Bed Bath & Beyond (NASDAQ: BBBY) reported Q1 earnings on Wednesday, and Trey Thoelcke highlighted the numbers in this earnings-recap piece. Shares rose substantially in the after-hours trading session yesterday, jumping over 8%, and as I reviewed various earnings reports last night, I found myself drawn to the retailer's stock performance. I haven't been a huge fan of Bed Bath & Beyond as of late, so I figured I should take a look at the earnings release to see if there's anything here that would change my opinion.
Unfortunately, there isn't. Sales may have grown 6%, and expectations may have been beaten by $0.03, but net income still dropped over 20% to $0.30 per diluted share. Cash flow from operations declined 44% to $65.8 million. And same-store sales were very anemic, rising only 0.8%.
I choose, in this case, to focus on those figures. I also consider the fact that Bed Bath & Beyond does not pay a dividend, and that we are in an awful economic environment, both from a consumer and stock-market standpoint. This is not the stock I'd want to face the recession with, and I don't necessarily find it to be a big value right now. When it comes to retail, I am more likely to look at Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). I'd even consider a Home Depot (NYSE: HD) or a Lowe's (NYSE: LOW). All of these stocks pay dividends and have better brand equities and more attractive prospects. Bed Bath & Beyond certainly didn't deliver an earnings bomb, but I'm still not inclined to put money here.
Disclosure: I don't own any company mentioned; positions can change at any time.
Lowe's (NYSE: LOW) shares are falling today after the Commerce Department reported that May home construction fell 3.3%, signaling continued weakness in the housing market and bad news for home improvement stores. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LOW.
After hitting a one-year high of $32.53 in September, the stock hit a one-year low of $19.94 in January. This morning, LOW opened at $24.15. So far today the stock has hit a low of $23.45 and a high of $24.23. As of 12:20, LOW is trading at $23.62, down $0.43 (-1.8%). The chart for LOW looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in four months as long as LOW is below $27.50 at October expiration. Lowe's would have to rise by more than 16% before we would start to lose money. Learn more about this type of trade here.
5-Star Stocks in Warren Buffett's Portfolio Morningstar examines the most watched portfolio in the world -- Berkshire Hathaway's. Among the five-star stocks in the Oracle of Omaha's portfolio are Amercian Express, CarMax, J&J, Lowe's, UPS, Wellpoint and Kraft Foods. 5-Star Stocks in the Berkshire Hathaway Portfolio - Morningstar Secret Ways to Boost Your Social Security These four strategies can add as much as $12,000 a year to your retirement income. Secret Ways to Boost Your Social Security - Kiplinger.com
In his Wall Street Strategies, the leading advisor -- and well-known panelist for Fox Business News -- explains, "The debate on which is a better investment, Home Depot or Lowe's, is now at a crossroads following the release of 1Q08 earnings results from each firm.
"As expected, both companies reported year on year earnings decreases as slowing home remodeling spend weighed on comparable store sales.
"Back in 2005-2007, Lowe's was hot the investment choice relative to Home Depot, with many citing its stronger operating margins and friendlier store shopping environment. Although Lowe's is still attracting higher income customers as a result of solid merchandise offerings and customer service, in our view one should crunch the numbers.
"When they do, it will become prevalent that Home Depot is the stronger investment in the niche at this time. The company has been ahead of the game with respect to Lowe's in drastically reducing capital expenditures and store operating outlays.
"Moreover, it has taken the fight back to its smaller rival in the area of customer service and product presentation. In our opinion, play the underdog card and look to invest in Home Depot in upcoming months given more attractive valuation."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
Reverse Mortgages: Beware the Come-Ons The loans can help you tap the equity in your house. Just don't get tripped up by greedy salespeople. Reverse mortgages: Beware the come-ons - MONEY
Sometimes one company cannot be discussed without another entering the conversation. The Home Depot (NYSE: HD) reported a 66% drop in first-quarter profit Tuesday, largely due to a one-time charge and continued weakness in the housing market. Only a few days ago, Lowe's Co. (NYSE: LOW) reported sizable losses too.
"Weakness in the housing market" -- in many places that is a gross understatement, since there is no market and they are giving houses away. There are places where home sales have stabilized, and based on April figures it appears that home construction was up when including apartment development. But there are still millions of single family homes and condominiums available at fire sale prices.
Atlanta-based Home Depot said it earned $356 million, or 21 cents a share, in the three months ending May 4, compared to a profit of $1.05 billion, or 53 cents a share, a year earlier. It announced earlier this month that it was putting the brakes on some of its expansion plans and said it would do what was previously unthinkable -- close 15 of its flagship stores. The move, to be completed by July, affects 1,300 employees
Lowe's (NYSE: LOW) reported Q1 earnings on Monday, and I'm sure a lot of investors looked to this report to see if it indicated how the economy was doing. I hope not too many people were looking to link the economy with the company's numbers, however, because they weren't the greatest.
Top-line sales declined about 1% to $12 billion. Net income dropped 15% to 41 cents per share. Perhaps worst of all, same-store sales plummeted 8.4%. So, with flat revenues and a declining bottom line, was there anything positive about the earnings release? Yes. According to Briefing.com, Lowe's beat expectations by a penny (it did miss on the net-sales number, though). Also, the cash-flow statement shows that the retailer is doing fine in terms of the green. Lowe's generated $2.5 billion from operations this quarter versus $2.1 billion in last year's comparable period. So all is not lost.
But make no mistake, this is a tough environment for Lowe's and its enemy, Home Depot (NYSE: HD). However, if you think you want to get in Lowe's at some point, now could be the time, assuming you are a long-term thinker. The company's shares have bounced off their lows of the year and are still off from their highs. As we all know, the economy will get better at some point, and Lowe's will ultimately benefit. Both Lowe's and Home Depot are not that expensive, in my opinion, and both are probably worth some due diligence.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Today started out as a good day, but traders went back to "do the opposite of what feels good." The Conference Board showed that April's leading economic indicators were +0.1%. Oil also stayed above $127 per barrel.
Here are the unofficial closing prices for US index levels:
Amazon.com (NASDAQ: AMZN) saw a sharp rise with shares up over 7% at $82.22 late in the day after Goldman Sachs added it to the CONVICTION BUY LIST.
Campbell's Soup (NYSE: CPB) saw a 5% drop by the end of the day to $34.06 after a disappointing result.
Lowe's Companies (NYSE: LOW) saw a 2.5% drop to $24.25 by the end of the day after the company's earnings came in line but guidance was weak.
Pacific Ethanol Inc. (NASDAQ: PEIX) saw shares rise an unbelievable 49% with shares at $4.78 late in the day after the battered ethanol producer beat earnings expectations.
SanDisk Corp. (NASDAQ: SNDK) was down over 8% at $29.74 in the final minutes today after making cautious comments at a JPMorgan investor conference.
Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.
5 Strong Stocks to Love In these uncertain economic times, only the strong survive. These five companies generate a lot of cash and use it wisely, making them good bets in a rocky market. They include Hewlett-Packard, National Oilwell Varco, Big Lots, Accenture and Genentech. 5 Strong Stocks We Love - CNNMoney.com
More People Complain About Debt Collectors With more people falling behind on their consumer loan payments, regulators and consumer advocates say they're seeing a surge in aggressive -- and sometimes questionable -- debt-collection tactics. More people complain about debt collectors - USATODAY.com
Stock futures were mixed early Friday morning with the Nasdaq futures higher, given a boost by a new deal being discussed between Microsoft and Yahoo! Blue chip stock futures were lower after a new forecast the economy will weaken further and unemployment will rise.
U.S. stocks ended Friday little changed after consumer confidence data disappointed Wall Street again and high oil prices dampened the mood. For the week, though all the major indexes posted gains. The Dow industrials rose 1.9% for the week despite being down 0.05% Friday, the S&P 500 rose 2.7% for the week, helped by a 0.13% rise Friday, and the Nasdaq Composite climbed 3.4%, including a 0.19% decline Friday.
At 10:00 a.m. EDT, April leading indicators, a lagging broad, general, indicator of economic activity, is expected to show minimal increase. However, a survey was released Monday by the National Association for Business Economics giving their collective outlook on the U.S. economy. While, according to the survey economists believe the worst of the housing slump and the credit crunch might come to an end this year, a majority of economists now believe the economy is in a recession or on the brink of a recession and therefore they forecast further weakening of the economy and unemployment to continue to rise.
Earlier this week, Jim Cramer pondered whether the U.S. economy had reached bottom, given such recent signs as stronger-than-expected retail sales and investor interest in homebuilders. In particular, he said he's looking at next week's quarterly results from Lowe's (NYSE: LOW) and Home Depot (NYSE: HD) as a sign for the housing sector and for the potential market rally.
Lowe's is expected by analysts surveyed by Thomson Financial to report second-quarter earnings of 39 cents per share, down 18.8% from 48 cents per share in the same period in 2007, but up 28.2% from 28 cents per share in the previous quarter. The company has provided positive surprises in four of the past five quarters.
North Carolina-based Lowe's is the second-largest U.S. home improvement chain, behind rival Home Depot, and the second-largest appliance retailer after Sears (NYSE: SHLD). In the past year, the company's revenues were $48.2 billion and its net income totaled $2.8 billion. Its long-term EPS growth forecast is 12.7%, which is better than its industry average. The consensus recommendation of analysts remains to buy Lowe's.
The stock is up 9.9% since the beginning of the year, but has fallen 20.5% from a year ago. It trades at a P/E ratio of 13.38. Shares closed Friday at $24.89.
"Which is the better buy among the leading home retailing stocks -- 
Sometimes one company cannot be discussed without another entering the conversation. 
Stock futures were mixed early Friday morning with the Nasdaq futures higher, given a boost by a new deal being discussed between Microsoft and Yahoo! Blue chip stock futures were lower after a new forecast the economy will weaken further and unemployment will rise..gif){kind=logo}
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