4 Last-Minute Third-Quarter Earnings Plays

AZO, TD, JOY and DRI all worth a ride before their reports

Philosophically, third-quarter earnings season is over.

Technically, it’s not.

About 15 more major and semi-major names will try to shout out their results above the din of holiday shopping and fiscal cliff headlines for the next couple weeks — of those, four of them might be worth a swing before they reveal their numbers:

AutoZone (NYSE:AZO) is the first of the four names in focus that will report Q3 numbers.

Look for a bottom line of $5.39 before the bell Dec. 4. That’s 21% stronger than the $4.44 it earned a year ago. If it hits that mark — and it would be shocking if it didn’t — it will be the sixth straight time the auto parts retailer’s calendar Q3 (fiscal Q1) bottom line has improved. It also will be at least the 17th consecutive quarterly beat for the company.

This outfit has been freakishly consistent with its earnings growth, but that’s not the sole reason traders would want to consider taking a swing on AutoZone now.

One of the toughest parts about investing in AutoZone since early 2010 has been finding a point where the stock wasn’t technically overbought during that time; even the pullback to the 200-day moving average line in August 2011 was very short-lived. But, over the course of 2012, AZO shares have made a major pullback and burned off any overbought pressure that had been baked in. With a proverbial hit of the reset button in place, the bounce effort since September looks like it could have legs.

Just for the record, Advance Auto Parts (NYSE:AAP) met its Q3 earnings estimates of $1.21 per share, and O’Reilly Automotive (NASDAQ:ORLY) also topped estimates of $1.27 by earning $1.32 per share.

Toronto-Dominion Bank

Toronto-Dominion Bank (NYSE:TD) releases its fiscal fourth-quarter earnings the morning of Dec. 6. The pros are expecting a per-share profit of $1.81, up from the year-ago number of $1.69.

While it might have ebbed and flowed in the short-term, over the long haul, TD has advanced in conjunction with the steady increase in its bottom line. Anyone who has bought on the dips — or bought on the way up after a bottom has formed — has been rewarded rather well. And it looks like Toronto-Dominion Bank shares have just started a new rally after a decisive bottom in early November.

One thing investors should know about Toronto-Dominion: Although it has been mostly reliable on the earnings front, earnings growth has been painfully slow. That’s not expected to change at any time in the foreseeable future.

Joy Global

Joy Global (NYSE:JOY) will post earnings of $1.91 per share before the bell Dec. 12 if the company meets analyst estimates. That’s 5% better than the $1.82 it earned a year earlier.

The mining equipment manufacturer hasn’t been anywhere near as consistent with its earnings growth as Toronto-Dominion has, and actually has missed estimates in three of the last four quarters. But, following the 50% pullback between early 2011 and mid-2012, the pessimists might have overshot — earnings still have been respectable.

The forward-looking P/E of 8.4 is a bargain no matter how you slice it, so unless the company completely botches third-quarter numbers or offers a horrible 2013 outlook, there are a lot of ways the company could put itself back in a (relatively) positive light next week.

Darden Restaurants

Darden Restaurants (NYSE:DRI) — parent of Olive Garden, Red Lobster and other popular chains — will unveil its most recent quarter’s results early on Dec. 14. Forecasters say the restaurateur is going to earn 47 cents per share, well up from the 41 cents it earned in the same quarter from 2011.

Not unlike Toronto-Dominion Bank shares, anybody who has bought into DRI on a dip since 2009 has done pretty well as a result; the longer-term trend has been a positive one. The recent push off of the 200-day moving average after the September/October pullback could make now the ideal entry time.

Any chance a brewing lawsuit over low wages could make things difficult in the future? Anything’s possible, but the claims might have as little merit, as the company suggests. So far, 50 employees have decided to become plaintiffs in the case that alleges the company required unpaid work time for its workers. But, given that Darden is the same company that has received high accolades for specifically creating a diversity-friendly workplace, it’s tough to imagine its attitude in terms of general work expectations would be so far at the other end of the spectrum.

Source: Investorplace

Santa Claus Rally Ahead: 3 Stocks to Buy & 2 to Avoid

Consumer buying patterns produce big holiday winners

Attention shoppers! That pretty much includes all of us at this time of year. And to add to the mania, we’ve got an extra long holiday season this year because of the early Thanksgiving. If moneymaking stocks are on your shopping list this year, I have three ideas for you that we’ll get to in a moment.

Early projections are for the 2012 holiday season have been a bit mixed. The National Retail Federation estimated sales in November and December would be up 4.1% this year, which would be slower growth than the last two years. Still, it’s growth, and the Thanksgiving weekend numbers were encouraging. According to a survey from BIGinsight, the number of shoppers over the weekend increased 9.2% to 247 million, with the average person spending $423, up 6% from $398 last year.

Before I get to the stocks I like, I wanted to give you a heads-up as to where not to invest. I know you might think that your safest bet would be with the big retailers, like Walmart (NYSE:WMT) and JCPenney (NYSE:JCP), but I would be leery of those.

Why? The main one is bargains. They are great for us as consumers, but they eat into profit margins at the retailers.

Instead, I like other companies that should do well this holiday shopping season but not depend on deep price cuts to make their money. Here are three I expect to do well:

1) Amazon (NASDAQ:AMZN). Let’s start with how more of us are doing our shopping: online. And the king of the cyber world is Amazon, which continues to grow in popularity. The Kindle was especially popular this year, and the devices actually doubled their sales from 2011 on Cyber Monday!

We already know that AMZN has pricing power because of their scale and reach, but the company has become even more successful because of their execution of the growing Groupon(NASDAQ:GRPN) style business. This makes the company one step more advanced because AMZN customizes the offers by “knowing” their customer and by having access to location. This is a website that is only going to get bigger and better.

2) FedEx (NYSE:FDX): Now think about how those purchases will be delivered. That’s where FedEx comes in. Now, the preferred delivery may not be the higher-priced priority deliveries, but volume on the less-expensive slower delivery options should be robust. Those who are mailing their gifts are going to need a way to deliver them, and FDX will be one of the leaders.

3) Abercrombie and Fitch (NYSE:ANF): Last, think about what’s popular. On that score, it’s hard to beat Abercrombie and Fitch right now. People love this store. ANF was one of the Black Friday winners, and what’s interesting is that they are an extremely popular brand that did better this year with less advertising, which means lower costs. This retailer is still the best of the breed with juniors clothing. Their less expensive, Hollister branded stores are also very popular.

I look for these three companies to have strong holiday seasons, and now is a good time to consider them before any “Santa Claus rally.” Stocks pulled back after the last earnings season, which was the worst in five years, and a lot of the bad news is now priced in. I know the market will move based on fiscal cliff headlines, but I do expect to see some of the usual seasonal strength, especially if the news out of Washington gets more positive.

Source: Investorplace

Top 11 Stock Charts to Watch in December

Trading ideas to play both up and down markets

If you’re tired of government and central bank policy being the most important driver of financial market performance, some good, old-fashioned stock charts ought to be a tonic for your fiscal cliff blues.

As we move into December, 11 charts point to potential opportunities — and they won’t necessarily depend on the latest quotes from John Boehner to provide traders with a little extra bang for their buck. Five are big-name stocks that are close to breaking out to new highs, while six others are resource picks that could be poised to move off bases they have established over the past year.

December Breakout Candidates

If you’re a bull on the broader market, a few select names could deliver outperformance in the months ahead:

Bank of America (NYSE:BAC)
Macy’s (NYSE:M)
Salesforce.com (NYSE:CRM)
Adobe Systems (NASDAQ:ADBE)
Stryker (NYSE:SYK).

It’s a diverse group of stocks, but they do share an important common trait: With the exception of Macy’s — which has traded down this week — all of these stocks are just pennies from breaking out to 52-week highs. The charts speak for themselves:

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6 Resources Stocks to Monitor

The story with this group of stocks from the energy and materials sectors is less clear-cut since they are trading at a roughly equal distance between downside support and the resistance created by their 200-day moving averages. Traders can therefore look at this group for opportunities in either direction … but stops are essential.

In the materials-related group, Alcoa (NYSE:AA), Caterpillar (NYSE:CAT) and Potash (NYSE:POT) are among those trading just above long-term support but within striking distance of their 200-day moving averages. The proximity to the 200-day is a common trait among many materials stocks right now, as illustrated in the charts of the Market Vectors-Coal ETF (NYSE:KOL) and the Market Vectors-Steel ETF (NYSE:SLX).

Together, all of these stocks are important to watch not just for potential trades, but to see whether support or resistance is broken first. This could provide a key indication of what’s in store for the rest of the market in the months ahead.

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Also, the energy sector is home to three charts that signal potential opportunity: Baker Hughes(NYSE:BHI), McDermott International (NYSE:MDR) and Nabors Industries (NYSE:NBR). All three stocks have tested established support and begun to climb higher. And as is the case with the materials stocks mentioned above, all are very close to their 200-day moving averages. What’s more, a look at the two-year charts shows that the upper trendlines aren’t far above the 200s.

Watch these names closely for a trade as we approach year-end, but hold onto long-side trades only as long as crude oil can hold above $80/barrel.

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Source: Investorplace

LONDON Results Round-up

Date: Monday 03 Dec 2012

AIM-listed tube manufacturer Tricorn surged on Monday following the release of its interim results, in which it reported a decent increase in the half-year dividend.

The company, which operates in three main segments - Energy & Utilities, Transportation and Aerospace - is to pay shareholder 0.1p per share in respect of its first-half performance, up 43% on the 0.7p a share paid out last year.

Revenue in the six months to the end of September fell from £12.42m to £11.55m as a result of "softening markets" in the second quarter.

Nevertheless, improvements in operating profit margins across all three businesses helped group pre-tax profit grow from £0.72m to £0.85m.

Tricorn said that its plan to establish a manufacturing facility in China is "on track" and shipments of first products are expected later this month.

Chairman Nick Paul said: "We have delivered a strong set of half year results demonstrating continued improvements in operating margins, strong cash generation has led to a considerably strengthened balance sheet and we have made encouraging progress in establishing our manufacturing facility in China. This, alongside the pipeline of opportunities for new business positions us well for further growth.."

While Paul admitted that, in the shorter term, the softening in markets seen is likely to continue into the second half, investors didn't seem too bothered, with shares up 6.47% at 18.10p by 15:40.


Evocutis, the skincare products testing group, managed to double revenues in the year to July 31st.

Turnover from commercial deals jumped from £0.22m to £0.46m, helped by collaboration and consultancy agreements with consumer healthcare companies.

The large increase in revenue was mainly as a result of the full-year trading revenues from Leeds Skin Centre for Applied Research which was acquired in May 2011.

The adjusted operating loss narrowed to £0.91m, from £1.09m previously. The loss per share reduced from 0.90p to 0.88p.

"These results show that the integration of Syntopix and Leeds Skin into Evocutis has led to significant growth in collaborations with major multi-national companies. Our collaborators are seeking the skill base at the core of Evocutis that enables them to strengthen their brands by providing scientific data that supports product claims," said interim Chief Executive Officer Gwyn Humphreys.

"Evocutis aims to grow these relationships over the coming twelve months, and to increase the availability of LabSkin™ for those companies who wish to carry out research in-house rather than by contract relationships with Evocutis."

Source: Digitallook

Should I Buy U.S. Steel? 3 Pros, 3 Cons

It's an efficient giant, but investors should be cautious

When it comes to American icons, United States Steel (NYSE:X) is certainly on the list. But the past year has been brutal for shareholders, with the stock price down 55%. Of course, a big factor is the slowing global economy.

Yet is U.S. Steel a good bargain at these levels? Or will it continue to be dead money?

To decide, let’s take a look at the pros and cons:

Pros

Huge Scale. U.S. Steel is one of the largest operators in the global market. It has about 24 million tons of steel capacity in North America and 5 million tons in the Slovak Republic.

The company also has an integrated platform, which means it controls its own supply — such as coke and iron ore — as well as the blast furnaces. As a result, U.S. Steel has been able to keep its costs relatively low.

What’s more, U.S. Steel is a top producer of tubular products. These are key for the fast-growing oil and gas industry.

Liquidity. U.S. Steel has a solid amount, coming to roughly $2.5 billion. The next major debt payment — for $863 million — doesn’t come due until 2014.

To protect its liquidity position, U.S. Steel has slashed its dividend from 30 cents a share to 5 cents a share.

Valuation. The shares are cheap. Consider that the stock is at a mere 0.15 times sales. In fact, the shares trade at the lowest levels since the bleakest point of the U.S. recession in the first quarter of 2009.

Cons

Supply. The world has excess amounts of steel, especially in the U.S. The result is that steel prices have plunged.

Because of this, last week Standard & Poor’s lowered its outlook on U.S. Steel from stable to negative. The firm sees little hope of a recovery for the next year or so.

Competition. Even though U.S. Steel is a large player, it still doesn’t have the scale of mega-operators like POSCO (NYSE:PKX) and ArcelorMittal (NYSE:MT). They could further squeeze rivals with price-cutting.

China. Of course, the country’s hefty economic growth has been huge steel demand. However, the momentum is starting to decelerate. So far, the Chinese government has been adept at managing the nation’s economy, but it’s not clear if Beijing can prevent a more severe downturn.

Verdict

Even with a dirt-cheap stock price, U.S. Steel has no foreseeable catalysts. If anything, the struggling economy could worsen. After all, the slowdown is hitting many countries across the globe. And a hard landing in China could be severe.

Besides, U.S. Steel’s dividend is meager, share buybacks are unlikely.

So in light of all these factors, the cons outweigh the pros on the stock.

Lock and Load (Up) on These 2 Gun Stocks

Smith & Wesson and Sturm Ruger can't keep pace with demand

Firearms sales are on fire again in the U.S., with most of the credit going to citizens stocking up now on fears that the Second Amendment will become a target if President Obama is reelected. Then there’s always the desire to defend oneself against the threat of violence, particularly by extremist groups of whatever persuasion.

Naturally, this gets me thinking about what stocks might benefit from such a notable trend. The obvious choices are gun manufacturers. Looks like that’s been the way to go.

Smith & Wesson (NASDAQ:SWHC) racked up record quarterly and yearly growth in gun sales, up 28% and 20%, respectively. The company combined this performance with an 8.7% drop in quarterly costs and 4% annually. The result pushed much of these sales to the bottom line, with continuing operations income increasing from $5.8 million all the way to $25.6 million for the quarter, and tripling annual operating income to $39 million.

Plus, Smith & Wesson has $439 million in backlogged orders, it shipped a record number of units, generated $25 million in free cash, increased gross margins, paid down $30 million in debt and bought back $6 million worth of senior notes.

Clearly, this is all great news. Even better, S&W says it foresees a 50% increase in earnings this year to a range of 60 cents to 65 cents per share. The stock trades at about 14x earnings with analysts projecting 22% annualized growth going forward. That suggests it’s a value play at only $8.70 per share.

Sturm, Ruger & Co. (NYSE:RGR) has an interesting problem. It’s receiving more orders than it can keep up with. So much so that it suspended taking new orders for two months this year. In its Q1, it saw a 33% increase in revenue on a 49% jump in unit sales, which drove a doubling of profit.

The company has a great balance sheet, with $96 million in cash and no debt. Sturm Ruger generated $21 million of free cash in the quarter, which will go toward capital spending for the year, leaving the other three quarters as pure cash flow gravy. Earnings are also expected to rise 50% this year. The stock trades at 16x earnings, suggesting it’s a value play.

These stocks are considered consumer discretionaries, so they might make a nice supplement if you hold the Consumer Discretionary Select Sector SPDR (NYSE:XLY). That ETF is full of large-cap names like Target (NYSE:TGT) and Nike (NYSE:NKE), so small-cap gun manufacturers like these are a good way to add some diversification.

Will this trend continue? A Benchmark analyst says the firm sees “long-term, secular growth from the increasing social acceptance of firearms for both personal defense and recreation/leisure.” It seems to me that those who like guns have always liked guns and won’t stop liking guns. In addition, millions of potential converts are out there — and that gives the gun manufacturers a long way to go.

Source: Investorplace

5 One-Time IPO Stars Worth Considering

These companies have struggled but could turn things around

Kiplinger’s Personal Finance  ran an article in June that highlighted some of the favorite stock picks of George Putnam, editor of the Turnaround Letter. Putnam looks for former IPO stars who’ve fallen on hard times and now trade for half the original offering price. But rather than rehash Putnam’s picks, I’ve come up with five of my own: 

Green Dot

Green Dot (NYSE:GDOT) provides reloadable prepaid debit cards to customers who earn less than $75,000 and are traditionally underbanked. It’s best known as the sole provider of the Wal-Mart(NYSE:WMT) MoneyCard, a program that now has more than 2 million active cards.

Green Dot went public at $36 to great fanfare in July 2010, gaining 22.2% in its first day of trading. Since then it has lost 44.9% and overall is down 32.6% from its IPO as of July 2.

So what do investors get for this 33% discount? A company that’s increasing revenues and earnings. In the first quarter ended March 31, it raised revenues by 21.3% and operating income by 31.2%. Management expects full-year 2012 non-GAAP earnings per share of at least $1.65.

Shares jumped 10% July 2 on the news American Express(NYSE:AXP) was pulling its Bluebird prepaid reloadable card from Wal-Mart pilot locations on lackluster sales. There’s not much downside at this point.

General Motors

In January 2011, Renaissance Capital, a leader in IPO information and analysis, named General Motors (NYSE:GM) its 2010 IPO of the Year. At the time, GM shares were up 17% from the IPO price of $33. Since then it’s been all downhill for the automaker with its shares trading below $20.

InvestorPlace contributor Tom Taulli recently highlighted some of the reasons GM is part of the Real America Index. The two that stand out for me — $9 billion in earnings and 10 million shares bought by Berkshire Hathaway (NYSE:BRK.B). The big three have figured out how to make money on just 12 million vehicles sold annually.

Plus, with the average car being 11 years old today, it’s going to be next to impossible for GM to mess up this once-in-a-lifetime opportunity.

Booze Allen Hamilton

Management consultant Booze Allen Hamilton (NYSE:BAH) went public in November 2010 at $17 a share. Since then its stock has lost 12.9%. Clearly, its reliance on the U.S. government and many of its agencies has been a huge drag on the stock. However, its noncompete clause with its former corporate consulting unit ended last July, and since that time it has focused much of its attention on the Middle East, opening an office in Abu Dhabi.

While government belt-tightening, especially prevalent in the Defense Department, has made it difficult to generate organic growth, Booz Allen still managed to increase revenues and earnings in fiscal 2012. Revenues grew 4.8% to $5.86 billion, and adjusted diluted earnings per share rose 29.8% to $1.61.

Its year was so solid, management paid out a special dividend on June 29 of $1.50 per share. At current prices that’s a 10% yield to shareholders. Not sure about investing? Its free cash flow yield is 14.7%, double rival Accenture’s (NYSE:ACN).

Zipcar

Zipcar (NASDAQ:ZIP) shares have lost 58% since closing the first day of trading at $28 back on April 14, 2011. I feel for those poor souls who bought at the high. If you’re still holding, hang in there — better times are ahead. And if you’ve never owned its stock, you might want to consider it.

I live in Toronto, one of two cities in which Zipcar is experimenting with a monthly plan where, instead of paying the $65 annual fee, you can try the service for $6 per month for a six-month commitment. Obviously, the company is feeling the heat from the rental-car companies as well as Daimler(PINK:DDAIF), which have entered the car-sharing business. I think it’s a good idea for people like myself who don’t own a second car and haven’t looked at car-sharing because of Zipcar’s $65 annual fee. The $36 teaser rate has me giving the idea a second thought.

With excellent customer-service standards, management figures that once I test out the service, I’ll sign on permanently. You can expect this trial to be rolled out across its network, putting some zip in its membership growth. Although it’s still losing money on a GAAP basis, its non-GAAP adjusted EBITDA in 2012 is expected to grow by at least 60% to $16 million on revenue of $290 million. Zipcar’s business is moving in the right direction.

Air Lease

My final pick is Air Lease (NYSE:AL), which went public in April 2011 at $26.50 a share. As its name suggests, it leases aircraft to airlines like Southwest (NYSE:LUV), United Continental(NYSE:UAL) and many others around the world. Air Lease has been in business for less than three years and went public within 15 months of starting up.

As of the end of March, it had 48 new and 66 used aircraft in its fleet with a weighted-average remaining lease term of 6.9 years, providing it with lease income for many years to come. In many ways this business is like operating a bank. Air Lease makes money by charging more to the airlines to lease the planes than it paid to buy them.

As of July 3, its stock is down 26.8% from its IPO. With extremely healthy margins, I like its chances to rebound in the future.

Source:Investorplace

Why Playing Gold Is a Dangerous Game

You can't rely on Fed policy to push prices higher anytime soon

Gold’s extraordinary run over the past few years has made bulls a lot of money, especially if they held the metal as part of a diversified portfolio. Otherwise, trying to game the market has been a fool’s errand. Wednesday’s announcement by the Federal Reserve shows just why that’s the case.

The general theory behind gold is that it responds inversely to the dollar’s behavior, and that one reason for its meteoric rise has been that it serves as an inflation hedge. Theoretically, all the money our government has been printing makes the dollar worth less. The less the dollar is worth, the more expensive goods become — also known as inflation.

Therefore, anything that has intrinsic value — such as a precious metal — should theoretically become worth more. This theory probably has a good deal of merit when you consider the multiyear run gold has had.

The Fed’s quantitative easing policy prints money so the central bank can buy bonds, thus driving down interest rates. It’s that printing of money that got gold bugs excited. They were hoping the Fed would continue that policy, but instead it decided to just continue with “Operation Twist.” This is where the Fed simply swaps short-term bonds for longer-term ones. It doesn’t actually change its balance sheet, thus it’s not inflationary.

So gold sold off, just as it did when the Fed first announced Operation Twist. It opened yesterday at around $1,610, then dropped to $1,590. Then, however, buyers stepped in and pushed the price as high as $1,620, before settling flat. And that’s the problem with trading gold these days.

So what’s an investor to do?

The first is to understand that numerous crosscurrents are at work in the gold market. There’s always the issue of supply and demand. And some of it is psychological, tied to the overall state of the global economy. That bias is certainly to the bullish side, and will remain there for some time to come.

The supply/demand side of the equation is harder to peg, because you could read a dozen different reports on gold every day and find this variable is far too difficult to actually forecast. That’s why I don’t put much stock in that part of the assessment — because nobody seems to agree on it. So I discount that.

As for the inflation angle, we’re already seeing it in a bad way, it’s just that rising prices are being hidden. Still, given gold’s huge run, it may be that this factor is already discounted in gold’s price. So there may be some slight bullish bias here, but not much.

The Fed may yet do another round of quantitative easing, but it’s not likely to make a move until after the election. If Romney wins, we may get a new face at the Fed, so this remains a big variable. I suppose the bias here is bullish for gold, if anything.

It’s possible that Europeans will start buying the dollar if instability continues across the pond, which would be bearish for gold.

So, if you put it all together, there’s probably still a slightly bullish bias at play here. I think the safest way to play gold — if you insist on playing — is to just buy the SPDR Gold Shares (NYSE:GLD) as part of a diversified portfolio, and decrease that position if and when the world is in a better place economically.

You could also purchase the Market Vectors Gold Mining ETF (NYS:GDX), which removes you from direct exposure to gold prices, but exposes you to the operational risk for these companies. That’s why you get an ETF, though, to spread that risk.

You could also do my favorite play, which is to buy companies that profit from gold’s high prices — the pawnshops. First Cash Financial Services (NASDAQ:FCFS) and EZCORP (NASDAQ:EZPW) make fantastic margins when people come to their stores to sell their gold outright, and they make great margins if people pawn a gold item and fail to redeem it. They turn it into scrap.

Both of these stocks are significantly undervalued and not even close to being totally dependent on gold as revenue sources.

But whatever happens, don’t just trade gold on the technicals. I’ve tried this several times, and was convinced I’d have a winning trade this time around in May. I was dead wrong. Thank goodness for stop loss orders!

Source: InvestorPlace