The Daily Dose: One Giant List to Know

 | Jan 17, 2014 | 10:00 AM EST  | Comments
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It's Friday, and that means it's time for a list!  Let's face it, you are beat up from doing battle in the markets and the office this week. Me, well, yeah I feel the same way after watching poor ole' Best Buy (BBY) shares plunge 30% in a single session. Brutal, brutal, brutal. So here is a list to print out and have handy while reading the weekend print periodicals... I promise you I plan on doing the same.

Intel (INTC): Another company in the early earnings season that was unable to meet modest top and bottom line goals. Red flag to see companies toss flat out underperformance on the board following execs not guiding too much three months ago. Moreover, another company forecasting below consensus earnings... and the stock getting penalized for it. Intel's woeful numbers do, however, support the bearish comments on the PC sector offered by Best Buy on its impromptu holiday sales call.

Earnings Season Overall: Weak, and made weaker as negative pre-announcements far outstripped positive pre-announcements heading into the financial hurricane season. Of most concern: the capex spending boom has not been seen, nor is it being forecast. That is a worrying trend considering lofty expectations are baked into stocks in part due to cash being spent on fixed asset investment.

Europe: From what I can tell, no news here, and that is good to slightly disappointing news. The European market conditions have to begin to turn the corner to accelerating growth as to support multinational stock valuations. When I ran through PPG's (PPG) earnings, for example, I mostly saw a company benefiting from modest growth off prior quarters of softness.

Bank of America (BAC), American Express (AXP), Citigroup (C), Banks Broadly: Where is the strong borrowing needed to really propel the economy?  Just don't see it in the bank results, and definitely are not witnessing it in the retail sector/consumer credit data. Bad. Here comes more store closure announcements by retailers that will have far-reaching impacts!

Best Buy: My firm Belus Capital Advisors will be issuing a downgrade on the stock in a damning note very shortly. In the meantime, here are the planks in that call:

  • Investment in pricing: above guidance for an already aggressive posture. The Street will interpret that as a new, unfortunate fundamental development that overpowers Best Buy's slowing restructuring related savings.
  • Expectations: the business will have to be more aggressive on price in non-peak shopping periods and basically, Best Buy's calendar 2014 initial guidance could be well below current consensus forecasts.
  • Sales floor: not enough products are winning yet to overcome weakness in the downtrending categories such as digital imaging, movies, etc.
  • Bottom line: a lower hurdle rate for margins was not achieved during the holidays, and that justifies the action in the stock on Thursday and likely, 10% more sliced from the top into the February earnings release.

J.C. Penney (JCP): My firm Belus Capital Advisors has reiterated a sell rating on J.C. Penney. These are the main factors:

  • Red clearance signs dominate the sales floor as a means to emotionally reconnect with a customer whose pocketbook was violated by the Ron Johnson regime. Home departments are resembling Macy's (M) in terms of presentation, a good thing as people actually buy housewares at Macy's. Theme-park like attractions at the front of the store, for example Joe Fresh, are in the process of being ripped out. J.C. Penney's rebirth is unfolding, but the huge issue is that it's moving extremely slowly, causing inefficiencies at the store that diminish the promotional and marketing initiatives being undertaken by management to rebuild customer relationships. 

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