Schaeffer's Midday Options Update Features United Parcel
Service, Genzyme, OfficeMax, Boston Beer Company, and Computer Associates International
CINCINNATI--(BUSINESS WIRE)--Jan. 12, 2005 Today's Schaeffer's Midday Options Update Features United Parcel Service (NYSE:UPS), Genzyme (NASDAQ:GENZ), OfficeMax (NYSE:OMX), Boston Beer Company (NYSE:SAM), and Computer Associates International (NYSE:CA). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1.
Options Update: Computer Associates International Ahead of Earnings
This morning kicked off with fresh U.S. trade data from the Commerce Department, and it was rather disappointing. For the month of November, the trade gap widened to a record $60.3 billion. This shocked economists as, according to a CBS MarketWatch survey, it was believed that the gap would drop to $53.3 billion. Exports suffered a 2.3-percent drop to $95.6 billion, a five-month low. All the while, imports rose 1.3 percent to hit a record $155.8 billion.
The disappointing trade gap information was followed up by mixed information in the weekly report on crude oil inventories. The Department of Energy (DOE) reported a decline in crude oil inventories to 288.8 million, a 3.0-million-barrel drop. The DOE saw distillate supplies mark an increase of 1.9 million barrels to tag the 123-million level. Additionally, the DOE saw gasoline levels rise by one million barrels to reach 215.3 million. The American Petroleum Institute (API) released some conflicting data. The API reported an increase of 2.8 million crude oil barrels. Furthermore, the API noted a gain of 2.5 million barrels in distillates and 2.4 million barrels in gasoline. For more information on the DOE and the API data, read "Oil Supply Report Mixed."
UPS and Downs
After the market closed yesterday, delivery guru United Parcel Service (NYSE:UPS) issued an earnings warning. UPS cut its fourth-quarter earnings estimation to a range between 81 and 82 cents per share. Before a tax benefit, the earnings are believed to come in around 75 to 76 cents per share. Originally, UPS had forecast earnings of 83 to 87 cents per share. Excluding one-time items, the consensus estimate for UPS's earnings was 85 cents per share. UPS blamed the lowered expectations on higher operating costs stemming from the severe weather in the Midwest during the company's peak delivery season. While this news was bad, the company did reaffirm its 2005 outlook for an increase in net income falling in the 13-to-17-percent range. This did little to deflect the ire of analysts as JP Morgan downgraded the company to "neutral" from "overweight" and Credit Suisse First Boston followed suit with a downgrade to "neutral" from "outperform."
Gen-ie In A Bottle
Genzyme (NASDAQ:GENZ) announced today that its fourth-quarter revenue jumped 23 percent after the completion of two mergers, the approval of Clolar, and the purchase of the U.S. sales and marketing rights for Synvisc. The company's fourth-quarter revenue leapt to $591 million, $110 million higher than last year's fourth-quarter revenue, and $8 million higher than the Street expected. Revenue for the year jumped 39 percent to $2.2 billion, above the consensus estimate of $2.19 billion. Thanks to the better-than-expected results, the company announced that it expects pro-forma earnings for 2004 to come in between $1.75 and $1.80 per share, above its previous forecast range and the Street's expectation of a profit of $1.77 per share.
A Max-imum Disappointment
Office supply giant OfficeMax (NYSE:OMX) let the Street down a bit today, announcing that it needs to postpone its fourth-quarter and full-year earnings reports. The postponement depends upon the conclusion of the expanded probe into accounting fraud. This investigation was first announced on December 20, 2004, after the company confirmed vendor claims that some employees created false documents to bolster claims totaling near $3.3 billion, which were billed in 2003 and 2004. Four employees have been fired during the investigation. OMX expects to have the investigation wrapped up by the third full week of February.
Sam is Smiling
Boston Beer Company (NYSE:SAM) received accolades from an analyst this morning, and has seen a nice jump in trading action. Deutsche Bank upgraded SAM from a "hold" to a "buy," citing evidence that SAM's fourth-quarter volumes are on pace to come in ahead of original expectations. This jump in volume can be attributed to underlying strength in demand for SAM's products.
Most-Active Options Update
At 1:22 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,572.3) is up 0.15 percent and the S&P 500 Index (SPX - 1,182.97) is down by 0.01 percent. The Nasdaq Composite (COMP - 2,081.2) is up 0.08 percent. At 1:23 p.m. in the options pits, 1,814,001 calls and 1,321,526 puts traded for a composite put/call ratio across all six exchanges of 0.72. The CBOE put/call ratio for equity options weighed in at 0.73.
Computer Associates International
According to Hoover's, Computer Associates International (NYSE:CA) offers software for a variety of enterprise tasks such as business intelligence, storage, security, and network management applications. The company's applications work across both mainframes and distributed computing environments; including its Unicenter enterprise management software that is designed to give customers centralized control over software, hardware, and network infrastructure.
The firm announced today that it will release its third-quarter earnings figures on Tuesday, January 25 after the market close. Currently, the Street is expecting the software firm to post a profit of 18 cents per share, a 12.5-percent improvement over the same quarter last year. Furthermore, CA has bested the consensus estimate in each of the past four reporting periods, coming out on top by an average margin of 16.68 percent.
Recently, the shares have been subject to the whims of the recent market downturn and the inherent weakness in the tech sector as a whole. Since setting a multi-year high in early December, CA has given back more than 12 percent, falling beneath former support at its 10-day and 20-day moving averages and ultimately pulling these short-term trendlines into a bearish cross. Furthermore, the equity has even taken out intermediate-term support at its 10-week and 20-week moving averages. However, long-term support appears to have halted the security's plunge for the moment, as CA is clinging to its rising 10-month and 20-month trendlines. The shares have not suffered a monthly close beneath these long-term trendlines since January 2003.
Options investors have reacted to the security's technical weakness by piling into bearishly oriented puts lately. In fact, today's trading has seen more than 10,400 puts cross the tape at the stock's February 25 strike. With open interest resting at a paltry 3,810 contracts, much of today's activity could translate into new open positions. However, while CA's Schaeffer's put/call open interest ratio has been on the rise lately, jumping higher from its December 15 reading of 0.62 in the 11th percentile, its current reading of 0.74 in the 37th percentile is still far from a bearish extreme.
On the other hand, short interest continues to creep higher for the equity. The number of CA shares sold short inched higher by one percent during December to 19.2 million shares, its second highest reading of the past year. However, given the weakness in the tech sector and CA's recent downturn, these bearish investors will be in no rush to cover their bets any time soon unless the firm's earnings report is stellar.
Brokerage firms also have their doubts about the equity. According to Zacks, eight of the 13 covering analysts rate the shares a "hold." Analysts are in a similar situation as the short selling community. Barring any surprises in the earnings confessional, brokerage firms have just as much reason to downgrade the shares as they do to upgrade them.
Click on the following link to see a Monthly Chart of CA Since January 2003 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=12264&obspage=2 .
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Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .
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