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Early Edge: Oshkosh Corp., E*Trade Financial, Potash Corp., and Synovus Financial

Strong military sales led to a blowout quarter for the military truck maker

by 4/29/2010 9:28:58 AM
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Potash Corp. of Saskatchewan

Potash Corp. of Saskatchewan (POT) said today that its first-quarter net income arrived at $449 million, or $1.47 per share, marking the second-highest first-quarter results in the fertilizer firm's history. Sales for the period weighed in at $1.71 billion, up from $923 million in the year-ago period. Analysts were looking for POT to report a slimmer profit of $1.32 per share on $1.48 billion in revenue.

Looking ahead to the remainder of 2010, POT expects full-year earnings to fall between $4.50 and $5.25 per share, compared to analysts' expectations for net income of $5.15 per share.

Traders seem less than thrilled with POT's guidance, as the shares have shed about 1% in pre-market trading. The equity is poised to continue a short-term slump beneath pressure from its 10-day and 20-day moving averages, which haven't been bested on a daily closing basis since March 22.

However, a number of options players already seemed to have low expectations for today's earnings report. The largest overnight open interest change for POT was at the out-of-the-money May 120 call, which added 1,284 contracts as a result of Wednesday's trading. The majority of these calls changed hands at the bid price, suggesting they were sold to open.

Synovus Financial Corp.

Synovus Financial Corp. (SNV) reported last night that it would price an offering of 255 million common shares at $2.75 apiece, representing a discount to the stock's closing price of $3.18 on Wednesday. The regional banking issue is selling stock and tangible equity units in an attempt to raise $1 billion in cash for working capital and general corporate purposes.

News of the discounted offering has pressured SNV to a loss of 6% ahead of the bell, with the equity set to open below the $3 level. The stock has added an impressive 55.1% year-to-date, but it's now on the verge of breaching support at its 10-week moving average for only the second time since late December 2009.

Speculative investors are banking on SNV to decline, with the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.49 ranking higher than 92% of comparable readings taken during the past year. Likewise, short interest surged by 37% during the past month, and now accounts for 15.8% of the equity's float. With so much pessimism priced into the stock already, additional downside could be relatively minimal.

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