Let’s take a look at analysts’ morning notes.
- Conservative on Arch Coal (ACI): As indicated in the company’s pre-announcement from earlier this month, the quarter was impacted by reduced Central Appalachian volumes, which came as a result of geological issues at the Mountain Laurel mine together with rail shipment issues. Although geological issues at Mountain Laurel are expected to continue through the remainder of the first quarter, the company still anticipates coking/PCi shipments of 7 million tons. Management seemed excited about the export potential for its eastern and western coal.
- Waddell & Reed Financial (WDR) remains attractive: In the fourth quarter flows into the flagship Asset Strategy fund continued to show steady improvements from the third quarter, a trend that we believe has also continued so far into 2011. The company is showing diversity of flows across a number of funds both in fixed income and equity, which is evidence that retail investor risk appetite has begun to make a comeback.
- Intrigued by McKesson Corp (MCK): It reported third-quarter revenue of $28.2 billion below the Street’s $29.2 billion expectations mostly due to lower bulk delivery sales. Management effectively widened the guidance range at both the top and bottom end, leaving operating expectations in tact.
- Noble Corporation (NE) shows strength: It recently announced the construction of two high specification jackups and two ultra-deepwater drillships. NE has options for another four jackups and two drillships. This is in addition to the four deepwater rigs the company already has under construction. We believe the new rigs will be a substantial addition to NE’s relatively older fleet. It continues to face very near-term EPS uncertainty given the sluggish GoM, lack of clarity in Mexico for its jackups and general softness in the midwater/deepwater markets. However, longer-term the newbuild program will be additive.
- Downgrading Plum Creek (PCL) on valuation: We remain cautious on the pace of the housing recovery and believe PCL shares are currently overvalued relative to underlying asset value/near-term earnings outlook. PCL expects harvests to be relatively similar year over year in terms of both volume and mix. They expect slightly lower manufacturing income and real estate revenues/income should fall, without a repeat of the land sale that benefited 2010.
- Bullish on Intel (INTC): Intel updated financial guidance to reflect the positive contribution from McAfee and Infineon’s Wireless Solutions business, however the positive contribution will be offset by a Chipset quality issue which will negatively impact first quarter revenue. The uncertainty around the acquisitions has been lifted but unfortunately it is offset by the quality concerns around Intel’s flagship product for 2011.
- Bullish on Verizon (VZ): It had a strong end to 2010 with an improvement in enterprise trends, among other things. Management also struck a very positive tone to its 2011 outlook during its analyst day presentations. Contrary to our expectations, the arrival of the iPhone is not seen as an earnings drag. Management said that using consensus’ 11 million iPhone activations, earnings could grown 5% to 8% in 2011. Relative to AT&T Verizon also laid out a more positive view of the economy.
- Las Vegas Sands (LVS) will be leveraged by Macau properties: We believe the market business will continue to grow nicely and should allow LVS to generate solid EBITDA growth in 2011 and that its mass business will grow along with 2H11 Macau market infrastructure improvements. With regards to Las Vegas Strip fundamentals, we believe commentary will be generally positive with respect to high-end Asian bacarat volumes and improving 2011/2012 group volumes.
- Optimistic on Starwood Hotels & Resorts Worldwide (HOT): We expect HOT to report that it is at the beginning stages of a multi-year lodging recovery. With year-over-year supply increases expected to remain below 1% through 2013 we expect that solid lodging demand will drive ADRs progressively higher, with 2011 being the first year for meaningful rate growth. Operating fundamentals will be strengthened throughout the year.
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