Good morning, here’s your morning takeout from the Street:
- U.S. Lodging: Analysts expect American hotels to post results that largely mirror Marriott: strong revenue per available room growth and optimistic expectations for 2012. Host Hotels announces tomorrow with results expected at $222 million on 7.4% increases in RevPAR. Farther out into the month, Starwood should post earnings of $233 million and RevPAR growth of 9%.
- Juniper Networks (NYSE: JNPR): The company has announced aggressive guidance, including 18-20% quarter-on-quarter ramp up, but analysts are suspicious that they can be meet if there is but a single misstep. Weak spots include new product delays, possible sluggishness at AT&T and a slip in T4000 first quarter sales. But Barclays is not completely cynical: “Solid networking demand and modest cost reductions could allow JNPR to outperform low expectations.”
- Valero Energy (NYSE: VLO): Barclays is upgrading to a buy with a $35 price target. The company has underperformed peers which have rallied 38% for the year while Valero declined 10%.
- Large-Cap Internet: Going into earnings, Citi is adjusting expectations on several internet stocks in its coverage universe. At Netflix, earnings estimates are lower by 6 to 13%, price target lowered to $220. Amazon could see a $4 billion revenue boost in 2012 on Kindle Fire sales, which could have a break-even operating income impact. Finally, at Priceline, swings in foreign exchange rates could hit EPS by 3%.
- Alcoa (NYSE: AA): Before the company announces results this afternoon — which kicks off earnings season — analysts at Citi are lowering expectations to $0.19 a share from $0.23 on lower aluminium pricing. Consensus is for $0.22.
- Goldman Sachs (NYSE: GS): Lowering third quarter expectations to a loss of $0.65 a share on weak trading and investment banking revenues. Investing and Lending division is forecast to post a $2.1 billion loss for the quarter. Analysts will look to see what progress has been made on Goldman’s $1.2 billion cost savings initiative, which could buoy shares.
- Focus List: Credit Suisse is removing Sprint from it’s focus list on liquidity concerns following last Friday’s analyst meeting — although it leaves the firm as a buy. Utility Edison International will take its place.
- SAP AG (NYSE: SAP): Strong momentum off of the last quarter coupled with healthy deal signings may leave SAP above consensus of a 7.6% sequential decline in licence revenue. Credit Suisse believes product pipeline into the fourth quarter remains robust, benefiting the company.
- Semiconductors: Analysts expect in-line results, but lower guidance for the fourth quarter. Typically during a downturn, reductions run up to 30% of earnings, but so far semis have only reduced by 5%. Inventory growth could hurt manufacturers as they may have to cut production in the coming months. Deutsche Bank’s top picks in the segment include Intel and SanDisk.
- U.S. Rail: Volumes have been surprisingly stable over the past two months, and analysts expect commentary to be rather positive for the fourth quarter outlook. J.P. is lowering Kansas City Southern third quarter EPS estimates to $0.72 from $0.75 and CSX to $0.42 from $0.44 on cost concerns.
- Franklin Resources (NYSE: BEN): Assets under management fell more than expected at 7.9% month-on-month to $659.9 billion. Declines in global equities and fixed income businesses contributed to the loss and analysts are lowering the price target to $96 from $102.
- RadioShack (NYSE: RSH): Lowering EPS by 25 cents to $1.45 on its transition in wireless to Verizon. No major product announcements will constrain the company going into holiday, which will hurt many electronic retailers.
- Price Targets: Increases: None, Decreases: Bank of America ($13.00 new v. $14.00 old), Citi ($48.00 new v. $50.00 old), Goldman Sachs ($128.00 new v. $151.00 old), J.P. Morgan ($54.00 new v. $55.00 old), Sprint ($2.00 new v. $3.00 old).
- Specialty Retail: Abercrombie is well positioned with women’s ticket prices up 21% post labour Day and no new promotions in August and September. Gap out-the-door pricing, or what consumers ultimately pay for an item after discounts, dropped by 18%. Category strength remained in denim, while women’s sweaters saw the biggest price decline.
- McDonald’s Co. (NYSE: MCD): Currency adjustments will hurt the company more so than in the past. UBS expects a $0.05 hit to earnings per share because of greater sourcing costs as the Ruble and Euro declined.
- Starbucks (NASDAQ: SBUX): Analysts are increasing same-store sales expectations to 6 to 7% growth for the fourth quarter on continued consumer strength. K-Cup sales at Dunkin doughnuts may prove a good indicator for Starbucks. At Dunkin the higher priced bulk coffee is selling well, adding $0.15 to earnings for Starbucks in 2012.
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