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Early Edge: Tiffany & Co., Ford Motor Co., Hartford Financial Services, and Under Armour

The upscale jeweler rang up stronger-than-expected holiday sales

by 1/12/2010 9:28:23 AM
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Today's column includes a rosy outlook from Tiffany & Co. (TIF), eco-friendly production plans from Ford Motor Company (F), a stronger-than-expected forecast from Hartford Financial Services (HIG), and a couple of bullish notes for Under Armour, Inc. (UA). Each day, Early Edge focuses on the hot stocks in the news and gives you a unique insight into each stock's sentiment backdrop. Our time-tested contrarian approach centers on options, and gives you the trading tools to approach the day with a much-needed edge over the investing herd.

Tiffany & Co.

Tiffany & Co. (TIF: View sentiment for TIFsentiment, chart, options) hiked its full-year earnings and revenue forecast this morning, citing stronger-than-expected holiday sales. The luxury retailer saw U.S. same-store sales spike 12% during the holiday season, while same-store sales climbed 8% in constant currencies. "We experienced growth across a wide range of jewelry categories and price points," noted Chief Executive Michael Kowalski.

TIF price chartAs a result, TIF now expects full-year earnings of $2.07 to $2.12 per share from continuing operations, compared to its prior outlook for $1.88 to $1.98 per share. The high-end jeweler is now on pace to ring up net sales of approximately $2.70 billion for the full year. TIF's new forecast outpaces analysts' consensus estimates, which called for a fiscal-year profit of $1.92 per share on $2.65 billion in revenue.

Despite its newly boosted forecast, TIF shares are fractionally lower in pre-market trading. However, any weakness in the equity could be contained by support at its 10-week moving average, in the low 40s. This trendline, in conjunction with its 20-week counterpart, has pushed TIF higher since March 2009.

If the stock's reaction to this good news seems lackluster, it could be due to last night's ill-received earnings from Alcoa (AA) -- but it's also worth noting that there's plenty of optimism already priced into TIF. Short interest on the shares plummeted by 22.4% during the past month as the weaker bearish hands hit the exits, and Zacks reports that not a single analyst offers up a "sell" rating on the security.

Option players are also bullishly aligned, with the International Securities Exchange (ISE) reporting that traders have bought to open 1.61 calls for every put on TIF during the past two weeks. Plus, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.37, just two percentage points from an annual low.

Ford Motor Company

Ford Motor Company (F: View sentiment for Fsentiment, chart, options) plans to invest $450 million to build its next-generation hybrid vehicle and a rechargeable plug-in hybrid at its Michigan Assembly Plant. Previously, the facility was used to churn out gas-guzzling sport utility vehicles. Production on the more eco-conscious cars will start in 2012, and the automaker says the initiative will create 1,000 new jobs in Michigan.

Additionally, Ford says it will relocate production of lithium-ion battery packs from Mexico to Michigan. The automaker recently won $188 million in state tax incentives and credits, allowing it to make some critical reinvestments in its business.

Ford shares are fractionally lower ahead of the open, keeping pace with a downside bias in the broader market. The stock recently rallied beyond short-term support at its 10-day moving average, which could step up to contain any further pullback.

Once the disappointment over Alcoa's earnings fades, F looks well-positioned to benefit from an unraveling of negative sentiment. Despite the equity's 52-week advance of 359%, its SOIR is currently docked at 1.27 -- its highest perch in the past 52 weeks, marking an annual bearish climax. What's more, short interest rose by 4.1% during the past month, and these pessimistic positions now account for 4.4% of the stock's float.

Hartford Financial Services

Hartford Financial Services (HIG: View sentiment for HIGsentiment, chart, options) is one stock that's successfully fighting Wall Street's negative momentum this morning. The insurance issue reported today that it now expects fourth-quarter core earnings per share of $1.45 to $1.60, significantly higher than its previous forecast for core earnings of 65 cents to 80 cents per share.

"The core businesses of The Hartford performed well in the fourth quarter," stated Liam E. McGee, who serves as the company's chairman, president, and CEO. "This is our third consecutive quarter of improving core earnings results, demonstrating the underlying strength of The Hartford's franchise."

HIG has rallied more than 8% in electronic trading. Today's gains will help the stock solidify its newfound foothold atop resistance from its 20-month moving average. If the shares can finish January on the north side of this trendline, it would mark the first monthly breach of this resistance level since November 2007.

If bearish speculators decide to unwind their losing positions ahead of Friday's expiration, it could provide an additional tailwind for HIG. The shares are trading well above heavy put open interest of 9,968 contracts at the January 2010 22.50 strike, and short interest accounts for roughly 4% of the security's float.

Under Armour, Inc.

Under Armour, Inc. (UA: View sentiment for UAsentiment, chart, options)

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