Gapping up: EFUT +13.2%, MBRX +12.7%, GRRF +9.8%, CSASR +9.2%, HIHO +9.1%, SCOR +8.2%, WON +7.1%, SSTR +5.0%, BOBJ +3.7%, PNRA +3.2%, DB +3.0%, CIEN +2.7%, HBC +2.4%… Gapping down: MWY -12.6%, RCH -8.6%, PFCB -9.1%, CTDC -7.3%, CRNT -6.6%, ACTS -6.6%, JRJC -4.3%, KONG -4.1%, MU -4.0%, CHNR -4.0%, CPSL -3.4%, LFC -3.0%.
After Hours Summary: MU down 3.6% on earnings; AAI down 3.2% (reports all-time record traffic during 3-month period ending Sep 30) Companies moving in after hours trading in reaction to earnings: Trading Down: MU -3.3%… Trading Up: USEY +30.3% (provides update on restructuring plans and names Joseph Reynolds CEO); MBRX +16.2% (announces European Commission grants Orphan Medicinal Product Designation to MB0713); CPST +6.1% (announces initial $3.8 mln order for its C200 microturbine); CNIC +3.5% (announces appointment of Marc Ferland and Lawrence Yelin to the Board of Directors); VASC +1.1% (comments on summary judgment rulings in patent litigation with VNUS medical)… Trading Down: MWY -6.4% (lowers Q3 EPS and revs guidance below consensus); MPET -4.3% (announces that the Patron 1 exploration well has been plugged and abandoned); AAI -3.2% (reports all-time record traffic during 3-month period ending Sep 30); EXM -3.1% (announces plan to offer $100 mln convertible senior notes); GIFI -1.0% (announces new Chief Financial Officer).
Bond Watch: Pulling Back
The market is losing its modest bid post-ADP (probably temporary) with only a smattering of newsbits to work with. More bank write-downs (Deutsche) & weak Euro data have given a positive tinge to global bond sentiment overnight. The 2-10-yr spread is out at 57.6 after unwinding some steepness yesterday. Bond prices in the EuroZone were helped higher by expectations of softer inflation rhetoric out of tomorrow’s ECB meeting & poor data while in Japan, bonds flipped lower as equities sported gains. Treasuries have some data to pour over today with ISM services on deck. Trade will be eyeing the employment detail within that report for more clues on the broader jobs picture ahead of Fri’s payrolls. ADP reported 58K new non-government jobs were created in Sep while Challenger says there were fewer job cuts that month but pointed to a disturbing ramp up in financial services yoy layoffs. Equities will continue to be eyed for further choking at or near their record highs yesterday while technicals suggest more consolidation but with positive momentum picking back up. The dollar is back off on the euro & better but retreating on the yen, which is hurting across the board. Gold is a unchanged with spot now 731.63(+0.03) with crude regaining some ground at 80.48 (+0.43). The data due is ISM services (10), There is no Fed-speak, but Greenspan is still out hawking his book. The euro is at 1.4191 & the yen is at 116.2300 while the 10-yr yield is unchanged at 4.520%.
TIVO TiVo: AmTech relaunches coverage with a Speculative Buy and $11 tgt; litigation as catalyst (6.60 )
AmTech sees TIVO as a speculative risk/reward trade heading into the DISH appeal. Firm argues that historical precedent favors TIVO. Oral arguments will be heard on Oct 4 - typically decisions are distributed within 2-3 months. The co would become a more investable story if the initial court decision is upheld. Shares have begun to move off the recent bottom, but firm still sees a trading opportunity on speculation of a favorable decision. Should it lose, they see downside support at the $4 level, or 40% from current levels. If TIVO wins and CMCSA, Cox and other cable relationships expand, firm sees upside to $13, or more than 100%. Firm’s $11 tgt assigns a 60% probability to a favorable ruling for TIVO.
S&P futures vs fair value: -8.0. Nasdaq futures vs fair value: -13.0.
ADP reports that employment rose 58,000 in September. That supports expectations of a 100,000 September nonfarm payroll gain to be reported Friday. ADP does not include government employment, which fell 28,000 in the August nonfarm data and could easily reverse in September
TSL Trina Solar signs equipment supply contract with Meyer Burger AG (63.19 )
Co announces that it has signed an agreement with Meyer Burger AG for the supply of ID cropping, band and wire saws used for the production of its monocrystalline and multicrystalline wafers and cells. The contract, valued over $154 mln, covers equipment and delivery schedule to meet the co’s capacity expansion goals through 2010.
Insider trading disclosed in filings after the close yesterday
Buyers: NorthStar Realty Finance (NRF 10.54) Director bought 5K shares at $9.98… Pep Boys (PBY 15.66) Director bought 2K shares at $15.68… Harvard Bioscience (HBIO 4.4 
10% Owner Skystone Advisors bought 47,886 shares at $4.42… Pier 1 Imports (PIR 5.42) Directors (2) bought 65K shares at $4.72 - $4.77… IncrediMail (MAIL 8.99) 10% Owner Longview Fund bought 19,500 shares at $9.01… Noven Pharma (NOVN 16.15) 10% Owner OSS Capital Mgmt bought 310K shares at $16.05… CMGI (CMGI 1.37) CFO bought 100K shares at $1.38; Officer bought 50K shares at $1.40… Emageon (EMAG 8.12) Disclaimed Group Oliver Press Partners bought 251,660 shares at $8.09 - $8.44… Opko Health (OPK 3.94) Chairman bought 21K shares at $4.02… Lamar Advertising (LAMR 50.06) 10% Owner SPO Advisory bought 300K shares at $48.56 - $49.40… EMCORE (EMKR 10.45) 10% Owner Quercus Trust bought 500K shares at $10.11. Sellers: Rockwell Medical Technologies (RMTI 5.99) Chairman sold 62,400 shares at $5.70… Chesapeake Energy (CHK 36.0 Chief Operating Officer sold 10K shares at $35.53… GeoEye (GEOY 26.4 10% Owner Harbinger Capital Partners Master Fund sold 1,649,050 shares at $25.59… PokerTek (PTEK 9.60) Directors (3) sold 309K shares at $9.30…Ivivi Technologies (II 5.05) 10% Owner sold 51,700 shares at $5.04… Global Industries (GLBL 26.01) 10% Owner sold 326,673 shares at $25.11… XTO Energy (XTO 62.81) President sold 20K shares at $62.60… Metalico (MEA 10.09) Director sold 50K shares at $9.88… Somanetics (SMTS 19.64) CEO sold 13,687 shares at $19.07… Magnetek (MAG 5.21) 10% Owner Riley Investment Mgmt sold 200,440 shares at $4.85.
NVDA Nvidia to launch IGP chipsets for AMD in November - DigiTimes (37.41 )
DigiTimes reports the co is planning to launch the AMD platform-based MCP72integrated graphics processor chipset at the end of November or the beginning of December this year, with mass production to start ahead in November, according to sources at motherboard makers.
AAPL Apple reportedly considering Intel platform for iPhone - DigiTimes (158.45 +2.11) -Update-
DigiTimes reports the co reportedly is considering adopting Intel’s Moorestown MID (mobile Internet device) platform processor in a new iPhone, according to OEM sources. Intel revealed a Moorestown-based MID product with functions similar to Apple’s iPhone at the recent Intel Developer Forum San Francisco. The Moorestown platform is expected to launch in 2009 and Apple is considering developing an iPhone based on it, stated the sources.
Prior month ADP revised down to 27K from 38K -Update-
ADP Employment Change 58K vs 58K consensus, prior 38K
FISV Fiserv: ThinkEquity believes long-term opportunity could override near-term fundamental softness (52.92 ) ThinkEquity notes FISV’s analyst event provided insight into future growth strategies and expectations regarding the CKFR acquisition. FISV expects to achieve the lower-end of its FY07 EPS outlook, as the lending business is expected to adversely affect EPS by $0.05-$0.07 for 2H07. Fiserv’s revenue and cost improvement initiatives from Fiserv 2.0 appear on track. Firm believes significant potential accretion from CKFR could outweigh soft near-term fundamental performance in the lending and insurance businesses for FISV.
ThinkEquity lowers their Vignette (VIGN 20.34) tgt to $19 from $23 following disappointing preliminary 3Q results, with license revenue of roughly $8 mln, down 50% y/y. The firm believes that sales force turnover over the past few quarters, and the resulting relatively young sales force, contributed to the co’s inability to close large deals at the end of the quarter. Despite the disappointment, they believe that Vignette represents an attractive acquisition target. Their new tgt of $19 represents an EV/Rev multiple of 2.0x their FY’07 revenue estimate, which is what they believe an acquirer would be willing to pay… Jefferies raises their China TechFaith Wireless (CNTF 7.99) tgt to $8.15 from $5. The firm believes the co’s portfolio transition to more 3G and smartphone projects is taking longer than expected. They highlight ‘07 as a year that investors should search for an inflection point in the co’s business… Wachovia notes that regional investment banks are facing a more challenging quarter, in light of a tougher trading environment and slower investment banking volumes. Accordingly, the firm lowers their EPS estimates for PJC and JEF. Their estimates for RJF and GHL remain the same… Jefferies says that after dismal execution in 1H07, they believe that Packeteer (PKTR 7.90) might be seeing some signs of stabilization in its business. The new iShaper product has garnered a lot of customer interest and enables the co to compete more effectively against other vendors in the WAN acceleration mkt.
DFS Discover Financial Services initiated with a Hold at Stifel (21.37 )
Stifel initiates DFS with a Hold saying although the payments industry has been experiencing strong growth and profitability, Discover has not participated due to its subscale network, inferior brand, and tired product strategy. Given the intense competition for card accounts and loans, the firm is concerned that these structural disadvantages have reduced profitability and credit quality on Discover’s recent originations.
GM General Motors: Upgrade details (37.05 )
BofA upgraded GM to Neutral from Sell and raised their tgt to $37 from $25 to reflect the better than expected labor agreement the co reached with UAW. They see some more upside as GM starts discussing details of the agreement (to be ratified by October 10th) and its accounting treatment. The firm also notes the co’s strong position in emerging mkts should continue to benefit them in the short term, but they see risks from stronger competition
Global cos barred from running China brokerages - Bloomberg
Bloomberg reports China may prevent foreign investors from taking control of domestic brokerages, a setback to Wall Street’s ambitions to tap the world’s fastest-growing stock market, people familiar with the planned rules said. Overseas cos will be limited to owning stakes in publicly traded brokerages, with the foreign holding capped at 20%, said the two people, asking not to be identified before the rules are approved. The China Securities Regulatory Commission has submitted the draft rules to the State Council, the nation’s highest decision-making body, they said
Global cos barred from running China brokerages - Bloomberg
Bloomberg reports China may prevent foreign investors from taking control of domestic brokerages, a setback to Wall Street’s ambitions to tap the world’s fastest-growing stock market, people familiar with the planned rules said. Overseas cos will be limited to owning stakes in publicly traded brokerages, with the foreign holding capped at 20%, said the two people, asking not to be identified before the rules are approved. The China Securities Regulatory Commission has submitted the draft rules to the State Council, the nation’s highest decision-making body, they said
Morgan Stanley Semiconductor initiation summary
Morgan Stanley initiated AMD tgt $11, INTC tgt $22, and NVDA tgt $32, with Underweights. The firm also upgraded ALTR, PMCS, and ONNN to Overweight from Equal Weight. According to Bloomberg.com Intel and Advanced Micro should be sold “ahead of what we expect will be an inventory correction and increasingly aggressive price environment,” analyst Mark Lipacis wrote in a research note. “The risk is high that Intel reacts to AMD’s increased competitiveness with aggressive price cuts.” Lipacis gave “underweight” ratings to both companies, saying their shares will trail the rest of the semiconductor industry during the next six to 12 months
YHOO Yahoo ponders Kelkoo’s future - FT (26.95 )
FT reports the co said it was considering “strategic options” for Kelkoo, including a possible sale of the online shopping comparison service that it acquired only three-and-a-half years ago. The internet co, which has been re-evaluating its business under its returned CEO, paid $672 mln in cash for Paris-based Kelkoo in March 2004, as part of a push to bolster its European operations. However, it acknowledged on Tuesday that it had not progressed as expected. “One of the priorities we have identified is to improve the performance of Kelkoo,” Yahoo told the Financial Times. “Today we are starting a process to give Kelkoo more independence — while we evaluate strategic options for the long-term future of the business.
SLM SLM Corp: Friedman Billings believes SLM’s Board would be willing to compromise to some point (50.09 )
Friedman Billings notes yesterday’s counteroffer from the buyers group was not entirely unexpected given that the group signaled its willingness to negotiation just last week. Firm views this offer as a meaningful positive as it demonstrates the desire of the buyers to close the deal and establishes a floor for the negotiation process. However, they view the offer as insufficient given their view that stand-alone SLM is worth at least as much. Ultimately, firm believes SLM’s board would be willing to compromise to some point, given the costs of breaking the deal, and a $55-$57 range is likely to satisfy all parties.
C Citi’s Prince awaits review on losses - FT (47.86 )
FT reports Chuck Prince, the co’s CEO, wants to see the results of a review of the $3.3 bln of losses and writedowns in its markets and banking business in the third quarter before deciding whether heads should roll, senior executives say. Mr Prince is involved in the review, which colleagues say could prompt personnel changes. People close to Mr Prince said he believes that Michael Klein and Tom Maheras, who jointly head Citi’s mkts and banking business, handled the turmoil in the credit mkts well. The insiders add that the pair have already taken tough action by ousting the co-heads of credit trading in New York.
MU Micron: Color on quarter (11.79 )
Broadpoint Capital notes MU reported 4Q07 EPS of ($0.21) on rev of $1.44 bln. Firm notes weak memory ASPs, driven by excess industry capacity, continue to squeeze gross margins. They note operating costs are also being cut via rationalization and strategic partnerships. Firm is lowering their 1QFY08 EPS est to ($0.22) on revenue of $1.58 billion from ($0.03) on $1.55 billion. Firm expects a robust demand outlook in memory, driven in part by increasing DRAM per box and broader adoption of NAND across various devices… Deutsche reinstates MU with a Hold and $10 tgt as they believe co will continue to face headwinds as the co attempts to improve margins and free cash flow. Firm says the DRAM and CIS markets are likely to remain very competitive due to oversupply and although NAND remains a relative positive, MU faces the prospect of achieving scale in this segment and the requisite capital expenditures, putting pressure on free cash flow. Firm notes positives from quarterly results include an improved cost structure, lower capital intensity in F2008, and some significant progress in NAND. However, firm notes cost reductions are likely to slow and combined with a accelerating ASP declines in NAND and continued oversupply of DRAM leave little opportunity for improved results in F1Q08 despite favorable seasonality.
YZC Yanzhou Coal Mining: China raises coal prices for South Korea above Japan - Bloomberg.com (107.78 )
Bloomberg.com reports that Chinese coal producers offered supplies to South Korean utilities at 7.5% above prices concluded in May with Japanese rivals because shortages of the fuel have worsened, said buyers involved in the talks. Sellers, including China National Coal Group, sought $73 a metric ton from buyers led by Korea Southern Power, said two Korean utility officials, who asked not to be named because of company rules. Korea, which turned down the opportunity in May to buy coal at $67.90, the same price Japan accepted, may have to agree to a 40% increase in the annual contract from the $52.10 a ton it paid last year. Prices have doubled this year as China became a net importer for the first time in January and Japan increased purchases when an earthquake closed a nuclear plant in July. Talks between China and Korea are deadlocked after both sides met at least three times this year to try to agree on the price for 2008 supplies. YZC, a unit of China’s fourth-largest coal producer, won’t sell the fuel at prices less than $80 a ton, Director Wu Yuxiang said Aug. 20.
MSFT Microsoft’s Zune not likely to get iPod fans to change their tunes - Latimes.com (29.70 -0.07)
Latimes.com reports that MSFT, chasing the speeding Apple (AAPL) iPod train, will introduce a lineup of its Zune hand-held music and video players next month. Analysts said the new Zunes, which MSFT Chairman Bill Gates unveiled to reporters in Redmond, WA, on Tue, might help the co hold on to its sliver of the mkt and perhaps gain some ground against fledgling entrants. But MSFT wasn’t given much chance of taking customers from AAPL. “They’re not going to gain against Apple because there is nothing really innovative about what they’re doing,” said Van Baker, a vice president at Gartner Group. There are some features the Zune has that the iPod doesn’t, such as FM radio reception and the ability to share songs with friends’ players, as long as they are within wireless range. Microsoft spokesman Chris Stephenson said the co was aiming for more than 10% of the part of the makt where the smaller Zunes would compete, which is new territory for Microsoft. Overall, he said, “our goal is to be the main No. 2.”
CIEN Ciena: Very upbeat analyst day features increased margin guidance; raising ests - Merriman (42.66 ) -Update-
Merriman notes CIEN’s annual analyst day featured a long list of positives that they believe are only beginning to be reflected in the shares. These included: 1) a very upbeat tone regarding the strength of current business trends, 2) explicit upside guidance on gross margins for 4Q driven by improved service margins and continued favorable product mix, and most importantly, 3) characterization of the company’s formal goal of 15% operating margins as a “milestone,” suggesting the potential for an operating model over time stretching toward 50% gross and 20% operating.
AMGN Amgen: FBR conf call with osteoporosis expert; reclast vs denosumab (56.04 )
Friedman Billings notes on Wed. Oct 3, they will host a conf call to discuss denosumab in osteoporosis, as well as Novartis’ Reclast, which was recently approved. Firm’s main speaker on the call is a leading expert in the field and was a lead investigator on the Phase III HORIZON trial which supported approval of Reclast. Firm’s expert will focus discussion on 1) expectations for the upcoming Phase III denosumab results next year; 2) Reclast and its competitive impact on denosumab; and 3) the current competitive environment for osteoporosis medications. This call should provide a framework for assessing the overall osteoporosis market and where denosumab may fit in.
Mortgage Applications
The weekly MBA mortgage applications index fell -2.7% last week, with purchasing applications down by -1.8% & refis dropping -3.8%. The fixed 30-yr mortgage rate was off at 6.32% while the 15-yr went down to 5.95% & 1-yr adjustable rate mortgage rose to 6.21%.
Northern Rock shares soar as buy-out group closes in - FT
FT reports shares in Northern Rock jumped 9% after it emerged that JC Flowers, the private equity group, had secured about 15 bln pounds of funding that could be used for a takeover. The JC Flowers team is to meet the bank’s advisers for talks that could lead to due diligence. JC Flowers is one of several bidders to have expressed interest in buying all or part of Northern Rock since the UK govt in effect rescued it last month. But most have given up on any purchase. Cerberus, the hedge fund, is the only other co thought still to be interested. It emerged that Northern Rock was ready to hire Citigroup (C) to work with Merrill Lynch (MER), its main investment banking adviser. Citigroup is expected to provide a financing package that could be offered to prospective bidders.
AAPL Apple: Credit Suisse raises 4Q07 and CY08 ests (158.45 )
Credit Suisse says that as AAPL enters this holiday season with its most compelling lineup of products in the company’s history, firm is revisiting both their near and long term ests for growth in iPods, iPhones and Macs and accordingly, are raising F4Q07 EPS to $0.92 from $0.87 and their CY08 EPS to $5.00 from $4.83. Firm’s replacement cycle analysis indicates iPod has plenty of available future growth as it has only penetrated 21% of its addressable market. Firm ests AAPL will sell 2.1 mln Macs this quarter (+30% y/y) as the co is only beginning to benefit from the iPod halo effect. Firm checks indicate AAPL is likely receiving 10-15% of monthly customer contracts from its international carriers with its iPhone, above the 10% they have been estimating in the U.S.
RIMM Research In Motion tgt raised to $100 at Credit Suisse; expect strong results and guidance (96.26 )
Credit Suisse raises their tgt on RIMM to $100 from $70. Firm expects RIMM to continue to benefit from rapid smartphone market growth and improving international traction; however, they remain concerned that an increasing consumer presence will pressure device margins over time as RIMM expands beyond the high-end market. To reflect strong near-term demand and a solid product roadmap, Firm is raising their FY08E/FY09E (FYE Feb.) rev est. to $5.66B/$7.68B from $5.34B/$6.71B, raising their FY08E/FY09E EPS est. (incl. options) to $2.11/$3.05 from $1.96/$2.49.
PNRA Panera Bread: September slightly better than expected; raising ests - FBR (43.12 ) -Update-
Friedman Billings notes PNRA’s Sept comps of +0.8% vs +5.9% last year were modestly better than expected, particularly given the challenging comparison. For the few restaurant cos that have already reported, it appears that Sept was only modestly weaker than July and August despite tougher comparisons for most cos. Firm is raising their 3Q and FY07 EPS ests for Panera by $0.02 each to $0.36 and $1.82, respectively, to reflect stronger Sept comps. Firm believes the market’s expectations for the remainder of 2007 are reasonable, but 2008 expectations may still be too high given commodity and labor cost pressures.
COH Coach profiled in New America section of IBD (47.20 +0.13)
IBD reports the upscale accessories designer, marketer and retailer has been on a real winning streak. For the past five years, earnings have grown at an average annual clip of 46% and sales by 29%. In North America, the premium handbag and accessory category has been growing at about a 20% annual clip, says analyst Stacey Widlitz of Pali Research. Growth in the category comes at a time when consumers are spending less on volumes of clothing and are going in for a very expensive or high-quality accessories, Widlitz says. Women are buying more Coach handbags relative to other players, adds analyst Liz Dunn of Thomas Weisel Partners. In any given year, Coach gets between 60% and 70% of its business from new products, she says. Mgmt has successfully extended the Coach brand into new areas including jewelry, footwear and, more recently, a fragrance, which was launched in March. Analysts polled by Thomson Financial expect earnings for fiscal 2008, ending next June, to rise 23% to $2.08 a share, then 19% in fiscal 2009. In terms of expansion, Coach plans on adding about 40 new retail stores in North America in fiscal 2008, including 15 in the first quarter.
PFCB PF Chang’s sees Q3 EPS and revs below previous guidance, reports same store sales (30.26 )
Co sees Q3 EPS of $0.18-0.20, compared to previous guidance of $0.25, vs $0.25 consensus; co reports Q3 revs of $270.8 mln, compared to previous guidance of $273.0 mln, vs $272.44 mln consensus. Co reports September comparable store sales -1.9% at the Bistro and -1.4% at Pei Wei. Co reports Q3 comparable store sales -1.6% at the Bistro and -1.0% at Pei Wei. Co says that they will report Q3 EPS below forecast due primarily to the $2.2 mln revenue shortfall compared to expectations of approx $273.0 mln. Co has also experienced unanticipated costs related to continued labor pressure, higher repairs and maintenance and restaurant supplies, the acceleration of the Bistro grill rollout, and a fire in the Nashville Bistro
Upgrades: Morgan Stanley upgrades Altera (ALTR 24.34), PMC Sierra (PMCS 8.75), and ON Semiconductor (ONNN 12.47) to Overweight from Equal Weight. Downgrades: Jefferies downgrades Cytec (CYT 67.32) to Hold from Buy and cuts their tgt to $75 from $79 saying near-term risks to demand and margins could provide a better entry point by 1H08 to focus on Cytec’s longer-term leverage to secular trends… ThinkEquity downgrades Micron (MU 11.79) to Accumulate from Buy and cut their tgt to $13 from $18 following earnings. The firm says they are cautious on the sustainability of PC related demand… BofA assumes Molex (MOLX 27.35) and downgrades to Neutral from Buy and lowers their tgt to $31 from $29, as they think slower handset connector sales could weigh on margins through FY08 and watch for incremental OEM penetration while they note short-term execution risk with the co’s new global organizational structure and restructuring plans… Morgan Stanley downgrades CSX Corp (CSX 43.03) to Underweight from Equal Weight based on execution risk as third-quarter volumes lag peers and valuation. Miscellaneous: RBC initiates Integra Lifesciences (IART 49.21) with an Outperform… Piper Jaffray initiates WNS Holdings (WNS 17.50) with an Outperform and a $25 tgt… Morgan Stanley initiates Advanced Micro (AMD 13.20) with an Underweight and an $11 tgt… Morgan Stanley initiates Intel (INTC 26.3 with an Underweight and a $22 tgt… Morgan Stanley initiates Nvidia (NVDA 37.40) with an Underweight and a $32 tgt.
Upgrades: JMP upgrades Orexigen Therapeutics (OREX 13.43) to Strong Buy from Outperform and maintains their $26 tgt saying they believe Orexigen’s lead product candidates, Empatic and Contrave, could become front-line therapies for obesity due to improved durability of efficacy, increased safety and tolerability, and lack of addiction…. Lehman upgrades Temple Inland (TIN 53.44) to Overweight from Equal Weight… Miscellaneous: Broadpoint Capital initiates lululemon (LULU 45.60) with a Neutral, based on valuation and believe fundamentals and momentum at lululemon athletica are very strong… Deutsche Bank reinstates Micron (MU 11.79) with a Hold and a $10 tgt… HSBC initiates Gruma, S.A. de C.V. (GMK 13.21) with an Overweight… Jefferies initiates Nasdaq Stock Market (NDAQ 38.75) with a Buy and sets a $45 tgt, as they believe the co is poised to benefit from the global consolidation trend amongst exchanges following the successful sale of its LSE stake and the potential combination with OMX… J.P Morgan initiates Douglas Emmett (DEI 25.9 with a Neutral… J.P Morgan initiates Vornado Realty Trust (VNO 114.13) with a Neutral… UBS initiates Consol Energy (CNX 47.86) with a Buy… UBS initiates CNX Gas (CXG 29.35) with a Buy.
Upgrades: Broadpoint Capital upgrades Central European Distribution (CEDC 50.00) to Buy from Neutral and sets a $58 tgt, as they believe CEDC should benefit from the export of its vodka brands to the U.K., U.S., France, Japan and Spain in FY08… UBS upgrades Charles River Labs (CRL 56.31) to Buy from Neutral… BofA upgrades General Motors (GM 37.03) to Neutral from Sell and raises their tgt to $37 from $25… RBC upgrades Kincross Gold (KGC 14.70) to Outperform from Sector Perform… Piper Jaffray upgrades Green Mountain Coffee Roasters (GMCR 34.34) to Outperform from Market Perform… Merrill Lynch upgrades Turkcell (TKC 22.49) to Buy from Neutral… Bear Stearns upgrades Kaiser Aluminum (KALU 71.96) to Outperform from Peer Perform. Downgrades: Baird downgrades Equity Inns (ENN 22.79) to Neutral from Outperform and maintains their $23 tgt, based on the narrowing of the arbitrage spread which previously offered significantly more upside… Jefferies downgrades Cytec (CYT 67.32) to Hold from Buy and lowers their tgt to $75 from $79, given recent chemical earnings warnings flagging erosion in U.S. coatings and risks to European demand, coupled with raw material pressure that could affect margins in Q4 and 1H08… Oppenheimer downgrades OMRIX Biopharmaceuticals (OMRI 37.95) to Neutral from Buy, based on valuation… UBS downgrades Parker-Hannifin (PH 74.12) to Sell from Neutral… BofA downgrades NAVTEQ (NVT 76.10) to Neutral from Buy… Bear Stearns downgrades Covance (CVD 78.31) to Peer Perform from Outperform
Miscellaneous: BofA initiates MSC Industrial Direct (MSM 51.44) with a Neutral and sets a $55 tgt, based on valuation as the co continues to execute on its geographic expansion growth initiatives while expanding its operating margins given its focus on cost takeout and emerging private label business… BofA assumes Arrow Electronics (ARW 44.06) with a Neutral and raises their tgt to $41 from $38, based on valuation as they expect organic growth to rebound slightly into ‘08 with the semi cycle… BofA initiates Tyco Electronics (TEL 35.95) with a Buy and sets a $42 tgt, as they see solid earnings/cash flow next year and significant upside potential in FY09… Janney initiates Exlservice Holdings (EXLS 22.54) with a Neutral, based on valuation as they would wait on the sidelines until visibility until ‘08 revenue growth increases… Janney initiates WNS Holdings (WNS 17.50) with a Neutral, based on valuation and the loss of a major client shortly after its most recent earnings call… Oppenheimer initiates Cardium Therapeutics (CXM 2.46) with a Buy and sets a $5 tgt, based on its treatments for cardiac ischemia, severe injury, and ulcers which were bought at a steep discount.
Sensex up 398pts - The Business Standard
The Business Standard reports the Sensex is now up 398 points at 17,727… Out of 2,836 stocks traded so far, 1,762 have declined, 1,021 have advanced and 53 are unchanged.
Asian stocks advance to record, led by Nikko; Hong Kong drops - Bloomberg.com
Bloomberg.com reports Asian stocks rose for a fifth day, led by banks and brokerages, after Citigroup offered to buy the shares it doesn’t own of Nikko Cordial… Hong Kong’s Hang Seng Index dropped 2.6%, after jumping as much as 2.4 percent in the morning session. Japan’s Nikkei 225 Stock Average added 0.9% to 17,199.89, the highest since July 31. Benchmarks also climbed in Taiwan, the Philippines, Malaysia, Sri Lanka and Pakistan. Markets in South Korea and China were shut for holidays today.
U.K. stocks climb; HSBC, Barclays, Northern Rock lead advance - Bloomberg.com
Bloomberg.com reports U.K. stocks gained, paced by banks including HSBC Holdings and Barclays. Northern Rock rose on speculation JC Flowers & Co. secured funding that could pay for a takeover. The FTSE 100 Index gained 16.1, or 0.3%, to 6,516.5 at 9:19 a.m. in London. The FTSE All-Share Index rose 0.3% to 3,348.85. Ireland’s ISEQ Index added 0.6% to 8,293.66.
Miscellaneous: Kaufman initiates NetScout Systems (NTCT 11.16) with a Buy and sets a $13.50 tgt, as they believe NetScout’s acquisition of privately held Network General should meaningfully improve its competitive position, significantly augment its scale and enhance its revenue growth due to its ability to provide a more comprehensive solution… BofA initiates WESCO International (WCC 43.92) with a Buy and sets a $55 tgt, as they view WCC as a co with a solid niche position as an Electrical Equipment distributor within the Industrial MRO distributor market, which provides the co outsized exposure to the current uptick in key late cycle end markets including nonresidential construction and utility spending… BofA initiates W.W. Grainger (GWW 92.76) with a Neutral and sets a $95 tgt, as valuation appears more than fair at this time and limited margin runway potential as well as the risk of a cyclical industrial downturn gives them pause… BofA assumes Amphenol (APH 39.71) with a Buy and raises their tgt to $43 from $39, as they believe the co’s diverse business mix, leading operational metrics and balance sheet flexibility make it a core holding while channel checks indicate APH is currently running 110% to meet the US military’s MRAP demand… BofA assumes Avnet (AVT 41.3 with a Neutral and raises their tgt to $40 from $39, based on valuation although they expect organic growth to rebound slightly into ‘08 with the semi cycle.
BEAS BEA Systems: Carl Icahn discloses 11.05% stake in SC 13D/A, up from 9.88% (13.73 -0.21)
Apartment firms look unfairly beaten-down - WSJ
The Wall Street Journal reports the supply of apartment buildings has been constrained by below-average construction of units, less than 100,000 units a year in the past few years in the top markets, according to research firm Reis. “In our view, we will have more additional demand for renters than additional supply of rental property,” says James Corl, chief investment officer at Cohen & Steers. The most attractive REITs are trading below the total value of the apartment buildings they own and are cheaper than their competitors based on their projected funds from operations, which is essentially their profit excluding depreciation expenses. For example, the share price of Apartment Investment & Management (AIV) is down 15% this year and has been sold off to the point that it looks cheap. What’s more, it trades at 13.5x its 2007 estimated funds from operations, compared with 21.2x for the apartment sector. Another to consider: AvalonBay Communities (AVB). AVB is trading at a 7.4% discount to NAV, though its funds-from-operations multiple is an above-average 25.2. According to BMO Capital Markets, apartment REITs overall are trading at a 10% discount to NAV.
DB Deutsche Bank to take $3.3 bln charge on leveraged loans, credit products - WSJ (132.37 )
The Wall Street Journal reports Deutshce Bank (DB) said it will take charges of up to 2.2 bln euros ($3.3 bln) for the third quarter on leveraged loans, structured credit products and mortgage-backed securities, although it will still achieve a sizeable net profit due to one-time gains. The co said the charge on leveraged loans and loan commitments will be up to 700 mln euros, in addition to charges taken on such loans and commitments during the second quarter. It will also take approx 1.5 bln euros in charges on structured credit products, residential mortgage-backed securities and valuation losses on both debt and equities. It said its Corporate Banking & Securities unit is likely to report a pretax loss in the quarter between 250 mln euros and 350 mln euros. Still, overall net profit is expected to exceed 1.4 bln euros, up from 1.24 bln euros a year earlier, due to tax credits and other gains, such as on the sale of its New York City property. The bank also reaffirmed its financial targets for 2008.
NYX NYSE Euronext business summary for Sept. 2007 (79.58 )
Co reports average daily volumes of 2.5 bln shares handled on NYSE Group in September 2007 which resulted in y/y gains of 4.1% while 1.3 mln average daily transactions were recorded on Euronext cash markets during the month, up 66.8% y/y. Liffe announced trading increased 46.1% from a year-ago. Total volume for equity options trading on NYSE Arca Options increased 53.3% y/y, while average daily volume in Sept. improved by 61.4% y/y.
‘Mad Money’ Recap: Lightning Round cont. - TheStreet.com
Cramer was bearish on ViroPharma (VPHM), Xinhua Finance Media (XFML), Terra Nitrogen (TNH), Sirius (SIRI), Schlumberger (SLB), Wynn (WYNN) and Force Protection (FRPT).
‘Mad Money’ Recap: Lightning Round - TheStreet.com
Cramer was bullish on Bucyrus (BUCY), Caterpillar (CAT), Vasco Data Security (VDSI), Oracle (ORCL) Google (GOOG), Norsk Hydro (NHY), BHP Billiton (BHP), Mosaic (MOS), Sociedad Quimica y Minera de Chile (SQM), National Oilwell Varco (NOV), Nastech (NSTK), Agrium (AGU) Apple (AAPL), Research In Motion (RIMM), Transocean (RIG) and Cytyc (CYTC).
Cramer’s ‘Mad Money’ Recap - TheStreet.com
On Tuesday’s edition, Jim favors CVS Caremark (CVS) and says there is value after shares fell in sympathy with Walgreen (WAG). In light of CVS’ foresight and Walgreen’s inability to perceive an obvious development in the drug market, Cramer considered transferring “best of breed” status for pharmacy retail to CVS. Next, he recommends Comscore (SCOR). Because Comscore is already profitable, has great earnings visibility, a very high retention rate and great growth, it’s in a position to become a “natural monopoly” and become the next Aecom (ACM). Finally, he recommends selling Baidu (BIDU) based on valuation.
