Skip to main content

Morning Update


Yesterday after the close Apple delivered a rare earnings miss, coming short on both revenue and EPS. This is only the second quarter of the past 39 in which the company missed. Apple reported EPS of $9.32 and revenue of $8.8 billion versus the analyst consensus was for EPS of $10.37 and revenue of $37.2 billion. The earnings miss was due to weakening iPhone sales: Apple sold 26 million iPhone this quarter, up 28% Y/Y but down 26% Q/Q. CEO Tim Cooke said that the company “did not detect any ‘obvious economic issue(s)’ in the US and China.” CFO Peter Oppenheimer said “Our weekly iPhone sales have been impacted by rumors and speculation regarding new products” (Wall Street Journal). Considering Apple’s earning miss is an isolated event, it is unclear whether this is a symptom of a global macroeconomic downturn or simply a shift of iPhone demand from the present to future, yet unreleased models.

Caterpillar reported strong earnings this morning, beating analysts’ expectations and guiding up for the rest of the year. EPS were up 67% to $2.54 while revenue increased 22% to $17.37 billion. Construction Industry sales increased across all global regions, with North America leading the way. Caterpillar’s raised guidance to $9.60 per share comes on the back of improving housing numbers and relative strength out of the home builder’s sector. At current market valuations Caterpillar trades at just 8.9 forwards earnings, representing a great value should Caterpillar be able to continue to insulate itself from a slowing Europe and China.

Today Western Digital will report earnings after the close. The company had a very strong report last quarter, beating analyst’s expectations and saying that disruptions from the Thai floods were finally over. The stock’s weekly options are seeing heavy trading with the most open interest in the33 calls. Despite yesterday’s broad market selloff which sent the S&P 500’s (SPY) Put/Call ratio to 1.779 Western Digital’s remained at 0.797, suggesting traders are optimistic about earnings.

Waste Management will report earnings tomorrow pre-market. The stock yields 4.37% currently, and the company has increased revenues the last four quarters. Investor’s will be looking to see if there is appreciable volume growth, as a lack of it in the past has hurt EPS growth. The company has regularly raised its dividend but only by raising its payout ratio, which is unsustainable over the long term. An increase in revenue and EPS on higher volume will reassure investors that the dividend is safe and will continue to rise.

Comments

Post a Comment

Popular posts from this blog

Is the KCJ Foreshadowing a 2008 Repeat?

The CBOE Correlation Index (KCJ) is close to the lowest level we have seen since it was first listed in 2007. The KCJ measures the implied movement of the S&P 500 components options, compared to the implied movement of the S&P 500 index options. Simply put, the higher the number, the more likely all stocks are going to move together. Conversely, a low number will be characterized by sector rotation, and flat markets; one sector moves higher, another moves lower.  (Source: Access Hollywood) Correlation, for lack of a better term, is correlated with volatility. Not surprisingly, 30-day S&P 500 historical volatility is near the low level of 6.5%. Currently at 33.5, KCJ is sitting close to rock bottom, lower than where it was in 2007, (but not lower than where Lindsay Lohan was in 2007).  So far this year, the market has been able to grind higher, characterized by leadership in FANG(Facebook Apple/Amazon, Netflix, Google) and sector rotation. A...
Post a Comment
Read more

Heading into Summer

With the dog days of summer almost upon us, it's time to start thinking about option strategies. Most of the time, the summer is when markets are calm. However, this may not necessarily be the case for options. Playing both sides, options give you an edge as you decide where you think the market may be. On Options Action, the panel had many interesting topics on their plates. As volatility continues the shrink, the fear in the market is slowly deteriorating. However, this may not mean a jump is coming. There is still a lot of uncertainty out there. Putting this all in prospective click below to hear all the newest option strategies. http://www.cnbc.com/id/15840232?video=1131628744&play=1 http://www.cnbc.com/id/15840232?video=1131630253&play=1 http://www.cnbc.com/id/15840232?video=1131628723&play=1 http://www.cnbc.com/id/15840232?video=1131628711&play=1
1 comment
Read more