Stocks in the News — week of July 29, 2013 (August 2nd update)

 

Goodfellow LLC’s “Stocks in the News”

seen on Townhall Finance, heard on Ransom Notes Radio

 

Google Introduces Moto X, New Smartphone Competitor

Google Inc.’s (GOOG, $906.57) wholly-owned Motorola Mobility unit is rolling out its new flagship Moto X smartphone this summer, with prices starting at $199, in direct competition to the iPhone and Galaxy S.  The new phone will be made in America, and features competitive improvements in design, camera, battery life and usability.

Google’s earnings are projected to grow 9, 18, and 18 percent over the next three years.  The PE is 20.8.

We told Ransom Notes Radio listeners to buy Google shares below $775 on April 19.  The stock is up 17% so far, and still on an uptrend, currently trading between $880 and $928.  Investors may have one more opportunity to buy below $900 before the stock starts reaching new highs again.  Goodfellow LLC Rating: Buy, Growth.  Read our research report. (08/02/13)

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Chevron Disappoints Analysts

Chevron Corp. (CVX, $124.95) missed analysts’ second quarter estimates today, with earnings down 25% year-over-year, and revenues down 8%.  The company reported “weak earnings on lower crude prices and soft downstream margins,” reports Zacks.

Earnings projections are flat, totaling one percent growth through fiscal 2015.  The PE is 10, and the dividend yield is 3.24%.

The stock is on a distinct uptrend, with an attractive chart, but there is no underlying reason to own Chevron shares.  On April 1, we advised Ransom Notes Radio listeners “to hold the stock during the upswing in price using stop loss orders to protect profits,” then consider moving on to a stock with earnings growth.  Our opinion remains the same.  Goodfellow LLC Rating: Public.  (08/02/13)

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P&G’s New CEO Shows Immediate Leadership

Consumer products company Procter & Gamble (PG, $81.29) reported fourth quarter earnings and organic sales growth above consensus, but margins were disappointing.  The company is guiding 2014 earnings growth estimates higher, in the 5-7% range including foreign exchange impact, as cost-cutting efforts are taking effect.  Citi Research says, “P&G is in the middle of a truly massive productivity spurt,” as returning CEO A.G. Lafley steers Procter & Gamble into the future.

We told Ransom Notes Radio listeners three times since April that the stock was in a trading range, and to stay on the sidelines.  The chart has now turned decidedly bullish, and the stock appears ready to break past resistance at $82 and make another run-up.  Fundamentals are not compelling, but with a 3% dividend and a bullish chart, P&G could appeal to growth & income investors and momentum investors.  Goodfellow LLC Rating: Public.  (08/02/13)

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Sturm Ruger Shoots and Scores!

Firearms company Sturm, Ruger & Company, Inc. (RGR) reported a 79% surge in earnings as U.S. citizens amass firearms in light of increasing threats to second amendment rights, and concerns over potential firearm confiscation.  Second quarter revenue was up 50%, though hampered by insufficient inventory.  New products accounted for 31% of sales in the first half of 2013.

The August dividend, which varies every quarter, will be 65 cents per share.

There is no expectation that current earnings growth is sustainable.

Sturm Ruger stock has been trading sideways for 18 months, with resistance in the upper $50’s.  It does not appear tradable at this time.  Goodfellow LLC Rating: Public. (08/01/13)

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Exxon Second Quarter Falls Flat

Exxon Mobil Corp. (XOM) reported much lower than expected second quarter earnings, with a wide variety of operational and accounting issues contributing to the disappointment.  Share buybacks totaled $4 billion, with another $3 billion expected in the third quarter.

Exxon’s earnings are expected to grow 3-7% per year for the next three years, largely supported by the share buybacks.  The dividend yield is 2.75% and the PE is 11.5.

The stock will likely trade between $91 and $95 in the near-term, and could easily break past long-term resistance at $95 this year.  The chart is bullish, but the fundamentals are completely lackluster.  Goodfellow LLC Rating: Public.  (08/01/13)

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DreamWorks Reports Blowout Quarter

DreamWorks Animation SKG Inc. (DWA) reported expanding gross margins leading to a 73 percent increase in second-quarter profit, with revenue up 31%, driven by the hit movie “The Croods.”  Soft sales of new release “Turbo” have not harmed the profit forecast.  The company is positioned well for new releases in the coming years, and is expanding  consumer product sales to provide a more steady income stream in the future.

After losing money in 2012, DreamWorks’ earnings are expected to be solidly profitable this year, with continued aggressive growth.  The PE is 34.

The stock is up 39% since we recommended it to Ransom Notes Radio listeners on March 22.  There’s price resistance at $28.  Goodfellow LLC Rating: Aggressive Growth, Public.  (08/01/13)

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Comcast Reports Great Second Quarter

Comcast Corp. (CMCSA, $45.08) reported an outstanding second quarter, surpassing Wall Street estimates on revenue, earnings, cash flow, and new subscribers.  The successes spanned both its cable TV, voice and internet services; and its wholly-owned NBC Universal unit.  In addition, Comcast is launching the X1 Platform entertainment operating system from Xfinity in Michigan, representing an innovative TV entertainment experience.

Wall Street expects Comcast’s earnings to grow 24, 16, and 18% over the next three years.  The PE is 19 and the dividend yield is 1.7%.

On June 10, we told Ransom Notes Radio listeners to buy Comcast shares.  The stock has risen 10% since then.  We absolutely believe that there’s much more upside to Comcast stock.  Goodfellow LLC Rating: Aggressive Growth, Growth & Income, Value.  (07/31/13)

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Weatherford Int’l Reports Second Quarter on Target

Oil & gas service company Weatherford International Ltd. (WFT, $13.96) reported second quarter revenue and earnings in line with Wall Street estimates, including significant improvements in free cash flow and capital expenditures.  North American and Latin American revenue and earnings are expected to improve later this year.

Wall Street expects earnings per share to grow  38%, 58% and 33% in the next three years.  The PE is 17.7.

On April 8, we told Ransom Notes Radio listeners to buy Weatherford shares in the wake of GE’s offer to buy competitor Lufkin Industries.  The stock is up 13% since then, and there’s lots more room for appreciation, based on aggressive earnings growth, low valuation, bullish chart, and takeover speculation.  Goodfellow LLC Rating: Aggressive Growth, Public  (07/31/13)

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 Alexion Prepping for Possible Roche Takeover Offer

Alexion Pharmaceuticals (ALXN, $116.19) has hired Goldman Sachs Group as an adviser, in preparation for a friendly or hostile takeover offer from Swiss drugmaker Roche Holding AG.  Roche is interested in adding Alexion’s successful drugs and pipeline to enable corporate growth.  However, Citi Research says, “We do not expect Alexion to be acquired.”

Wall Street expects Alexion to increase earnings per share another 42% in 2013.  The PE is 38.

In February, we told Ransom Notes Radio listeners to buy Alexion under $90.  The stock is up 29% since then, and is breaking out of another trading range this week.  The chart is bullish, but there’s downside risk if a buyout doesn’t materialize.  Aggressive growth investors should use stop-loss orders.  Goodfellow LLC Rating: Aggressive Growth  (07/31/13)

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Russian Potash Cartel Dismantled; Industry Rocked

(MOS, $43.44, down $9.52 midday)

“Russia’s Uralkali has dismantled the world’s largest potash cartel in a move that it expects to slash prices by 25 percent, heralding a reshaped industry and pummeling shares of companies that produce the key fertilizer ingredient,” reports Reuters.

Lower potash prices could lead to cancellations of projects, but ultimately benefit farmers and consumers.

The Mosaic Company sells $10 billion annually in potash and phosphate crop nutrients and animal feed.  In June, we told Ransom Notes Radio listeners that Mosaic shares were in danger of falling through support levels.  The stock price fell significantly below a two-year trading range today, and is unlikely to fall farther.  It’s volatile enough that traders could buy now and make money on a rebound.  Growth stock investors should probably sell near $50 and move on.  Goodfellow LLC Rating: Public, Volatile. (07/30/13)

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Chemical Stocks: the Next “It” Sector

(EMN, $79.58, up $4.55 midday)

Eastman Chemical Company reported second quarter profits up 48% year-over-year, blowing away Wall Street’s expectations.  Revenue came in on target, up 32% year-over-year.  CEO Jim Rogers said, “We continue to expect double-digit earnings growth through 2015 given our leading market positions, our end-market and geographic diversity, and the growth initiatives we are pursuing throughout the company.”

The price-earnings ratio is 12.5, and the dividend yield is 1.51%, but the long-term debt ratio is a little high.

Many chemical stocks have bullish charts on the verge of breakout right now, and Eastman is no exception.  All stock investors should be buying chemical stocks right now.  Goodfellow LLC Rating: Public. (07/30/13)

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Goodyear Tire & Rubber Profits Stun Wall Street

(GT, $18.67, up $1.63 midday)

The Goodyear Tire & Rubber Company reported second quarter revenue of $4.9 billion, on target with Wall Street estimates, but earnings per share soared at 67 cents vs. the 48 cent consensus estimate, and 33 cents a year ago.  “All four of Goodyear’s regional businesses achieved higher operating income in the second quarter compared to the year-ago period,” reports Crain’s.

Goodyear is expected to grow earnings 12, 18 and 14% over the next three years.  The PE is 8.8.

The stock has been trading between $9 and $19 for four years, and appears ready to break past resistance in the near future and climb towards $24.  Goodfellow LLC Rating: Public, Volatile. (07/30/13)

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Amazon to Hire Workers; Build Warehouses

(AMZN, $307.48, down $4.53 midday)  Amazon.com Inc.

Amazon.com Inc. plans to hire 2000 customer service workers, 5000 warehouse workers;  and build five more facilities, as it continues to chase revenue at the expense of profits.  President Obama is expected to visit a warehouse in Chattanooga, TN this week.

After losing money in 2012, Amazon will be solidly profitable this year, although earnings estimates have been falling in recent months due to increased expenses and unfavorable foreign exchange rates.  Earnings are then projected to grow 144% and 96% in 2014 & ‘15.  The PE is ridiculously high at 243.

Amazon stock has been rising for four years, and broke out on the upside again in early July.  Lucky shareholders should protect profits with stop-loss orders.  Goodfellow LLC Rating: Public. (07/29/13)

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Perrigo Buying Elan; Gains Irish Corporate Tax Rate

(PRGO, $125.14, down $9.09 midday)

(ELN, $15.49, up $0.56 midday)

Michigan-based OTC-drugmaker Perrigo Company has agreed to buy Irish drug company Elan Corp. for $16.50 in cash and stock.  Perrigo will gain an experimental Alzheimer’s drug, royalties from Elan’s successful multiple sclerosis drug, and a new domicile in Ireland.  The Irish domicile will provide a 12.5% corporate tax rate, which is expected to save Perrigo over $150 million per year, and enhance international expansion opportunities.

Perrigo’s earnings are expected to grow 12, 18, and 10 percent over the next three years.  The PE is 22.6.

We view Perrigo shares as fully-valued: shareholders should use stop-loss orders to protect profits.  Elan shareholders should sell into the rally as the share price approaches $16.50.  Goodfellow LLC Rating on PRGO: Public.  (07/29/13)

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Valeant Fine-Tuning Corporate Structure in Light of Bausch & Lomb Merger

(VRX, $91.41, down $0.55 midday)

Valeant Pharmaceuticals International Inc. plans to reduce headcount by 10-15%, consolidate some locations and experience quicker-than-expected cost savings as it readies itself for the planned acquisition of contact lens-maker Bausch & Lomb Holdings. Valeant is a rapidly growing Canadian drugmaker, in the areas of dermatology, neurology and ophthalmology.

Valeant has projected earnings growth of 24%, 44% and 19% over the next three years, a PE of 15.6, and high debt levels.

On April 29, we recommended that Ransom Notes Radio listeners buy Valeant stock, and the shares have since risen 21%. The stock appears to be ready to break out of a trading range again in the near-term.  Goodfellow LLC Rating:  see research article.  (07/29/13)

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