Sunday, January 13, 2008

Trading Alerts: Monday, January 14, 2007

Apple Computer (AAPL-$172.69) Chief Executive Steve Jobs is set to take to the stage at MacWorld Conference & Expo on Tuesday to unveil some new widgets/services.

Bank of America (BAC-$38.50) said Friday it will buy Countrywide Financial (CFC-$6.33) for $4.1 billion in stock, a deal that rescues the country's biggest mortgage lender and expands the financial services empire of the nation's largest consumer bank.

The Boeing Co (BA-$80.52) won an order for 16 of its 787 "Dreamliner" aircraft and options for eight more from Bahrain-based Gulf Air, in a contract worth as much as $6 billion, Gulf Air said on Sunday.

Citigroup (C-$28.59) is hoping to announce the receipt of $8 billion-to-$10 billion in new investments from a number of investors, likely including Saudi Prince Alwaleed bin Talal and the China Development Bank, on Tuesday when it is scheduled to report fourth-quarter earnings, the Wall Street Journal reported on its Web site. At the same time, the company also could announce writedowns of about $15.0 billion, above previously estimated forecasts of $8 - $11 billion. Because the writedowns will pressure earnings, analysts expect the largest U.S. bank to cut its dividend payment, too.

The Swiss Sunday newspaper Sonntag predicted in its Sunday edition that global banker Credit Suisse Group (CS-$57.00) faces write-downs in its commercial mortgage and leveraged-finance business.

Zacks senior service industry analyst Steve Biggs, CFA, restates his Hold rating on DST Systems (DST-$74.30), but adjusts the target price of the provider of information processing and software services to $78 a share. Inc. (DIET-$5.11), which runs a Web site that provides weight-loss products and advice, on Friday said its chief financial officer resigned to take a similar position at a privately held company.

Stung by credit problems, First Horizon National (FHN-$17.48) has tempered its mortgage-business ambitions. But it may be a great time to buy the shares—as the Tennessee-based holding company for First Tennessee Bank—redirects resources to in-state and retail corporate banking, according to Barron’s columnist, Jack Willoughby.

After the bell on Monday, Genentech, Inc. (DNA-$71.50) reports earnings for its fourth-quarter ended in December. Analysts polled by Thomson Financial expect the biotech to report fourth-quarter profit of 67 cents per share on revenue of $2.97 billion. Look for an update on Avastin to move the stock price.

Despite the housing downturn, Hovnanian Enterprises (HOV-$5.90) maintains a positive outlook and sums this up to the cyclical nature of the homebuilding industry. CEO Ara Hovnanian opines that the “housing slump is nearing bottom.” Investors ought note, however, that management called for a recovery in the homebuilding industry —and a return to profitability—back in November, too.

Shares of IncrediMail Inc. (MAIL-$3.24) tumbled 29.1%, or $1.33 a share, in trading on Friday after Google Inc. cancelled the AdSense partnership with the company. In the after-market, shares of the Israel-based entertaining e-mail solutions provider declined an additional 13.2%, or 43 cents a share.

Pricing volatility increased in Logitech International S.A. (LOGI-$30.69) shares last week amid speculation that Microsoft might be preparing to acquire the Swiss-based computer peripherals maker. Anti-trust and strategic obstacles make for difficult bid prospects, a source familiar and several independent lawyers told FT/mergermarket.

After disappointing holiday sales, Macy's Incorporated (M-$21.31) says it will be eliminating 271 jobs in the northern Midwest. The department store chain will also discontinue most of its wine business in the region and shutter several food operations.

Merrill Lynch & Co Inc's (MER-$54.69) move to accelerate vesting on previously awarded stock-based pay to employees could add to the huge fourth-quarter loss already expected by analysts. On CNBC’s Fast Money Friday, On-Air Trading Editor Charlie Gasparino said total write-downs could be as high as $20 billion, too. The troubled financial services giant reports results Thursday before the bell.

Former Hollywood Video CEO Mark Wattles is unlikely to make a bid—as a white knight—for struggling Movie Gallery (MOVIQ-$0.03), according to sources.

The chief executive of Northwest Airlines (NWA-$15.81) sent an internal memo to employees on Friday saying his airline's board and management team would analyze any merger proposal carefully.

Mortgage lender NovaStar Financial Corp. (NFI-$2.92) on Friday cut 85 percent of its work force, according to a regulatory filing.

Barron’s columnist, Christopher Williams, writes all Real Estate Investment Trusts (REITs) aren't created equal, and investors willing to endure volatility can scoop up fundamentally sound companies selling cheaply. The best bargain in REIT landProLogis (PLD-$57.77), a Denver-based industrial REIT whose growing global business and diverse income stream could buffer it against any slowdown in the U.S. The stock price could rally to around 70 a share, according to Williams.

Quebecor World Inc. (IQW-$0.90) received a proposal for C$400 million ($393 million) in funding from its parent and Brookfield Asset Management to recapitalize the company and prevent default. Bond and equity analysts have suggested a sale of the distressed commercial printer would fetch no more than the than the value of the company's debt, estimated at a value of about $2.5 billion to $2.7 billion.

Among the flood of earnings being released this week, The Charles Schwab Corp. (SCHW-$22.55) reports results for the fourth quarter on Wednesday. Analysts polled by Thomson Financial expect a quarterly profit of 26 cents per share on revenue of $1.32billion for the financial services company, on average.

Citing strong petrochemical product demand, Zacks senior Chinese market analyst Paul Cheung, CFA, reiterates his bullish view on shares of Shanghai Petrochemical, or Sinopec (SHI-$55.24), rating the stock a Buy with a six-month target price of $65.00 a share.

After the bell, Sport Chalet, Inc. (SPCHA-$5.82) said it expects to record a loss in its fiscal 2008 third quarter, due to a challenging sales environment, particularly in its core Southern California market. The sporting goods retailer expects a loss in the range of $0.06 - $0.09 per share, on net sales of about $116.00 million.

The Steak n Shake Company (SNS-9.48) forecast a surprise first-quarter loss of 4 – 5 cents, hurt by lower sales, competition and unfavorable weather, and also withdrew its outlook for the full year.

Mad Money host Jim Cramer said when the Fed starts aggressively cutting, it won’t just be the financials that benefit. The industrials should come back, too. Cramer recommended Terex Corp. (TEX-$52.93), the third-largest construction and mining equipment maker in the world.

In the wake of mortgage lender Countrywide Financial’s sale, merger speculation is now centered on Washington Mutual Inc. (WM-$14.69), the largest U.S. savings and loan. Bank analyst Richard Bove of Punk Ziegel & Co said possible buyers for Washington Mutual could be Wells Fargo and Co and JPMorgan Chase & Co Inc.

Jim Cramer said his “absolute favorite gold stock” remains Yamana Gold (AUY-$16.40). Cramer welcomed AUY’s chairman & CEO, Peter Marrone, to his Mad Money cable show on CNBC Friday for an update. Marrone said that his company (i) produces gold at $250 to $270 per ounce and (ii) continues to expand its operations.
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.

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