Michael Fowlkes
Chapel Hill, NC - http://www.investorsobserver.com
Michael Fowlkes is an options analyst and writer at Investors Observer.
Michael Fowlkes
Chapel Hill, NC - http://www.investorsobserver.com
Michael Fowlkes is an options analyst and writer at Investors Observer.
Airlines ditching long distance flights to combat fuel prices
Fuel prices seem to be the number one concern on just about everyone's mind lately, and it seems like things are not going to be getting better any time soon. As prices have risen to record levels, many of us have decided to cut back on our driving, especially on long trips in order to save a little on our fuel prices. Well, the airlines are no different, and there's an interesting report today in The Wall Street Journal showing how airlines are cutting back on long flights in order to save a little on fuel consumption.It is a pretty nasty cycle we are seeing with the airlines. The higher fuel costs have led to higher tickets prices and extra fees. These higher prices have led to less air traffic, and that has led to an even greater need to find more ways to cover rising costs. Definitely a tough situation.
The new way they are starting to combat the high costs of flying is by cutting back, or postponing long international flights, in particular flights that are in excess of 12 hours.
Continue reading Airlines ditching long distance flights to combat fuel prices
May's pending home sales figure signals more housing weakness
Chances are, if you follow the economy at all, there are two things on your mind, oil and housing. Despite a couple days in a row of oil selling off, it seems like high oil prices are here to stay for a while. And housing continues to remain weak, with signs pointing to more weakness in the months to come.
I am sure you are as sick of hearing about homes sales as I am, but unfortunately it is something we have to look think about, and today we get more bad news, as the National Association of Realtors announced that May was yet another tough month for pending home sales. In fact, with a reported 4.7% drop in pending home sales, May was the third lowest month on record, a sign that tough times are still here, and probably going to be sticking around for a while longer.
First, let's get a better idea of what exactly we are talking about here. What are pending home sales? Simply put, a home sale is pending when there has been an offer made and accepted, but the deal has not yet closed. The lag between the acceptance and the closing is typically one to two months. The index to track this was started back in 2001, so to get to a 100 rating, you would have to have the average level of sales activity that we were seeing back in 2001.
Continue reading May's pending home sales figure signals more housing weakness
Slowing economy hits Office Depot (ODP) hard
Look for shares of Office Depot (NYSE: ODP) to take a beating today after the office supplies retailer shocked Wall Street by predicting a huge drop in its second quarter same-stores sales.Office Depot is going to announce its second quarter numbers later this month, and investors got a better picture of just what to expect this morning after the company stated that it is now forecasting a 10% drop in its same-store sales for the quarter, citing the slowing American economy as the main reason.
The company also warned it expects the remainder of the year to remain difficult. While the retailer believes that sales trends should improve slightly, it is remaining pessimistic. Margins for the quarter, it says, have declined by about 200 basis points than what it had previously anticipated. Even before today's revision, the company had estimated about 200 to 250 basis point decline in its margins. Looking at the rest of the year, the company thinks that its margins should increase sequentially in both Q3 and Q4.
Continue reading Slowing economy hits Office Depot (ODP) hard
Coke settles 'channel stuffing' lawsuit for $137.5 million
It was announced today that soft drink giant Coca Cola (NYSE: KO) had settled an almost 8-year-old lawsuit today for $137.5 million. The case originated back in October of 2000, and alleged that the company had artificially boosted its strike price in 1999.According to the lawsuit, back in late 1999 Coca Cola applied pressure to some of its bottlers to buy unnecessary beverage concentrate. By adding "hundreds of millions of dollars" to the books, the company was allegedly able to report much higher sales volumes to its shareholders and keep its stock price artificially inflated. This practice is typically referred to as "channel surfing".
Despite the fact that the company decided to settle, there was definitely no admission to any wrongdoing. A company representative stated that the decision to go ahead and settle out was merely a move meant to avoid any length and drawn out legal battle, and by no means should be viewed as any admission of guilt in the charges.
Continue reading Coke settles 'channel stuffing' lawsuit for $137.5 million
Automakers see potential in cars with smaller engines, but more amenities
With gasoline prices sitting at record highs, and the auto industry struggling to deal with the situation, there is a new shift in the design of cars. Historically, when you bought a smaller engine car, that engine came in a vehicle that had far less in the way of comfort and amenities... well, that is changing.Think back a few years. You went to your local auto lot to pick up a new car, and your first choice was what size engine you wanted, the heavy duty 8-cylinder, 6, or 4-cylinder car? Suppose you decided the 8-cylinder was for you, can you picture the car that supported this engine? Typically these cars had all the bells and whistles you could imagine: the sunroof, the leather seating, fancy radios, power windows, etc. Basically, the bigger the engine, the better the "packaging" that it came along with.
Now, picture the 4-cylinder car from the past. Not much to picture here. Power windows? Doubtful. Yes, the 4-cylinder cars of the past were typically your bare bones vehicle with few fewer amenities than those coming with the 8-cylinder alternatives. If you were lucky, you would at least get some power steering in the car, but that was not always the case either.
Continue reading Automakers see potential in cars with smaller engines, but more amenities
Automakers brace for more hard times to come
It probably should come as no surprise, but June was a tough month for automakers, and all signs are pointing to more troubles out on the horizon. All but one major automaker saw their sales drop last month, with Honda Motor (NYSE: HMC) being the sole exception. For the month, Honda actually had a 1% year-over-year sales growth, which given the current market place was an exceptional feat.
So just how bad was June for the automakers? Pretty bad. During the month, combined auto sales fell to 1.19 million vehicles sold, a 266,000 decline from the same period last year. This just continues the trend that we have been seeing all year, amounting to roughly a 10% sales decline during the first half of the year.
Continue reading Automakers brace for more hard times to come
Oil trading higher ahead of today's inventory report
Oil continued to remain strong with prices moving slightly higher this morning, ahead of today's weekly inventory report. The main reason for prices remaining strong continues to be worries over oil supplies. Traders have pushed prices through the $142 mark this morning, with the precious crude trading as high as $142.45, but have cooled off a bit and are now sitting at $141.06, which is $0.09 higher on the day. As Douglas McIntyre discussed earlier, typically such high oil prices are expected to put a crimp in demand, but this time around that may not be the case at all. Already many analysts are stating that demand may not fall too much, even with the record high gasoline prices.
We should get a slightly clearer picture on just how true that is later today when the Department of Energy releases the weekly inventory numbers. Last week inventories increased, but that is expected to reverse this week, and analysts are predicting this week's oil inventory numbers to actually show a decline of around 1.2 million barrels (compared with a 800,000 barrel increase that was reported last week).
Continue reading Oil trading higher ahead of today's inventory report
Kroger (KR) issues a beef recall following reports of E. coli
If you are a Kroger (NYSE: KR) shopper and you think that you may have picked up some beef from the grocer recently, you may want to take a closer look at it, as reports of E. coli have prompted a recall from the grocery chain.The recall involves beef products that were purchased between May 21 and June 8 in Michigan, and parts of the Ohio market. Kroger was forced to take this action following reports that there had been E. coli illnesses linked to beef sold in Kroger stores in the two locations.
So far, it looks as though there have been 19 reported cases in Michigan, and another 15 cases reported in the state of Ohio that can be linked back to the Kroger beef. The meat in question has been traced back to a Kroger store in Gahanna, a town in central Ohio. It does not look as though any stores in Michigan have definitely been linked to the tainted meat, but since there are reported cases of the disease in the area, you should definitely return any beef that you purchased from Kroger during the time frame in question.
Continue reading Kroger (KR) issues a beef recall following reports of E. coli
The world's millionaire list hits a milestone
For the first time ever, the number of millionaires in the world broke through the 10 million mark last year. All said and done, the total number of people who can claim to have $1 million in the bank grew to around 10.1 million people, and on average, these lucky few boast around $4 million in net worth.While the number of people in the "millionaires club" is definitely impressive, they still do not have to worry about the clout of their $1 million claims being diluted just yet. Ten million people may sound like a lot, but when you consider the world's total population is currently running at around 6.7 billion, you find that the percentage of all people on the planet who can claim to have $1 million is less than 0.2%. So don't feel too bad if you are not part of the club just yet.
As in the past, the majority of millionaires have an American address, with one out of every three millionaires being American. But there are a few other areas of the world where growth is out-pacing the United States. Developing economies in India, China and Brazil resulted in huge growth in those countries, especially in India, where the number of millionaires rose by about 23% last year alone.
Continue reading The world's millionaire list hits a milestone
Monsanto (MON) beats earnings estimates, but misses revenue target
Shares of agricultural producer Monsanto (NYSE: MON) are trading in the red today, despite posting better than expected earnings per share for its fiscal third quarter. The main reason why the stock is trading lower is that it was unable to match the revenues that Wall Street was hoping to see.
Heading into today's earnings release, analysts had been hoping to see Monsanto show earnings of $1.34 per share, and the company was able to come in above this, with a reported $1.45 a share for the quarter. A fairly impressive EPS, and a very respectable 42% jump from the same period last year when it reported earnings of $1.02 a share to its investors.
The company stated that the main reason for the jump in earnings was strong sales for herbicides as well as specialty seeds. One of the company's most recognizable names in the herbicide market is Roundup, which it said had a great quarter.
Continue reading Monsanto (MON) beats earnings estimates, but misses revenue target
More troubles for Circuit City (CC) during the first quarter
It is safe to say that the past couple of years have been tough on shareholders of Circuit City (NYSE: CC), and today is no different as the company posted a large loss for its fiscal first quarter. Shares of the electronics retailer are down 7.5% after the company posted a loss of $1 a share for its most recent quarter.The company stated that the main reason for its poor performance last quarter was weak sales performance in the company's established stores. This really should not come as a big surprise to us since we have been well aware of the company's faltering sales over the past couple of years. On the whole, same-store sales dropped by 11.3%, and continues to affirm the belief that Circuit City definitely has its work cut out for it if it ever wants to start regaining its lost market share.
The total loss on the quarter totaled $164.8 million, about triple the $54.6 million loss it recorded for the same period last year. I wish I could say that things are looking brighter down the road but that is just not the case, as the retailer is expected to post another large loss for its second quarter. Analysts had been expecting to see a loss of $143.4 million for the current quarter, but the company issued weaker guidance, stating that it expects to see a loss of somewhere between $170 and $185 million.
Continue reading More troubles for Circuit City (CC) during the first quarter
Morgan Stanley (MS) sees a 61% decline in quarterly profit
Morgan Stanley (NYSE: MS), the nation's second largest investment bank, posted its second quarter numbers today. As expected, the firm saw a hefty drop in quarterly profit. The ongoing credit crisis hit the bank hard and resulted in a 61% decline in quarterly profit, a number that could have been much worse.
The reason why I say that the situation could have been much worse is that the company benefited from the sale of around $1.4 billion in assets during the quarter. This contributed to a profit of 95 cents per share for the quarter.
The 95 cents per share was actually above Wall Street estimates, as analysts had been expecting to see the company show earnings for the quarter of 92 cents per share. But that has not prevented traders from pushing the stock lower in early morning trading. As of 11:00 am, we are seeing shares trading down 5% to $38.49.
Continue reading Morgan Stanley (MS) sees a 61% decline in quarterly profit
Apple's new iPhone comes with $199 price tag
As expected, Apple announced today the launch of its next generation iPhone, and the new phone will come with a price tag that is $200 less than the current model. The new 3G iPhones are going to hit the market with a $199 price tag.A big reason for the release of the the new iPhones is the desire by Apple (NASDAQ: AAPL) to hit their goal of selling 10 million phones by the end of the year. The new phone will have faster Internet connection and satellite navigation capabilities. If you are like me, and have been postponing the purchase of a new phone in anticipation of today's announcement, you will have to wait a bit longer. The new phones will be available on July 11.
While the new phones will be about half the price of the current models, the monthly service plans will be a bit higher. Look for a $39.99 monthly plan, plus another $30 monthly fee for unlimited data. This works out to be about a $10 monthly increase, but considering the improvements of the new phones, not too bad of a deal if you ask me. Supposedly the new iPhones will be able to download data twice as fast as the current model.
Continue reading Apple's new iPhone comes with $199 price tag
Goldman Sachs looking for $150 oil soon
Oil is starting the week off trading a little lower today, but Goldman Sachs (NYSE: GS) is looking for oil prices to continue to move higher, and expects to see $150 much sooner than previously thought.While speaking today at a conference in Malaysian's capital, Kuala Lumpur, Jeffrey Currie stated that the possibility that we were going to see $150 oil was real, and that he believed that we would hit that time sometime this summer. Goldman has been bullish on oil prices for some time now, and last month went so far as to state that we would be seeing $200 oil at some point within the next two years.
While $150 oil may sound insane, it really is not that big of a difference from where we are now. Today prices have retreated a bit back down to around $136.25, but Friday they were close to breaking through the $140 mark, after trading up more than $11 and hitting a high on of $139.12. All it would really take is just one or two more days like that to make $150 oil a reality.
Continue reading Goldman Sachs looking for $150 oil soon
Deep job cuts coming to Ford Motor (F)
Some more bad news for American car maker Ford Motor (NYSE: F) as the Detroit auto maker announced it would be reducing its salary workforce by upwards of 12%.The move came about a week after the company announced that it wouldn't be able to meet its goal of returning to profitability next year due to the current economic slowdown. A factor leading to the company's problem has been a shift in consumer preference from trucks to smaller, more fuel efficient vehicles, a move that comes in reaction to the current record high gasoline prices that have spread across America. Ford said last week it was forced to cut SUV production.
Ford has not released any specific details on the job cuts, but the details are expected to be released sometime in July. The company currently has 24,300 salaried workers in the United States, Canada and Mexico.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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