Sears shares higher on short-covering

Revenue for the quarter of $4.3B was down from $5.4B in the prior year quarter, but was better than the $4.05B consensus

Comparable store sales declined 11.9% in the quarter. Kmart comparable sales declined 11.2%

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Shares of #Sears Holdings $SHLD are higher after the troubled department store posted a smaller than expected loss for the first quarter. While the company said it had a challenging quarter, it is committed to returning to “solid financial footing.”

EARNINGS: Sears this morning reported an adjusted loss per share of $2.15, better than the $3.05 loss analysts were expecting. Revenue for the quarter of $4.3B was down from $5.4B in the prior year quarter, but was better than the $4.05B consensus.

Comparable store sales declined 11.9% in the quarter. Kmart comparable sales declined 11.2%, primarily driven by declines in the grocery and household, pharmacy, apparel and home categories, while Sears Domestic comp sales dropped 12.4%, primarily due to decreases in the home appliances, apparel and lawn and garden categories.

Sears Chairman and CEO Edward #Lampert said that while Q1 was “certainly a challenging quarter” for the company, “it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing.” Lampert said Sears is “moving decisively” with its $1.25B restructuring program.

COST-CUTTING EFFORTS: Sears said this morning that it has already actioned $700M in cost savings to-date from its strategic restructuring program through the closure of 150 non-profitable stores, as well as the closure of 92 under-performing pharmacy operations in certain Kmart stores and the closure of 50 Sears Auto Center locations.

Sears CFO Rob Riecker commented that the company “will continue to evaluate our options to deliver further improvements to our operational performance and balance sheet.” Earlier this week, Sears signed a deal to annuitize $515M of pension liability with MLIC, under which MLIC will pay future pension benefit payments to approximately 51,000 retirees. The company is targeting a reduction in its outstanding debt and pension obligations of $1.5B for fiscal 2017.

WHAT’S NOTABLE: Sears CEO Lampert accused the media earlier this month of “unfairly singling out” the company over the past decade, blaming “irresponsible” news for the company’s issues, Reuters reported, citing a presentation Lampert made at an annual shareholders’ meeting.

Sears, which had not reported a profit for six years, is in the midst of a turnaround strategy, but the retailer has warned it may not be able to continue as a going concern.

Sears, like many other mall-dependent retailers, has been impacted by the slowdown in general mall traffic as consumers turn to #Amazon $AMZN and other online retailers.

Lampert recently told the Chicago Tribune that he feels like “We’re ahead of J.C. Penney $JCP , we’re ahead of #Macy’s $M , we’re ahead of #Target $TGT , in some aspects of where the world is going.” He added that Sears is “fighting like hell to change the way people do business with us.”

Meanwhile, Barry Sternlicht, the Chairman & CEO of Starwood Capital Group and Chairman of Starwood Property Trust $STWD , told Bloomberg that Sears is usually the weakest performing store in the mall, adding that he’d like to see Sears in its malls “go away.”

PRICE ACTION: Sears (SHLD) is up 17% to $8.74 in Thursday trading. Note that as of May 15th, a total of 14,418,732 shares were shorted compared to average daily volume of 875,054, and a 16.7 days to cover the shorts.

OTHERS TO WATCH: Peers in the sector trading higher this morning include Macy’s, J.C. Penney and Kohl’s $KSS .

If you are a Sears Holdings stockholder, it is a good idea to sell into the strength and cut your losses.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Moody’s Downgrades Hong Kong

The announcement follows Moody’s downgrade of China’s rating to A1 from Aa3

The economic and financial linkages between Hong Kong and China are close and broad-based

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#Moody’s Investors Service has downgraded Hong Kong’s local currency and foreign currency issuer ratings to Aa2 from Aa1 and changed the outlook to stable from negative.

The announcement follows Moody’s downgrade of China’s rating to A1 from Aa3 and change in the outlook to stable from negative.

The downgrade in Hong Kong’s rating reflects Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland.

Hong Kong’s local currency senior unsecured debt ratings are downgraded to Aa2 from Aa1.

The economic and financial linkages between Hong Kong and China are close and broad-based. Combined with political linkages, this means that any erosion in China’s credit profile, such as that reflected in the 24 May downgrade of China’s rating to A1 with a stable outlook, will ultimately affect Hong Kong’s credit profile and will be reflected in the Special Administrative Region’s rating.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Target to Focus on High Margin Products

target #Target $TGT appears to be taking a “less is more” strategy with ecommerce, choosing to revamp some online projects, cut relationships with digital partners, and walk away from prospective acquisitions, the Wall Street Journal reported earlier, citing sources.

“We’re not trying to be the catalog of everything. We aren’t going to add products to our website and stores just because they exist,” Target digital head Mike McNamara commented, according to the report.

Under McNamara, the company is pursuing select online projects, and is working on a curbside-pickup service, a source said. The Journal noted that Target stayed on the sidelines when #Wal-Mart $WMT acquired #Jet.com last year, considering the deal overpriced and a poor fit with Target chief Brian Cornell’s emphasis on high-margin product categories, according to sources.

Additionally, the report noted that Target was in advanced discussions last summer to potentially acquire #Sprouts Farmers Market $SFM but ultimately walked away, according to sources. More recently, Target explored acquiring an ecommerce name, including #Boxed.com, though those talks didn’t lead anywhere, sources told the Journal.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Apple $AAPL Stock Reaches its All Time High on $1000+ iPhone 8

apple-cash#Merrill Lynch and Goldman Sachs upped their price targets on #Apple $AAPL , while reiterating their Buy ratings on the shares, citing the potential for new products and “significant upside” in iPhone Average Selling Price, or ASPs.

NEW CATEGORIES: In a research note to investors, Bank of America Merrill Lynch raised its price target for Apple to $180 from $155. While noting that last year Apple accounted for 10% of global consumer spending, the analyst told investors that he believes the markets that the company currently addresses can be about $550B in 2020 and close adjacencies can be $300B. This excludes potential Total Available Market, or #TAM, from healthcare and automotive, he pointed out. He also noted that given the iPhone maker’s “immense” net cash, Apple can easily enter most markets through M&A.

Moreover, the analyst argued that new products and categories add to its already “significant” growth opportunity in its existing areas, and that ignoring the “shadow TAM” of new product opportunities understates Apple’s true potential. The analyst believes the tech giant still has room to grow and gain share in the traditional areas of smartphones, tablets, wearables and desktops/laptops, while new areas to explore include game consoles/handheld games, cameras/camcorders, DVD players/Blu-ray players, set-top boxes, streaming audio and video services, wearables, TVs/HDTVs and Virtual Reality.

HIGHER IPHONE PRICES: Meanwhile, Goldman Sachs was also bullish on Apple this morning, raising her price target on the shares to $170 from $164 ahead of the upcoming iPhone 8 product cycle. The analyst told investors in a research note of her own that she sees “significant upside” in iPhone ASPs, expecting the 128GB model to be priced at $999 and the 256GB at $1,099. Given the analyst iPhone SKU analysis, the analyst believes the iPhone 8 will drive well over 50% of total new iPhone shipments in the first four quarters.

Based on the higher mix and ASP of the iPhone 8, the analyst also estimates blended iPhone ASPs to be up 16% year over year in FY18, and sees a relatively modest 40bp headwind to iPhone gross margins in 2018 as additions to the bill of materials and higher memory costs are largely offset by the expected $130 ASP increase in the iPhone 8.

PRICE ACTION: Since start of the month, shares of Apple more than $11. They last traded at $156.10. Earlier in the session the stock hit an all time high of $156.42 per share.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Pandora shares get a boost from KKR

pandora_logo_blue-796x174Noting that #Pandora $P announced it had raised $150M by selling a 5-year, 8% convertible preferred security to KKR $KKR , #Needham analyst Laura Martin calculates that adding KKR to the Pandora story adds $5 per share to the latter’s value, implying that it should trade up to $15 per share on the news over time.

The analyst believes #KKR provides a financial safety net, and expects KKR’s exit time frame to be 5 years, giving public shareholders a clearer exit path.

She reiterates a Buy rating and $16 price target on Pandora’s shares.

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Investor Encourages Sale of Gigamon

id-gigamon#Elliott Associates said in its SEC filing regarding its new activist stake in #Gigamon, “The Reporting Persons intend to communicate with the Issuer’s management and Board about a broad range of operational and strategic matters, and intend to encourage the issuer to undertake a strategic review process including, without limitation, a potential sale of the Issuer or certain of its businesses or assets, in which the Reporting Persons may participate, as a means of enhancing shareholder value.
The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may from time to time in the future express their views to and/or meet with management, the Board, other shareholders or third parties, including, potential acquirers, service providers and financing sources, and/or formulate plans or proposals regarding the Issuer, its assets or its securities.”
Shares of #Gigamon $GIMO are up 15% to $40.30 following news of the activist stake.

Synchronoss Technologies shares sink

#cropped-527178_434502233267150_400064991_n.jpgSynchronoss Technologies $SNCR shares are down about 40% in premarket trading after the company’s chief executive officer and chief financial officer resign to “pursue other interests.” To make matters worse, the cloud computing company,   expects total revenue in the first quarter to come in $13 million to $14 million well below the company’s guidance, which was $173 million to $178 million.

The company also said it expects operating margins to come in below its guidance.

Wednesday’s Tax announcement likely to be only broad guidance and ideas

White House budget director Mick Mulvaney said on Sunday, “I think what you’re going to see on Wednesday is some specific governing principles, some guidance. Also some indication of what the rates are going to be. I don’t think you’re going to see something — and I don’t think anybody expects us to roll out — bill language on Wednesday. In fact, we don’t want to do that.

So what you’re going to see on Wednesday for the #FirstTime is: Here’s what our principles are, here’s some of the ideas that we like, some of the ideas we don’t like. Here’s some of the rates we’re talking about.”cropped-527178_434502233267150_400064991_n.jpg

Asked whether the #taxreform will be revenue neutral, #Mulvaney said, “I don’t think we’ve decided that part yet. Keep in mind, it’s a balancing act on that. You can either have a small tax cut that’s permanent, or a large tax cut that is short term. I don’t think we’ve decided yet, but you’ll know more on Wednesday.”

Questioned about his recent statement that he doesn’t expect a “real plan, specifics, meat on the bone” until June, Mulvaney responded, “I think that’s still probably fair. Again, we want to start working — and have already started working with the committees in the House and the Senate as we try to build some momentum.”

President Comments Move Stocks!

Here is a re-cap of how President Trump’s comments moved stocks last week:

1. STEEL SECTOR: On Thursday, Donald Trump met with several steel company CEOs at the White House to discuss the state of the industry and the administration’s plans to crack down on steel dumping. Following the sit down, he signed a memorandum related to section 232 of the Trade Expansion Act of 1962 and said he has directed the Commerce Department to launch an investigation into whether or not foreign companies, particularly those from China, are dumping steel on the U.S. market. Publicly traded companies in the steel space include Steel Dynamics $STLD , AK Steel $AKS , U.S. Steel $X and Nucor $NUE .TrumpHouseLogo_FINAL-1

2. HOSPITALS: Earlier this week, hospital stocks were under pressure following reports of Health bill progress. CNBC tweeted, “NEW: If health care changes in MacArthur memo are in bill text, they’d get 18-20 new @freedomcaucus votes. Brings total to
25-30, per source.” Publicly traded companies in the space include Community Health $CYH , HCA Holdings $HCA LifePoint $LPNT , Tenet $THC and Universal Health $UHS .

3. TECH COMPANIES: According to a news report by Recode, tech companies such as Amazon $AMZN , Apple $AAPL , Facebook $FB , Google $GOOG; $GOOGL , and Microsoft $MSFT have focused some of their lobbying sums in Washington over the past three months on fighting President Trump, as he looked toward major changes to the U.S. tax code and placed new restriction on foreign immigrants. Both issues are present on many companies’ first quarter lobbying reports, the publication notes.

4. HUMANA: On Friday, Jefferies downgraded Humana $HUM to Hold and lowered his price target on the shares to $221 from $237. The analyst told investors that he views the shares as expensive and pointed out that 2018 premium growth under President Trump is lower than 2017 under Obama. Events that would enhance Medicare Advantage decidedly above Medicaid and Commercial “are not blossoming,” Windley contended.

5. FINANCE-RELATED EXECUTIVE ORDERS: President Trump signed two finance-related executive orders on Friday aimed at unwinding regulations put into place after the financial crisis. The directives target “living wills” that banks must formulate to show how they would be broken up it there is danger of failure. Alongside banking measures, the administration is ordering a review on rules regarding inversions. Publicly traded money center banks include Bank of America $BAC , Citi $C , Goldman Sachs $GS , JPMorgan $JPM , Morgan Stanley $MS , U.S. Bancorp $USB and Wells Fargo $WFC .

6. TAX REFORM: On Thursday, Treasury Secretary Steven Mnuchin said during the International Finance Washington Policy Summit that the Trump administration is close to bringing forward “major tax reform.” The following day, Trump told Associated Press that he will unveil a tax plan next week that includes “massive” tax cut for individuals and businesses.

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POTUS calls for steel probe!

The White House published President Trump’s request today for an investigation into steel imports. The document states: “As imports of #steel to the United States continue to rise, an examination of foreign practices is urgently needed… President Donald J. #Trump is taking action to ensure America’s steel industry comes first, in addition to his Buy American and Hire American policies.panel-okays-20-provisional-safeguard-duty-on-steel-products

Today, the President signed a Presidential Memorandum prioritizing an investigation initiated by the Secretary of Commerce into whether steel imports threaten to impair the national security… By law the investigation must be concluded and a report submitted within 270 days. If the report concludes that steel imports threaten to impair the national security, and the President concurs, he may take several actions, including #tariffs.”

Publicly traded companies in the steel space include Steel Dynamics $STLD , AK Steel $AKS , U.S. Steel $X and Nucor $NUE $ZEUS

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Pfizer receives grand jury subpoenas from DOJ

Pfizer $PFE confirmed that the company had received grand jury subpoenas from the U.S. Justice Department as part of an antitrust investigation focused onpfizer-logo intravenous saline solution makers, said Reuters.

Note that in a regulatory filing last night, ICU Medical $ICUI disclosed that on April 18, in connection with the Hospira Infusion Systems business that the company acquired in February 2017 from Pfizer.

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ICU Medical received a grand jury subpoena issued by the U.S. District Court for the Eastern District of Pennsylvania, in connection with an investigation by the U.S. Department of Justice, Antitrust Division.

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Oppenheimer bullish on Visa, MasterCard ahead of results

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The analyst is encouraged by “solid” January intra-quarter volume growth, improving gas price trends, strong retail sales growth, and broadly positive card issuer trends.

Further, Greene continues to believe that MasterCard and Visa are attractive at current levels, given their defensible market positions and strong long-term prospects. Nonetheless, he prefers Visa relative to MasterCard at present given the continuing U.S. volume boost from the Costco $COST wins and JPMorgan Chase $JPM Sapphire Reserve momentum, apparent conservative guidance, and Visa Europe accretion benefits.

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Earnings Raise Red Flag for Stocks

A review of latest quarterly results from corporate America pointing to a slowing economy. Several key companies have either missed their results or have lowered their forward looking guidance. On April 18, 2017, several major corporations just did that. Much of the today’s market weakness was attributed to the price decline in both Johnson & Johnson (JNJ) and Goldman Sachs images

(GS) following their earnings reports. The weakness in those bluechips caused the Dow Jones Industrial Average (DJIA) to underperform the other major averages and struggle all day. The market action was
an auspicious start to the earnings season, which has been anticipated with great optimism by investors since the November election. Shares of Goldman Sachs fell nearly 5% after reporting downbeat quarterly results, which is exceedingly rare for the investment bank. Commenting on the quarter, Goldman chairman and chief executive officer Lloyd Blankfein called the quarter’s operating environment “mixed,” with client activity “challenged in certain market-making businesses.”jnj

Johnson & Johnson (JNJ) shares dropped 3% after the healthcare giant posted better than expected profits but lower than expected quarterly sales.  Meanwhile, shares of Netflix (NFLX) declined over 2.5% after the company mixed Q1 report and Q2 guidance.

Industrial goods seller, Grainger (GWW) shares dropped to their 52-weeks low after the firm cut its full year Earnings per Shares (EPS) view to $10.0grainger0-$11.30 from $11.30-$12.40. The firm also lowered its  FY17 sales growth view to 1%-4% from 2%-6%. The firm blamed the pricing acceleration and a 1% reduction in sales from foreign exchange as the culprit for the miss.

Among the notable losers on the day was Barracuda (CUDA), which dropped 17% after it reported quarterly results and provided lowered guidance for the first quarter and fiscal 2018. Also lower was Cardinal Health (CAH), which fell 11.5% after announcing that it will acquire a patient product portfolio from Medtronic (MDT) for $6.1B and warning that it now sees its FY18 EPS to be flat to down mid-single digits, citing the impact of generic deflation and other factors.

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