Filed under: Earnings reports, Good news, United Parcel’B’ (UPS), Options, Technical Analysis

United Parcel Service, Inc. (NYSE: UPS) shares are rising slightly today even after the company announced that it lost $2.58 billion, or $2.46 a share in the fourth quarter. UPS made a $6.1 billion payment to shift 45,000 of its employees from one pension plan to another during the quarter. Excluding that payment, UPS made $1.13 a share, which was in line with analyst estimates. The earnings thatmet estimates is buoying the stock, but the pension charge is keeping buyers from going too crazy. 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 UPS.

After hitting a one-year high of $78.99 in August, the stock hit a one-year low of $64.01 last week. UPS opened this morning at $69.31. So far today the stock has hit a low of $69.31 and a high of $71.74. As of 10:55, UPS is trading at $71.34, up $0.42 (0.6%). The chart for UPS looks bearish and steady, 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 $65 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 9.9% return in just two months as long as UPS is above $65 at March expiration. UPS would have to fall by more than 8% before we would start to lose money.

Continue reading UPS matches Q4 earnings estimates

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Filed under: Earnings reports, Forecasts, Starbucks (SBUX)

I believe it was 1993, probably right after the Starbucks (NASDAQ: SBUX) IPO. At the time, I worked in downtown Vancouver B.C. and one day a tourist from Toronto asked me to take a picture of her in front of a Starbucks. This picture, she said after thanking me, will make all her friends back east really jealous. I thought she was nuts.

Vancouver had Starbucks stores as early as 1987, but the hype really started in the early 90s. Personally, I never liked Starbucks coffee. The strong roasted flavor wasn’t to my taste, not to mention I felt Starbucks promoted a stuck-up atmosphere to allow it to charge outrageous prices for a cup of coffee I didn’t even want. Seems I was in the minority, and Starbucks went on to become a true success story. People liked the coffee and the upscale atmosphere.

Starbucks grew fast, opening more and more locations, until the growth affected the business. From an upscale atmosphere where baristas prepared espressos and other specialty coffees, machines were brought in and no doubt the coffee lost some of its taste, not to mention value in the eye of the consumer. A corporate atmosphere replaced the intimate coffee-shop one, especially with the introduction of sandwiches and breakfast. Locations were cannibalizing each others’ profits, and lately, to pour salt on the loyal customers wounds who stuck with the company and paid $3+ for coffee, it started experimenting with $1 coffees — Star … buck?

Continue reading Can Starbucks turn it around?

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Filed under: Yahoo! (YHOO), Options

Yahoo! Inc. (NASDAQ: YHOO) is recently down $1.80 to $19.01. Stanford Group says, “We lower our estimates and price target for the second time in a week. Our new target is $21 per share.”

YHOO call option volume of 142,909 contracts compares to put volume of 45,821 contracts. YHOO February option implied volatility of 55 is a below a level of 83 from January 29 and is above its 26-week average of 44 according to Track Data.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Insiders

Shares of E*Trade (NASDAQ: ETFC) are up more than 8% on news that insiders and directors have acquired $1.9 million worth of stock in recent days. But investors should be cautious.

The buying was in all probability coordinated to send a message to investors — and Wall Street is eating it up. But the reality is that $1.9 million is just not that much money in the context of the amount that the company top executives are paid.

The insider buying, in conjunction with the money E*Trade will spend on Super Bowl ads, looks like a pretty desperate and transparent effort by the company to convince investors and customers that the company is OK.

But think about it: if everything is so rosy, why isn’t Ameritrade (NASDAQ: AMTD) jumping in with an offer to acquire the company, something it had previously contemplated doing at a much higher price?

E*Trade executives appear to be hoping that if they can convince people everything is peachy, it will be. But that’s not a game you want to be playing.

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Filed under: Earnings reports, Bad news, Eastman Kodak (EK), Options, Technical Analysis

Eastman Kodak Co. (NYSE: EK) stock is falling this morning after the company announced a fourth-quarter profit of $215 million, or 71 cents per share. Excluding one-time items, the company’s profit came to 41 cents a share, missing analysts’ estimates of 52 cents a share. 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 EK.

After hitting a one-year high of $30.20 in June, the stock hit a one-year low of $16.66 last week. This morning, EK opened at $20.54. So far today the stock has hit a low of $19.85 and a high of $20.91. As of 11:05, EK is trading at $19.88, down $0.57 (-2.8%). The chart for EK looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a March bear-call credit spread above the $22.50 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 an 8.7% return in 2 months as long as EK is below 22.50 at March expiration. Kodak would have to rise by more than 15% before we would start to lose money.

Continue reading Eastman Kodak (EK) falls on Q4 earnings miss

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Filed under: Products and services, Marketing and advertising

As investors from around the world gear up for some Super Bowl fun and excitement, one firm is hoping to score a touchdown from the hype surrounding the world’s most watched football

E*Trade (NASDAQ: ETFC), the beleaguered online broker, plans to spend as much as $4 million for two ads airing during this weekend’s Super Bowl.

Is this just some more post-boom, sock puppet lunacy?

Maybe, but today’s Wall Street Journal article doesn’t think so. As the troubled broker tries to re-cement its image and reputation, the article claims that “the Super Bowl distraction couldn’t come at a better time.”

Continue reading E*Trade’s goal line stand

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Filed under: Earnings reports, Housing

The subprime follies continued their global run today as European banking giant UBS AG (NYSE: UBS) reported a record $14 billion loss for it fourth quarter. The loss exceeded analyst estimates by $4 billion.

The stock was down over 2% in trading this morning, and over 10% this month.

UBS attributed most of the loss to assets declining in value due to the subprime mortgage situation in the United States. But according to Bloomberg, Citigroup analyst Jeremy Sigee believes that the losses have expanded to “new areas” — “Value declines have extended beyond just subprime-related exposures, to new areas, for which we do not yet have disclosure on exposure size . . . The recently bolstered capital base remains vulnerable to further erosion.”

This is the really troubling part of the subprime credit crisis: no one knows how far the damage goes. And until the accounting is done, the threat of more and growing losses will continue to hang over the markets.

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Filed under: Earnings reports, Forecasts, Boeing Co (BA)

Boeing ’s Q4 2007 earnings increased 5.1% on a rise in jet deliveries and improved productivity, the company announced Wednesday [pdf]. The company also stated that the 787 Dreamliner is on-schedule.

Boeing (NYSE: BA) reported Q4 2007 EPS of $1.36 versus the Reuters consensus estimate of $1.32. Boeing reported EPS of $1.29 in Q4 2006. The company reported Q4 revenue of $17.5 billion versus the Reuters consensus estimate of $17.2 billion.

Boeing shares jumped $1.88 to $82.85 in mid-day Wednesday trading on the news.

Boeing also revised its 2008 EPS guidance to $5-70-$5.85, up from the previous guidance of $5.55-$5.75. The Reuters 2008 EPS consensus estimate is $5.95.

787 Dreamliner on track

Equally important, Boeing said it was on track to meet its revised production schedule set earlier this month for its next-generation plane, the 787 Dreamliner. However, Boeing did not mention when power would be switched on in the first 787, or project a schedule for deliveries beyond stating that the first one would be delivered in early 2009. Boeing has secured more than 800 orders for the 787.

Continue reading Boeing Q4 earnings up 5.1%, says 787 Dreamliner is on track

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Filed under: Earnings reports, Bad news, Options, Technical Analysis, Kraft Foods’A’ (KFT)

Kraft Foods Inc. (NYSE: KFT) stock is falling this morning after the company announced its fourth-quarter profit fell to $585 million, or 38 cents a share, from $624 million a year earlier. Earnings excluding restructuring costs matched analysts’ estimates of 44 cents a share, but KFT’s revenue was hurt by higher costs for dairy products and other ingredients, which offset an 11% increase in sales. 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 KFT.

After hitting a one-year high of $37.20 in June, the stock hit a one-year low of $28.63 last week. This morning, KFT opened at $29.75. So far today the stock has hit a low of $29.51 and a high of $29.95. As of 10:50, KFT is trading at $29.90, down $0.29 (-1.0%). The chart for KFT looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $35 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 an 8.7% return in 5 months as long as KFT is below $35 at June expiration. Kraft would have to rise by more than 17% before we would start to lose money.

Continue reading Kraft Foods (KFT) lower on flat earnings

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Filed under: Analyst upgrades and downgrades, Yahoo! (YHOO), Merrill Lynch (MER)

MOST NOTEWORTHY: Merrill Lynch, Yahoo! and T Rowe Price were today’s noteworthy downgrades:

• Oppenheimer downgraded shares of Merrill Lynch (NYSE: MER) to Underperform from Perform on valuation and their negative outlook related to the monoline insurers given MER’s overall exposure to sub-prime mortgage related assets. The broker believes MER could have an additional write-down of $10B if the monolines were to be downgraded and that MER shares are valued more appropriately below $44.
• Yahoo! (NASDAQ: YHOO) was downgraded to Hold from Buy at Citigroup and lowered their target to $22 from $33 to reflect the company’s continued share losses in the search market and uncertainty over 2008 investments. Oppenheimer lowered shares to Perform from Outperform and lowered their target to $20 from $30 to reflect the weaker than expected 2008 margin guidance.
• Friedman Billings downgraded T Rowe Price (NASDAQ: TROW) to Underperform from Market Perform and expects margin pressure in 2008.

OTHER DOWNGRADES:

• JP Morgan downgraded Scotts Miracle-Gro (NYSE: SMG) to Neutral from Overweight.
• UBS lowered Centex (NYSE: CTX) to Neutral from Buy.
• Merrill lowered American Campus (NYSE: ACC) to Neutral from Buy.

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