Goodfellow LLC’s “Stocks in the News”
Aggressive Earnings Growth Projected for Gilead Sciences
(GILD, $62.34, up $1.48 midday)
Gilead Sciences, Inc. reported second quarter earnings on target, with revenues up 15%, and Wall Street was pleased. Gilead has a strong pipeline fueling projected earnings growth of 50% per year in 2014 & ‘15. European regulators approved Gilead’s new HIV medicine last week, and the FDA is expected to approve a cancer drug, and a breakthrough hepatitis C drug, late this year.
On June 10, we told Ransom Notes Radio listeners that the stock would probably bounce once more at $49, then recover to $56, both of which happened by July 11. The stock price is up 26% since our buy signal, broke past $56 in mid-July, and continues to climb. We would wait for a pullback to accumulate more shares. (07/26/13)
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Starbucks’ Grocery Products Catapult Earnings Growth
(SBUX, $72.65, up $4.48 midday)
Starbucks Corp.’s third-quarter sales and earnings came in higher than analysts expected after yesterday’s market close. Sales of new food and beverage products in its retail stores and supermarkets showed surprising increases. The grocery category represents Starbuck’s fastest-growing and most profitable business segment. Morgan Stanley called Starbucks “a best in class retailer producing one of its best ever quarters.”
Earnings are expected to grow 20-22% for each of the next three years. The PE is 33. Watch for fourth quarter estimates to increase after today’s report.
The stock began reaching new highs in early May. We would buy more shares on price pullbacks. (07/26/13)
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Expedia Stock Plummets on Poor Second Quarter; Stock Price to Stagnate
(EXPE, $48.74, down $16.27 midday)
Global online travel company Expedia Inc. missed analysts’ second-quarter sales and profit estimates by a wide margin due to internal problems, poor Hotwire revenue, and domestic competition. The sales problems seem to be company-specific, and are not expected to affect competitors such as Priceline.com (PCLN, $899.15, down $12.85 midday). At least ten brokerage firms cut their price targets on Expedia today.
Full-year profits are expected to grow in the high single digits this year. The PE is 14.5.
Frustrated shareholders have missed their chance to sell at a good price. The stock will likely establish a new trading range between $48 and $52. Shareholders who want to maximize growth of principal should consider selling at $52 and moving on to a stock with stronger earnings growth projections. (07/26/13)
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PulteGroup Quarterly Successes Overshadowed by Drop in New Home Orders
Homebuilder PulteGroup, Inc. (PHM, $16.29 midday) reported second quarter earnings below expectations, with a series of one-time charges. New home orders came in weaker than expected, as Pulte is focusing on price over sales.
The company had strong increases in revenues, selling prices, gross margins, and backlog; and lowered its debt ratio to 26%. Pulte also announced a five-cent quarterly dividend, and authorized the repurchase of another $250 million of shares.
The stock’s been trading between $18 and $24 all year, then fell below $17 today. If it closes around $18 and holds support, traders should jump in. If it falls toward secondary support at $15, the worst is likely to be over quite soon. (07/25/13)
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Facebook Stuns Wall Street with Successful Transition to Mobile Advertising Revenue
Global social network icon Facebook, Inc. (FB, $33.69 midday) reported second quarter ad revenue up 61% year-over-year, surprising Wall Street with its rapid transition from desktop to mobile advertising. Ad prices also grew 13%. The company reported earnings of 13 cents per share, vs. an 8 cent loss last year.
Earnings per share are projected to rise 8% this year, then 37% next year. The PE is 59.
The Facebook IPO was priced at $38 last year: shares promptly fell to the low $20’s. We told Ransom Notes Radio listeners to buy Facebook shares in May. The stock price is up 15% since then. The stock is pushing against price resistance today, and there’s additional resistance at $38. (07/25/13)
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Boston Scientific Reports Second Quarter Earnings; FDA Clearance
Boston Scientific Corp. (BSX, $10.52 midday), maker of medical devices, beat Wall Street’s growth estimates on second quarter revenues, earnings and gross margins, with broad-based strength across product lines. The company also announced FDA clearance of its new Rhythmia Mapping System, which is expected to become the new gold standard for mapping and navigation in the diagnosis and treatment of abnormal heartbeats.
After many years of net losses, the company is finally on track to report annual growing profits.
The stock price is rebounding from a long-term slump. There’s some price resistance around $11. Aggressive growth investors should jump in on a bounce below $10. (07/25/13)
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iPhone Sales Mask Weak Third Quarter at Apple
Apple Inc. (AAPL, $441.88 midday) surprised Wall Street with a third quarter surge in iPhone sales, but earnings per share were still down 20% year-over-year on flat quarterly revenues. iPad, iPod, and Mac sales were all down for the 12-month period, and gross margins continued a steady decline. Watch for updated versions of the iPad and iPhone to be released later this year.
Full year profits are expected to fall about 11% this year, then rise 10% in 2014.
On July 2, we called Apple a trading buy under $420. The stock is up 6% since then. Traders should jump out at resistance at $460. Buy-and-hold investors should look elsewhere for growth stocks. (07/24/13)
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Delta Solving its One Big Balance Sheet Problem: High Debt Levels
After cautioning investors in early July that the weak yen was affecting revenues, Delta Air Lines Inc. (DAL, $21.00 midday) reported a great second quarter, with net profit up 44% year-over-year, handily beating the consensus estimate. The company is focusing on debt reduction, and return of capital via increased dividends and a $500 million share repurchase program.
Earnings are projected to grow 42% in 2013. The PE is 8. The long-term debt ratio is 106%.
Delta’s stock price is up 52% since we told Ransom Notes Radio listeners to buy at $14 earlier this year. The stock broke past long-term resistance in early March, then broke out of another trading range last week. (07/24/13)
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Ford Motor on a Roll
Ford Motor Company (F. $17.40 midday) trounced Wall Street today with second quarter earnings of 45 cents per share, vs. the expected 37 cents, and now expects full-year earnings to exceed last year’s numbers. Deliveries of the Focus are surging in China, losses are being cut in Europe, and the Fusion is gaining in popularity in the U.S.
Earnings are expected to grow in the low single-digits this year, then 17 and 23 percent in 2014 & ’15. The PE is 12.2, and the dividend yield is 2.29%.
Ford shares are up 30% since we urged Ransom Notes Radio listeners to buy in May. The stock price is approaching medium-term resistance at $19. Investors should expect a pullback at that point. 07/24/13)
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Texas Instruments Raises Third Quarter Guidance
Analog-chip maker Texas Instruments Inc. (TXN, $38.93) is guiding third quarter revenue and earnings estimates higher on broad-based end demand, strength in communication infrastructure, and lean inventories; boding well for the entire peer group. Second quarter results came in on target, with sustainable improvement in gross margins.
Earnings are expected to grow 4 and 23 percent over the next two years. The PE is 23 and the dividend yield is 2.88%.
The stock is pushing up against long-term resistance at $39 and appears capable of climbing immediately. S&P says, “We believe solid management execution and an industry recovery will drive shares higher.” (07/23/13)
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Domino’s Pizza Second Quarter EPS Up 18%
Domino’s Pizza Inc. (DPZ, $59.43) reported a good second quarter, beating expectations on earnings, revenues; and domestic & international same-store-sales.
Earnings are expected to grow 19, 14, and 15% over the next three years. The PE is 26.6 and the dividend yield is 1.3%.
The stock is up 34% since we recommended it on Ransom Notes Radio on February 28. Domino’s shares broke out of a trading range in early July, and are still climbing. (07/23/13)
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DuPont May Sell/Spin-off Teflon, and Titanium Pigment
E.I. DuPont de Nemours & Co. (DD, $57.12) reported that it is exploring options for its Performance Chemical segment, including possible sale or spin-off, as the company aims for higher revenue growth and earnings stability. After a negative earnings pre-announcement in June, DuPont’s second quarter earnings came in slightly above expectations today.
Earnings are expected to grow 16, 12 and 12% in the next three years. The PE is 15.3, within a five-year range of 10 to 24; and the dividend yield is 3.05%.
The stock broke past three-year price resistance last week. Expect it to climb immediately. (07/23/13)
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New York Times Loses Nate Silver to ESPN
New York Times Company (NYT, $12.05 midday) reported that Nate Silver is taking his popular statistic-based political blog, FiveThirtyEight, to ESPN, dealing another blow to the Times’ attempts to sustain both audience and profits in the digital world. Standard and Poor’s says “[We] believe it remains the best positioned of the newspapers in our coverage universe”, but gives the stock a Sell rating based on valuation.
In the midst of a difficult transition from print to digital, earnings are projected to fall a total of 26% over the next three years. The PE is 28.
On July 10, we told investors on Ransom Notes Radio “The stock price is approaching long-term resistance at $14. We see no reason for investors to own shares in a company with consistently shrinking earnings.”
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McDonalds Continues to Report Weak Quarters
McDonald’s Corp. (MCD, $97.77 midday) disappointed analysts with second quarter earnings two cents shy of estimates, coming in at $1.38 per share, on weak revenue. Poor global economies are projected to hurt sales all year, although competition from Burger King and Taco Bell could be compounding revenue problems.
The company remains solidly profitable, and expects earnings to grow 6-10% per year for the next three years. The dividend yield is 3.15%, and the PE is 17.2.
In April and May, we told investors on Ransom Notes Radio that “the stock will likely trade between $98 and $104 in the very near-term,” which is exactly what it’s done. Watch for continued sideways trading activity.
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Slow 2013, Booming Years to Follow at Halliburton
Global oilfield services company Halliburton Co. (HAL, $45.33) said second-quarter profit fell due to price pressure on hydraulic-fracturing services, and lower onshore rig count. However, earnings came in higher than expected. The company repurchased $1 billion of shares in the second quarter, with another $5 billion authorized.
Earnings per share are projected to grow 6, 27, and 18 percent over the next three years. The PE is 14.4, within a normal range of 8-26, and the dividend yield is 1.10%.
Energy stocks are volatile, and Halliburton is no exception. It’s currently working its way toward price resistance in the upper $50’s. The stock appears ready to climb immediately.
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