Bookham, Great Atlantic & Pacific Tea Company, and Elan
CINCINNATI--(BUSINESS WIRE)--April 17, 2006
Among the stocks featured in the April 17th edition of
Schaeffer's Market Blog are Citigroup (NYSE:C), Eaton (NYSE:ETN),
Bookham (NASDAQ:BKHM), Great Atlantic & Pacific Tea Company
(NYSE:GAP), and Elan (NYSE:ELN). Schaeffer's Market Blog is just one
of the many free market commentaries written everyday at
www.SchaeffersResearch.com - the home of Bernie Schaeffer and
Schaeffer's Investment Research. The Market Blog is written throughout
every trading day by Schaeffer's financial analysts and traders. They
are quick insights to the day's most notable market activity from an
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Schaeffer's Market Blog for Monday, April 17, 2006:
Below are just a few of today's Market Blog entries. Click here to
read all of today's Market Blog.
9:47 AM Citigroup Posts First-Quarter Earnings
This morning, Citigroup (NYSE:C), announced first-quarter income
that came in four percent higher. The company's earnings of $1.12 per
share ($5.64 billion) were driven higher thanks to strong results in
global consumer banking and corporate investment banking operations.
Analysts expected earnings of $1.02 per share for the quarter.
Analysts at Morgan Stanley noted that the "upside (was) driven by (a)
strong top line in investment banking and low consumer provisions due
to low bankruptcy run rate." C's revenue increased from $21.2 billion
last year to $22.18 billion this year, an increase of five percent.
The analysts did caution that apparently negative operating leverage
numbers could pressure the shares a bit this morning.
C's revenues declined in its consumer lending business, despite
growth of 18 percent in average loans. This growth was counteracted by
net interest margin compression across the loan portfolios. The banks
stated that revenue dropped in the consumer lending business as well.
The first tick for C this morning is a positive one, pushing the
company more than 0.50 percent higher. This morning's gap higher was
stifled at the 48.50 level, which capped the shares earlier this
11:15 AM Eaton Tops the Consensus Estimate
Earnings news propelled Eaton (NYSE:ETN) to a new all-time high
earlier this morning. The company announced that its first-quarter net
income increased to $1.36 per share ($208 million). The company
announced that income excluding charges came in at $1.40 per share, or
$214 million. According to Thomson First Call, the consensus estimate
stood at $1.32 per share. The company's revenue increased 14 percent
to come in at $3.01 billion during the quarter. ETN's sales grew nine
percent, acquisition sales added another six percent; however, this
was offset by a decline of one percent from lower exchange rates. The
firm also forecast second-quarter income of $1.50 to $1.60, but
earnings excluding acquisition charges should fall between $1.55 and
$1.65 per share. The consensus estimate stands at $1.61 per share.
Finally, ETN raised its 2006 net income and earnings outlook to ranges
of $5.90 and $6.20 per share and $6.10 to $6.41 per share, an increase
of 15 cents per share.
This news sent the shares to an all-time high of $77.10 earlier
this morning, but they have slipped back below the 76 level. It does
appear that the shares are finding a bit of support at the 75 level.
This region capped the shares for the better part of April, and could
now relish its new role as support.
12:29 PM Bookham Plunges
So many people want to look at the companies that are performing
well, but my eyes were drawn to the 24-percent drop by Bookham
(NASDAQ:BKHM) so far today. The company slumped after forecasting
gross margin and adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) for the third quarter to fall
short of its original forecast. BKHM now expects gross margin of 10 to
12 percent with an adjusted EBITDA loss of $10 million to $12 million.
Previously, BKHM expected gross margin of 23 to 27 percent with
adjusted EBITDA between $1 million and a loss of $3 million. BKHM
blamed the lower-than-expected forecast on the unfavorable product mix
and lower semiconductor production volumes. Merriman Curhan Ford
downgraded BKHM to "neutral" from "buy" thanks to this unfavorable
That's a sizeable loss that the company has posted today. What
should be more of a concern is the fact that the shares slipped below
the support of their 10-week and 20-week moving averages. The last
time the equity closed out a week below this support was March 2005.
BKHM could find support at its 50-day moving average. This trendline
is pointed higher and recently completed a bullish cross of its 80-day
moving average. This technical formation often hints that further
bullish performance is on the way.
1:01 PM Call Options Swell on Great Atlantic & Pacific Tea Company
Grocery-store name Great Atlantic & Pacific Tea Company (NYSE:
GAP) is currently on the CBOE's list of most-active call options
today, as more than 11,600 contracts have changed hands on the
in-the-money May 25 call (GAP EE). Prior to today, this
soon-to-be-front-month position was home to exactly zero open
contracts. GAP's April 22.75 call (GAP DQ) and its May 22.75 call (GAP
EQ) have also seen notable volume today, so it is possible that
options traders are rolling out their existing positions to a
Checking out the transaction data, GAP EE has seen three large
blocks trade this morning, all of which were executed with a "spread"
designation. Tomorrow's open-interest translations and
implied-volatility changes will better reveal what strikes saw
Technically speaking, GAP was on the rise during the past two
months until plunging nearly 20 percent last Thursday after CIBC
reduced its price target to $30 from $37. This move took the stock
below long-term support at its 10-month moving average, below which
the shares have not endured a monthly close since October 2004.
2:05 PM Call Options Trading Actively on Elan
Options activity on Elan (NYSE:ELN) has been heavily skewed
toward the call side of the spectrum over the past couple of days. In
fact call option volume on the equity has been running around 10 times
respective put volume over the past two trading sessions. The shares
have been consolidating around their uptrending 80-day moving average,
and technically look poised for a move to the upside. Nevertheless,
over-optimism regarding such a breakout may leave the shares out to
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