Stocks in the News — week of Feb. 25, 2013 (03/01 update)

Best Buy Gears Up for Tough First Quarter, Cuts Jobs, as Takeover Bid Expires

Best Buy (BBY, $16.50) reported an unremarkable fourth quarter today, warning of a difficult first quarter ahead.  While the company is solidly profitable, earnings are on a multi-year downtrend, and the stock hit a ten-year low in December.  As part of a plan to cut $750 million in annual costs, Best Buy CEO Hubert Joly is cutting 400 jobs at the company’s Minneapolis headquarters.

pending buyout offer by founder and former Chairman Richard Schulze failed to materialize by yesterday’s deadline due to lack of financing.

At Goodfellow LLC, we never recommend stocks with falling earnings.  We would rather invest in growing, thriving retailers, like Macy’s and this other popular fashion stock.  (03/01/13)

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Mason Ouster Leaves Groupon Seeking CEO to Uncover Profit  (Bloomberg)

We told you yesterday that Groupon’s (GRPN, $4.72) CEO, Andrew Mason, was on thin ice with his Board of Directors, and now we’re here to report that he’s been fired, “after the daily-deal provider lost $723.8 million in the past three years.”  The search for a new CEO has begun, and the market is reacting favorably to the company’s change in leadership.

We never recommend low-priced stocks at Goodfellow LLC, due to the poor risk/reward ratio.  Here are two other internet-oriented companies which are more appealing investments: this global information technology company and this professional network company.  (03/01/13)

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Our Featured Stocks in Action notes from Feb. 28, after the market close, itemize two investment sectors — and four specific stocks — which are likely breaking out of trading ranges tomorrow morning.  Subscribe now for a free trial, and then read more here.  (02/28/13)

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Domino’s Pizza (DPZ) Reports Fourth Quarter

Morgan Stanley reported today that Domino’s “4Q SSS [same store sales] delivered on high expectations, EPS beat and management at long last initiated a regular cash dividend – in short, delivering everything shareholders would want.”

The new dividend is 20 cents per quarter, with a yield of 1.7%, and share repurchases are expected to continue at approximately $90 million per year.

The stock price reached a new high today on the news, currently trading at $48.29.  The recent range was $44.5-$48.00.  We would use a pullback to $46.50 to accumulate shares of DPZ.  (02/28/13)

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Kohl’s (KSS) Reports Fourth Quarter

“KSS reported 4Q12 EPS of $1.66, which was $0.04 above our estimate of $1.62 and above consensus of $1.63. Results were above the company’s guidance for EPS to be $1.60 to $1.62. The variance vs. our estimate was driven by better SG&A leverage and higher share repurchases, partially offset by a lower gross margin rate. However, the company provided 2013 EPS guidance of $4.15 to $4.45, which was below our estimate and consensus and will likely be viewed as disappointing by investors,” commented Citi Research.

Kohl’s (KSS, $46.53) is a solidly profitable company, but earnings growth is quite slow.  At Goodfellow LLC, we invest in companies with strong earnings growth and bullish charts, because those are the companies most likely to outperform the market.  Sign up now for your free trial subscription to Goodfellow LLC, and start improving your stock performance portfolio today!  (02/28/13)

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Groupon Shares Slump After Revenue Forecast Misses Estimates

Groupon Inc.’s (GRPN) Fourth quarter revenues came in at the low end of the company’s expectations, and disappointed Wall Street.  CEO Andrew Mason is on thin ice with his Board of Directors, who have already considered replacing him.

There is definitely revenue growth, but no cohesive plan to capitalize on market opportunities.   Shares are trading at $4.68, down $1.30 for the day.  We never recommend low-priced stocks at Goodfellow LLC, due to the poor risk/reward ratio.  Here are two other internet-oriented companies which are more appealing investments: this global information technology company and this professional network company.  (02/28/13)

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JC Penney Co. Inc. reports $1.95 4Q adjusted EPS loss

Inventory is falling and accounts payable are rising at JC Penney (JCP), indicating cash flow problems.  The 2013 inventory build-up will put even more strain on currently low cash levels.

The company reported a net loss of $4.49 per share for fiscal 2013, which ended on February 2; and is expected to lose money again in fiscal 2014.  The share price this morning was $17.00, down $4.16 for the day.  There is some price support in the mid-teens.

We would rather invest in growing, thriving retailers, like Macy’s and this other popular fashion stock.  (02/28/13)

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CBS Finishes February Sweep Month on Top (Media Decoder)

“With the Super Bowl, the Grammy Awards and the strongest regular lineup in television all on its schedule this month, it should be no surprise that CBS will be the big winner when the official February sweep rating period closes Wednesday night.”

“But the result will actually break one long streak of futility for CBS: this will be the first time since 1998 that the network will finish first in the most important category for advertising sales, viewers between the ages of 18 and 49.”

Read our report on CBS Corp. (CBS, $43.91) here.  (02/27/13)

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Priceline stock up 3% today as international sales boost profit. Inc. (PCLN, $702.01) is competing with Expedia to sell hotel reservations in Europe and Asia, where consumers are warming to booking travel online.  But while international sales are showing a long-term uptrend, growing international competition is squeezing gross margins, which directly affects profitability.

Priceline is projected to increase its earnings per share 20%, 18% and 18% in fiscal years 2013 through 2015.  So there’s good growth there.  The PE is 18.7, on projected 2013 EPS of $37.51.

Let Wall Street digest the long-term gross margin warning.  Then traders and growth stock  investors could consider buying during a market correction, when PCLN could bounce at support at $620.  (02/27/13)

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Target Corp. had its worst holiday-season store sales performance in four years.

Target’s (TGT, $63.36) gross margins came in lower than expected for the quarter, and revenue was up only 0.4%, its worst performance for the period since 2008.  In addition, capital spending on new Canadian stores has been heavier than expected, and a drag on earnings.  Full year 2013 earnings per share are projected to grow 3%.  We would avoid Target shares for now, in favor of retailers with better earnings growth.  (02/27/13)

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First Solar shares down $4.50 due to drop in expected revenue.

First Solar Inc. (FSLR, $26.86) designs and sells solar power systems.  The company had $8 billion in expected revenue at the end of 2012, down from $9.4 billion a year earlier, and below Wall Street’s expectations.  First Solar’s earnings per share are expected to fall in each of the next three years.

Since a basic rule of stock investing is to buy shares in companies that are growing their earnings, we would not invest in FSLR shares.  (02/27/13)

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US Gov’t Starts to Sell Remaining Stake in GM (MENAFN.Com)

The earnings outlook is mixed on General Motors Company ($26.46), with minimal earnings per share (EPS) growth in 2013 followed by good increases projected for 2014 and 2015.  The chart is neutral, and the share price is likely to stagnate in the $26-$30 range while the government continues to flood the market with unwanted shares.

Read our recent report on an attractive automotive stock with a better chart and better earnings growth.  (02/26/13)

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JPMorgan Says Mortgage, Community Units May Lose 19,000 Jobs (Bloomberg)

“Mortgage profits that have driven banks’ earnings may fade this year as increased competition keeps the rates on new loans near all-time lows.”

The firm expects to shrink employee headcount by 4000 this year through attrition, and accomplish the rest of the job reductions through 2014.  The company is trying to reduce expenses.

We told you to avoid JPMorgan Chase last Wednesday, due to minimal earnings growth going forward.  (02/26/13)

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Macy’s Posts Lower 4Q Profit, Issues Rosy Outlook (Fox Business)

Don’t let the “lower 4Q profit” thing fool you.  Excluding debt-retirement expenses, 4th Quarter earnings per share exceeded last year’s numbers, and also exceeded Macy’s and analysts’ projections for the quarter.

Read our recent report on Macy’s (M) here.

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Home Depot (HD) shares are up about $3.50 at $67.47 after today’s earnings report beat estimates.  Home Depot also raised its dividend and approved a $17 billion share buyback.

Read our most recent report on Home Depot here.  (02/26/13)

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New-Home Sales in U.S. Surge to Highest Level Since 2008 (Bloomberg)

U.S. Stocks Rise as Home Prices Climb Most in Six Years  (Bloomberg)

“Purchases of new homes in the U.S. jumped in January to the highest level since July 2008.”

Also, the index of property values increased 6.8 percent in December, year-over-year, the biggest gain since July 2006.

Investors can take advantage of growth in the housing industry by investing in this homebuilder.  (02/26/13)

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Yum’s KFC to Tighten Supplier Reviews as China Sales Drop  (Bloomberg)

KFC Growth Seen Slowing as Indonesia Limits Franchisees (Bloomberg)

“KFC is trying to revive results in [China] after a former chicken supplier was found to have supplied meat with too much antibiotics. Sales at locations open at least 12 months in [China] fell 6 percent in the fourth quarter, the first quarterly drop in three years.”

On the back of ongoing sales problems in China, Yum! Brands Inc. (YUM) announced that Indonesia is limiting restaurant franchise holders to operating 250 outlets in their country.  Yum Brands — owner of Kentucky Fried Chicken, Pizza Hut, and Taco Bell chains — already operates 700 restaurants in Indonesia.

YUM shares are trading at $65.90, up 45 cents today.  Shares are down from a November all-time high of $74.75, when news surfaced of the Chinese chicken problem hampering international sales.

Earnings are projected to fall a bit in 2013.  We would not be buyers of YUM shares right now.  Current shareholders probably won’t be greatly harmed if they keep their shares, but trading out at $68 for a better growth stock opportunity could be a prudent move.  (02/25/13)

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HP Shows Progress as Profit Outlook Tops Estimates (Bloomberg)

“Hewlett-Packard Company (HPQ), the largest personal-computer maker, forecast fiscal second-quarter profit that exceeded analysts’ estimates, helped by cost-cutting measures and a smaller-than-projected drop in service sales.”

However, the company still projects falling earnings for full-year 2013, and relatively flat earnings for the following two years.

The stock traded at a ten-year low of $12.01 per share in December.  The current price is about $19.10.

We’re not recommending HPQ shares due to stagnant earnings.  Instead, try this famous company with good earnings growth and a large dividend.  (02/23/13)

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Barnes & Noble’s Riggio Said to Offer to Buy Bookstore Unit (Bloomberg)

“Barnes & Noble’s (BKS) founder and chairman, Leonard Riggio, told the bookstore chain he is interested in buying its consumer business and spinning out the unit that makes the Nook tablet, said a person familiar with the matter.”

Riggio owns about 30 percent of the company’s stock.

Riggio’s plan would keep the 689 consumer bookstores, but separate out a collegiate unit and the Nook-making technology unit.

BKS closed on Friday at $13.61.  The company has been taking net losses since 2011, and the annual losses are projected out through 2015.

This is not an investment…it’s a money pit.  No serious investor should own this stock.  (02/25/13)

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