The first major economic act of presidential hopeful Barack Obama will be to add Hillary Clinton to the lower half of the democratic ticket. If he does not, he will be throwing caution to the wind.
All indications are that he does not want to do this and hopes he will not have to -- but he may not have any choice.
It is just good business and if he is too stubborn, too arrogant, or just misguided by favorable polling numbers, he should think again. There are many Hillary supporters who will find McCain more centrist than Obama and switch parties. There will be very few, if any, to the right of McCain who will vote for Obama. They are more likely to not vote than support Obama.
Adding Hillary Clinton, in most people's eyes, will slam dunk the presidential race and if Obama does not make this tough decision, putting success in front of politics and personalities, then I am afraid all his talk of being able to stand up to special interests and take the heat in the kitchen is just that.
U.S. stock futures were lower Tuesday morning, indicating stocks would likely start the same. Investors' concerns about the financial sector dampened sentiment, but oil prices continued to decline and could offset some of the negative mood. Still, housing and inflation data are on tap before the market opens today. And of course earnings with The Home Depot already beating investors' expectations this morning but with Staples issuing a warning.
A day after smaller Lowe's (NYSE: LOW) reported a profit drop, The Home Depot (NYSE: HD) followed suit, reporting a 24% profit decline for the second quarter. It held onto its earnings outlook as second-quarter net fell 24% to $1.2 billion, or 71 cents per share. Sales declined 5.4% to $21 billion. Analysts had projected earnings per share of 61 cents on revenue of $20.58 billion. Home Depot shares rose 2% in premarket trading.
Other retailers scheduled to release earnings include discounter Target (NYSE: TGT) -- could it follow Wal-Mart's results? -- while Hewlett-Packard (NYSE: HPQ) is to report after the close -- AP preview.
Meanwhile, Staples, Inc. (NASDAQ: SPLS) issued a profit warning, saying that "Challenging market conditions continued during the company's second quarter, resulting in weaker than anticipated results in Staples' pre-acquisition business." Staples said sales increased approximately 3% and earnings per share decreased approximately 15% yoy. Shares of Staples declined nearly 6.5% in premarket trading.
Investors in shares of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) went wild on speculation today that the government would put new funds into the mortgage agencies and wipe out common shareholders. The market was dragged down over 200 points at some point on a ripple of concerns about the financial sector:
Early in the day, the chance of a hurricane moving into the Gulf of Mexico pushed oil up and knocked equities down. Once the storm moved over Florida and away from deep-water rigs, oil went back down.
The trading was so bleak and depressing that most traders probably went home to watch the last few events of the Olympics. Those who stayed saw a few notable moves:
Lowe's Cos. (NYSE: LOW) shares are little changed after the second-largest home improvement retailer reported better-than-expected second quarter earnings. They still should be avoided.
Earnings fell 7.9% to $938 million, or 64 cents a share. Sales rose 2.4% to $14.5 billion, up from $14.2 billion in the second quarter of 2007. The results surpassed the 56-profit and $14.12 billion in revenue expected by Wall Street. Nonetheless, the company continues to face a tough slowdown and gave disappointing third quarter guidance.
"We are encouraged by our results and our continued market share gains, but the macro economic factors pressuring consumers and the ongoing challenges and uncertainty of the financial markets suggest a cautious sales forecast for the balance of fiscal 2008 is prudent," said Chief Executive Robert A. NIblock in the earnings release.
Lowe's opened 23 new stores in the last quarter and expects to open 38 new stores during the current one. Is now really the right time to be adding so many new stores? There is a housing crisis, right? Square footage is expected to grow by 10%. The company is spending $34 million opening new locations.
Moreover, comparable same-store sales are expected to drop 5% to 7%, which Bloomberg says is less than what some analysts forecast. Earnings per share will be 27 to 31 cents in the quarter versus 43 cents a year earlier. Analysts had expected 33 cents. Profit for the year is seen at $1.48 to $1.56. Wall Street consensus is for $1.50.
For now, investors would be wise to avoid Lowe's and Home Depot Inc. (NYSE: HD), which reports tomorrow, until the housing market rebounds. That won't be until next year at the earliest.
TheStreet.com's Jim Cramer says lower gas prices mean the numbers are too low.
People are missing this retail move. They are missing it because the market is deciding right now that the guidance companies are giving is just plain wrong given the $3.50 at the pump (although premium's a lot more expensive). They are also recognizing that the strong are surviving and thriving and taking share in a radical fashion -- witness Lowe's (NYSE: LOW) (Cramer's Take), which must be killing Sears (NASDAQ: SHLD) (Cramer's Take) and the mom-and-pop shops out there.
When I met with Lowe's last year, they told me that they have picked up share in every downturn. They did not know when the downturn would end or when you would see the results, but they were confident that the longer the downturn lasted, the more likely they would be to have pulled away from their competition.
U.S. stock futures turned higher Monday morning despite a dip in the dollar and oil prices rising somewhat. Investors may focus on the financial sector again following some news while they await housing data later today. More inflation data is due Tuesday.
UnionBanCal (NYSE: UB) accepted a sweetened bid from Mitsubishi UFJ Financial Group (NYSE: MTU). After rejecting two previous offers, UB accepted MTU's offer to pay $3.5 billion, or $73.50 a share, for the remaining 35% portion of the California bank that it doesn't already own. UB shares are trading 11.85% higher in premarket action.
Staying in financials, Lehman Brothers (NYSE: LEH) may see some action after The Wall Street Journal said some analysts believe it could lose $1.8 billion during the quarter. LEH shares are 2% lower in premarket trading. Meanwhile, Barron's said a government recapitalization of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) is almost inevitable, wiping out investors -- and management. Shares are 2% and 6% lower respectively in premarket trading.
Lowe's (NYSE: LOW), the home improvement retail chain, reported results this morning. Lowe's profit fell for the fourth straight quarter as the biggest U.S. housing slump since the Great Depression slowed spending. Net income declined 7.9% to $938 million, or 64 cents a share, exceeding analysts' estimates by 8 cents. Sales rose to $14.5 billion from $14.2 billion. Lowe's raised guidance, but stayed within estimates.
Rival home improvement chains Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW) are scheduled to report quarterly results this week. Not surprisingly, given the ongoing housing slump, analysts surveyed by Thomson Financial on average expect both companies to post earnings lower than in the same period a year ago. For Home Depot, that's 61 cents per share, down 20.8%, and for Lowe's, 56 cents per share, down 16.4%. Meanwhile, cabinet maker American Woodmark Corp. (NASDAQ: AMWD), for whom Home Depot and Lowe's are major distributors, is also expected to report lower earnings: 11 cents per share, down 67.6%.
The presidential campaigns have prompted much discussion of energy policy and alternative energy sources. Some solar-energy-related concerns are scheduled to report this week, and expectations seem to be high. Trina Solar Ltd. (NYSE: TSL) is expected to report 81 cents per share earnings, up 67.9%; ReneSola Ltd. (NYSE: SOL) is expected to post earnings of 32 cents per share, up 62.5%; and Suntech Power Holdings Co. (NYSE: STP) is expected to have earnings of 32 cents per share, up 21.9%. Even China Sunergy Co. Ltd. (NASDAQ: CSUN) is expected to have swung to a profit of 3 cents per share, from a per-share loss of 14 cents a year ago.
Lowe's (NYSE: LOW/Option chains) is expected to report Q2 EPS on August 18. Deutsche Bank has a $23 price target on LOW. LOW September option implied volatility of 50 is above its 26-week average of 40 according to Track Data, suggesting larger price movement.
Home Depot (NYSE: HD/Option chains) is scheduled to report Q2 EPS on August 19. Deutsche Bank has a $22 price target on HD. HD September option implied volatility of 44 is above its 26-week average of 39, suggesting larger price movement.
Profit From the Fantastic Four Take a look at these 26 stocks, funds and exchange-traded funds that key in on the fast-growing BRIC nations -- Brazil, Russia, India and China. Profit From the Fantastic Four - Kiplinger.com
Southwest's Seven Secrets for Success By some estimates, the country's major carriers have consumed perhaps $100 billion in capital during the past decade, but Southwest Airlines continues to be profitable. It's been in the black for 33 consecutive years and, last week, for the 127th consecutive quarter. While its competitors are shrinking, Southwest will add a handful of flights this fall. What does Southwest know that no one else in airlines does? It keeps things simple and consistent, which drives costs down, maximizes productive assets, and helps manage customer expectations. Why Southwest Succeeds - Portfolio.com
Bed Bath & Beyond (NASDAQ: BBBY) reported Q1 earnings on Wednesday, and Trey Thoelcke highlighted the numbers in this earnings-recap piece. Shares rose substantially in the after-hours trading session yesterday, jumping over 8%, and as I reviewed various earnings reports last night, I found myself drawn to the retailer's stock performance. I haven't been a huge fan of Bed Bath & Beyond as of late, so I figured I should take a look at the earnings release to see if there's anything here that would change my opinion.
Unfortunately, there isn't. Sales may have grown 6%, and expectations may have been beaten by $0.03, but net income still dropped over 20% to $0.30 per diluted share. Cash flow from operations declined 44% to $65.8 million. And same-store sales were very anemic, rising only 0.8%.
I choose, in this case, to focus on those figures. I also consider the fact that Bed Bath & Beyond does not pay a dividend, and that we are in an awful economic environment, both from a consumer and stock-market standpoint. This is not the stock I'd want to face the recession with, and I don't necessarily find it to be a big value right now. When it comes to retail, I am more likely to look at Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I'd even consider a Home Depot (NYSE: HD) or a Lowe's (NYSE: LOW). All of these stocks pay dividends and have better brand equities and more attractive prospects. Bed Bath & Beyond certainly didn't deliver an earnings bomb, but I'm still not inclined to put money here.
Disclosure: I don't own any company mentioned; positions can change at any time.
Lowe's (NYSE: LOW) shares are falling today after the Commerce Department reported that May home construction fell 3.3%, signaling continued weakness in the housing market and bad news for home improvement stores. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LOW.
After hitting a one-year high of $32.53 in September, the stock hit a one-year low of $19.94 in January. This morning, LOW opened at $24.15. So far today the stock has hit a low of $23.45 and a high of $24.23. As of 12:20, LOW is trading at $23.62, down $0.43 (-1.8%). The chart for LOW looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in four months as long as LOW is below $27.50 at October expiration. Lowe's would have to rise by more than 16% before we would start to lose money. Learn more about this type of trade here.
5-Star Stocks in Warren Buffett's Portfolio Morningstar examines the most watched portfolio in the world -- Berkshire Hathaway's. Among the five-star stocks in the Oracle of Omaha's portfolio are Amercian Express, CarMax, J&J, Lowe's, UPS, Wellpoint and Kraft Foods. 5-Star Stocks in the Berkshire Hathaway Portfolio - Morningstar Secret Ways to Boost Your Social Security These four strategies can add as much as $12,000 a year to your retirement income. Secret Ways to Boost Your Social Security - Kiplinger.com
In his Wall Street Strategies, the leading advisor -- and well-known panelist for Fox Business News -- explains, "The debate on which is a better investment, Home Depot or Lowe's, is now at a crossroads following the release of 1Q08 earnings results from each firm.
"As expected, both companies reported year on year earnings decreases as slowing home remodeling spend weighed on comparable store sales.
"Back in 2005-2007, Lowe's was hot the investment choice relative to Home Depot, with many citing its stronger operating margins and friendlier store shopping environment. Although Lowe's is still attracting higher income customers as a result of solid merchandise offerings and customer service, in our view one should crunch the numbers.
"When they do, it will become prevalent that Home Depot is the stronger investment in the niche at this time. The company has been ahead of the game with respect to Lowe's in drastically reducing capital expenditures and store operating outlays.
"Moreover, it has taken the fight back to its smaller rival in the area of customer service and product presentation. In our opinion, play the underdog card and look to invest in Home Depot in upcoming months given more attractive valuation."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
The first major economic act of presidential hopeful Barack Obama will be to add Hillary Clinton to the lower half of the democratic ticket. If he does not, he will be throwing caution to the wind.
U.S. stock futures were lower Tuesday morning, indicating stocks would likely start the same. Investors' concerns about the financial sector dampened sentiment, but oil prices continued to decline and could offset some of the negative mood. Still, housing and inflation data are on tap before the market opens today. And of course earnings with The Home Depot already beating investors' expectations this morning but with Staples issuing a warning.
U.S. stock futures turned higher Monday morning despite a dip in the dollar and 
Rival home improvement chains 
Lowe's
"Which is the better buy among the leading home retailing stocks -- 
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