Bill Cara’s Blog for Jul 26, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
“Lessons From the Trader Wizard (2012)” is now available at Amazon.com. Now that I grasp the publishing process and the requirements of the people involved, I plan to write more.
A statement early today from the president of the European Central Bank pledging to preserve the Euro has rallied the Euro and equities, led of course by the Bank stocks.
The media seems caught up in the differences between words and actions, but the market got wind early yesterday that the ECB was ready to act, and bid up the Bank stocks then as I pointed out in the blog.
Today the Bulls are back on the bid as these monitors of the Banks, Miners & Oilers and Consumer stocks in Europe show.
Yesterday, Sandy Weill, the man who led the move by Citigroup to become the world’s largest and most diverse financial conglomerate admitted the folly of that plan, now stating that depository banks ought to be separated from investment banks, something I’ve said all along was needed.
Banking analyst Meredith Whitney disagrees.
Have a good day.
Good morning, Geoff here.
The Euro and European stocks are in rally mode this morning pulling all risk assets up.
Mario Draghi stated: “within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Will real actions follow? Is he really worried about the banking sector? Actions are all that matter at this point.
Shorts in euro are going to be squeezed in negative sentiment and the US Dollar’s breakout could fail so lets watch the following charts:
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||18.68 (0.98%)||Components, Chart, More|
||14.40 (0.66%)||Components, Chart, More|
||46.24 (1.50%)||Components, Chart, More|
||26.01 (0.41%)||Components, Chart, More|
||1.41 (0.45%)||Components, Chart, More|
|^OSEAX||OSE All Share||466.41
||4.36 (0.94%)||Components, Chart, More|
||1.96 (0.62%)||Components, Chart, More|
||55.53 (0.90%)||Components, Chart, More|
||29.23 (0.53%)||Components, Chart, More|
||7.50 (0.85%)||Chart, More|
||1.93 (0.14%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||587.72
||0.37 (0.06%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from brokers
July 26, 2012
July 26, 2012
Credit Suisse Report
Boeing (BA) OUTPERFORM R. Spingarn
CP: US$ 74.03 TP: US$ 90 CAP: US$ 55.5b
Mix and MAX to Define Guidance Upside in H2; Raising Estimates and Target Price to $90 (from $85)
We Expect Consensus to Rise: Today’s 25-cent guidance increase (to $4.40-$4.60) was greater than expected, we think, at least at this point in the year. We had been of the mind that anything above $4.60 was out of reach, but we’re more optimistic now. We think there are still risks on 787 rate and elsewhere in H2, which we believe management is still protecting against, and therefore if execution is strong, we see another guidance increase. Therefore we are raising our estimate above guidance to $4.70 and expect consensus of $4.56 to rise as well. Despite global economic volatility, we still like the visibility and cycle dynamics behind the BA thesis, and its relative defense position, and therefore reiterate OP and raise our TP to $90 (from $85). Our TP incorporates multiples on peak estimated EPS and FCF. Our 12/13/14 estimates rise to $4.70/$5.40/$6.57 from $4.56/$5.08/$6.15, respectively.
Q2 Color: The EPS beat was derived from performance at both BCA and BDS. BCA’s 10.5% margin was driven by mix & volume, and highlights the strong op. leverage there. Moreover, we see continued improvement in the learning curve on 787, where we est. cash unit cost is now $236M from $241M in Q1. The Q2 improvement was even greater on Seattle-built 787s but Charleston’s more expensive early aircraft distort the unit cost upward.
H2 Upside: Mgmt has repeatedly said rate performance at BCA is key to EPS upside in ’12, especially on 787. Today’s guidance uptick boosts our confidence in BA’s ability to achieve 5 787s/month this fall, as suppliers likely are already showing this rate. We also suspect today’s guidance reflects progress on 737 ramp. Finally, for those concerned about the margin impact from H2 introduction of MAX into the 737 program pool, we believe it is already embedded in the 9% full year guide.
July 26, 2012
Credit Suisse Report
Caterpillar Inc. (CAT) OUTPERFORM J. Cook
CP: US$ 82.60 TP: US$ 117 CAP: US$ 53.1b
CATch 22; Revising Estimates and Lowering Target Price to $117 (from $120)
Thoughts Post Call: CAT’s stock got a modest lift today despite beating consensus estimates by $0.42 cents on record incrementals (44% ex BUCY & MWM) and lifting EPS again by $0.10 to $9.60. CAT’s commentary implies they expect another up year in 2013 vs market fears of a double digit decline. On the downside, the inventory overhang remains an issue, up another $800M in Q2, but CAT quantified expectations to take $1B of inventory out by year end. China will take the full year to fix and the markets are taking longer to recover. Lastly, CAT still expects to spend about $4B in capex in 2012 despite macro concerns… Where’s the Relief? While the macro is too tough for anyone to call, however management can provide insight into what levers they can pull in the event of a downturn. While we didn’t get these answers today we expect some clarity at Minexpo in terms of how to think about trough EPS and/or decrementals given recent acquisitions and capacity additions. We also think a better understanding of CAT’s overall recession strategy may help give this management team some credit for how they might handle a downturn given what has been fairly impressive execution during Oberhelman’s reign and relative to CAT’s history.
CAT Raises 2012 EPS to $9.60; Reduces Sales by $1B at Midpoint: For 2012, CAT is now guiding EPS to be $9.60, or up $0.10 and above consensus of $9.54. Sales are tweaked down $2B off the high end ($1B FX and $1B macro) and $1 at midpoint to $68-$70B from $68-$72B. The EPS raise was due to better operations partially offset by a tax rate increase,
now expected to be 30.5% (prev 30%). This implies EPS of $4.68 in the back half (street is at $4.96) and incrementals of 32%. We tweak our FY2012-2014 EPS to $9.60, $10.50 and $11.20 (from $9.50, $10.70, and $11.45). Our $117 price target (down from $120) assumes 11.5x our 2014 EPS discounted back. We reiterate our Outperform rating.
Whole Foods Market(WFM)
July 26, 2012
Credit Suisse Report
Whole Foods Market (WFM) NEUTRAL E. Kelly
CP: US$ 84.53 TP: US$ 90 CAP: US$ 15.3b
Surprisingly Strong Results Given Weakening Macro; Raising Estimates Again
Credit Suisse View: Whole Foods squashed recent concerns of slowing momentum, as the company reported another impressive quarter despite the weakening consumer environment. Strong sales and operational execution drove yet another beat and raise, and it’s clear the company’s underlying fundamentals remain robust. EPS of $0.63 exceeded consensus of $0.61 and our estimate of $0.60. Identical store sales rose 8.0% (8.6% excluding the Easter shift), in line with consensus, but the ID strength continued so far in Q4. The company also produced another quarter of strong gross margin expansion (up 62 bps vs. consensus of +30 bps), despite suggesting otherwise last quarter, and operating costs were a touch better than expected. New store productivity also remained strong, suggesting that recent smaller markets are performing well. WFM topped off the report with above consensus guidance for Q4’12 and 2013. While it’s clear that the company’s underlying fundamentals remain robust, we continue to struggle with valuation, especially against the backdrop of increased economic uncertainty. Consequently, we maintained our Neutral rating.
Key takeaways: (+) The company posted strong Q3 ID growth of +8.0% (including 62bps of negative impact due to the Easter shift). Transactions rose 7% and basket grew 1%, suggesting inflation has not been a meaningful benefit. (+) FIFO GM expansion of 52 bps was above our expectation of 20 bps, driven by largely by improvements in occupancy costs and CGS. (+) Operating margin expanded 104 bps to 6.9%. (+) Mgmt commentary on the performance of recently opened stores in smaller markets was constructive. Several data points were also encouraging including sales/sq ft of $786 and a 16% comp at stores less than two years old. (+) Management raised FY12 guidance by $0.05-$0.07, implying 4Q12 EPS of $0.59-$0.60, above current consensus of $0.57. The midpoint of initial FY13 guidance ($2.83-$2.87) is above consensus of $2.83.
Our estimates: We raised our FY’12 est. to $2.52 from $2.47. We raised our FY’13 est. to $2.87 from $2.78 and our FY ’14 est. to $3.29 from $3.16.
Potash Corp, a Cara 100 company, is an integrated fertilizer and related industrial and feed products company.
Today the stock was downgraded by equities research analysts at National Bank from a “sector perform” rating to an “underperform” rating. A week ago, analysts at CIBC downgraded shares of POT from a “sector outperform” rating to a “sector perform” rating… Today the company reported $1.01 earnings per share for the quarter, missing the consensus estimate of $1.02 by $0.01. The company’s revenue for the quarter, however, was up +3.1% on a year-over-year basis. On average, analysts are forecasting that Potash Corp will post $3.47 earnings per share for the current fiscal year.
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
Yesterday, on an uptick in volume, the Direxion Daily China Bear 3x ETF (YANG) formed a bullish engulfing candle, as it gapped down, held support of its trendline and the 20-day EMA, and reversed to close at session highs. Further, it marked the second consecutive day that YANG formed a bullish reversal candle. A volume propelled move above the two day high of $17.75 could present a buy entry trigger in this ETF. We are placing YANG on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.
Since Early June of this year, the ProShares UltraShort Basic Materials ETF (SMN) has made three attempts to break above resistance near $18.50. Over the past two sessions, this ETF has attempted to crack above this level for the fourth time. With each touch of a resistance level, the odds increase that the level will be broken. If SMN can find its way above this key mark on a burst of volume, this fourth test of this level could be what is needed to propel SMN to a fresh six month high.
The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of our best technical ETF and stock picks, access to our market timing system, and more. To get started today, sign up for your 30-day risk-free subscription at MorpheusTrading.com or visit our trading blog to learn more about our short-term trading strategy.
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report