Adobe Systems Inc. (ADBE-$42.11) reports fiscal fourth-quarter earnings on Monday after the market closes. Analysts polled by Thomson Financial expect the desktop publishing software maker to report adjusted earnings of 48 cents per share on sales of $887.3 million, thanks to strong sales from recent upgrades of key products and the weak dollar.
Advanced Micro Devices Inc. (AMD-$8.43) has delayed shipments of a key, high-end microprocessor until the first quarter of next year and does not expect to break-even until the second quarter.
Patients taking hormone blockers (known as aromatase inhibitors) to fight breast cancer showed improvements in bone density when given shots of an experimental bone drug (denosumab) made by Amgen (AMGN-$48.40), researchers said.
Berkshire Hathaway Inc. (BRK.A-$143,000.00), the conglomerate built by billionaire investor Warren Buffett, could be overvalued by as much as 10 percent, Barron's reported on Sunday
Best Buy (BBY-$50.34) will post third-quarter numbers on Tuesday, with a conference call to follow at 10:00 A.M. Analysts expect the electronics retailer to post a 32% surge in earnings to $0.41 a share, boosted by strong videogames and consoles sales and overseas growth. On average, they expect to see 11% sales growth to $9.43 billion.
Power tools and accessories maker Black & Decker Corp. (BDK-$73.31) guided fourth-quarter and fiscal 2007 earnings lower, citing a product recall and weak business conditions.
Shares of CDC Corp. (CHINA-$4.18) sank to a year low Friday, after the Chinese software and games maker swung to a third-quarter loss of US$ 7.1 million (compared to a net profit of US$ 3.2 million last year) on declining game and mobile application revenue.
Cemex S.A.B. de C.V. (CX-$26.35), among the largest building materials companies in the world, on Sunday said it expects fourth quarter sales of about US$5.8 billion, below the consensus estimate of $5.96 billion, according to three analysts polled by First Call/Thomson Financial. Cemex Chief Financial Officer Rodrigo Trevino said the earnings guidance for 2007 "reflects the continued weakness in the U.S. residential sector and the upfront costs associated with the post-merger-integration process." The company said it expects "zero growth" from its U.S. operations.
Analysts expect weak third-quarter results from Circuit City Stores (CC-$6.82) as it continues to lose market share to competitors. The electronics retailer is expected to post a loss of 30 cents a share when it reports earnings next Friday.
Banking analysts question whether Citigroup (C-$30.70) can continue to pay out $11 billion a year in dividends when the firm is, by its own admission, below its desired capital ratios.
Citizens Communications Co (CZN-$12.05) could generate a total return of 35 percent for investors as it benefits from the adoption of high-speed Internet services in rural communities, Barron's reported on Sunday.
Despite weak fourth-quarter guidance from Collective Brands (PSS-$17.18), Jeffrey Stein of Keybanc Capital Markets believes the current price to be an "attractive entry point for the stock," as the shoe retailer made investments this year —such as the acquisition of Stride Rite—that should pay off in 2008.
Zacks senior energy sector analyst Sheraz A. Mian has initiated coverage of Core Laboratories, N.V. (CLB-$123.32) with a Buy rating and $142 price objective, which reflects a favorable view of the Netherlands-based provider of reservoir management services’ prospects in the current oilfield cycle.
Electronic Clearing House Inc. (ECHO-$9.09), an operator of electronic payment processor, swung to a net loss of $0.11 million, or $0.02 per share, for the fourth quarter of fiscal 2007, impacted by lower revenues and higher expenses.
Standard & Poor upgraded its recommendation on shares of The Estee Lauder Companies (EL-$43.30) to STRONG BUY from BUY, citing valuation metrics. Analyst L.Braverman, CFA, thinks that fundamental positives include about 60% of Estee Lauder's operating income coming from outside the Americas geographic sphere, growth in other channels in the Americas offsets lingering issues from U.S. department store closures and conversions, and prospects that the cosmetic company’s current strategic initiatives program will help drive future sales gains. S&P is maintaining a P/E-based 12-month target price of $51 a share, which uses calendar 2008 EPS estimate of $2.53 as a base.
Franklin Resources Inc. (BEN-$111.04) raised its quarterly dividend to 20 cents a share, up 33.3% from the previous quarter, the global money management firm said late Friday. The dividend is payable on Jan. 11 to stockholders of record on Dec. 28.
Goldman Sachs Group Inc. (GS-$210.57), The Bear Stearns Cos. (BSC-$95.29), and Morgan Stanley (MS-$50.30) will provide more pieces to the credit puzzle when the three brokers deliver their fiscal fourth-quarter numbers next week. They all will be watched closely for write-downs or other lingering credit blemishes.
Harvard Bioscience Inc (HBIO-$4.52) has unanimously rejected an unsolicited offer from Skystone Advisors LLC, which currently owns a 15.4% stake, to take the scientific instruments maker private for $5 a share in cash, saying the offer undervalues the company and is not in the best interest of the shareholders.
Home Solutions of America Inc (HSOA-$1.05) said in a regulatory filing on Friday that its financial reports for the first two quarters of 2007 had errors and should not be relied upon.
Ingersoll-Rand Co. (IR-$49.21), a maker of refrigerated vehicles and industrial machinery, has agreed to acquire air-conditioner maker Trane Inc. (TT-$37.20) for about $10.1 billion. Under the terms of the deal, Ingersoll agreed to pay a total of about $47.81 per share for Trane, with $36.50 per share to be paid in cash and the remainder to be paid in 0.23 shares of Ingersoll-Rand stock.
Department store operator J.C. Penney Co Inc (JCP-$42.52) is set for a rebound after losing about half of its value since February, Barron's reported on Sunday.
Nortel Networks Corp. (NT-$16.08), the Canadian maker of telecom equipment, filed a patent-infringement lawsuit on Friday against Vonage Holdings (VG-$2.05)—claiming the money-losing Internet phone company is infringing 12 patents covering technology used in managing telephone data. Nortel seeks both an injunction and monetary damages.
Banc of America Securities analyst Kirk Materne said a buyback plan would help support the shares of Novell Inc. (NOVL-$7.13), especially considering the business software developer’s balance sheet could support one. He kept his $8.50 price target.
Standard & Poor's Scott Kessler thinks that despite a forecasted slowdown in corporate spending on technology, Oracle Corp. (ORCL-$21.20) will benefit from two trends: international growth and consolidation in the business software industry. The world's largest enterprise software company, which reports Wednesday, is expected to continue its string of strong quarters. Consensus estimates project 23% growth in fiscal second-quarter earnings on a 20% increase in revenue. Morgan Stanley analyst Peter C. Kuper concurs that shares in the software company are a safe bet in a worsening economy.
Morningstar believes Par Pharmaceutical (PRX-$21.17) does not deserve a selling premium to its specialty pharma peers. The company is rapidly losing relevance to large generic customers, as competitors like Mylan (MYL-$13.70) consolidate the industry. Branded pharma is bringing authorized generics in-house, reducing these opportunities for Par. Although this makes Par's transition to more complex and proprietary drug development necessary, the introduction of a branded salesforce by no means guarantees success.
A tentative contract award to Peregrine Pharmaceuticals, Inc. (PPHM-$0.46) to investigate bavituximab and other anti-phosphotidylserine PS antibodies as possible therapies for hemorrhagic fever virus with the Defense Threat Reduction Agency - DTRA of the U.S. Department of Defense—was terminated due to Congressional budget cuts.
Bleak future prospects and the shrinking top-line of pharma giant Pfizer, Inc. (PFE-$23.10)have led Zacks senior pharmaceuticals analyst Jason Napodano, CFA to reiterate his Sell rating on the shares.
Quiksilver (ZQK-$8.91) declined 12%, or $1.26 a share, on Friday after the seller of Rossignol ski wear and other outdoor gear swung to a fourth-quarter net loss of $110.9 million, or 89 cents a share, from a net profit of $65.3 million, or 51 cents a share, a year ago. Nonetheless, Morgan Stanley analyst Brian McGough reiterated his "Overweight" rating on the stock "Clearly - the core business is healthy, and the results prove how much more diversified and global the sportswear retailer is relative to competitors," he wrote in a research note. S&P reiterated its own strong BUY, as it continues to see opportunity for successful development of Rossignol as an activewear lifestyle brand—while minimizing its hardgoods exposure. Morgan Stanley and S&P hold 12-month target prices of $18 and $15 a share, respectively.
Research in Motion (RIMM-$105.98) reports its third-quarter results on Thursday, with Bank of America expecting revenue to hit the high end of the company's revenue range of $1.6 billion to $1.67 billion on the backs of the Blackberry Curve, Pearl and International and 8830 models. Analysts will be looking at the fourth-quarter forecast for smart-phone market growth and comments on improving international traction. Nonetheless, on “Mad Money” Recap, Jim Cramer said there are a lot of people betting against this stock. Although he likes RIMM very much, Cramer said he believes the short-selling raid could put a lid on the stock.
Hoffmann-La Roche Inc., the Nutley, New Jersey based U.S. pharmaceuticals division of Roche Holding Ltd. (RHHBY-$90.20), the world's biggest maker of cancer medicines, on Saturday said interim results of the Phase II XeNA trial suggested that the combination of oral chemotherapy drug Xeloda and Taxotere, with the addition of Herceptin in HER2-positive patients, may be an active and well-tolerated pre-surgical treatment option for women with invasive breast cancer.
Morningstar believes the market is being far too pessimistic on Ruth's Chris Steak House (RUTH-$10.41), with the stock trading off nearly 40% since initial purchase in May 2007, largely on fears of a slowdown in consumer spending. The chain is a leader in the growing upscale steakhouse segment, with a respected and well-known brand built over the last 42 years. The company also has ample opportunities for expansion. Based on a weighted average of probable outcomes, the stock's expected value is $28 per share.
Billionare Edie Lampert’s big bet on Sears Holding (SHLD-$105.24) looks dicier as profits plunge, but the chairman has a built-in safety net. Even if the turnaround doesn't pan out, he still can sell the chain's real estate for a tidy profit. "Lampert has far more financial flexibility [than do other retailers]," says Deutsche Bank analyst Bill Dreher. Sears owns 518 of its 816 locations outright, and many of the 1,333 Kmarts are located in strip malls close to big cities. So Lampert can get some juice out of Sears even if the turnaround doesn't materialize.
S&P Equity Research upgraded J.M. Smucker Co. (SJM-$50.08) from Hold to Strong Buy. Analyst T. Graves, said SJM shares sell at a sharp P/E discount to a group of other packaged food stocks. To reflect additional caution about cost outlook, however, S&P is trimming its 12-month target price to $60, from $61 a share.
Cowen analyst Doug Creutz says Take-Two Interactive Software (TTWO-$18.48) remains his best idea ahead of its fourth-quarter earnings release. When Take-Two reports results on Tuesday (after the market close), he expects revenue of $309.7 million, vs. the company's guidance of $275-$300 million, and a loss (including option expense) of 7 cents, vs. guidance for a loss of 13 to 18 cents. Creutz looks for management to give a progress report on Grand Theft Auto IV, though he doesn't necessarily expect an announcement of an actual launch date. The analyst says investors should also get more clarity on the company's balance sheet situation; he believes concerns about a potential liquidity crunch are unwarranted.
In the opinion of Morningstar, prudent investors should exit their positions in Western Digital Corp (WDC-$29.75). The Company faces industry challenges that prevent the hard drive maker from building an economic moat. Competition among the drive manufacturers is fierce. Its two independent rivals, Seagate Technology (STX-$27.52) and Excelstor, routinely slash unit prices in an effort to gain share and fill idle capacity. Western Digital's four other competitors are large integrated systems builders (Fujitsu, Samsung, Hitachi, and Toshiba). These captive manufacturers derive only a portion of their revenues from hard drives, and can cut disk drive prices to irrational levels, forgoing profits for sales. Additionally, Western Digital derives most of its revenues from powerful integrated information technology providers, such as IBM. These companies ruthlessly demand price concessions and can cancel orders at a moment's notice without penalty. Because disk drives are a commodity, Western Digital must succumb to these demands or risk losing the business to a competitor.
Zacks Investment Research, however, contends Western Digital is a cheap stock with a lot of momentum. It recently raised guidance citing strong demand in the computer and electronics industries. Analysts expect earnings to jump 18.6% next year. The stock is cheap at less than 10x next year's estimates.
Editor David J. Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.