Wal-Mart (NYSE: WMT) has a new division and it expects the world from it. The company will launch its new small Marketside grocery stores this Fall. Job postings uncovered by the FT indicate that the world's largest retailer expects sales from the chain to eventually hit $10 billion with 1,000 stores in operation.
Wal-Mart insists that the new stores are simply a pilot project, but it is not likely that Wal-Mart would think small. For any new chain to help the company's revenue, sales would have to be very significant.
The new business may face rough going. Big chains like Kroger (NYSE:KR) and Safeway (NYSE:SWY) are likely to fight Wal-Mart every step of the way.
Wal-Mart was the first company into the big box discount retail business. The company was not only remarkably well-run under Sam Walton. It also had the advantage of being the "first mover" In the grocery business; being late to market is a handicap.
Douglas A. McIntyre is an editor at 247wallst.com.
TheStreet.com's Jim Cramer says these stocks will be killed today, and attentive investors can get them on the cheap.
Oh my, Costco (NASDAQ: COST) (Cramer's Take). I didn't expect that one. That's the best -- it's a shocker. I can't recall how many years it has been since I have seen the words "well below" and "Costco" together.
You can see how it happened: Costco held out. They didn't raise prices. Almost everyone else is raising prices and many are losing customers -- look at Safeway (NYSE: SWY) (Cramer's Take) or Supervalu (NYSE: SVU) (Cramer's Take). But two held out: Costco and Wal-Mart (NYSE: WMT) (Cramer's Take).
When you lump in the ridiculous price hikes that Costco had to take in its gasoline business, you see that it simply wasn't making much money selling anything.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
MOST NOTEWORTHY: Texas Industries, TransGlobe Energy and Level 3 Communications were today's noteworthy downgrades:
Stephens downgraded shares of Texas Industries (NYSE: TXI) to Equal Weight from Overweight as it believes higher energy costs will affect the company's ability to achieve its guidance. The firm lowered its target to $68 from $83.
Jefferies assumed coverage and downgraded shares of TransGlobe Energy (NYSE:TGA) to Hold from Buy as it sees limited upside until the company completes its seismic activity and can better quantify its exploratory reserve potential. The firm lowered its target to $5.25 from $6.50.
Citigroup downgraded Level 3 (NASDAQ: LVLT) to Sell from Hold as it believes the pullback in telecom valuations increases downside risk for the stock. Citigroup lowered their target price to $2.50 from $3.
Though the quarter is winding down, there are still earnings reports to come, including Walgreen Co. (NYSE: WAG) and Kroger Co. (NYSE: KR). Both companies are expected to report profit growth this coming week.
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided positive surprises in four of the past five quarters -- by two cents in the previous quarter.
Based in Deerfield, Ill., Walgreen is the largest drug store chain in the U.S. in terms of sales, and has more than 6,200 stores in the U.S. and Puerto Rico. In the past year, the company's revenues were $53.7 billion and its net income totaled $2.0 billion. Its long-term EPS growth forecast is 14.0%, which is less than the retail industry average, as well as less than that of rival CVS Caremark (NYSE: CVS). The consensus recommendation of analysts has recently shifted from hold to buy Walgreen.
The share price is up 4.0% since the beginning of the year, and up from 11.6% from a year ago. It trades at a P/E ratio of 20.68. Shares closed Friday at $41.35.
Private equity giant Blackstone Group (NYSE: BX) and leading grocery chain Kroger Co. (NYSE: KR) are scheduled to report earnings this week. Here's a quick peek at them ahead of results.
Blackstone went public in 2007 and has yet to beat earnings estimates. When the company reported third-quarter results back in November, earnings came to 21 cents per share, well below the consensus forecast of analysts polled by Thomson Financial of 30 cents, as well as the previous quarter's earnings of 46 cents (its first report after the IPO). For the current quarter, analysts expect only 19 cents per share, and $1.47 for the year.
The analysts' consensus recommendation is to buy Blackstone, with 3 of 8 analysts rating it a strong buy. Shares have fallen since the IPO to a low of $14.16 last week, but closed Friday at $14.58.
For news about Blackstone that could influence the earnings results, see BloggingStocks' Blackstone coverage.
Shares in supermarket chain Safeway (NYSE:SWY) dropped 7% yesterday setting up investors with an interesting investment opportunity. The stock is off more than 25% from its' 52-week high. Investors were spooked about a slowdown in same store sales. I think investors need to take a second look at the company.
With an economic slowdown, many consumers will turn to home made food as opposed to eating out. This will be a big benefit to the supermarket. Another catalyst for the stock is that, unlike other food retailers like restaurants, they are able to pass on rising costs to the consumer. This will help keep their bottom line from dropping.
At these levels for investors looking for an inflation protected portfolio, you may want to take a look at Safeway.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no positions in any stock mentioned as of 2/22/08.
Among companies reporting quarterly earnings on Thursday were Safeway Stores Inc. (NYSE: SWY), the largest food retailer in North America, and Newmont Mining Corp. (NYSE: NEM), one of the world's largest gold producers.
Despite ongoing efforts to upgrade the image of its stores, Safeway, which reported that fourth-quarter earnings in-line with the consensus estimates of analysts surveyed by Thomson Financial, also reported that same-store sales slowed.
The quarterly earnings came to $301.1 million, or 68 cents per share, for the period that ended December 29, down 2% from $307.9 million, or 69 cents per share, in the same quarter of 2006, when tax benefits lifted results. Excluding that gain, earnings per share would have climbed by more than 11%. Fourth-quarter revenue rose 7% to $13.36 billion, which beat the analysts' average estimates.
Despite signs of a slowdown, the fourth quarter capped Safeway's most profitable year since 2001. The company earned $888.4 million, or $1.99 per share, on sales of $42.3 billion, compared to earnings of $870.6 million, or $1.94 per share, on revenue of $40.2 billion in 2006. For 2008, Safeway forecast earnings of $2.25 to $2.35 per share, in-line with analysts' expectations.
Safeway shares fell more than $3 in morning trading, reaching a new 52-week low of $28.80.
U.S. stock futures were higher this morning, looking to extend Wednesday's rally following the Federal Resereve's comments that the Fed's focus should remain on helping the economy, even at the expense of inflation. Still, the As the Fed has lowered its economic forecast, it seems committed to spurring growth.
Stocks had another roller-coaster session on Wednesday. Stocks started the day with declines following further signs of inflation and a non-encouraging housing report, as well as oil trading near $100 a barrel. The market then reversed course, especially after the Fed released the minutes from the last policy meeting that indicated the Fed is ready for further rate cuts. That boosted stocks and they finished higher with the Dow industrial closing 90 points higher, or 0.73%, the S&P 500 adding 11 points, or 0.83%, and the Nasdaq composite rising20 points, or 0.91%.
Several economic indicators are due out today.
At 8:30 a.m. EST, weekly jobless claims are due.
January leading indicators will be reported at 10:00 a.m., along with manufacturing in the Philadelphia region for February.
The market's choppy/consolidating pattern (or perhaps worse) continues, with several unknowns weighing on the minds of investors. It goes without saying then, that in this market defensive stocks represent a prudent addition to almost any portfolio. The grocery store sector is a dependable defensive, and in this category, Safeway is worth a review.
Safeway Inc. (NYSE: SWY) is one of North America's largest grocery store chains, with more than 1,700 stores, primarily in the West, Midwest, and Mid-Atlantic United States. Safeway also operates the Vons, Dominick's Finer Foods, Carr-Gottstein (Alaska), Genuardi's, and Randall's Food Market Chains (Texas). SWY also has an international presence via ownership of about 125 Casa Ley food/variety stores in Mexico.
Other positives: Safeway has struck the right balance between its high quality/wide selection Safeway stores and Safeway supercenters: the former, via remodeling, better reflect middle-income customers' needs, and the later have displayed solid traffic. This winning formula leads many analysts to conclude that Safeway should be able to build on its 8% grocery store sector market share.
The risks? Analysts are keeping an eye on intensifying competition: wholesale operations and warehouses represent the biggest threat, as they boast comparable economies of scale.
The First Call mean rating for SWY is: Hold [15 firms]. Mean 2008 target: $39.00 [high: $42, low: $34].
Stock Analysis: Safeway is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from SWY's shares. Sell/Stop Loss if you were to purchase shares in this company: $23.
When it comes to O.T.C. drug products, folks are often surprised to learn that a single Tennessee outfit is responsible for nearly thirty of the best known names. It was founded 128 years ago, as the Chattanooga Medicine Company.
Chattem (NASDAQ: CHTT) provides over-the-counter drugs, personal care products and dietary supplements. Offerings include such pain treatments as dental analgesic Benzodent, topical analgesic Aspercreme, muscle pain reliever Flexall, menstrual symptom reliever Pamprin and analgesic Icy Hot. The company also makes sleep aid Melatonex, medicated powder Gold Bond and Mudd facial masks. Chattem sells its products in eighty countries, through such merchandisers as CVS Caremark (NYSE: CVS), Safeway (NYSE: SWY) and Walgreen (NYSE: WAG).
The company surprised investors last week, when it reported Q3 EPS of 83 cents and revenues of $109 million. Analysts had been expecting 74 cents and $106 million. Management also guided FY07 EPS to $2.96-3.06 ($2.95 consensus) and FY08 EPS to $3.69-3.89 ($3.56 consensus).
MOST NOTEWORTHY: Sunpower (SPWR), U.S. Steel Group (X), Sysco Corp (SYY), Safeway (SWY), Performance Food Group (PFGC) and Kroger (KR) were today's noteworthy downgrades:
Sunpower Corp (NASDAQ: SPWR) was downgraded to Buy from Strong Buy at Needham and to Neutral from Buy at Merrill Lynch, both based on valuation.
U.S. Steel Group (NYSE: X) was downgraded to Neutral from Outperform at Credit Suisse on valuation.
Sysco Corp (NYSE: SYY), Safeway Inc (NYSE: SWY), Performance Food Group (NASDAQ: PFGC) and Kroger (NYSE: KR) were downgraded to Hold from Buy at BB&T Capital. The firm expects higher food cost inflation to impact near-term real sales growth and margins industry-wide...
OTHER DOWNGRADES:
Merrill Lynch downgraded shares of Huntington Bancshares (NASDAQ: HBAN) to Sell from Neutral following the company's Q2 report.
Hershey (NYSE: HSY) was downgraded to Peer Perform from Outperform at Bear Stearns.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from .gif){kind=logo}
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided 
Blackstone went public in 2007 and 
U.S. stock futures were higher this morning, looking to extend Wednesday's rally following the Federal Resereve's comments that the Fed's focus should remain on helping the economy, even at the expense of inflation. Still, the As the Fed has 
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