Schaeffer's Trading Floor Blog

Earnings on Deck: Michael Kors Holdings Ltd, Coach Inc, and CVS Caremark Corporation

Taking a closer look at KORS, COH, and CVS ahead of their earnings results

by 8/1/2014 10:47 AM
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While next week is light on the economic front, there will be plenty of earnings reports to capture traders' attention. Kicking things off bright and early Monday morning will be apparel issue Michael Kors Holdings Ltd (NYSE:KORS), while accessories designer Coach Inc (NYSE:COH) and pharmacy name CVS Caremark Corporation (NYSE:CVS) will take to the stage ahead of Tuesday's open. Here's a quick look at KORS, COH, and CVS as earnings approach.

  • KORS has struggled in recent months, with the shares off 18% from their most recent high of $98.96, tagged in late May. However, this pullback was contained by the equity's 320-day moving average, and at last check, the stock was lingering near $81.14. If past is prologue, KORS could be poised to extend its rebound after the company steps into the earnings confessional Monday morning. Specifically, the stock has averaged a single-session post-earnings gain of 7.2% over the past eight quarters, which widens to 9.2% going out one week. Plus, the security could benefit from a round of upgrades, should Michael Kors Holdings Ltd (NYSE:KORS) turn in another earnings win. At present, 56% of covering analysts maintain a "hold" or "sell" suggestion toward the stock, leaving the door wide open for a re-evaluation of ratings.

  • COH's post-earnings price action over the past eight quarters paints a decidedly different picture, with the shares averaging a loss of 6.1% in the session subsequent to reporting. This only highlights the equity's withstanding technical troubles, though, with COH down nearly 39% year-to-date to trade at $34.29. Not surprisingly, sentiment is tilted toward the skeptical side, with 74% of covering analysts levying a "hold" or "sell" suggestion toward Coach Inc, and 11.2% of the stock's float sold short. For Coach's fiscal fourth quarter, Wall Street is calling for a per-share profit of 53 cents -- a 36-cent decline from what the company banked one year ago.

  • Following recent reports of a fresh acquisition, CVS will unveil earnings Tuesday morning. Over the past eight quarters, the company has matched or exceeded analysts' bottom-line estimates seven times, resulting in an average single-session post-earnings gain of 0.2%. On the charts, shares of CVS have been guided higher by their 80-day moving average since mid-October, with the equity last seen lingering near $76.84. Analysts, meanwhile, aren't expecting much more upside for the stock, considering its consensus 12-month price target of $81.39 stands at a slim 6% premium to current trading levels.

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Analyst Downgrades: Alcatel Lucent SA (ADR), 3D Systems Corporation, and Valeant Pharmaceuticals Intl Inc

Analysts downwardly revised their ratings on ALU, DDD, and VRX

by 8/1/2014 9:30 AM
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Analysts are weighing in today on France-based networking name Alcatel Lucent SA (ADR) (NYSE:ALU), 3-D printing expert 3D Systems Corporation (NYSE:DDD), and specialty drug maker Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Here's a quick roundup of today's bearish brokerage notes on ALU, DDD, and VRX.

  • ALU has had a rough 2014, down 22% so far, and gapping 10.7% lower yesterday to finish at $3.43, as weaker demand for its core networking products eclipsed an earnings report that largely met expectations. Alcatel Lucent SA (ADR) was subsequently slapped with price-target cuts from MKM Partners (to $4 from $4.50), Nomura (to 3.50 euros from 4 euros), and SocGen (to 3 euros from 3.25 euros) -- though Deutsche Bank upped its own target slightly to 2.90 euros from 2.80 euros. In general, the Street has taken a mixed view of the shares. While 60% of covering analysts have given the stock a "hold" or worse rating, ALU's consensus 12-month price target of $4.79 stands at a roughly 40% premium to current trading levels.

  • DDD shed 10.6% yesterday to close at $50.13, following a lackluster quarterly earnings report. These technical troubles prompted a round of bearish notes from no fewer than six brokerage firms, including downgrades today from RBC (to "sector perform" from "outperform") and Piper Jaffray (to "neutral" from "overweight"). Additional downgrades could be on the way, too, as two-thirds of 3D Systems Corporation's 15 covering analysts have handed out "buy" or better recommendations. In addition, the stock's consensus 12-month price target of $63.84 represents a 27.3% premium to Thursday's closing price.

  • Finally, VRX suffered a nearly 7% loss yesterday and closed at $117.39, after the firm cut its full-year profit and revenue forecast. As a result, the company saw its price target slashed at Cantor (to $167 from $209), CIBC (to $155 from $160), Piper Jaffray (to $135 from $151), and Susquehanna (to $160 from $170). Meanwhile, short sellers were likely cheering Valeant Pharmaceuticals Intl Inc's Thursday sell-off; 6.3% of the equity's float is sold short, which would take more than 13 sessions to cover, at VRX's typical daily trading volume.

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U.S. stock futures are wading in red ink this morning, pressured by a softer-than-forecast jobs report for July. In company news, today's stocks to watch include gaming specialists Scientific Games Corp (NASDAQ:SGMS) and Bally Technologies Inc. (NYSE:BYI), electronics retailer RadioShack Corporation (NYSE:RSH), and Wall Street newcomer Mobileye NV (NYSE:MBLY).

  • Scientific Games Corp (NASDAQ:SGMS) has offered to pay roughly $3.3 billion, or $83.30 per share, to acquire sector peer Bally Technologies Inc. (NYSE:BYI). Including the assumption of BYI debt, the deal is valued at $5.1 billion. SGMS is up 23.3% ahead of the open, while BYI has bounced 31.2%. (AP, via Yahoo! Finance)

  • RadioShack Corporation (NYSE:RSH) is in its death throes, according to CNNMoney. RSH shares on Thursday tumbled to an all-time low of $0.62, and the retail chain reportedly has only $62 million in cash on hand -- which means it's not even liquid enough to shutter underperforming locations. Representatives for RSH did not comment for the story. (CNNMoney)

  • Israeli software firm Mobileye NV (NYSE:MBLY) is set to make its trading debut on the Big Board today, after raising $890 million through its initial public offering (IPO). MBLY sold 35.6 million shares at $25 each, topping its upwardly revised price range of $21 to $23 per share. (Bloomberg)

  • Apple Inc. (NASDAQ:AAPL) is planning to cut 200 employees from its freshly acquired Beats division, representing roughly 29% of the unit's work force. Sources say most of the layoffs will be made to eliminate redundancies with the current AAPL payroll, such as positions in the human resources and finance areas. (Mashable)

  • On the earnings front, The Procter & Gamble Company (NYSE:PG), Tesla Motors Inc (NASDAQ:TSLA), LinkedIn Corp (NYSE:LNKD), and GoPro Inc (NASDAQ:GPRO) were among the big names to report their latest quarterly results. (CNBC; Business Insider)

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Analyst Upgrades: SunPower Corporation, Tesla Motors Inc (TSLA), and T-Mobile US Inc

Analysts upwardly revised their ratings on SPWR, TSLA, and TMUS

by 8/1/2014 9:00 AM
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Analysts are weighing in today on solar concern SunPower Corporation (NASDAQ:SPWR), electric automaker Tesla Motors Inc (NASDAQ:TSLA), and telecom name T-Mobile US Inc (NYSE:TMUS). Here's a quick roundup of today's bullish brokerage notes.

  • SPWR reported second-quarter earnings and announced plans for a new factory last night, and was met with a pair of bullish brokerage notes this morning. Specifically, Brean Capital upgraded the stock to "buy" from "hold," and RBC upped its price target to $36 from $35, to go along with a "sector perform" rating. SunPower Corporation has had a solid year, tacking on 23.2% in 2014 to trade at $36.73, and if it continues to muscle higher, additional upgrades could be on the way. Specifically, six out of 10 covering analysts give the shares a tepid "hold" recommendation (compared to four "strong buys").

  • TSLA also entered the earnings confessional yesterday afternoon and topped expectations. What's more, the shares subsequently saw their price target raised to $170 from $163 at J.P. Morgan Securities, and are trading higher in pre-market activity. On a longer-term basis, Tesla Motors Inc has fared well, advancing more than 48% year-to-date to hover near $223.30. Nevertheless, skepticism abounds toward the equity, as more than one-quarter of TSLA's float is sold short. Should the stock keep driving higher, a short-squeeze situation could materialize.

  • Finally, TMUS grabbed headlines yesterday, with the big news being a buyout offer from French telecom name Iliad SA. These developments are being applauded on the Street, where T-Mobile US Inc has received price-target hikes from J.P. Morgan Securities (to $40 from $36) and Nomura (to $32 from $30). From a broader perspective, however, the brokerage bunch is mixed toward the equity. Nine covering analysts have given TMUS a "buy" or better endorsement, whereas eight have doled out either a "hold" or "sell" rating. Plus, the consensus 12-month price target of $35.21 is less than 7% from the stock's current perch at $32.94.

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U.S. stocks are broadly lower this afternoon, as a rising employment cost index suggests the Fed may be forced to hike rates sooner than expected. Additionally, traders are weighing the prospect of a potential Argentine default. Among the names making notable moves are commercial printer VistaPrint Limited (NASDAQ:VPRT), 3-D printer specialist 3D Systems Corporation (NYSE:DDD), and media company World Wrestling Entertainment, Inc. (NYSE:WWE). Here's a quick look at how VPRT, DDD, and WWE are faring on the charts today.

  • VPRT has spiked 27.8% today to trade at $48.20, narrowing its year-to-date loss to 15.2%. Last night, VistaPrint Limited crushed Wall Street's quarterly profit and revenue predictions, and the news likely has short sellers rushing to cover. Short interest accounts for nearly 28% of VPRT's float, or 23.4 times the stock's average daily trading volume. Meanwhile, analysts have taken note of the firm's fundamental outperformance. Earlier in the session, Jefferies upped its price target to $51 from $49, while Topeka Capital lifted its target to $50. Today's rally has propelled VPRT north of its 80-day moving average for the first time since late April, but the stock's positive momentum fizzled out around the $49 level -- which is home to its formerly supportive 320-day trendline.

  • DDD is off more than 10% to $50.32, widening its 2014 loss to roughly 46%. Traders are responding to a second-quarter earnings miss, with CEO Avi Reichental noting that "transitional forces temporarily pressured our gross profit margin." Following the profit miss, J.P. Morgan Securities lowered its price target on 3D Systems Corporation to $49 from $54.50. Additional target cuts could be on the horizon for DDD, as the equity's average 12-month price target of $66.13 is an ambitious 31.4% north of its current perch.

  • WWE is up 3.7% on the day in the wake of a slimmer-than-forecast quarterly loss. The shares peaked at $13.40 earlier in the session, but WWE has since pared its gains to trade at $12.54 -- which suggests short-term resistance here isn't giving way just yet. The $13 level has rejected multiple rally attempts by World Wrestling Entertainment, Inc. since July 17. However, a capitulation by some of the weaker bearish hands could help WWE continue to challenge this technical ceiling, as a hefty 22% of the security's float is sold short.

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