Fed, Economy Spell Good Recipe for Stocks (BBY, FDS, SAFM, HCP, MNKD)
A strong retail sales number trumped a poor report from Best Buy (BBY) to lift stocks initially, but for a second-straight day, equities retreated in late afternoon trading. However, after a brief dip into the red, the major market averages were able to finish in positive territory. The Fed, meanwhile, said it plans to continue with its quantitative easing program, as it doesn’t believe the recovery is robust enough to meaningfully lower unemployment. An accommodative Fed and an improving economy remain a good recipe for stocks in the near to intermediate term in our view.
Stocks rose on the day, led by a 48-point climb in the Dow to 11,477. The S&P added 1 point to 1,242, while the Nasdaq advanced 3 points to close at 2,628. Oil slipped -33 cents to $88.28 a barrel, while gold rose $6.30 to $1,404.30 an ounce.
On the economic front, the Commerce Department reported that total retail sales in November grew 0.8%, coming in above the 0.6% increase anticipated by economists. Elsewhere, the Labor Department said that producer prices rose 0.8% last month, better than the 0.6% gain predicted by analysts. Core wholesale prices, which exclude food and energy prices, moved up 0.3%. Economists were expecting an increase of 0.2%. Meanwhile, the Fed left rates unchanged and indicated that it will maintain the current pace of its Treasury bond-buying program.
In earnings news, shares of Best Buy tumbled -14.8% after the electronic chain’s Q3 results missed estimates. The company also cut its forecast for the full year. For the period ended November 27th, net income was $217 million, or 54 cents a share, down -4% from $227 million, or 53 cents a share, a year ago. Analysts were expecting EPS of 61 cents. Revenue fell -1% to $11.9 billion, coming in below the $12.5 billion consensus. Same-store sales fell -3.3%. For the full year, Best Buy guided for EPS of $3.20-$3.40, down from an earlier view of $3.55-$3.70, and below estimates of $3.59. Twenty-four Pros held the stock in their top-15 U.S.-listed equity positions at the end of Q3, and 518 tickerspy members hold the stock in their portfolios.
FactSet Research Systems (FDS) reported that its Q1 profit jumped 15% on higher sales. For the quarter, the financial information provider earned $41.6 million, or 88 cents per share, topping the consensus by 4 cents. Last year, net income was $36.1 million, or 74 cents per share. Revenue climbed 12% to $173.3 million. Looking forward, FactSet forecast Q2 EPS of 85-87 cents on revenue of $174-$179 million, in line with expectations of 86 cents and $175.7 million. The stock fell -3.6%. Ten Pros held the stock in their top-15 U.S.-listed equity positions at the end of Q3, and 77 tickerspy members hold the stock in their portfolios.
Shares of Sanderson Farms (SAFM) sank -5.5% despite the chicken producer announcing that its quarterly net income more than doubled, mainly due to higher prices. For Q4, profit rose to $47.8 million, or $2.08 a share, from $19.8 million, or 95 cents a share, a year earlier. The Street was expecting EPS of only $1.72. Sales increased 13% to $529.1 million, coming in above the $521.1 million consensus.
In M&A news, REIT HCP (HCP) said it will purchase all of the real estate assets of nursing-home operator HCR ManorCare, including 338 facilities in 30 states, in a cash and stock deal worth $6.1 billion. HCP will pay $3.53 billion in cash and $852 million in stock. The deal, which is expected to close during Q1 2011, also includes $1.72 billion that HCP previously invested in HCR. The stock rose 1.4% on the news. Separately, HCP said it plans to buy out its partner in a joint venture for $137 million in cash and $650 million in assumed debt.
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