XY Auto Car: May 2015

Sunday, May 31, 2015

Market Wrap for Friday, May 16: Stocks Rally Out Of Thursday's Valley

Related BZSUM Mid-Afternoon Market Update: Markets Rallying Into The Close As Dillard's Catches A Boost On Earnings Mid-Day Market Update: Nordstrom Rises On Upbeat Results; WWE Shares Slide

A late day rally led markets higher to recover some value lost during Thursday's sell off.

Major Indexes

The Dow Jones Industrial Average rose surged 44.5 points, or 0.27 percent to close at 16,491.

The S&P 500 added 7.01 points, or 0.37 percent to close at 1,878.

The Nasdaq rose 21.29 points, or 0.52 percent to close at 4,090.59.

The Russell 3000 climbed 10.34 points, or 1.04 percent to close at 1,001.2.

Thursday, May 28, 2015

Herbalife and GNC Are Good Investments, Hereâ€™s Why

There is a jump of more than 200% since 1970 in the number of Americans who are either obese or overweight, with around 34% of Americans as obese and nearly two-thirds being overweight. A metabolic disorder like diabetes increased 400% in the same period. According to Gary Taubes and Dr. Peter Attia of Nutrition Science, fat-free food labels are only worsening the obesity crisis. They have started causing growing concern in society as well.

Due to the reasons mentioned above, the awareness about keeping healthy and taking proper nutrition is spreading fast among people. Vitamins and supplements are more of a part of the lifestyle nowadays due to which the wellness industry is a flourishing business. GNC Holdings (GNC) and Herbalife (HLF) are popular in the wellness and dietary supplements market.

Looking at GNC

GNC's business is very well diversified and runs through three different segments – retail, franchise and manufacturing/third-party.

GNC has been growing top and bottom lines through strong comparable-store sales growth and is the least controversial of the three companies in this space, and the strong increase in consumer traffic resulted in 8.2% product comps in quarter three. In addition, GNC.com significantly exceeded the industry growth rates and delivered 31.7% comps increase this quarter.

Moreover, GNC offers a dividend that yields 1% that still has a significant room for improvement because the company has ample free cash flow with a payout ratio of 21%. The company has been good at returning money to shareholders through the share repurchase program. GNC has returned far more cash to shareholders than it raised since its IPO in April 2011; its shares have appreciated by a whopping 260% since then.

GNC acquired the UK-based web-only retailer Discount Supplements to boost growth, and expanding in the UK and other European and Scandinavian markets must accelerate growth.

The health and wellness market has been dominated by GNC for over seven decades. It has 8,100 locations in 54 countries worldwide and marvelous brand awareness. These strong reasons make GNC a trusted brand for consumers to fulfill their needs of a healthy lifestyle.

Going forward, GNC targets to maintain the store count growth of approximately 115 net new stores each year and sees potential for opening approximately 5,000 total standalone GNC stores in the U.S.

A Look at Herbalife

The global rise of obesity enabled Herbalife to record net sales of $1.2 billion, 19% above last year's third quarter. However, Herbalife's marketing practice, like all other direct-selling through individual distributors is questionable.

But Herbalife has received good recent endorsements as it won in the Belgian appeals court. The court rejected claims of Herbalife being a pyramid scheme. The court concluded that the income that its distributors earn from others recruited to buy or sell its products isn't in violation of European consumer protection laws.

So, the company looks to be a good investment option with increasing acceptance in Europe and most probably in the U.S. as well. The P/E ratio of 15 indicates that the stock is cheap with a satisfying dividend yield of 1.70%. Analysts are projecting an impressive CAGR of 15% for Herbalife for the next five years.

Conclusion

Both companies have capitalized on people's awareness about leading a healthy lifestyle. While GNC is a well-established name and oldest of the lot, Herbalife has also been making its mark. The growth expectations look promising. But the cheapest is Herbalife and it could make a good addition to your portfolio.

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Wednesday, May 27, 2015

Under Armour: More Games ahead for us

It's not the suit.

The much-maligned suit worn by the U.S. speedskating team should never have been victimized, Under Armour CEO Kevin Plank, says in an exclusive interview. "It was a bit of a witch hunt that began to build," he says, in his first extensive interview since the Under Armour suit became a scapegoat for the failure of U.S. speedskaters to win Olympic medals. "The suit became the witch."

Plank is so certain that the "Mach 39" suit is a winner, he says Under Armour will continue to invest in it and tweak if until the 2018 Olympic Games in South Korea. And he's so confident that the suit can help the U.S. Speedskating team, that Under Armour on Friday announced it plans to not only renew its team sponsorship, but double its length through 2022.

AP Sochi Olympics Americans High Tech Suits

Tucker Fredricks of the United States wears an Under Armour uniform in the the men's 500-meter speedskating race Feb. 10 at the Winter Olympics in Sochi, Russia.(Photo: Patrick Semansky, AP)

"We're doubling down," says Plank. "We will not stick our heads in the sand. We want people to know that when we get knocked down, we get back up bigger, better and stronger."

MORE: Under Armour CEO says he learned tough business lessons

Few well-meaning Olympic sponsors have undergone the kind of intense media and image scrutiny that Under Armour has over the past week, as the highbrow brand name suddenly got linked to Olympic-sized failure. "This brand was dragged through the mud," he says. "There was a lot of conjecture and speculation, but none of it based on fact."

For Plank, 41, the whole tumult has been a hugely humbling experience, he says, yet he adamantly refuses to point a finger of blame at anyone.! "In no way, shape or form will we ever point fingers at the athletes. These guys have a ton of things going through their heads. There was no push back from us. We said, whatever will make the athletes more comfortable, we'll do."

U.S. Speedskating executive director Ted Morris says he's thrilled — and the skaters will be, too. "It's a testament to (Under Armour's) commitment and fire to keep working with us," he says.

But it hasn't been easy. Plank says that the night the suit brouhaha broke, he was up at 4 a.m., unable to sleep "sick to my stomach that the company I love was getting beat up. And I can't do anything about it but bite my lip and hope the facts come out."

After the team voted to switch suits — and fared no better — Plank insists, he did not celebrate or feel vindicated. "We remain patriots first," he says. "As I sat there watching the events on TV and my laptop, I'm wearing red, white and blue and an American flag."

Contributing: Kelly Whiteside

Monday, May 25, 2015

Productivity grows at 3.2% rate

WASHINGTON — U.S. productivity growth slowed in the fourth quarter while labor costs kept falling. For the year, productivity turned in another weak gain.

Productivity grew at an annual rate of 3.2% in the October-December period, down slightly from a 3.6% growth rate in the third quarter, the Labor Department reported Thursday. Labor costs fell at a 1.6% rate in the fourth quarter after an even bigger 2% rate of decline in the third quarter.

THURSDAY STOCKS: How markets are doing

For the year, productivity rose a slight 0.6%, down from a 1.5% increase in 2012, and the weakest performance since an 0.5% rise in 2011. Labor costs edged up a slight 1% in 2013, continuing a trend of modest gains in labor costs.

Productivity measures output per hour of work. Greater productivity raises living standards because it enables companies to pay their workers more without having to raise prices which could boost inflation.

The Federal Reserve monitors productivity and labor costs for any signs that inflation could pick up. Mild inflation has allowed the Fed to keep short-term interest rates at record lows and purchase bonds to try to keep long-term rates down.

The Fed in December and again in January announced that it was reducing its monthly bond purchases, taking them from $85 billion per month down to $65 billion.

But at the same time, the Fed strengthened its commitment to keep short-term rates low for an extended period. It expects to keep those rates low "well past" the time that unemployment dips below 6.5%. The unemployment rate is currently 6.7%.

In records going back to 1947, productivity has been growing by about 2% per year.

In 2010 and 2011, productivity increased at annual rates above 3%. That reflected the fact that millions of Americans were laid off as companies struggled to cope with a deep downturn. While output was down as well, the number of workers fell more, increasing the rate of productivity.

After that initial jump, productivity ! has slowed in recent years.

Sunday, May 24, 2015

WPCS surges on bitcoin platform; Textron gains

NEW YORK (MarketWatch) — WPCS International Inc. was the biggest gainer in premarket trade Friday following the communications company's announcement that it was launching a software platform to trade the digital currency bitcoin.

Gainers

Bloomberg

Enlarge Image WPCS said it would launch a bitcoin trading platform.

WPCS (WPCS) launched a beta version of BTX Trader, which is set to be used to gather data and execute trades on five exchanges for bitcoin, a virtual currency that has been highly volatile in recent weeks. Shares in WPCS were up 54% premarket.

Bitcoins recently traded on the Mt. Gox exchange at $794 Friday. This month, the cryptocurrency has traded as high as $1,240 and as low as $455.

Textron Inc. (TXT) shares gained 2.2% premarket Friday after the firm said it would acquire Beechcraft Corp. for $1.4 billion. Beechcraft, maker of Cessna planes and Bell helicopters, emerged from Chapter 11 bankruptcy earlier this year.

Decliners Click to Play

China rebukes Japan leader's visit to Yasukuni Shrine

Japanese Prime Minister Shinzo Abe visited the Yasukuni Shrine, triggering condemnation from the Chinese government, which views the shrine as a symbol of Japan's past militarism.

Central European Media Enterprises (CETV) fell 5.2% premarket after gaining 1% in the previous session.

Trending tickers

Twitter Inc. (TWTR) shares retreated 0.9% Friday as investors tried to gauge whether the Internet company's stock surge this week was poised to continue. Twitter was up 22% on the week with 82.7 million shares changing hands on Thursday alone.

3D Systems Corp. (DDD) was closely watched after it gained 7% Thursday to trade at $92.10. Shares were up another 2% premarket. Canaccord Genuity raised its price target on the 3D printing company ahead of the Consumer Electronics Show in January.

Canaccord Genuity Analyst Bobby Burleson wrote on Tuesday: "We are increasing our price target to $95 from $85 ahead of expected multiple expansion during CES. We believe new consumer-related product releases and refreshes will be met by investors with optimism."

Wednesday, May 20, 2015

Microsoft Gets Its Tablet Strategy Right

For years, Microsoft tried unsuccessfully to make a foray into the tablet market dominated by Apple. In the last year the company had some success –making its presence felt in this market, and IDC predicting better days ahead for the software pioneer.

Windows-based tablets market share has risen from less than 1% in 2012 to 3.4% in 2013, and is expected to reach 10.2% in 2017.

What made the difference? What did Microsoft do right this time around? Two strategic moves, in our opinion.

The first was development of Surface 2, which gets the hardware-software bundle right at a competitive price. With its Windows operating systems, Office Suite and keyboard, the Surface 2 has bridged the gap between laptop and tablet, appealing to users who seek the full functionality of a laptop rather than a smartphone in a tablet.

"The Microsoft tortoise has been playing a slow-and-steady strategy on mobile, largely because it was about 1,000 years late to the starting gate writes New York Times' Bob Tedeschi. "But Microsoft's continued dominance with Windows and Office gave it time to develop a mobile strategy while maintaining a prominent place on desktops."

"The value proposition of the base Surface 2 seems about right," he continues. "For around the price of an iPad, you get a tablet that's great for watching movies, checking email, browsing the web and using most of the basic apps you'll need."

The second strategy is a partnership with Best Buy which is beginning to pay off, as discussed in a previous piece.

Last June Microsoft MSFT +0.94% and Best Buy BBY -0.92% entered a partnership whereby Microsoft set Windows Stores at Best Buy. Sales of Microsoft's Surface 32GB topped the list of items sold at Best Buy on Black Friday, according to iPad Insight.

The sales picture was quite different at Walmart, where Apple AAPL -0.33%'s iPad Mini 16GB topped the list, and Target TGT +0.09%, where Apple's iPad Air 16GB topped the list.

To be fair, data from one season isn't sufficient to confirm a trend. Nonetheless, Surface's superior performance in Best Buy stores demonstrates that electronic gadgets are not commodities that can be purchased merely anywhere, especially as these products become more sophisticated.

Besides, getting into retailing can be a very profitable enterprise for gadget makers, as the history of Apple stores confirms.

Microsoft's Windows Stores occupy between 1,500 square feet to 2,200 square feet of Best Buy floor space, allowing consumers to compare and purchase a broad range of the company's products and accessories, including Windows-based tablets and PCs, Windows Phones, Microsoft Office, Xbox, and so on.

The bottom line: Though late, Microsoft is getting its Tablet strategy right by addressing genuine consumer needs; and by letting consumers experience the product in its retail stores. Will it catch up with market pioneer and leader Apple? It remains to be seen.

Benzinga Weekly Preview: Markets Anxiously Await Fed Meeting

Next week the US Federal Reserve will be in the spotlight as investors anxiously wait to see whether or not the US central bank will begin to taper its bond buying plan.

Recent jobs reports coupled with Washington's bipartisan budget deal have both supported the Fed's case to taper sooner rather than later. With that said, many are skeptical about a taper as housing data has been lack luster and the Fed may be hesitant to cut back at the end of the year.

Key Earnings Reports

Next week, investors will be waiting for several key earnings reports including Oracle Corporation (NASDAQ: ORCL), Nike, Inc. (NYSE: NKE), BlackBerry (NASDAQ: BBRY), Rite Aid Corporation (NYSE: RAD), and FedEx Corporation (NYSE: FDX).

Oracle Corporation

Oracle is expected to release second quarter EPS of $0.67 on revenue of $9.8 billion, compared to last year's EPS of $0.64 on revenue of $9.11 billion.

The analyst team at BMO has Oracle with an Outperform rating with a $42.00 target price and said the company is well positioned to continue growing and gaining market share.

"Oracle, as a leading provider of database, middleware, and applications solutions, in our view, is positioned for continued growth and market share gains through leveraging its installed base (cross-sell/up-sell), favorable product refresh cycles, and surrounding the competition in customer environments. We see multiple company-specific drivers: increasing specialized sales force (+3,000), traction of engineered systems and pull-through of related software, and an apps business that is primed for long-term growth. Oracle also appears positioned for continued margin expansion through prudent spending and cost economies of scale in both its core and Sun business."

On December 12, Morgan Stanley has Oracle with an Equal-weight rating, saying the company lacked any major catalysts for growth.

"ORCL now trades near our price target and, in our view, lacks an incremental catalyst to drive the multiple higher. After taking a fresh look at the four key debates on apps, data mgmt and hardware and capital returns that we laid out six months ago, we are hard-pressed to find conviction in further upside to our ests/multiple assumptions over the next year. In particular, our fourth deep-dive customer survey on Fusion Apps indicates momentum is continuing to weaken as competitive drums beat louder, while Engineered Systems growth has faded more rapidly than we expected. Net, until we see signs of product and sales investments yielding stronger returns, ORCL looks fairly valued at ~12x NTM P/E, in line with EPS growth and approaching long-term averages."

Also on December 12, RBC Capital Markets has Oracle with a Sector Perform rating with a $35.00 price target. The analysts at RBC said its reduced rating was attributed to Oracle's share price nearing the firm's Price target.

Nike, Inc.

Nike is expected to release second quarter EPS of $0.58 on revenue of $6.44 billion, compared to last year's EPS of $0.57 on revenue of $5.96 billion.

In mid-September, Piper Jaffray has Nike with a Neutral rating with a $71.00 price target, saying the company's outlook in the near term was more positive than its competitors.

"We believe the next several weeks potentially offer a compelling trade opportunity for NKE shares on the long side. The following events over the next four weeks could all be positive catalysts for NKE shares: Dick's Sporting Goods analyst day on September 18th, Nike's FQ1 earnings in late September, Nike's analyst day on October 9 and NKE shares being added to the DJIA on September 23. Furthermore, we believe product innovation such as Flyknit, mildly improving macroeconomic conditions in China and several global sporting events in 2014 provide a favorable backdrop. Lastly, NKE's earnings multiple relative to UA is approaching its historic low, which has typically been a good indicator of NKE's relative outperformance. We have raised our 12-month price target from $64 to $71, but are maintaining our Neutral rating given valuation."

JP Morgan has Nike with an Overweight rating with an $80.00 price target on October 1. The analysts at JP Morgan noted several risks to Nike's success, including the current employment figures in the US, which could stifle consumer spending.

"The economic climate, particularly the employment picture, can affect consumer spending and the department store industry. A greater than expected downturn in household spending could cause sales trends to decelerate below our current assumptions, rendering our estimates too high. Conversely, an improvement in the economy could render our estimates too low."

BlackBerry

BlackBerry is expected to report a loss of $0.43 per share on revenue of $1.58 billion, compared to last year's loss of $0.22 on revenue of $2.73 billion.

CIBC has BlackBerry with a Sector Underperform rating with a $5.00 price target on November 4. The analysts at CIBC said that although BlackBerry's balance sheet is improving, the company faces a long road to recovery.

"BB's balance sheet is now in good shape. Pro-forma cash (convert & restructuring) is $3.1B or ~$5/share. BB's survival was an issue for many enterprises who have watched the downward spiral. Today's cash up should alleviate the financial concerns, but competitive ones remain. BB's long-term strategy is a return to focus to the enterprise market. There are many issues with BB, but the largest one is BYOD led by iPhone and Samsung's Galaxy. Today it's not clear what a realistic BB response is. Establishing BB's competitive edge here is the largest unknown. We lower our rating to SU and PT to $5 from $12. Our prior thesis was the shares could only be bought for this sale process that has now failed. Current fundamentals are quite weak (Q3 market share 1% vs. 2.7% Q2, 4.3% Q3 LY) and yield a lower price, hence our downgrade to SU."

On the 15 of November, Macquarie also has BlackBerry with an Underperform rating with a price target of $5.50. The analysts at Macquarie noted that although the company's CEO has been praised, they found several red flags upon closer inspection.

"While we have heard very good things about Mr. Chen from his days at Sybase, we are concerned that he is not relocating to Waterloo and that he is not the permanent CEO. Furthermore, a review of the filings suggests that Mr. Chen appears to be incentivized to sell the company as one entity, which would accelerate his vesting on 13mm RSUs upon a change in control, with a further $6mm cash termination payment. We believe investors would prefer Mr. Chen's long-term compensation package to be tied to profitability thresholds and/or share price performance relative to the market or peers."

On the November 5, Societe Generale was more positive about BlackBerry and has a Hold rating with a $7.00 price target. The firm's optimism came from news that BlackBerry had decided not to sell itself.

"Blackberry announced yesterday that it has abandoned plans to sell itself to an investor consortium (which includes its largest shareholder Fairfax) for $9 per share. Instead, a consortium of investors (again including Fairfax) will invest $1bn in Blackberry in the form of convertible debentures. The investment should be completed within the next two weeks. The debentures will have a coupon of 6% and will be convertible into shares at $10 per share. The debentures have a term of seven years. Assuming all $1bn of the debentures are converted, the debenture holders would own 16% of the enlarged share capital. In addition to the financial transaction, it was also announced that the current CEO will resign as CEO from the board once the deal has closed. Peter Chen, the ex-CEO of Sybase, will join the board as the Interim CEO pending the completion of a search for a new CEO."

Rite Aid Corporation

Rite Aid is expected to release third quarter EPS of $0.04 on revenue of $6.29 billion, compared to last year's EPS of $0.07 on revenue of $6.24 billion.

BTIG has Rite Aid with a Buy rating with a $6.00 price target on October 3. The analyst team at BTIG saw a bright long term future for Rite Aid based on changes to healthcare policies in the US.

"We have reason to believe that results will improve from here over the longer term. While second half guidance was strong, it already incorporates the threat of increased reimbursement pressures and the weakness in new generics. What the guidance omits is any positive impact in the second half from the launch of the exchanges associated with the Affordable Care Act – even though that guidance already incorporates the cost of paying for more than two thousand consultants working in RAD's locations to help existing and prospective RAD customers to sign up for ACA coverage."

On October 7, Jefferies has Rite Aid with a Hold rating with a $5.30 price target, noting that although the company has made progress, it faces several headwinds in the future.

"Rite Aid has made progress in its turnaround, but we see declining EBITDA in the near-term as the company faces a fading generic drug wave, and some attrition from the Express Scripts customer wins from last year. Given Rite Aid's financial leverage, and its 30-40% lower store productivity vs. CVS and WAG, we believe the current EV/EBITDA discount vs. these peers is justified."

FedEx Corporation

FedEx is expected to release second quarter EPS of $1.62 on revenue of $11. 43 billion, compared to last year's EPS of $1.39 on revenue of $11.11 billion.

JP Morgan revised its estimate for FedEx from Neutral to Overweight with a price target of $154.00 on October 22. The analysts at JP Morgan noted that FedEx's buyback announcement instilled some confidence in the company.

"What has changed to drive our upgrade to OW? We have been cautious on FDX for the past four months due primarily to concerns regarding the headwind from trade down and excess international airfreight capacity. While we still have concerns about trade down, we now believe that the combination of FDX's Asia / U.S. air capacity reductions and its initial steps to flow IE into commercial lift provide the ability for FDX to absorb trade down pressures. We also read FDX's large and uncharacteristic buyback announcement last week as indicating they are being aggressive and they are willing to change to drive improvement."

Citi's analysts were also optimistic and has FedEx with a Buy rating with a price target of $170.00 on December 10.

"We believe further upside in FedEx shares remains, as the current investor base appears to be playing for a meaningful improvement in profitability, led by cost efforts underway at the company's Express segment. Sentiment is firming around FedEx's ability to produce profit improvement and coupled with accretion from the buyback and help from improving volumes, $10 of earnings power should enter the discussion for F15. We are increasing our target to $170 and reiterate our Buy"

Economic Releases

Although the Fed will be on everyone's mind next week, European PMI data is also due out and will be closely watched. Last month's figures were slightly weaker, but still indicated growth. Most are expecting to see similar figures out this week. France's PMI last month showed a disappointing contraction and if this month's figures follow the same trend, it will signal that last month's data was not a fluke and instead that the nation has fallen off track.

Daily Schedule

Monday

Earnings Releases Expected: No notable releases expected Economic Releases Expected: US industrial production, Italian trade balance, eurozone manufacturing and services PMI

Tuesday

Earnings Expected From: Jabil Circuit, Inc. (NASDAQ: CSPI), Verifone Systems, Inc. (NYSE: PAY) Economic Releases Expected: Japanese trade balance, New Zealand current account, US current account, US CPI

Wednesday

Earnings Expected From: General Mills, Inc. (NYSE: GIS), Lennar Corporation (NYSE: LEN), FedEx Corporation (NYSE: FDX), Oracle Corporation (NASDAQ: ORCL) Economic Releases Expected: US FOMC meeting announcement, US housing starts, US building permits, British unemployment rate, Indian interest rate decision.

Thursday

Earnings Expected From: Accenture plc. (NYSE: ACN), Pier 1 Imports, Inc. (NYSE: PIR), ConAgra Foods, Inc. (NYSE: CAG), Rite Aid Corporation (NYSE: RAD), Nike, Inc. (NYSE: NKE), Red Hat, Inc. (NYSE: RHT) Economic Releases Expected: British consumer confidence, US existing home sales, British retail sales, British mortgage approvals, eurozone current account, Swiss trade balance.

Friday

Earnings Expected From: BlackBerry (NASDAQ: BBRY), CarMax Inc. (NYSE: KMX), Walgreen Co. (NYSE: WAG), The Finish Line, Inc. (NASDAQ: FINL) Economic Releases Expected: eurozone consumer confidence, US GDP, US consumer spending, Italian trade balance

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Tuesday, May 19, 2015

When Will The Pain End For Caterpillar?

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0 Disqus When Will The Pain End For Caterpillar? October 23, 2013 | Filed Under » Earnings Recap, Equity, Heavy Construction, Industrial Equipment Wholesale Tickers in this Article » CAT, GE, UTX, BA, GS, After reporting weaker-than-expected results earlier this year because of a drop-off in orders for mining equipment, Caterpillar (NYSE:CAT) CEO Doug Oberhelman sounded an optimistic note, telling CNBC, "We don't want to be overly optimistic but it certainly feels better than the last two springs."

Unfortunately, things haven't gotten better for the Peoria, Illinois-based company. The company today reported earnings that were far worse than analysts expected and slashed its outlook for the year. The numbers were so bad that CNBC's Herb Greenberg nominated Oberhelman to win the title of worst CEO of the year. That assessment, though, may be overly harsh.

For one thing, Oberhelman doesn't seem like he's sugarcoating the company's problems. He called 2013 "a painful year" in the company's earnings release, but he added that there are "encouraging signs" for 2014.

"The rest of the business is hanging in there," Oberhelman said to CNBC.

Commodities have gone through cycles of booms and busts for decades. The forces of supply and demand balance each other out, and when that happens Caterpillar stands to benefit. Of course, the tricky part is figuring out when that rebound will occur.

"It (mining) comes back," said Eli Lustgarten, an analyst with Longbow Securities, to CNBC. "It just takes time."

The time, though, is right for investors to add Caterpillar to their portfolio because the shares have gotten too cheap to ignore.

For one thing, the shares are trading at a price-to-earnings multiple of about 14, well under their five-year average high of 39.9. That's cheaper than other industrial companies such as General Electric (NYSE:GE) (18), United Technologies (NYSE:UTX) (19) and Boeing (NYSE:BA) (23). Wall Street has an average 52-week price target on Caterpillar of about $92, about 9.5% above where it currently trades.

Investors, though, should be aware that the road ahead for Caterpillar will not be easy.

According to Caterpillar, sales from its Resource Industries division, which serves the mining sector and is the company's largest, are expected to plunge 40% this year. The company's other businesses, Power Systems and Construction Industries aren't doing great either. Sales in both divisions are expected to fall 5% in 2013, though these businesses should hold their own if the economy doesn't falter.

Mining giants such as Rio Tinto (NYSE:RIO) and BHP Biliton (NYSE:BHP) are slashing their capital expenditures because of weak commodities prices, which many analysts expect to continue. Both Goldman Sachs and Credit Suisse Group expect gold prices to continue their losses into 2014, according to Bloomberg News. The declines in gold are expected to pull down prices for silver. UBS expects the metal to fetch an average of $24 an ounce, down 17.2% from an earlier forecast in 2013 and $25 in 2014 (16.7% lower from a previous estimate). Earlier this month, Chile raised its estimate for the global surplus of copper by 40%. The largest copper producer expects prices in 2014 to fall to $3.15 per pound versus $3.15 in 2013, according to Reuters.

The Bottom Line

Caterpillar is the type of stock that illustrates Warren Buffett's famous quote "be fearful when others are greedy and greedy when others are fearful." There are many examples of stocks that people have left for dead that have roared back. Many pundits argued that Best Buy was stuck in a race for customers with Amazon that i! t couldn't win. Netflix was written off after angering customers with an ill-advised price increased. Both have surged more than 200% this year. Though no one can predict that Caterpillar will equal that performance, the stock should do better than it is today.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

Monday, May 18, 2015

24/7 Wall St.: 11 countries with perfect credit

A bipartisan deal was reached to end the government shutdown and raise the debt ceiling on Wednesday. While this provides immediate relief, the agreement is only a short reprieve. Funding to the government now ends January 15, and the debt ceiling will only be raised through February 7th.

This follows nearly two weeks of acrimonious debate in the House and Senate which triggered concern in the markets about downgrades by the major credit agencies. In fact, Fitch Ratings warned on Tuesday that it might downgrade U.S. debt amid fears Congress could not find a resolution to the raising the debt ceiling. Fitch and Moody's still assign the U.S. their top ratings (AAA and Aaa respectively); Standard & Poor's downgraded the U.S. to AA+ in August 2011.

As of October 16, Fitch was alone with its downgrade warning. At the time, S&P spokesman John Piecuch told reporters that the agency's ratings reflected the potential that a deal could not be struck between Democrats and Republicans. In the last two years, three major countries have lost their top rating from at least one agency: the United States, the United Kingdom and France. In light of the Fitch warning, some have wondered what those few remaining AAA-rated countries have going for them. 24/7 Wall St. examined the 11 countries with perfect AAA ratings from all three ratings agencies.

When determining a country's debt rating, agencies consider several factors, including the country's political climate. Most of the countries with AAA ratings have a stable political environment, something the U.S. can no longer exactly claim. Few of these countries have faced the bitter battle that was and may continue to be waged in the U.S. over federal spending and debt.

The countries with the highest credit ratings are wealthy economies, with high levels of GDP per capita. All 11 of these countries are in the top 25 for this figure. Luxembourg, by virtue of its growing financial services industry, generated GDP per capita income of nearly $78,! 000 2012, 50% greater than in the U.S.

U.S. government gross debt amounted to 102% of GDP in 2012, 11th highest in the world. On Some of the top-rated countries have relatively low debt to GDP, including Australia and Luxembourg, which had debt levels at 27% and 21% of GDP in 2012.

Having low debt to GDP, however, is not necessarily a sign of a stable economy. According to many economists, wealthy, stable countries are able to borrow significantly more than developing nations. For some countries, high debt is a sign of a healthy economy. Five of the AAA-rated countries had debt exceeding 50% of national GDP as of 2012.

To determine the countries that are higher rated than the U.S., 24/7 Wall St. reviewed credit ratings for sovereign countries published by Moody's, Fitch, and Standard & Poors (S&P). In order to make the cut, nations had to be awarded the highest possible credit rating from each institution– Aaa from Moody's, or AAA from S&P and Fitch. We excluded countries with very small economies, including the Isle of Man, Guernsey and Liechtenstein. Unemployment rates are from the Organisation for Economic Co-operation and Development, excluding Singapore, while further data on economic activity is largely from the IMF's World Economic Outlook.

1. Australia

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 3.7%
> Unemployment rate: 5.8%

Australia's AAA rating is based on a solid economy and low government spending. By 2012, the economy had grown by an average of 3.5% a year for more than 20 years. The government debt-to-GDP ratio was 27.9% at the end of 2012, low even among countries that received top ratings from all three agencies. If there's a vulnerability, it's that much of the economy is based on exports of natural resources and energy to fast-growing economies, especially China. Growth in the last few years has been stressed by softening conditions in China, but not nearly enough! to threa! ten Australia's high ratings.

MORE: The best (and worst) countries to grow old in

2. Canada

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 1.7%
> Unemployment rate: 6.9%

Canada's economy mirrors the U.S. economy. It has a big automotive sector. Technology companies are growing in and around Vancouver and Toronto. It is the largest supplier of energy to the U.S., including oil, natural gas, uranium and hydroelectricity. In all, roughly three quarters of Canadian exports go to the U.S. The country was hit hard by the 2008-2009 recession, first with its automotive sector slumping and then with declining commodity prices, especially oil. Canadian banks, however, largely weathered the economic storm. Also, recent rising oil prices and exports to the U.S. have boosted the economy.

3. Denmark

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: -0.4%
> Unemployment rate: 6.6%

Denmark's finances are in solid shape, despite after-effects from the 2008-2009 financial crisis and the eurozone crisis. Government debt is 59% of GDP, higher than any other AAA rated economy. Denmark has considerable strengths, including a vibrant maritime industry and a strong pharmaceutical industry. Unemployment, however, remains relatively high at 6.6%, but the rate has come down slowly from 7.4% 12 months earlier.

4. Finland

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: -0.8%
> Unemployment rate: 8.0%

Finland became an economic star in the 1990s and the first part of the 21st century because of rapid growth in technology and telecommunications. Nokia contributed a quarter of the country's growth and paid as much as 23% of Finnish corporate income taxes by itself between 1998 and 2007, according to The Economist. But the recession and the eurozone crisis have hurt the econo! my. Perha! ps worse has been Nokia's decline in the face of Apple's ascendancy.

5. Germany

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/negative
> 2012 GDP growth: 0.9%
> Unemployment rate: 5.2%

The last few years have not been easy for Germany because of the ongoing struggles of eurozone nations such as Greece, Cyprus, Ireland, Spain, Portugal, and Italy. However, many economists believe the worst of Europe's economic troubles are over. That should help Germany's exports, which are already equivalent to more than 51% of total GDP. While Moody's says the German government finances are in good shape, the ratings agency maintains a negative outlook on German debt because of all the contingent liabilities the country assumed keeping the eurozone afloat.

6. Luxembourg

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/negative
> 2012 GDP growth: 0.3%
> Unemployment rate: 5.8%

Three factors help Luxembourg's credit rating: it's close to France, Germany, and Belgium; it has a diversified economy; and its financial sector has helped insure that its per capita incomes are among the world's highest. Luxembourg suffered from the 2008 financial crisis and slowdown prompted by the debt problems elsewhere in the eurozone. The nation's GDP fell by 0.7% in 2008, and then by an additional 4.1% in 2009.

7. The Netherlands

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: negative/negative
> 2012 GDP growth: -1.2%
> Unemployment rate: 4.9%

As the year began, weakness in Dutch banks and the broader Dutch economy threatened the Netherlands' AAA rating. All three ratings agencies continue to rate Netherlands' outlook as negative. Fitch cited sagging home prices and worsening public debt picture as reasons for the negative outlook. After a housing boom-and-bust, some 25% of mortgages in the country are underwater, Fitch says. Still, the country has the eurozone's fift! h largest! economy..

MORE: The most educated countries in the world

8. Norway

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 3.0%
> Unemployment rate: 3.6%

Lucky Norway. It has a small population and abundant reserves of crude oil lying under the North Sea. The country's unemployment rate is among the lowest in Europe. Norway offers its citizens a generous set of social benefits. Its sovereign wealth fund has nearly $800 billion in assets and is the world's largest. Because of its oil reserves, Norway's government was able to spend around 43% of GDP in 2012, yet still have a total debt obligation equal to just 34% GDP. Only Luxembourg and Australia have less government debt as a percentage of GDP among the AAA-rated countries. No wonder that S&P and Moody's see Norway as a AAA credit and stable.

9.Singapore

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 1.3%
> Unemployment rate: 2.1%

Singapore is one of the most business-friendly countries in the world, according to the World Bank. It's the only country in southeast Asia with a AAA rating from all three agencies. The island nation of 5.3 million people, is a transportation hub, a technology center, and an important banking center. It's also jobs friendly with an unemployment rate of just 2.1%. However the country is restricted by its small land size, and has to expand its actual land area through reclamation.

10. Sweden

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 1.0%
> Unemployment rate: 8.0%

Sweden's unemployment rate is relatively high at 8%, but its strong overall fiscal management keeps impressing ratings agencies. Public debt, which was as high as 73.3% of GDP in 1996, dropped to 38% at the end of 2012. Like just about every European country, Sweden was staggered by the 2008 financial cr! isis and t! he eurozone debt crisis later. But the economy has been recovering, albeit slowly.

MORE: Countries with the most multimillionaires

11. Switzerland

> S&P/Moody's ratings: AAA/Aaa
> S&P/Moody's outlook: stable/stable
> 2012 GDP growth: 1.0%
> Unemployment rate: 4.2%

Switzerland is a model of consistency. Government spending runs at just about 33% of GDP year after year. Government debt-to-GDP ratio is just under 50% year after year. It is a very prosperous country built around its financial services industry (UBS and Credit Suisse), its big drug and food companies (Novartis and Nestle), its transparent legal system, its advanced transportation network and, of course, the scenery. But its prosperity and stability can also be a problem. The Swiss franc has appreciated by 22.5% against the euro and 24.5% against the U.S. dollar over the last five years. 44% against the U.S. dollar since the end of 2005 and 36% against the euro since a low in 2007. That threatened important Swiss exports — such as watches, scientific instruments and the like — and forced the Swiss to intervene to drive the franc lower in 2011.

24/7 Wall St. is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

Wednesday, May 13, 2015

Petmed Express (PETS) Upcoming Earnings News Obscures a More Important Reality

The two-year soft patch for Petmed Express Inc. (NASDAQ:PETS) may well be over; we'll know for sure on Monday. The two-year dry spell for faithful PETS shareholders may also be over. In fact, the chart says the stock's already in a new uptrend, and the company has a chance to cement that budding move into place when earnings are unveiled early next week.

First things first - the chart. Though PETS has been in a broad uptrend since late 2011, it's been an erratic and unreliable uptrend. The falling resistance line that kept that pullback going for so long was snapped in early 2013. And, thanks to some serious buying interest that's materialized in the past two weeks, Petmed Express shares have finally broken above a key resistance zone between $11.50 and $13.00.

That in itself is a great bullish clue, and were earnings not on the agenda for Monday (the 22nd), that may be enough to step in. Earnings are often a stock-moving catalyst though, and it's mot likely PETM is going to be an exception to that rule of thumb. The good news is, the company is very, very likely to post good news.

To call a spade a spade, Petmed Express probably deserved to see its shares pull back in 2011... not to the degree they did, but to pull back nonetheless. Per-share earnings slumped from 2010's peak of $1.14 (when pet-mania was still growing but few had learned how to compete with the online pet pharmacy company) to what would be a multi-year low of $0.80 by fiscal 2012. The tide started to turn last year though, with the company booking a bottom line of $0.86 per share, and putting itself on pace to earn a projected $0.87 this year. No, it's not much, but it does explain the stock's recovery. Take a look at the long-term chart of annual per-share earnings for PETM, which roughly mirrors the stock's chart.

A step in the right direction? Sure, but critics will be quick to point out that the growth rebound has been tepid so far (7% in fiscal 2013), and is projected to be even less impressive this fiscal year (+1%). Before coming to that conclusion, however, interested parties may want to take a detailed look at the last several quarterly per-share reports from Petmed Express Inc. In six of the last eight quarter, PETM has topped estimates... by more than a little. In its most recent three quarters, it's grown the bottom line.

Point being, analysts may be underestimating how well the company's going to do not just in fiscal Q1 of 2014 (which it just completed), but for the next three quarters as well.

Just in the interest of complete reporting, fiscal Q1 has historically been a tough one for the company; PETM missed in both of its most recent first quarters. The bigger picture is still showing improvement though, and there's a great chance the company could be on the verge of posting a surprising earnings beat. There's an even better chance it'll top earnings estimates for the next three quarters.

The chart says traders are starting to agree, and though the runup right in front of earnings has to leave one wondering if this is a "buy the rumor, sell the news" situation, even a post-earnings dip would be a buying opportunity.

Bottom line? Though probably not worth getting into right now, barring anything but a skyrocketing stock after Monday's earnings announcement, Petmed Express Inc. should be a great longer-term buy.

For more trading ideas and insights like this one, register for the free SmallCapNetwork newsletter today.

Tuesday, May 12, 2015

3 Jesse Livermore Rules for a Fed Taper

NEW YORK (TheStreet) -- Before I discuss the current market outlook, I'd like to summarize a few investment rules made famous by American stock trader Jesse Livermore that are especially pertinent this week: Pivotal Points. The core of Livermore's timing strategy was built upon two categories of pivotal points. The first he called a reversal pivotal point and the second he called a continuation pivotal point. Optimum buy and sell opportunities occur when an investor is able to identify these key market moments. A speculator has to be patient, Livermore remarked that he always made money when he waited and traded on the confirmation of these pivotal points. When entering a new trade rooted in a pivotal point thesis, Livermore let the market tell him what to do. He got his clues and cues from what the market told him. He did not anticipate: "To anticipate the market is to gamble; to be patient and react only when the market gives the signal is to speculate." One must be right on the moves but also right on the timing. Therefore, Livermore pioneered the probing strategy similar to a commanding officer sending out a reconnaissance platoon to probe the enemy lines and gather intelligence before unleashing the troops. Averaging into an allocation enables you to avoid pitfalls. If your initial allocation loses 10% it's time to cut losses, admit your mistake, and exit the trade. Averaging in is a sure way to confirm judgement. If the line of least resistance cannot be identified, it is best to be in cash. The trend is your friend. No trend means get out. Investors should learn to be comfortable in cash.

With these three rules providing a conversational foundation, let's discuss the market outlook.

On Friday we were faced with a potential double whammy of negativity because of Federal Reserve bond purchase tapering on Wednesday and a Larry Summers nomination to Fed chairman by President Obama. Summers was a disaster waiting to happen because of his anti-stimulus bias. The decision to pull his name from consideration provides the stock market with a significant long-term boost.

Jesse Livermore's rulebook would have labeled the Summers catalyst as a reversal pivotal point; however, with Fed official Janet Yellen now in the picture, the status quo is reaffirmed and Obama's Fed appointment catalyst simply becomes a continuation pivotal point which reinforces the long-term bullish trend.

In the short run we still have to deal with the second half of the double whammy, which is the beginning of a Fed taper. The media is referring to it as a "tiny taper" of only $10 billion so it shouldn't be too much of a shock to our economic sentiment, especially in the absence of Summers. Nevertheless, it is a noteworthy pivotal point that should be recognized with a negative bias. This is why we have more than 90% of the portfolio in cash.

Until the technical action proves otherwise, I will remain cautious in the short run. If this catalyst snowballs into a reversal point it would impact upon leaders such as Google (GOOG), Tesla (TSLA) and Priceline (PCLN) -- three leadership stocks that have experienced strong technical resistance in recent weeks at $890, $170 and $980, respectively. Netflix (NFLX) is also an interesting breakdown candidate at $300, if this taper turns into a reversal pivotal point.

Of course, the other play to watch is gold. Monday the metal finished at $1,311, even with the news that Summers is out. If Tuesday is down again, we'll buy more of the SPDR Gold Trust (GLD) January 2014 $135 puts that have performed so well so far. Recent positive market action that has boosted the Dow Jones Industrial Average all the way back to 15,500 because of good news from Syria, and Summers has yet to recognize the reality of the taper. We will learn a lot from the broad market action of the next five trading days as the taper finally becomes the market's singular focus. Either it's a reversal pivotal point or it's a continuation pivotal point. Until we get a definitive answer, we'll probe the short side of GOOG/TSLA/PCLN/GLD and hold the majority of the portfolio in cash. After enjoying the previous $97 Apple (AAPL) Apple run we are certainly comfortable to be in cash as the market signals its next move. At the time of publication the author had no position in any of the stocks mentioned. Follow @EconomicTiming This article was written by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management. Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

Sunday, May 10, 2015

Should I Buy Kellogg Stock? 3 Pros, 3 Cons

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Investors' appetite for Kellogg (K) continued today, with Kellogg stock up about 4%.

Yet for the third quarter, Kellogg earnings were actually mixed. The company posted flat sales of $3.7 billion, which was in-line with Wall Street expectations. But earnings increased by 2.5% to $326 million, or 90 cents a share. The analysts' consensus was for 89 cents. But after excluding one-time items, Kellogg earnings came to 95 cents a share.

But perhaps the biggest factor moving Kellogg stock today was the announcement of a restructuring program. It could lead to juicier profits over the next few years.

So is it time to buy Kellogg stock? Or should investors hold off? To see, let's take a look at the pros and cons:

Pros on Kellogg Stock

Brand portfolio. It's extensive. Some of Kellogg’s franchise brands include Corn Flakes, Keebler, Eggo and Rice Krispies.

But of course, Kellogg has expanded its portfolio using savvy acquisitions. Just look at its purchase of Pringles, which was owned by Proctor & Gamble (PG). With the transaction, Kellogg got a big foothold in the lucrative snacks category, with top brands like Pop-Tarts and Cheez-Its.

But over the years, Kellogg has struck some other key deals, such as for Morningstar Farms, Nutri-Grain and Kashi.

Restructuring. Called "Project K," Kellogg announced a wide-ranging effort to realize efficiencies. The projection is for reductions of $425 million to $475 million by 2018. But to achieve this, Kellogg has announced a 7% slashing of its global workforce. It looks like a big target for cuts will be in the supply chain.

This is certainly a tough decision. But to remain competitive, Kellogg had little choice. Kellogg says it will still invest in key parts of its business, such as R&D, brand building and emerging markets.

Dividend. Kellogg stock has a juicy yield of 3%. And there should be little risk of a cutback as Kellogg continues to generate healthy cash flows. For the full-year, they are expected to total between $1.1 billion to $1.2 billion (this includes the costs of Project K.

Something else: Kellogg has paid a dividend since 1925.

Cons on Kellogg Stock

Debt. Kellogg’s leverage is on the high side. Keep in mind that long-term debt is a hefty $6.3 billion. There is also outstanding pension liabilities of $886 million. All this compares to about $2.8 billion in equity.

Even though Kellogg's strong cash flows should be enough to support the overall liabilities, there may still be a problem. That is, the company may not have much firepower to use debt financing for acquisitions.

Valuation. Kellogg stock is far from cheap. The current price-to-earnings ratio is at 24X, which is well above some of its peers. General Mills (GIS), for example, has a multiple of 18X and Kraft Foods (KRFT) is trading at 17X.

Consumer shift. The cereal business, which accounts for over 30% of overall revenues for Kellogg, is feeling pressure. The fact is that older and affluent consumers have been looking at alternatives. For example, Greek yogurt, smoothies and breakfast sandwiches have become quite popular.

At the same time, the competitive environment in the cereal market is also intense. Companies like General Mills have been aggressive with discounting and promotions.

Verdict on Kellogg Stock

Kellogg has some troublesome headwinds, as seen with the competition and sluggishness with the core cereal business. But the good news is that the company is taking swift actions to restructure its cost structure. The result should be higher cash flows, which will allow for a robust dividend and share buybacks in Kellogg stock. There will also be opportunities to pursue more acquisitions.

Kellogg is also positioned nicely for the megatrend of healthier eating habits. The company's brands like Morningstar Farms, Nutri-Grain and Kashi have become synonymous with the category.

So then should you buy Kellogg stock? Yes — if you're looking for a fairly low-risk, high-dividend-paying option for your portfolio, the pros certainly outweigh the cons.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.