Here's a quick recap of some additional earnings reports on Wednesday.
Beaverton, Ore.-based Nike Inc. (NYSE: NKE) said strong growth overseas helped boost its fourth-quarter profit by 12% to $490.5 million, or 98 cents per share. Analysts polled by Thomson Financial expected the company to earn 96 cents per share for the quarter. Shares fell more than 5% in after-hours trading to $62.15.
CKE Restaurants Inc. (NYSE: CKR) said its first-quarter profit climbed 8% to $16.6 million, or 31 cents per share, helped by a small increase in same-store sales at Carl's Jr. restaurants. Revenue fell 3% to $466.2 million. Analysts polled by Thomson Financial expected profit of 27 cents per share on revenue of $465.5 million. Shares fell 5 cents to $12.25 in after-hours trading.
Red Hat Inc. (NYSE: RHT) said its fiscal first-quarter profit rose 6.6% to $17.3 million, or 8 cents per share. Adjusted earnings were 18 cents per share. Revenue rose 32% to $156.6 million. Analysts polled by Thomson Financial on average predicted a profit of 18 cents per share on revenue of $153 million. Shares fell 19 cents in after-hours trading to $22.11.
General Mills Inc. (NYSE: GIS) said its fourth-quarter profit dropped 17% to $185.2 million, or 53 cents per share. Adjusted earnings were 73 cents per share, which met Wall Street expectations. Sales increased 13% to $3.47 billion beating expectations. The company reaffirmed its guidance for the full year. Shares fell almost 2% to $61.19.
CKE Restaurants (NYSE: CKR) reported earnings for the fourth quarter yesterday after the bell. Total revenue decreased 3% for the quarter, and net income from continuing operations was $0.00 per diluted share, which wasn't too good in comparison to last year's number, which was $0.17 per diluted share. Total revenue was flat for the year, and net income from continuing operations was $0.57 per diluted share versus $0.77 per diluted share in the previous fiscal year.
CKE Restaurants, which operates the Carl's Jr. and Hardee's brands, did not impress analysts, as earnings expectations for the quarter were missed by two pennies. I myself wasn't too impressed with the entire report. Same-store sales increased 0.9% at Carl's Jr. and 2% at Hardee's for 2007 -- I'm not going to jump up and down over that bit of news. In addition, costs are up because of inflationary pressures, and revenues have obviously been challenged. There's not a lot that I like about this story.
CKE's stock is certainly on the lower end of its 52-week range, but I can't say it is necessarily cheap; it closed yesterday at $12.45 -- the high for the year on the stock is $23.24. This is a situation that calls for an old standby: "There are better opportunities out there in this space." For me personally, if I'm looking at the burger business, I'm way more likely to consider a McDonald's (NYSE: MCD), a Burger King (NYSE: BKC), or a Wendy's (NYSE: WEN) before I entertain CKE as an investment idea. Although they don't do burgers (so far as I know), I'd even look at a Yum! Brands (NYSE: YUM) before CKE. These companies have better brand equities in my estimation. CKE may turn itself around, but I just wasn't impressed by my look at its data.
Disclosure: I own none of the companies mentioned here; positions can change at any time.
In the battle of the fast food restaurants, it's hardly ever about taste or service or quality: it's all about perception (and as my former car salesman boss says, perception is reality). So when I saw the news this week about how CKE Restaurants (NYSE: CKR) restaurants, Hardee's and Carl's Jr., have agreed to start purchasing a very small percentage of their pork and eggs from cage-free animals, I was wowed at the headlines. "Cage-free eggs!" an email from a colleague read.
Gallery: Cage Match: Alicia Silverstone vs. Paris Hilton
Why is this the funnest news all month? Because of the very famous pin-up girls involved in the dispute. Paris Hilton is, after all, famous for her extremely sexy Carl's Jr. ads (I'd venture to say they are the pinnacle of her sordid career). Alicia Silverstone has made headlines with her racy PETA ads that were pulled off the air thanks to their nearly-naked nature. So in the cage match between Paris Hilton and Alicia Silverstone, I could have called it: smart Alicia whooped Paris' lingerie-clad booty with a (slightly happier) hen.
While People For the Ethical Treatment of Animals attracts a lot of flack (not to mention a South Park episode) for its perceived "militancy", the organization should be commended for its latest coup. According to the Associated Press, CKE Restaurants (NYSE: CKR) will begin purchasing eggs and pork from suppliers who do not keep their livestock in cages or crates. The concessions may seem relatively modest, but CKE is just the second chain to adopt these standards after Burger King (NYSE: BKC) made similar changes in March. The chain will:
Stocks moved mildly lower today taking a break from the bullish buying over the last two days. This is not really a bad sign, after all the S&P 500 gained 3.5% Tuesday and Wednesday so losing 0.67% today still leaves it up 2.8% since the Fed cut. September equity options expire tomorrow so we may see some some extra volatility gong into the end of the week.
The NYSE had volume of 3.0 billion shares with 978 shares advancing while 2,331 declined for a loss of 34.43 points to close at 9,936.47. On the NASDAQ, 1.6 billion shares traded, 1,131 advanced and 1,864 declined for a loss of 12.19 to 2,654.29.
In options there were 5.8 million puts and 7.7 million calls traded for a put/call open interest ratio of 0.75. The most active options lists were almost completely filled with ETF and index options. S&P Depositary Receipts Trust ETF (NYSE: SPY) saw very heavy volume on the September 150 calls (SYHIT) with over 643,800 options trading. The SPY September 149 calls (SFBIS) also had a lot of activity moving 300,400 contracts. Financial Sector SPDR ETF (NYSE: XLF) were again active; the September 33 calls (XLFIG) with over 171,900 options trading. PowerShares QQQ Trust ETF (NASDAQ: QQQQ) saw heavy volume on the March 45 puts (QQQOS) with over 199,800 options trading and the March 48 puts (QQQOV) moved 180,500 options trading. .
Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.
These are the times that try investors' souls, or so Thomas Paine might have put it had he been a money manager. There is scary news all around -- the credit markets are seizing up, mortgage-backed securities are plummeting in value, even Wal-Mart Stores (NYSE: WMT) and Home Depot (NYSE: HD) have expressed worry lately that the stalwart American consumer is losing her resolve to spend.
Yet no sooner do investors panic and sell their stocks, than the market gets some relief. Central bankers around the world step in with billions in short-term loans, giving the debt markets some wiggle room. Or a hot growth company provides some upbeat news -- VMware's hot initial public offering on Aug. 14 was a nice respite from all the bearishness, for example. Or investors just start to realize there are lots of great companies getting much cheaper while the economy really is still humming along just fine.
Suddenly the Dow Jones industrial average will leap 50 points in an hour and we are left kicking ourselves for not picking up some shares of a favorite stock while it was down -- until the next market swoon when we wonder why we didn't get out when the gettin' was good.
MOST NOTEWORTHY: CKE Restaurants (CKR), Capella Education (CPLA), IAC/InterActiveCorp (IACI), Liberty Media (LINTA) and BWAY Holding (BWY) were today's noteworthy initiations:
JP Morgan started CKE Restaurants (NYSE: CKR) with a Neutral rating, citing near-term margin concerns.
Barrington believes Capella Education (NASDAQ: CPLA) is one of the fastest growing companies within its group in every aspect including enrollment, earnings and revenue.
Stifel started IAC/InterActiveCorp (NASDAQ: IACI) with a Buy rating, believing there is a 60% chance of a material event occurring within the next 6 months. Stifel believes QVC is the best interactive retailing operator given its 22% EBITDA margins and 16% operating margins.
Banc of America initiated BWAY Holding (NYSE: BWY) with a Neutral rating, citing a balanced risk/reward. JP Morgan started shares of BWY with an Overweight rating on valuation...
Although they spent most of the day in the positive, markets ended flat after a little volatility following the feds comments. As expected the fed left rates unchanged today continuing the wait and see approach. First Quarter GDP was revised lower to an annual 0.7% -the slowest pace in four years.
The NYSE had volume of 2.9 billion shares with 1,880 shares advancing while 1,377 declined for a gain of 16.86 points to close at 9,865.77. On the NASDAQ, 1.9 billion shares traded, 1,536 advanced and 1,453 declined for a gain of 3.02 to 2,608.37.
CKE Restaurants (NYSE: CKR), parent company of Hardee's and Carl Jr.'s is suing Jack in the Box (NYSE: JBX) for a television commercial which allegedly suggests that the company's famous angus burgers are made from cow anus (see YouTube video above).
This is one of the more entertaining legal cases I've seen in awhile. According to the Associated Press, "CKE claims the ads create the misleading impression that Jack In The Box's new 100 percent sirloin burgers use a better quality of meat than the Angus beef used by Carl's Jr. and Hardee's. CKE claims the spots confuse consumers by comparing sirloin, a cut of meat found on all cattle, with Angus, which is a breed of cattle."
According to CKE CEO Andrew F. Puzder "They're not being funny. They need to stop misleading people about what Angus beef is."
Here's the problem: They actually are being funny. And I certainly don't claim to be a legal expert, but I think that part of Jack in the Box's defense is going to be "Lighten up and learn to take a joke."
Puzder said that CKE had asked Jack in the Box to pull the ad, but the company refused, pointing to a Carl Jr.'s ad which suggested that its milkshakes were better than the competition. Here's the best part: Puzder said the comparison was not valid because they had not claimed that competitors made their milk from cow anuses.
This whole "scandal" seems like a tempest in a tea pot to me. Jack in the Box's commercial was a clever pun on the word "angus" and certainly not misleading. Did anyone watching it really come away thinking that angus burgers were made from anuses?
In addition to Wendy's (NYSE: WEN) management's recent hiring of JP Morgan (NYSE: JPM) and Lehman Brothers (NYSE: LEH) to help review strategic options for the company, the fast-food restaurant has decided to throw its hat into the breakfast ring by signing an exclusive deal with Proctor & Gamble (NYSE: PG). The deal allows Wendy's to be the only major fast-food restaurant chain to offer a proprietary blend of Folgers Gourmet Selections coffee and will become part of Wendy's new breakfast menu.
What's that you say, "Breakfast menu?"
Yes folks, Wendy's just isn't for lunch or dinner anymore (or dessert – mmmm Frosty's). You can now eat Wendy's for every meal of the day. By the end 2007, Wendy's expects to have 20-30% of its North American restaurants serve breakfast along with premium Folgers coffee.
Wendy's is definitely throwing its hat into a very crowded ring. The fast-food breakfast market is growing at almost three times the rate of the overall market, with Burger King (NYSE: BKC), McDonald's (NYSE: MCD), Arby's, a unit of Triarc Co. (NYSE: TRY), Carl's Jr and Hardee's, both owned by CKE Restaurants (NYSE: CKR) and even Starbucks (NASDAQ: SBUX) offering similar on-the-go breakfasts to consumers. Papa John's (NASDAQ: PZZA), Dunkin Donuts and Chick-fil-A are planning new breakfast products as well. What's going to be so different to make me go to Wendy's?
When looking at the coffee aspect, one has to recall last year's Canadian Business magazine taste test between McDonald's "Café Roast" and Starbucks coffees. I'm sure all the companies I mentioned above serve some brand of coffee. Wendy's is really walking into a competitively caffeinated situation. We also can't forget about
Seattle
's "Sexpresso" baristas, but that's competition on a different level.
Where do you go to get your morning cup o' joe? And would the chance to have Folgers Gourmet change your mind?
Encouraged by sales of its Angus beef burgers in southern California, McDonald's Corp. (NYSE: MCD) is planning to expand its test marketing of the premium burgers to New England.
McDonald's comes late to the Angus burger trend. Rivals Burger King Holdings, Inc. (NYSE: BKC), Hardees and Carl's Jr. -- the latter two part of CKE Restaurants, Inc. (NYSE: CKR) -- have been selling the premium burgers for years. In fact, Hardees has just announced a new addition to its menu, a patty melt style Thickburger, also made with Angus beef.
The new burgers are part of McDonald's ongoing efforts at revitalization. Those efforts have included the introduction of new beverage choices, such as iced coffee, which is also expected to spread throughout the U.S. soon. Another part of that effort is a new advertising campaign, emphasizing career opportunities at McDonald's -- no doubt to try to change its image as a source of low-paying, dead-end jobs.
MOST NOTEWORTHY: CKE Restaurants (CKR), Cardinal Health (CAH), eBay (EBAY) and CA Inc (CA) topped today's noteworthy initiation list today:
Nollenberger believes the Hardee's franchise is entering a period of accelerated growth and initiated shares of CKE Restaurants (NYSE: CKR) with a Buy rating and $27 target.
Goldman views Cardinal Health (NYSE: CAH) as a as a high quality, focused franchise with strong fundamental outlook driven by margin expansion and improvements in non-drug wholesale businesses and restructuring efforts, reinstating its Buy rating on the company.
American Technology initiated eBAY Inc (NASDAQ: EBAY) with a Buy rating and $43 target, believing the company is the top play on growth of U.S. e-commerce and they expect upside to numbers tonight.
Needham believes CA Inc (NYSE: CA) Inc remains in transition as it continues to work on the repackaging of its vast product array into five solution sets and started the company with a Hold rating.
OTHER INITIATIONS:
Lazard initiated F5 Networks Inc (NASDAQ: FFIV) with a Buy rating and $100 target.
Citigroup started Clearwire Corp (NASDAQ: CLWR) with a Hold rating and $23 target.
MOST NOTEWORTHY: CKE Restaurants. Inc (CKR), Texas Instruments Inc (TXN), SurModics, Inc (SRDX), Nokia Corp (NOK) and DirecTV Group, Inc (DTV) were today's notable initiations:
Wedbush initiated CKE Restaurants (NYSE: CKR) with a Buy rating and $25 target.
Wachovia resumed coverage of Texas Instruments Inc (NYSE: TXN) with an Outperform rating, as the firm believes that TXN's fundamentals have bottomed and the valuation is attractive.
SurModics Inc (NASDAQ: SRDX) was initiated with an Underperform rating and $28 target at Piper Jaffray. Piper doesn't see a near-term catalyst to move shares higher given a lack of visibility regarding new licenses.
Nokia (NYSE: NOK) was initiated at Nollenberger with a Neutral rating.
HSBC started DirecTV (NYSE: DTV) with an Underweight rating and $21 target.
OTHER INITIATIONS:
Stanford initiated Armor Holdings, Inc (NYSE: AH) with a Buy rating and $80 target.
Wedbush initiated Jack in the Box Inc (NYSE: JBX) with a Hold rating and $68 target, citing the company's operational improvements and benefits from ongoing refranchising and share repurchases are fully reflected in the stock price.
Canadian Pacific Railway Ltd (NYSE: CP) was initiated with a Sector Performer rating at CIBC.
Stifel initiated Medical Properties Trust, Inc (NYSE: MPW) with a Hold rating.
Bear Stearns initiated Teva Pharmaceutical Industries Ltd (NASDAQ: TEVA) with a Peer Perform rating.
Thomas Wiesel initiated shares of Cepheid (NASDAQ: CPHD) and Luninex Corp (NASDAQ: LMNX) with Overweight ratings.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).
While People For the Ethical Treatment of Animals attracts a lot of flack (not to mention a South Park episode) for its perceived "militancy", the organization should be commended for its latest coup.
Stocks moved mildly lower today taking a break from the bullish buying over the last two days. This is not really a bad sign, after all the S&P 500 gained 3.5% Tuesday and Wednesday so losing 0.67% today still leaves it up 2.8% since the Fed cut. September equity options expire tomorrow so we may see some some extra volatility gong into the end of the week. 
These are the times that try investors' souls, or so Thomas Paine might have put it had he been a money manager. There is scary news all around -- the credit markets are seizing up, mortgage-backed securities are plummeting in value, even 
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