MOST NOTEWORTHY: ComScore, Duke Realty, Nordstrom and Sun Healthcare were among today's noteworthy upgrades:
ComScore (NASDAQ: SCOR) was upgraded to Outperform from Perform at Oppenheimer to reflect the strong Q1 report and strong customer additions.
Duke Realty (NYSE: DRE) was upgraded to Outperform from Market Perform at Wachovia upgraded based on valuation.
Nordstrom (NYSE: JWN) was upgraded to Outperform from Neutral at Credit Suisse.
Sun Healthcare (NASDAQ: SUNH) was upgraded to Outperform from Market Perform at Friedman Billings based on valuation and notes the Medicare rate cuts will be as drastic as feared.
OTHER UPGRADES:
MedAssets (NASDAQ: MDAS) was upgraded to Buy from Neutral at Piper, which thinks the company's acquisition of Accuro will strengthen its revenue cycle management offering, and the firm believes the tight credit markets make the company's MedAssets a compelling product in the short-term. In addition, Piper notes that the company has recently had success with large hospital systems.
Jones Apparel (NYSE: JNY) was upgraded to Buy from Neutral at Merrill citing sales expectations for the l.e.i. brand at Wal-Mart (NYSE: WMT) and margin improvements from leaner inventories.
Affiliated Computer (NYSE: ACS) was upgraded to Buy from Hold at Jefferies based on valuation and expectations for better bookings.
So I'm looking at Liz Claiborne (NYSE: LIZ) and its latest earnings report. I don't currently have a retailer in my portfolio, so I'm thinking to myself, hey, maybe I'll want to buy Liz after I check out its latest numbers. Well, that didn't happen.
Net sales (excluding discontinued operations) dropped 3% for the fourth quarter, and adjusted net income declined dramatically, coming in at $0.20 per diluted share -- last year at this time, the metric was over four times as big at $0.94. For the year, net sales dropped over 1% (excluding discontinued operations), and adjusted net income was $1.30 per diluted share -- yet another huge drop, considering that Liz Claiborne took in $2.99 per diluted share of adjusted net income in 2006. Oh, and there are other things here that will make any prospective investor shudder -- operational cash flow was down, the dividend was stagnant, and the margins weren't anything to write home about. And comps at some of the company's stores have been challenged (Juicy Couture, however, did report a strong 25% increase in comparable sales in the fourth quarter).
This was an easy one for me -- I'll stay away from Liz Claiborne. The company, which competes with the likes of Jones Apparel Group (NYSE: JNY) and Polo Ralph Lauren (NYSE: RL), currently exists in the land of strategic reviews, cost reductions, and discontinued operations. I don't want to travel to such a land with this particular business.
Disclosure: Steven Mallas owns none of the companies mentioned.
Jones, still executing its restructuring plan, said its fourth-quarter net loss narrowed to $89.8 million, or $1.06 per share, from $269.5 million, or $2.51 per share, last year. Without the gain on the sale of its high-end department-store chain, Barneys New York, and other costs, net income was nine cents per share, beating the seven cents per share analysts had been expecting.
Jones, which exited several lines during the quarter and along with the rest of the market suffered from weak holiday shopping season, posted a 17% decline in revenue to $838.5 million from $1.01 billion last year. Analysts expected revenue of $874.8 million. To get a better feel for the retailer's performance during the quarter, same-store sales fell 4.8%.
TheStreet.com's Jim Cramer says that next to the consumer, this is the biggest problem facing the otherwise strong companies in this sector.
Doesn't it seem like another day where it is impossible to make money? We have earnings season without any sense that anybody's numbers can be raised. We have an ennui that comes from months of pounding and indecision, and we have stocks that can't seem to go up to save their lives.
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Want an Armani cell phone? Nokia's very cool 8800 Sirocco? Well fughedaboutit. These are among hot cell phones that you cant get in the U.S. See other phones you can't here and see why the mobile phone you want exists somewhere other than the
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The beermaker employs an off-center approach to everything, including its flavors, grassroots marketing, and wacky promotions.
Jones Apparel Group Inc. (NYSE: JNY) shares are rising today after the company's Q3 earnings release. Earnings skyrocketed to $3.97 per share, up from $0.56 in the year-ago period, thanks to a hefty income tax benefit and other one-time gains. Revenues fell 5% but still exceeded analysts' expectations. Excluding one-time items, the company's adjusted EPS was $0.51, ahead of analysts' expectations of $0.34. 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 JNY.
After hitting a one-year high of $35.54 in January, the stock fell to a 52-week low of $16.73 in August. JNY opened this morning at $22.94. So far today the stock has hit a low of $19.70 and a high of $23.08. As of 10:35, JNY is trading at $20.07, up $0.37 (1.9%). The chart for JNY looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $17.50 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 an 8.7% return in just 3 months as long as JNY is above $17.50 at January expiration. Jones would have to fall by more than 13% before we would start to lose money.
MOST NOTEWORTHY: Radian Group (RDN), Heelys (HLYS), Sonus Networks (SONS), Leap Wireless (LEAP) and MetroPCS (PCS) were today's noteworthy downgrades:
Radian Group (NYSE: RDN) was downgraded to Hold from Buy with a $23 target at Citigroup on concerns over the company's potential merger with MGIC Investment (MTG).
Heelys (NASDAQ: HLYS) was downgraded to Neutral from Outperform at Baird, to Hold from Buy at Brean Murray, to Neutral from Overweight at JP Morgan, to Sector Performer from Outperformer at CIBC and to Market Perform from Outperform at Wachovia following the company's FY07 guidance which was well below the consensus.
Sonus Networks (NASDAQ: SONS) was downgraded to Sell from Neutral at Merriman, as the firm believes there are a number of concerns that are not reflected in shares, including a flat N-T revenue outlook, a cut in 700bp in gross margins and a sharp uptick in receivable days, among other things.
LeapWireless (NASDAQ: LEAP) and MetroPCS were both downgraded to Hold from Buy at Citigroup, as they believe the break in subscriber momentum will last for 6-9 months. Wachovia downgraded Leap Wireless to Market Perform from Outperform citing mixed Q2 results and weak Q3 guidance.
OTHER DOWNGRADES:
UBS removed Coca-Cola (NYSE: KO) and Coach (NYSE: COH) from its Strategic Stock Selection List.
Jones Apparel (NYSE: JNY) was downgraded to Sell from Neutral at Merrill Lynch.
The value of luxury retailing chain Barneys New York, currently owned by Jones Apparel Group (NYSE: JNY), just got a little steeper. Over the weekend, Japan's Fast Retailing Company said it would pay $950 million to acquire the Barneys chain. Since July 5, Fast Retailing has been trying to beat out Dubai investment group Istithmar, which originally offered $825 million for the chain but has since upped its bid to $900 million.
The latest offer is 15% higher than Istithmar's original acquisition price and nearly 140% above what Jones paid to buy-out Barneys in December 2004.
Jones Apparel officials have responded by saying Istithmar has two business days to respond with an offer that, according to a statement published by the Associated Press, is "at least as favorable to Jones as the amended Fast Retailing offer." If Jones decides to deal with Fast Retailing, it will owe the Dubai suitor a $22.7 million break-up fee.
Jones shares have dropped more than 2% today to hit a new 52-week low of $19.79. The stock may be continuing to real from its disappointing earnings report last week.
Friedman Billings believes Symantec's (NASDAQ: SYMC) fundamentals are about to show significant improvement over the next year and upgraded shares to Outperform from Market Perform.
JP Morgan raised OfficeMax (NYSE: OMX) shares to Overweight from Neutral on valuation.
Qwest (NYSE: Q) was upgraded to Sector Outperformer from Sector Performer, expecting revenue growth to be driven by the improving enterprise business. JP Morgan added Qwest to its Focus List.
Metlife (NYSE: MET) was upgraded to Buy from Neutral at Merrill, based on valuation...
OTHER UPGRADES:
ValueClick (NASDAQ: VCLK) was upgraded to Sector Perform from Underperform at Pacific Crest.
Penn West (NYSE: PWE) was upgraded to Sector Perform from Underperform at RBC Capital.
Friedman Billings upgraded Cubic (AMEX: CUB) to Market Perform from Underperform.
Morgan Stanley upgraded shares of Jones Apparel (NYSE: JNY) to Equal Weight from Underweight.
Broadcom (NASDAQ: BRCM) was raised to Sector Outperformer from Sector Performer at CIBC.
The market spent most of the day in the red, but shot up in the last hour to close in the green. The NYSE had volume of 4.1 billion shares with 1,398 shares advancing while 1,906 declined for a gain of 18.55 points to close at 9,573.05. On the NASDAQ, 2.9 billion shares traded, 1,263 advanced and 1,810 declined for a gain of 7.6 to 2,553.87.
In options there were 9.0 million puts and 7.2 million calls traded for a put/call open interest ratio of 1.25. Bristol-Myers Squibb (NYSE: BMY) saw heavy volume on the December 32.50 calls (BMYLZ) with over 52,000 options trading. ALCOA Inc. (NYSE: AA) saw heavy volume on the August 47.50 calls (AAHW) with over 35,000 options trading. Valero Energy (NYSE: VLO) saw heavy volume on the August 75 calls (ZPYHO) with over 34,000 options trading. General Motors Corp. (NYSE: GM) saw heavy volume on the September 32.50 puts (GMUZ) with over 53,000 options trading.
The CBOE S&P 500 Volatility Index (NASDAQ: $VIX) saw heavy volume on the August 25 calls (VIXHE) with over 55,000 options trading. The CBOE Volatility Index is a measure of option volatility and effectively a fear index of the market. The VIX jumped from 15.00 area in the beginning of July to a recent reading of 23.67 (see chart). The index being up indicates that there is still fear in the market. The heavy call option activity at the 25 strike represents a bet that fear will increase or a large insurance policy against further market downturns.
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.
It has been a tough start of the day for Jones Apparel Group (NYSE: JNY) after reporting an unexpected second quarter loss this morning. The stock fell sharply this morning, setting a new 52-week low.
Analysts had expected a profit of $0.31 per share, and were stunned by the loss of $0.44 per share. Excluding some special items, the company earned $0.17 per share, marking the second straight quarter that the company has failed to meet estimates.
The company blamed its poor performance on a tough retail market, which led to weak same stores sales. The troubles that the retail market created forced Jones to slash many of its prices just to get some of its excess inventory out the door.
Also making news this morning was the company's decision to sell its subsidiary Barneys New York Inc. The company has accepted a $900 million offer from Fast Retailing. Jones bought Barneys New York, a chain of upscale department stores, for $400 million.
However, receiving a huge sum for Barneys, the once-bankrupt retailer, might change that. Jones has a $3.1 billion market cap and is expected to generate $431 million in 2007 EBITDA and $447 million in 2008 EBITDA, with much of that being free cash flow.
Trading at 7.7x and 7.5x enterprise value-to-EBITDA according to a Goldman Sachs report released yesterday, this deal that can get financing if private equity offers a 10 to 20% premium.
Jones has good management and good cash flow and provides a very attractive trading opportunity for investors with the stock having dropped from $34 to $28 the past few months. The retailer should be able to receive in the low-to-mid $30s when adjustments are made for the Barneys sale.
Jones looks to me like a good risk-reward trade with not much downside and good upside appreciation.
It's possible that Istithmar, the private-equity arm of the Dubai government, is grimacing today, after news of a higher bid for Jones Apparel Group Inc's (NYSE: JNY) Barneys New York unit surfaced. Under the terms of their agreement, Jones is allowed to weigh other offers for the Barneys unit until July 22 and can explore bids for the entire company through August 11. Jones said Thursday it received an unsolicited bid from Japanese clothing company Fast Retailing Co Ltd to acquire Barneys for $900 million. That's a 9% premium over Istithmar's $825 million offer.
Fast Retailing, which owns stores in more than 12 countries, says owning Barneys New York would increase its market diversification and boost its revenue. The company recently expanded its Uniqlo casual clothing into the U.S., and said last year it would target the U.S. retail market for acquisitions. Fast Retailing sees "potential top-line synergies" in buying Barneys.
For Jones, though, analysts believe the upscale unit has allowed Jones to "lessen its dependence on selling its wholesale lines to department stores." Should Jones decide to break up the in-place deal with Istithmar, it will have to pay Dubai a $20.6 million breakup fee, or $22.7 million if terminated after July 22. So far, however, the deal is still on the table.
Either way, a purchase of Barneys would show the increasing desire for upscale retail, and the increasing desire of companies from countries like Dubai and Japan to further expand into the U.S. market.
Don't feel too badly for Istithmar if their Barneys deal falls through. The firm also reportedly has interests in clothing retailer Loehmann's Holdings, various commercial buildings in New York and London, and investment bank Perella Weinberg Partners.
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MOST NOTEWORTHY: ComScore, Duke Realty, Nordstrom and Sun Healthcare were among today's noteworthy upgrades: 
TheStreet.com's Jim Cramer says that next to the consumer, this is the biggest problem facing the otherwise strong companies in this sector.
The value of luxury retailing chain Barneys New York, currently owned by 
The market spent most of the day in the red, but shot up in the last hour to close in the green. The NYSE had volume of 4.1 billion shares with 1,398 shares advancing while 1,906 declined for a gain of 18.55 points to close at 9,573.05. On the NASDAQ, 2.9 billion shares traded, 1,263 advanced and 1,810 declined for a gain of 7.6 to 2,553.87.
It has been a tough start of the day for .gif){kind=logo}
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