Tuesday, October 28, 2014

HealthSouth (HLS) Stock Declining in After-Hours Trading Following Earnings Release

NEW YORK (TheStreet) -- HealthSouth (HLS) shares are down 1.5% to $39.94 in after-hours trading on Monday after the company released its third quarter earnings results after the closing bell today.

The country's largest owner and operator of inpatient rehabilitation hospitals reported a 5.8% increase in consolidated net operating revenues to $596.9 million, ahead of analysts expectations of $595.2 million.

Must Read: Warren Buffett's 25 Favorite Stocks

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Earnings for the period were 53 cents per diluted share, 4 cents better than the consensus analysts expectations.

However, the company's shares are declining after it narrowed its full year earnings guidance to between $2.24 and $2.27 per diluted share from its previous expectations of $2.25 to $2.31 per share. TheStreet Ratings team rates HEALTHSOUTH CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate HEALTHSOUTH CORP (HLS) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows: You can view the full analysis from the report here: HLS Ratings Report HLS Chart HLS data by YCharts

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Friday, October 24, 2014

CBS All Access and HBO Go Aren't Good Reasons to Cut Your Cable Cord

CBS All Access isn't the game-changer unbundlers hoped it would be. Source: CBS

Recently, both Time Warner's (NYSE: TWX  ) HBO and CBS (NYSE: CBS  ) gave a glimmer of hope to the cord cutting and unbundling subset looking to cut pay-TV providers out of their lives. Both companies joined Hulu Plus and Netflix by offering a stand-alone, streaming product for their content. There's just one problem...if this is the future of television, consumers appear to be better off sending checks to their pay-TV providers.

Specifically, the issue is one of pricing and value: The two new entrants pricing is structured in such a way that it appears they do not want to compete against cable providers. Rather, it appears they are looking to add incremental revenue and are pricing the product in a manner that actually encourages a pay-TV subscription. In addition to providing streaming services, the unbundlers hoped for a value proposition from these channels. Sadly, it appears they're not going to get it.

HBO is not attacking its "bigger" opportunity
Time Warner's CEO Jeff Bewkes appeared to fire a shot across the bow to pay-TV providers at a September Goldman Sachs investor conference. When discussing HBO Go, its current Internet offering only available with a pay-TV subscription, he appeared to tip this hand to an Internet-only offering [emphasis added]:

Up until now, it looked like the best opportunity was to focus on HBO through the existing affiliate system... The broadband-only opportunity up until now wasn't ... at the point where it would be smart to move the focus from one to the other. Now the broadband opportunity is quite a bit bigger.

This was noteworthy considering last year at that conference he identified HBO's main opportunity as the 100 million pay-TV subscribers rather than the less than 10 million without pay-TV. However, if a recent report from The Information is correct, HBO plans to price the service at $15 a month -- generally more than the cost through pay-TV providers. A survey from The Diffusion Group, by way of Fierce Wireless, reported that only 6% of broadband users who don't subscribe to pay-TV were interested in HBO if the service was priced at $15 or more per month.

Will HBO keep the Go brand for its Internet-only service? Source: HBO

Although HBO may pay lip service to this new opportunity, the pricing appears to contradict this. Matter of fact, the pricing appears to be designed not to anger its pay-TV partners rather than provide value to unbundlers and cord cutters.

CBS All Access is still too expensive
Although CBS priced their All Access service at roughly $6, it is still too expensive when one considers the value provided by pay-TV. For perspective, the FCC estimates basic cable only averaged $64.41 in 2013. If CBS' price becomes the average price of a channel, subscribers can only purchase 10 unbundled channels; the average U.S. household watches 17 channels. In addition, you lose the optionality of new programming and discovery under an unbundled scenario. The end result could be fewer programs with higher costs.

CBS also faces problems in its All Access network by the exclusion of NFL programming. The NFL and other live sporting events are a powerful moat against cord cutting and the league appears to be on the side of pay-TV providers. The league has been reticent to cut pay-TV providers out of the process, but has deals with DirecTV and Verizon for limited streaming of games.

Final thoughts
Although many feel the pay-TV model in its current form is unsustainable -- myself included -- CBS and HBO haven't provided the value necessary for mass defection. Right now, Hulu Plus appears to have the right plan with its "mini bundle" of programming from ABC, Fox, and NBC for nearly $8 a month. If these channels are looking to entirely cut cable out of the process, I'd like to see a mini bundle of all these Internet-based services with an attractive price.

Get paid while your cable company suffers
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Lululemon: The Future’s So Bright I Gotta Wear Yoga Gear

We haven’t had many reasons to talk about Lululemon Athletica (LULU) recently. But, given the headline-making drama at the yogawear- and athletic apparel-maker, this period of quiet is probably the cleansing breath the company has hoped for.

Analysts had seemingly unconditional love for Lululemon before its recent troubles, and now that it’s on the upswing–Lululemon’s up 11% during the past three months, even if it’s down 30% on the year–it's no surprise that the love is getting stronger.

BB&T analyst Paul Alexander, for instance, initiated coverage on Lululemon with a Buy rating and $50 price target in a note today. He explains why:

After a challenging year and a half for the company, we think Lululemon is poised to stabilize results. We expect gradual near-term improvement due to new merchandising and design strategies, new traffic-driving initiatives, and better public sentiment toward the brand. lulu’s significant long-term growth potential should also limit downside, creating a positive risk/reward.

Alexander also sees any growling from bears about the company as overblown:

Lululemon still boasts one of the longest and most compelling growth runways in specialty retail. The company can still nearly double U.S. store count, and it is beginning to roll out new stores in Europe and Asia, each of which should add to lulu’s growth potential. A new go-to-market strategy should support margins as the merchandising and design organization and supply chain become more efficient and effective.

It looks like investors agree. Shares of Lululemon have gained 1.6% to $41.52 at 3:25 p.m. this afternoon.

Monday, October 20, 2014

McDonald's Suffering Franchisees Pin Hopes on Monopoly, McRibs

A man bicycles past a McDonald's restaur Stephane Jourdain/AFP/Getty Images If you stop by a McDonald's (MCD) and find some franchise owner looking wistfully at you, and then gazing over at a poster for the company's annual Monopoly promotion or the return of the McRib, don't be surprised. Things are tough for franchisees standing under the golden arches, and they're really hoping for something -- anything -- that can reverse the trend of dropping sales. For a fast food company that for a long time could do no wrong , McDonald's is in a not-so-happy place now. In September, the chain announced its worst sales dip since 2003, according to Bloomberg. Between slow demand in the U.S. and health scares over a Chinese meat supplier, same-store sales were down in August 3.2 percent in the U.S. and 7.3 percent in Asia, for an overall 3.7 percent hit. And it's expected that the chain will see another 2.7 percent drop in September, according to the site BurgerBusiness.com. Same-store sales, or sales in locations that have been open more than a year, are a critical measurement in retail. They show how well a company's operations are doing without the distorting factor of new outlets opening. So same-store sales declines are a problem not just for McDonald's, but its franchise owners.

Wednesday, October 15, 2014

Morning MoneyBeat: Selloff Takes Out Key Chart Level; Now What?

Morning MoneyBeat is the Journal’s pre-market primer packed with market updates, insights and must-read news links. Send us tips, suggestions and complaints: steven.russolillo@wsj.com

Click here to receive this morning newsletter via email

MARKET SNAP: At 6:05 a.m. ET, S&P 500 futures up 0.1%. 10-Year Treasury yield lower at 2.20%. Nymex down 92 cents at $84.82. Gold 0.2% higher at $1233. In Europe, FTSE 100 down 0.5%, DAX down 0.7% and CAC 40 down 0.9%. In Asia, Nikkei 225 down 2.4% and Hang Seng (0011.HK) down 0.4%.

WATCH FOR: September NFIB Small Business Survey (7:30 a.m. Eastern Time): seen 95.9; previously 96.1. Citigroup (C), CSX, Del Frisco’s, Domino's Pizza (DPZ), Intel (INTC), J.B. Hunt Transport (JBHT), Johnson & Johnson (JNJ), Linear Tech (LLTC), Wells Fargo (WFC) and Wolverine World Wide (WWW) are among companies scheduled to report quarterly results.

THE BREAKFAST BRIEFING

A key technical level in the stock market was breached on Monday, ending a years-long streak and making some investors nervous about what lies ahead.

The S&P 500 tumbled below its 200-day moving average for the first time since November 2012, ending the fifth-longest streak in history, according to MKM Partners, and calling into question the stamina of the rally.

Stocks waffled Monday before pushing decisively lower in the final trading hour. The S&P 500 fell 1.7% to 1874, its fifth-straight daily close greater than 1%. Perhaps more importantly, the late-day selloff pushed the S&P 500 well below the 200-day marker, around 1905.

To some, that's a sign of additional weakness ahead.

The 200-day average is a chart line technical analysts use as a guide to define a market's trend. When the S&P 500 starts trading below this level, the market is viewed as entering a longer-term downtrend. The S&P 500 is down 6.8% from last month's record high. The Dow Jones Industrial Average, which also fell below its 200-day average on Monday, is now down 5.5% from its all-time high. Both haven't had a 10% pullback in three years.

"Simply put, it feels like the long-awaited test of the 200-day moving average for stock indices is now not a reason to pick-up bargains, but a reason to sell," said Andrew Wilkinson, chief market analyst at Interactive Brokers. "Contrarians are free to use [a chart] to pinpoint a turning point if they choose. Everyone else is likely to keep on hedging and selling."

History is on Mr. Wilkinson's side.

Since 1928, eight of the S&P 500's nine longest streaks above the 200-day moving average were greeted with additional selling one week after those streaks were snapped, according to MKM Partners. The index averaged a 3% drop in a one-week span after those streaks were breached.

The average one-month and six-month returns after those streaks were also negative.

Investors who focus on fundamentals and corporate profits say they remain composed and are taking the latest chart action with a heavy grain of salt.

"I haven't heard anything that suggests the economic outlook for 2015 has changed a bit," said James Meyer, chief investment officer at Tower Bridge Advisors. "That gives me comfort that the current correction won’t be long lasting."

But a troublesome technical picture over the short-term has prompted some analysts and E*Trade (ETFC)rs to expect further declines in the coming weeks.

"Perhaps there are bigger forces at work and the playbook over the last two years is beginning to change," said Jonathan Krinsky, chief market technician at MKM Partners.

Morning MoneyBeat Daily Factoid: On this date in 1979, hockey legend Wayne Gretzky scored the first goal of his career as a member of the Edmonton Oilers. He would finish his hall-of-fame career with 894 goals.

-By Steven Russolillo; follow him on Twitter @srussolillo.

STOCKS TO WATCH

Advanced Micro Devices (AMD) shares fell sharply in late trading Monday on heavy volume. The stock fell as much as 16%. AMD named a new CEO last week and is expected to post its latest quarterly results on Thursday.

J.P. Morgan Chase (JPM) releases third quarter results early, with earnings of $1.36 a share on sales of $24.2 billion in the third quarter.

Citigroup is expected to report earnings of $1.12 a share on sales of $19.2 billion in the third quarter, based on a FactSet survey of 21 analysts covering the stock.

Wells Fargo is expected to report earnings of $1.02 a share on sales of $21.1 billion in the third quarter, based on a FactSet survey of 24 analysts covering the stock.

Johnson & Johnson is expected to report earnings of $1.44 a share on sales of $18.4 billion in the third quarter, based on a FactSet survey of 17 analysts covering the stock.

MUST READS (LINKS)

J.P. Morgan Returns to Profit: “J.P. Morgan Chase & Co. swung to a third-quarter profit as the bank bounced back from a year-earlier period weighed down by massive legal charges.”

Ebola Response Strains Hospitals: “The challenges specialized centers have encountered with Ebola show the steep learning curve all hospitals are facing.”

Railroad Merger Plan Remains Alive: “Canadian Pacific's proposed merger with CSX is being pushed by perhaps the only railroad boss in favor of consolidation and discussions remain possible.”

Heard on the Street: CSX Deal Hopes Could Run Off the Rails: “If CSX changes its mind and decides to accept Canadian Pacific (CP.T) Railway's overtures, there is still one problem. Any nuptials would face the threat of regulators standing up from the pews and objecting.”

Global Glut Keeps Pressure on Oil Prices: “Crude producers, from corporations to oil-rich nations, are keeping the spigots open, and there is little sign that global demand will rise quickly enough to help erase the overhang in supplies.”

European Stocks Under Renewed Pressure: “Stock markets in Europe took a fresh tumble while German government bonds surged to their strongest level on record, with investors fleeing to the safety of high-grade debt amid further signs that the economic recovery in the eurozone has hit the buffers.”

New Penney CEO Is Strong in Retail Operations: “J.C. Penney chose Marvin Ellison, a retail veteran most recently at Home Depot (HD), as its next CEO, picking an executive who is known for his strong operational skills and giving him a long transitional period to come up to speed.”

Ahead of the Tape: Big Banks Look to Get Back on Track: “Many of the largest U.S. banks may finally be experiencing a reversal of fortune—in a good way.”

Janus Deal Gives Bill Gross an ETF Platform: “Janus Capital said it will buy a provider of exchange-traded funds, a move that some analysts say will provide new hire Bill Gross a platform to launch his own ETF.”

Abigail Johnson Named CEO of Fidelity: “Fidelity Investments has named Abigail "Abby" Johnson chief executive, according to an internal memo sent by the mutual-fund firm Monday.”

Former E*Trade Unit Lays Off Several Employees, Including CEO: “G1 Execution Services LLC laid off several employees, including its CEO, eight months after the company was acquired by Susquehanna International Group LLP, according to people familiar with the matter.”

Wednesday, October 8, 2014

The Day I Changed From a Spendthrift to a Lifelong Saver

Newspaper boy walking down street, Regina, Saskatchewan Wave Royalty Free/Design Pics Inc./Alamy This is going to make me sound like an old man, but I'll get it out of the way: I had a paper route in high school. Back in the day when newspapers were prosperous and teenagers could deliver the daily paper on their bikes, I had many paper routes. At one time, I managed three at once: one in the morning and two in the afternoon. I learned a lot of good life skills as a paper boy, and among the most important was that spending a lot isn't always a good thing. Since I didn't have the expenses of adulthood, I was free to blow my earnings on pizza, video games, clothes and anything else that caught my eye. What I didn't have, because I was piddling away my money, was any substantial amount of savings to buy a car or anything else that required more than a week's salary. I don't remember precisely when the realization hit, but when it did, it hit hard: If I ever wanted to be able to make a big purchase, I had to start saving for it. My first major savings goal was to be able to pay for college. My parents had agreed to cover half of my college education, so my goal was to raise the other half. My paper routes helped me start, leading to selling newspapers in front of the local subway station before and after school, and putting Sunday newspapers in news racks around my hometown in the early hours of Sunday mornings. It was a lot of work, and I didn't sleep much for a few years, but it paid off with a good-size savings account when I graduated from high school. Since then I've tried, though I haven't always been successful, in saving for big, planned purchases -- a house, car, vacations and even my daughter's first year of life -- so my wife and I could each afford to take six months off from work to take care of her. Putting money aside for months so we could care for our new baby was the best savings goal. We now have savings accounts that we regularly contribute to for vacations, Christmas and emergencies. Having a savings plan requires thinking ahead about things that will come up anyway. Christmas is every December, and having a savings plan for your holiday spending can make it easier to afford. Saving for a vacation, for example, can take six months to a year. Putting aside money each month isn't the only benefit in thinking ahead about a vacation. It can also give you time to find the best deals and research where you want to go, while knowing you'll have enough money saved to pay for most of the trip before you depart. Saving for a home, auto or any other big expense can take years. But that doesn't mean it should be seen as insurmountable. After putting aside a few hundred dollars each month -- or whatever you can afford -- consider saving a tax rebate or bonus at work. Tips from happy customers, as I learned from my newspaper routes, can add up to substantial savings and more spending money in college. And you can never have enough spending money in college.

Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

Tuesday, October 7, 2014

Why Oil Prices Are Falling Now

Why oil prices are falling: Crude oil prices fell again early this morning (Thursday), as West Texas Intermediate (WTI) crude dropped as much as 2.8% to $88.18 per barrel for November delivery. That's a 20% drop from the three-year highs WTI set in June, and just above the 52-week low of $87.85 futures contracts set in January.

Brent crude oil prices were down to $92.45 per barrel, or 1.8%, shortly after 9:30 a.m. today.

Now the question that needs answering: Why are oil prices falling now?

why oil prices are falling

The price of oil has continued to drop since June as the global oil supply exceeds demand. Earlier this week, a Reuters survey indicated that supply from OPEC had reached a two-year high of 30.96 million barrels per day (bpd) in September. That was up from 30.15 million bpd in August.

The supply glut is attributed to a recovery in Libya, as well as increased output in Saudi Arabia, Iraq, Nigeria, and Angola. The shale boom in the United States has also had a huge impact on global oil supply, as the U.S. has become the world's largest producer of liquid petroleum.

"We have more than enough supply out there and demand is not catching up," Tyche Capital Advisors' fund manager Tariq Zahir told Bloomberg. "U.S. production is just incredible. Fundamentally we are just producing so much oil."

Another development affecting prices today was the decision by Saudi Arabia to lower its official selling prices, as government officials expect oil to continue trading at low levels. Many analysts expected Saudi officials to curb production in the country in an effort to send prices higher.

OPEC will be meeting on Nov. 27 in Vienna, and a debate regarding output is almost guaranteed. Reportedly, some OPEC countries are concerned about the drop in prices and have called for OPEC to cut its production.

Now for what this means for the future oil market: Money Morning's Global Energy Strategist Dr. Kent Moors says that falling crude oil prices could trigger an unpredictable, dangerous mess for numerous countries around the world. Here's the "recipe for disaster" we're facing now...

Related Articles:

Bloomberg: WTI Oil Plunges Below $90 on Supply Glut; Brent Declines