious minefield of international economics. If the stock market tanks all over again or if the data still resembles a double-dip recession’s increased chances, then these will remain in the basement.

JON C. OGG

Filed under: Economy, Housing Tagged: DRI, HOV, ITB, KBH, LEN, TOL, XHB

Key Earnings to Watch This Coming Week (FCEL, PBY, THO, HOV, CIEN, LULU, NSM, TXN, FNSR)

Administrator — Fri, 03 Jun 2011 18:31:37 +0000

Earnings season has all but ended as far as the great market-movers. That does not mean that there are not some interesting companies reporting earnings that need to be watched. The corporate earnings reports that we will be watching are Fuelcell Energy Inc. (NASDAQ: FCEL), The Pep Boys – Manny, Moe & Jack (NYSE: PBY), Thor Industries Inc. (NYSE: THO), Hovnanian Enterprises Inc. (NYSE: HOV), Ciena Corporation (NASDAQ: CIEN), Lululemon Athletica Inc. (NASDAQ: LULU), National Semiconductor Corporation (NYSE: NSM), and Finisar Corporation (NASDAQ: FNSR).

We have added in Thomson Reuters estimates, added in price action, and added in color if appropriate on each. As a reminder, some of the days and estimates could have changed, and many may change before the actual reports.

Fuelcell Energy Inc. (NASDAQ: FCEL) is due on Monday and this one has been a disaster in alternative energy. We do not even care about the losses nor do we interpret anything that the company says as being a sector-moving event. All that matters is whether or not the company can reach profits by 2013 or so.

The Pep Boys – Manny, Moe & Jack (NYSE: PBY) is just one more auto parts company with earnings, but it is one which some investors are hoping is a buyout. Thomson Reuters has estimates of $0.30 EPS and $537.03 million in revenue; next quarter estimates are $0.25 EPS and $534.44 million in revenues. With shares around $13.60, the 52-week range is $7.86 to $15.96.

Thor Industries Inc. (NYSE: THO) is not about the movie, but it is about RVs. Thomson Reuters has estimates of $0.67 EPS and $848.92 million in revenue; next quarter estimates are $0.83 EPS and $869.73 million in revenues. With shares around $31.00, the 52-week range is $20.74 to $39.12.

Hovnanian Enterprises Inc. (NYSE: HOV) is due on Tuesday and we are not expecting anything of any merit other than from “other operations” as housing data just stinks now. Thomson Reuters has estimates of -$0.51 EPS and $263 million in revenue; next quarter estimates are -$0.38 EPS and $341.35 million in revenues. With shares around $2.46, the 52-week range is $2.31 to $6.19.

Ciena Corporation (NASDAQ: CIEN) is due Wednesday and the equipment maker could have some very volatile shares as traders will have very little else to focus on. Thomson Reuters has estimates of -$0.10 EPS and $428.1 million in revenue; next quarter estimates are $0.06 EPS and $456.42 million in revenues. With shares around $25.30, the 52-week range is $11.86 to $29.24.

Lululemon Athletica Inc. (NASDAQ: LULU) is due next Thursday and it has been impossible to not notice that the chart is becoming strained after a monster run up in the yoga and athletic-wear retailer. Thomson Reuters has estimates of $0.38 EPS and $180.91 million in revenue; next quarter estimates are $0.40 EPS and $196.95 million in revenues. With shares around $87.25, the 52-week range is $31.08 to $102.83. We do not expect that investors will be happy with a “meet and reaffirm guidance” quarter. As a reminder, we saw this as one of the top analyst calls of last week based upon its chart and valuation.

National Semiconductor Corporation (NYSE: NSM) is due next Thursday and we want to remind that this is only being evaluated for the Texas Instruments Inc. (NYSE: TXN) angle. Thomson Reuters has estimates of $0.27 EPS and $365.15 million in revenue; next quarter estimates are $0.29 EPS and $374.9 million in revenues.

Finisar Corporation (NASDAQ: FNSR) is due with earnings next Friday morning. Thomson Reuters has estimates of $0.33 EPS and $242.89 million in revenue; next quarter estimates are $0.38 EPS and $253.9 million in revenues. With shares around $21.57, the 52-week range is $11.98 to $46.09. Keep in mind that this one got killed last quarter as shares fell from $40 to $25 and its shares have traded in a range of $21 to $25 almost ever since.

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JON C. OGG

Filed under: Calendar, Earnings, The Week Tagged: CIEN, FCEL, FNSR, HOV, LULU, NSM, PBY, THO, TXN