Filed under: Products and services, Merck and Co (MRK)

Merck & Co. (NYSE: MRK), like its pharmaceutical competitors, has seen better days. A raft of patent protection expirations, bad PR, concerns over health risks for many of its drugs, and a lack of pipeline products, have all combined to stomp on one of the largest pharmaceutical firms in the world. Is the future brighter? Possibly, but there’s a lot of risk to go with it.

Merck says that it will continue to develop experimental drugs for cholesterol and obesity [subscription required]. Nothing new there, as those two health conditions are increasing in numbers in the U.S. (obesity in particular). But Merck will be developing new drugs in these areas where the competition has miserably failed in the recent past due to safety problems.

What can Merck do to ensure its efforts to not meet the same fate? That is a question without a clear answer, although stakeholders long in MRK shares should be asking that question right now. It doesn’t have the best track record, with the Vioxx lawsuit mess and strong competition for one of its most popular blockbuster drugs, the Zocor cholesterol product.

Merck, embracing some recent science, believes that raising good cholesterol could reduce the risk of heart problems beyond what can be accomplished by existing statin drugs (and let’s hope they are right). Statin drugs work by lowering bad cholesterol, and although the approach works for many, it’s not the best route according to many medical experts.

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Filed under: Exxon Mobil (XOM)

Exxon Mobil (NYSE: XOM) said yesterday that “it wants to anchor a floating liquefied natural gas (LNG) terminal 20 miles off the coast of New Jersey.” If regulators approve the terminal, it would cost more than $1 billion to build, but it would be able to supply about 1.2 billion cubic feet of natural gas per day, enough to meet the needs of more than 5 million residential consumers. This would ease the supply of natural gas to New Jersey and neighboring New York.

Since the gas is cooled to liquid form, it can be shipped through tankers, rather than pipelines, thus allowing nations the use of more gas than is nearby. Exxon expects demand for gas in North America to rise above the ability of drillers to supply it. It also expects worldwide demand for LNG to more than triple to 500 million metric tons a year in 2030, 20% of which will be consumed in North America, meaning America would have to rely on imported gas. Hence the need for the terminal.

Continue reading Exxon Mobil plans liquefied natural gas terminal off New Jersey

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Filed under: Earnings reports, Analyst upgrades and downgrades, Technical Analysis, Stocks to Buy

Copart (NASDAQ: CPRT) provides owners of salvage vehicles with a full range of online remarketing services. The firm’s auction format allows such clients as insurers and rental agencies to display their vehicles to licensed dismantlers, rebuilders, used car dealers and exporters in more than 85 countries. Most of the vehicles offered are damaged, trade-ins, or repossessions. Copart also operates a search engine for used parts and provides vehicle storage at 136 facilities in North America and the UK. The company sells over a million vehicles a year.

The firm pleased investors last week, when it reported fiscal Q1 EPS of 41 cents and revenues of $184 million. Analysts had been looking for 38 cents and $173.3 million. BB&T Capital Markets subsequently reiterated its “buy” rating on the shares and Barrington Research repeated its “outperform” recommendation.

Continue reading Copart (CPRT) share price moving in bullish ‘pennant’

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Filed under: Products and services, Sears Holdings (SHLD)

Sears Holdings (NYSE: SHLD), which has been lately for poor quarterly results, said this week that it will reduce the use of Polyvinyl Chloride (PVC) from plastic packages in its stores.

Sears said that it has adopted a policy of identifying more sustainable choices for product packaging in an effort to reduce “environmental risks tied to the manufacture, use and disposal of PVC.”

Kudos to Sears here. However, if this story is being pitched as a good piece of PR in a year filled with performance disappointments from the retailer, why now? Chairman Eddie Lampert has lashed out at critics who continue to complain about the horrid retail performance of the combined Sears/K-Mart, although Lampert’s use of Sears Holdings as a cash-flow company (as opposed to a retailer) is still under review by the market — and misunderstood, according to many.

Regardless, every retailer should look at alternatives to PVC for all those hundreds of millions of plastic packages that eventually end up in landfills. Packages that break down naturally should be the packaging material of choice, and when Sears makes this kind of commitment, other retailers should follow. A press release from an under-performing company may be worth more as a motivator to other companies than as a rescue effort for the company’s sullied reputation.

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Filed under: Earnings reports, General Electric (GE), Technical Analysis, Stocks to Buy

Analogic Corporation (NASDAQ: ALOG) designs and manufactures medical and security imaging processing systems, primarily for original equipment manufacturers. Its devices are used in such products as magnetic resonance imagers, ultrasound transducers, checked luggage scanners and explosives detection systems. Major customers include L-3 Communications (NYSE: LLL), Philips (NYSE: PHG) and General Electric (NYSE: GE).

The company pleased investors last week, when it reported fiscal Q1 EPS of 53 cents and revenues of $94.2 million. Analysts had been expecting 40 cents and $87.4 million. ALOG shares popped through moving average resistance on the news and then passed into a bullish “flag” consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Continue reading Analogic Corp. (ALOG) shares defining bullish “flag”

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Filed under: Newsletters, Procter and Gamble (PG), Stocks to Buy

“For our latest Focus Stock we look to the consumer staples chain, add Proctor & Gamble (NYSE: PG) to our portfolio,” says Chris Johnson.

In The Insightful Investor, the advisor explains, “Consumer staples stocks continue to provide a bullish alternative within this potentially slowing economic environment.” Here is his review.

“Proctor & Gamble is attractive for a number of reasons. First, the obvious: in the consumer staples universe, it’s hard to get bigger than P&G. The Cincinnati-based company produces everything from Ivory soap to Pampers diapers to various snack foods.

“In other words, P&G has a heavy presence in most every household, something that probably won’t change too much should the economy slow down.

“Second, PG has an incredible international presence, which provides a few valuable fundamentals. Demand for their products continues to grow with the strength in overseas economies. And a weakening dollar won’t hurt P&G’s balance sheet as it may other domestic companies.

Continue reading Procter & Gamble (PG): Stick to staples

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Filed under: Major movement, Analyst upgrades and downgrades, Bad news, Options, Technical Analysis, Akamai Technologies (AKAM)

Akamai Technologies Inc. (NASDAQ: AKAM) stock is declining today after an analyst with Cowen & Co. cut his rating of the stock to “Neutral” from “Outperform” this morning on fears of increased competition. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AKAM.

After hitting a one-year high of $59.69 in February, the stock hit a one-year low of $27.75 in September. This morning, AKAM opened at $36.01. So far today the stock has hit a low of $34.53 and a high of $36.35. As of 11:55, AKAM is trading at $34.68, down $2.42 (-6.5%). The chart for AKAM looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 7.5% return in two months as long as AKAM is below $45 at February expiration. Akamai would have to rise by more than 28% before we would start to lose money. Learn more about this type of trade here.

Continue reading Akamai Tech (AKAM) plunges on downgrade

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Filed under: Bad news, Television, General Electric (GE), Media World

NBC Universal took the unusual step of giving advertisers cash back for weak performance in prime time ratings during the Fall 2006-Spring 2007 season, The Wall Street Journal reported Wednesday [subscription].

Typically, a broadcast network will offer advertisers additional time if a ratings shortfall occurs, but NBC has none to give, Reuters reported. NBC, a division of General Electric (NYSE: GE), is in fourth place in the network ratings wars, and currently has no standout new programs that media buyers desire, The Journal reported. GE’s shares gained 30 cents to $37.33 in Wednesday morning trading.

Some industry executives blame the ratings dip partially on the Writers Guild of America strike that began November 5 and that has reduced the supply of original material, Reuters reported. Others cite technical changes in a new ratings formula, or the continuing audience ‘fragmentation and dilution,’ whereby the networks are losing viewers to specialized cable TV channels and internet activities. However, one experienced analyst believes that while the above variables play a role, the key driver of any ratings change remains a television network’s core component: programming.

Continue reading In unusual move, NBC refunds ad dollars as ratings slump

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Filed under: Major movement, Good news, Industry, Chevron Corp (CVX), Options, Technical Analysis, Oil

Chevron Corp. (NYSE: CVX) shares are trading higher this morning, helped by rising oil futures. Oil is higher due to a spill in the North Sea even though the weekly crude inventories report is expected to show an increase in stores. If you think that the company 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 CVX.

After hitting a one-year low of $64.99 in March, the stock hit a one-year high of $95.50 in September. CVX opened this morning at $91.91. So far today the stock has hit a low of $91.31 and a high of $92.87. As of 10:45, CVX is trading at $92.82, up $2.93 (3.2%). The chart for CVX looks bearish but improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $75 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 5.3% return in just three and a half months as long as CVX is above $75 at March expiration. Chevron would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.

Continue reading Chevron (CVX) buoyed by higher crude prices

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Filed under: Analyst upgrades and downgrades, Boeing Co (BA), Wachovia Corp (WB), US Airways Group (LCC), AMR Corp (AMR)

MOST NOTEWORTHY: The airline sector, Boeing and UBS were today’s noteworthy downgrades:

• Morgan Stanley downgraded the airlines sector to Cautious from Attractive citing higher fuel prices and the weakening economy. The firm lowered AMR Corp (NYSE: AMR) to Underweight from Equal Weight and Northwest Airlines (NYSE: NWA) and US Airways Group (NYSE: LCC) to Equal Weight from Overweight.
• Morgan Stanley also downgraded Boeing (NYSE: BA) to Equal Weight from Overweight and has concerns that the 787 will not be retired as early as they previous believed.
• Lehman downgraded shares of UBS (NYSE: UBS) to Underweight from Equal Weight following the company’s $10B write-down and capital injection from Singapore, which they point out will dilute existing shareholders.

OTHER DOWNGRADES:

• Credit Suisse lowered SAP AG (NYSE: SAP) to Underperform from Outperform.
• Goldman downgraded MGIC Investment (NYSE: MTG) to Sell from Neutral.
• Merrill downgraded Wachovia (NYSE: WB) to Sell from Neutral.

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