Consumer
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News and Views
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Macro/Technicals
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Earnings
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Sector News, M&A, Capital Raises
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Research Away
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Top Events/Earnings Calendar
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Cantor Flows
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News and Views
News and Views
Consumer Discretionary had a decent week, but 70% of retailers reporting so far have beat consensus expectations by only 2.4% on average, which is considerably lower than the 5.9% & 8.3% rate from 1Q10 & 4Q09. Friday, KIRK and HIBB disappointed and their prices reflected it. ANN managed to be up 2.5% on in line numbers, but is still down 10% MTD. Of the companies that have reported 3Q10 and/or FY10 earnings guidance, most retailers have been negative, or in line, with very few companies guiding higher. This coming week we will see 26 more retail companies report and unless there are some real upward surprises, the group faces a tough 2nd half of the year. LOW upgrade this morning should help HD as well.
Futures: +5.10; 1075.40
Pre-Market Movers
UP— LOW +1.2%
DOWN— COCO -1.78%
Macro/Technicals
SPX: 1071.69; -.37%RLX: 409.05; +.19%
RTH: 88.99; +.14%
XLY: 30.90; -.06%
XLP: 26.73; flat
VIX: 25.49; -3.59%
Leaders: NDN, BC, DDS, JCP, PSUN, SJM, ANN
Laggards: EDMC, KIRK, COCO, HIBB, FLWS, ZLC
Earnings
SAFM Sanderson Farms reports Q3 EPS $1.55 vs Reuters $1.87 ($43.16). Company reports revenues of $489.1M vs Reuters $518.6M.
Sector News, M&A, Capital Raises
CPB Campbell Soup thought to be planning £1.5B bid for United Biscuits's biscuit-making arm - Guardian ($36.64) . United's private-equity owners have considered an IPO, but the option is thought less likely in the wake of Ocado (OCDO.LN)'s unrewarding listing. Campbell would want to break up the company. The article says Kraft (KFT), Pepsi (PEP), and Kellogg (K) may also make offers, and that SAB Miller (SAB.LN) may offer £7B for Foster's (FGL.AU) beer operations, although industry insiders say Asahi Breweries (2502.JP) is in a better position to make an offer.
Death reports of the for-profit education group may be early, says the WSJ. The "Heard on the Street" column notes proposed changes in legislation could keep shares under pressure but believes if the government is to meet its goal of substantially increasing college graduates by 2020, it will need the sector. The latest push by the schools to target veterans whose benefits let the institutions circumvent a rule that 10% of sales come from non-government sources is seen as a positive with education benefits for veterans rising to $9.5B this year from $4.2B.
Barron’s Streetwise comments about recent takeover speculation and says while it is not a key reason to buy the market, the M&A theme is a net positive until it gets more out of hand. Traditional growth stocks with multi-generational brands such as Coca-Cola (KO), and JM Smucker (SJM) are noted to have performed well in sideways markets.
MKC McCormick adopts 10b5-1 stock repurchase plan ($40.90)
The stock repurchase plan will operate in accordance with guidelines specified under Rule 10b5-1 and consistent with McCormick's policies regarding stock repurchases. Under the company's stock repurchase plan and similar plans that the company expects to enter into in the future, the company may utilize a portion of the previously announced authorizations to repurchase shares of common stock during specified time periods concurrent with the end of the company's fiscal quarters, at prevailing prices and subject to market conditions and other factors. The shares that may be purchased under the stock repurchase plan will be included in the shares previously authorized by the company's board. As of 20-Aug, $404M is available under current repurchase authorizations, which have no expiration date.
JMBA Jamba has refranchised 102 stores to date, for which it incurred aggregate impairment charges of $5.5M ($1.87). As previously disclosed on May 28, 2009, JMBA approved a plan to refranchise up to 150 company-owned stores, primarily outside of California. At the time of filing, the company was unable to determine whether any charges would be incurred. To date, the company has refranchised 102 stores for which the company incurred aggregate impairment charges of $5.5M. The company does not expect to incur additional charges for the refranchising of the balance of its stores identified for refranchising.
Research Away
COCO FBR Capital Markets lowers target to $4.50 from $13 on Corinthian Colleges, reiterates underperform rating ($4.49). The firm expects significant earnings declines due to the fixed cost nature of the business, falling enrollment and higher compliance costs.
LOW Lowe's upgraded to buy from neutral at Goldman Sachs ($20.64). Target is $24. The firm expects EPS growth to accelerate.
Top Events/Earnings Calendar
Earnings
PRE: SAFM, TUES
POST: None
Events
Morgan Stanley w/SuperValu (SVU) IN Dallas, TX
Cantor Flows
Flows
Consumer Staples: GMCR, HANS, KFT, LNCE, SLE
Consumer Discretionary: FLWS, FRED, HIBB, LOW, M, PBY, TPX
Consumer Services: COCO, ONVI