PSS opened this morning at $7.76. So far today the stock has hit a low of $7.68 and a high of $9.70. As of 12:00, PSS is trading at $9.11, up $1.85 (25.5%). The chart for neutral and S&P gives PSS a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $5 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 19.0% return in just three and a half months as long as PSS is above $5 at March expiration. Collective would have to fall by more than 45% before we would start to lose money. Learn more about this type of trade here.
PSS hasn't been below $5 at all except for one day in the past year and has shown support around $6.50 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PSS or FDO.
Youth-retailer Aeropostale (NYSE: ARO) had a much better third quarter than I thought it would have. I was expecting a lower earnings growth rate and a worse performance in terms of same-store sales. Diluted earnings per share actually rose over 30%, coming in at $0.63. Way to go. And this performance beat expectations by a penny, according to Reuters Estimates. Net sales increased 17%. Double-digit expansion in both the top and bottom lines really is something to crow about in this terrible mall environment.
At least as far as I'm concerned, the 5% fall in same-store sales for the month of November wasn't too bad, especially considering that comps increased 7% for Q3 as a whole. Plus, on a year-to-date basis, comps rose 7%. Management can be proud of its achievements. However, that 5% drop in comparable sales for November is, unfortunately, a sticking point in terms of buying the retailer's stock. The economy has gotten much worse since I wrote about Aeropostale back in August. This decline might be a precursor to more bad times ahead. In fact, the stock is no longer as strong as it was earlier in the year. Shares of Aeropostale are trading closer to a 52-week low as opposed to a 52-week high.
There's no question that Aeropostale, whose colleagues at the mall include Abercrombie & Fitch (NYSE: ANF), Gap (NYSE: GPS) and American Eagle Outfitters (NYSE: AEO), has been efficiently marketing to its target audience. There's also no question that now may not be the time to roll the dice on a business that caters to fickle demos. Personally, I think Aeropostale offers value at these levels. But I'd still rather wait for the macro economy to improve before getting into this retailer.
Disclosure: I don't own any company mentioned; positions can change at any time.
General Motors Corp. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler executives are returning to Congress for what many see as a crucial hearing as the automakers hope will persuade skeptical lawmakers to bail them out with a $34 billion in emergency aid. Still, a top Senate Democrat wants to hand their problem to the Federal Reserve. Automakers executives are also considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, according to Bloomberg sources. GM and Ford shares are down 6.1% and 7.7% in premarket trade (8:10 am). As of 11:45, GM shares declined nearly7%, Ford's were flattish.
Wal-Mart Store Inc. (NYSE: WMT) November same-store sales were expected to fall 7% gain 2.1%, but rose 3.4%. WMT is trading 2.8% higher in premarket (8:10 am). WMT shares traded higher during the session. Costco Wholesale Corp (NASDAQ: COST) reported that November same-store sales fell 5%. Limited Brands Inc. (NYSE: LTD) reported November same-store sales fell 12%.
Toll Brothers (NYSE: TOL)reported a loss of nearly $80 million, or 49 cents per share, including about $175 million in pre-tax writedowns. Without the charges, the company reported a profit of 23 cents per share. Revenue fell to $698.9 million from $1.17 billion a year ago. TOL beat analyst estimates of 46 cents per share on revenue of $681.4 million, according to Thomson Reuters. TOL decline to issue guidance for next year. As of 11:47, TOL shares were 9.5% higher.
Merck & Co. (NYSE: MRK) issued guidance, saying net income in 2009 may miss analysts' expectations as the drug maker trying to make up for falling sales of its top-selling cholesterol pills with cost cuts, including job reduction. Merck made no change in its forecast for 2008 earnings. MRK shares traded 3.6% lower in premarket (8:14 am). Shares of MRK traded down 3.6% by 11:47.
Do corporate management teams and board of directors manipulate stock prices?
You bet they do.
Despite being charged to act in the best interest of shareholders, those running publicly traded companies will often go to extremes to convince the market of value that may or may not be there.
We all remember the stories of the accounting games that were used to feed the Wall Street beat-the-estimate game. In the days of the crazy bull market, beating the number would be rewarded with huge gains in stock value.
Now those days are over, and we are in a different market and economic environment, but the temptation to manipulate a stock is still alive and well in corporate board rooms.
The owner and operator of Sears and Kmart stores reported losses yesterday that were wider than expected. The company lost more than $1 per share on revenue of $10.7 billion.
Excluding special items, SHLD lost 90 cents versus an expectation of minus 49 cents.
The big losses in the period were widely expected. What was not expected was the company pulling future guidance given the weak economy.
Typically, such lack of confidence in the future is met with skepticism by the market. Perhaps that is why in announcing the news SHLD also mentioned that it would start buying back up to $500 million of stock.
Now why would they go and make that statement, especially at a time when cash is king?
If you were watching the market today, it really felt like a mixed bag despite the rally and sell-off. The Fed's Beige Book said that all sectors showed weakness with weakening across the board. Rumors that Hank Paulson might ask Congress to approve a second wave of TARP funds failed to generate any hard interest today.
Constellation Energy Group, Inc. (NYSE: CEG) traded up on reports that the state-controlled utility group Electricite de France SA in France is rivaling a Warren Buffett bid for the nuclear assets. The bid is $4.5 billion for 50% of the nuclear assets. Unfortunately, the gains here faded throughout the day.
Marvell Technology Group's (NASDAQ: MRVL) Q3 earnings report had some great numbers that made me want to consider the stock as a potential buy. However, some things about the long-term price action of the company's shares makes me want to avoid the stock altogether.
The bottom line for the storage and networking tech company increased 64% to $0.23 per diluted share; this number beat estimates by three pennies. Pretty cool, right? Here are a couple more positives: operational cash flow increased 41% on a sequential basis compared to Q2 of this year, and free cash flow increased 47% on the same basis. On a year-over-year basis, operational cash flow increased more than ten times, leading to a huge increase in free cash flow. And non-GAAP gross margin, while not seeing an increase, saw fit to at least remain flat instead of decreasing. Not bad. Marvell's shares traded 8% higher in premarket action.
Here's the deal, though. I'm not sure I'd want to buy Marvell at this point in the dreadful economic cycle. Going back to the long-term price action, there's no escaping the significant decline in the stock price as a result of potential future weakness in its business. For example, recently, Melly Alazraki wrote about Apple's (NASDAQ: AAPL) iPhone and how sales of that device might be affected by the recession. Marvell is a supplier to the iPhone.
With the stock in single-digit territory, and with the global markets acting horribly, I just can't see buying Marvell. Indeed, I enjoyed the earnings report. But one must consider the company is unsure about demand for the stuff it sells going forward. Maybe Marvell might make a trade or something, but I'm not ready to go long-term on it just yet.
Disclosure: I don't own any company mentioned; positions can change at any time.
TheStreet.com's Jim Cramer says we're in a relentlessly terrible market.
Slew of bad news to wake up to. Freeport (NYSE: FCX) (Cramer's Take) eliminates its dividend to conserve cash as copper has had an unmitigated decline. Impairments coming; ugly, but somewhat predictable given the stunning stock drop. Research In Motion (NASDAQ: RIMM) (Cramer's Take) overnight becomes Nokia (NYSE: NOK) (Cramer's Take) or maybe even Garmin (NASDAQ: GRMN), (Cramer's Take) as the commoditization of tech continues apace. We can sell everything cell-phone-related off that. Tech down again.
Too bad, because it wrecks the rally from yesterday and confirms -- endlessly -- how bad this market is.
It's also too bad because China was up big last night, which I believe will put in a bottom to the mineral and steel market components someday. Pricing will get tight eventually as U.S. Steel (NYSE: X) (Cramer's Take) and Freeport are taking out a huge amount of capacity. They have to; the pricing falls are that devastating. There will be plenty of companies in these industries that simply won't survive because of the pricing.
General Motors Corp. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler appealed to Congress for a bailout Tuesday. GM said it wouldn't last till New Year's without an immediate $4 billion and is asking for as much as $18 billion to keep afloat and survive. Together they asked for $34 billion. Meanwhile, November auto sales plunged 37% with Ford's U.S. sales declining 31%, GM's falling 41% and Chrysler LLC's dropping 47%. Overseas rivals didn't do better. GM shares traded 5.2% lower and F's 1.9% higher in pre-market (7:51 and 7:55 am respectively).
Research In Motion Ltd. (NASDAQ: RIMM)lowered its financial earnings per share, revenue and new subscriber accounts guidance for its third-quarter, saying it has added fewer new subscribers than expected as the economy slowed. This news will likely have an effect on Apple Inc. (NASDAQ: AAPL) as well. RIMM shares already hit a low Tuesday following an estimate cut from JPMorgan. RIMM shares traded 5.6% lower in premarket action (7:58 am). AAPL shares were down 2% in premarket trade (8:09 am).
Bank of America (NYSE: BAC) could end up cutting 30,000 jobs as it absorbs Merrill Lynch (NYSE: MER), three times as many as previously estimated, sources told CNBC, as BAC's CEO is trying to increase cost cuts. The majority of the layoffs are likely to come from Merrill's side of the business. BAC shares were 3% lower in premarket trade (7:59 am).
Constellation Energy Group Inc. (NYSE: CEG) finds itself in the midst of a bidding war as Electricite de France SA, the world's biggest operator of atomic reactors and which owns 9.5%, offered to pay $4.5 billion for half of CEG's nuclear business to expand in the U.S. CEG agreed earlier this year to be bought by Warren Buffett's Berkshire Hathaway Inc.'s MidAmerican Energy Holdings Co. for $4.7 billion. CEG shares gained over 25% in premarket trading (8:00 am).
It must be something in the water in Bentonville, Arkansas. The tiny town is home to Wal-Mart (NYSE: WMT), of course, but also the less famous America's Car-Mart (NASDAQ: CRMT), which operates 92 used car dealerships in the South-Central United States.
While the auto industry is mired in the biggest downturn in its history, America's Car-Mart is posting some pretty impressive numbers.
The company reported its second quarter results today, and achieved same-store sales growth of 5.3%. That compares quite nicely to Carmax's (NYSE: KMX)17% decline for its second quarter.
Sears Holdings (NASDAQ: SHLD - option chain) shares have jumped higher today even after the company announced a Q3 loss that included slowing sales and falling margins. Earnings and revenues fell, but an extension of the company' s buyback plan is boosting the shares today, along with a positive outlook for the company's holiday layaway promotion. It might just be that investors expected even worse results from the beleaguered retailer. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on SHLD.
SHLD opened this morning at $33.98. So far today the stock has hit a low of $31.55 and a high of $38.47. As of 12:20, SHLD is trading at $36.67, up $4.83 (15.2%). The chart for SHLD looks bearish and S&P gives SHLD a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $22.50 range.
General Motors Corp. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler plan to present their plan to Congress today as they ask for $25 billion of help. They would refinance their debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies. Meanwhile, autmakers will also release November sales and analysts expect them to post large declines of between 20-40%. GM shares rose 10% in pre-market trade and Ford's added 5.1% (8:02 am). By around 11:42, GM shares rose 6.5% and Ford's 10.2%.
Sears Holdings Corp. (NASDAQ: SHLD) reported a much wider-than-expected third-quarter loss due to an 8% decline in sales and store closing charges. Excluding the charges, Sears reported a loss of 90 cents per share in the latest period. Analysts had expected, according to Thomson Reuters, a loss of 49 cents per share. The company did announce a $500 million stock buyback. By around 11:42 SHLD shares soared 17.9%.
Goldman Sachs Group Inc. (NYTSE: GS), known so far for being able to mostly dodge most of its rivals' problems, may now, according to industry insiders The Wall Street Journal quotes, report a net loss of as much as $2 billion for its quarter ended Nov. 28 -- its first loss as a public company. Fourth-quarter loss could be as much as $5 a share, five times the current analyst consensus. GS shares trade 1% lower in premarket. By around 11:42 Goldman shares declined 2.2%.
U.S. stock futures were higher Tuesday morning, a day after stocks returned most of last week's gains as the Dow dropped 680 points -- one of its worse ever.
Automakers will be in focus today as no only do they return to Capitol Hill armed with a plan this time as they ask for aid, they will also release November sales. Analysts expect to see large sales declines.
Overseas, Asian markets sank following Wall Street's deep selloff, with the Nikkei dropping below 8,000. European stocks, however, were little changed as indications grew of a modest rebound on Wall Street.
Oil prices continued Monday's retreat, falling to a 3-year low below $48 a barrel Tuesday as the U.S. economic news combined with the savage selloff in the stock market gave a bleak picture for future demand.
The retail industry will also be in focus today as several retailers are scheduled to report earnings. Sears had already reported it had swung to a loss.
Santa is losing money on every delivery. That makes paying for reindeer feed tough.
Analysts looking at US retail sales for Black Friday say that there has been a slight improvement over last year. But, that may not mean much to retailer bottom lines. According toThe New York Times, "The bargains that drove shoppers to stores were so stunning, analysts said that retailers - already suffering from double-digit sales declines the last two months - would probably see their profits erode even further."
Who cares if we lose money on every sale. We can make it up on volume. That has never worked and this year is no exception.
What the analysis does mean is that the retail recovery in the face of a recession is a mirage, a convenient way to make investors in store company stocks feel better. Until fourth quarter earnings reports come out that is.
The fact that Black Friday total sales saw a minor improvement is a sucker play. It may give a slight boost to GDP, but that makes GDP an unreliable indicator of how some American companies are doing.
The economy may look like it is rebounding ever so slightly. But that will not matter much if companies go further into the red. All it means is more job losses down the road as retailers try to improve their bottom lines.
Douglas A. McIntyre is an editor at 247wallst.com.
Last week, Bank of Montreal (NYSE: BMO), one of Canada's oldest and largest banks, reported growth in its fiscal fourth-quarter earnings. But it may be the only one that does, as at least two of the Canadian banks scheduled to report fourth-quarter numbers this week have already released preliminary results that warn of lower earnings due to debt write-downs and trading losses.
Analysts surveyed by Thomson Reuters expect Toronto-based Canadian Imperial Bank of Commerce (NYSE: CM) to post earnings 42.6% lower than a year ago, or $1.28 per share. CIBC beat estimates by a penny in the third quarter, but missed by a penny in the period before that. The bank faces a class-action lawsuit related to investments in collateralized debt obligations consisting of U.S. subprime mortgages. Shares have climbed 20.7% from a recent 52-week low of $39.52, but are down 37.8% in the past three months.
Toronto Dominion Bank (NYSE: TD), Bank of Nova Scotia (NYSE: BNS), and Royal Bank of Canada (NYSE: RY) are expected to report more modest earnings declines of $1.01 per share, $0.73 per share, and $0.83 per share, respectively. All three Toronto-based banks topped estimates in the third quarter. Toronto Dominion and RBC have recently announced plans to offer shares in order to raise capital. Toronto Dominion and Scotiabank have been trading near 52-week lows, and their share prices are down around 39% in the past three months. But only Toronto Dominion has a consensus buy recommendation from analysts.
Collective Brands (NYSE: PSS - option chain) shares have moved higher today after the company, which includes Payless Shoe Source and Stride Rite reported a third-quarter profit of $47.5 million, or 75 cents per share, on revenue of $862.7 million. PSS's adjusted profit of 42 cents per share met analysts' estimates of 42 cents per share on revenue of $840.7 million. In this environment, merely meeting estimates warrants a 20+% jump in stock price. It seems that PSS is keeping up its profits the same way discounters like Family Dollar (NYSE: FDO) have by taking advantage of cost-conscious consumers. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on PSS.
Do corporate management teams and board of directors manipulate stock prices? 
If you were watching the market today, it really felt like a mixed bag despite the rally and sell-off. The Fed's Beige Book said that 
It must be something in the water in Bentonville, Arkansas. The tiny town is home to 
Last week, 
Best & Worst in Money 2008: Most shocking financial collapse
Closing Bell: Stocks slump as AMD, AT&T, GM and Merck decline
Global Q&A: A rocky road, but profits ahead
