Daily Report

This report is posted right here every trading day one hour before "the close". We run all of the searches and select our most bullish and bearish candidate of the day. This report includes live updates for stocks in our watch list that are on the move.

Issue     06/29/2012 Recent Reports     Past Reports    

Bullish WHR
Stock I WILL BE TAKING NEXT THURSDAY OFF. THE MARKET WILL REACT TO THE ADP REPORT, BUT THE ACTION SHOULD BE LIGHT AFTER THE FIRST HOUR OF TRADING. THE LIVE UPDATE TABLE WILL BE WORKING AND YOU WILL BE ABLE TO SEE THE STRONGEST CANDIDATES.

Whirlpool Corporation engages in the manufacture and marketing of home appliances worldwide. Its principal products include laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers, and other portable household appliances.
Set-up Stock opened near its low and is trading near its high on expanded daily range. Stock is trying to reverse recent pullback and resume longer-term up trend.
Chart

This stock rallied from $45 in January to $78 in March. It has been in a steady decline and it found support at $55. It is bouncing on heavy volume today and it looks ready to rebound.
 Outlook

In April, the company recorded an increase in adjusted net income to $1.41 per share for the first quarter of 2012 from 64 cents in the same period last year, beating the Zacks Consensus Estimate of $1.12. However, before adjustments, net income slumped 46% to $92 million, or $1.17 per share in the quarter, from $169 million, or $2.17 in the first quarter of 2011.

Revenues in the quarter fell marginally to $4.35 billion from $4.4 billion as improving product price/mix was offset by unfavorable currency, lower industry demand and lower monetization of tax credits. Revenues were slightly lower than the Zacks Consensus Estimate of $4.37 billion.

Revenues in North America fell 1% to $2.2 billion from the first quarter of 2011. Revenues in Europe, Middle East and Africa fell 8% to $688 million. Revenues in Latin America increased 3% to $1.3 billion. Revenues in Asia decreased 3% to $202 million.

The stock trades at aforward P/E of 7.
Tactic

"The first quarter was a strong start to the year as we benefited from our margin expansion efforts and continued innovation investments," said Jeff M. Fettig, Whirlpool Corporation chairman and chief executive officer. "Our cost and capacity-reduction initiatives and previously implemented cost-based pricing actions are on track to deliver our operating profit margin, earnings and free cash flow guidance for the year."

For full year 2012, Whirlpool expects to report earnings per share of $5.00 to $5.50. However, excluding restructuring charges and Brazilian tax credits, the company anticipates earnings per share of $6.50 to $7.00.

The company was able to maintain revenues during weak economic conditions. If you add Europe, Africa and Asia together, they only account for 25% of sales. North and South America account for more than 75% of revenues.

The housing market in the US is showing signs of a recovery. The stock trades at a low P/E of 7 and I believe all of the bad news is priced in. I like the bounce today and I believe this rally still has a few days left in it. I like buying the July $62.50 calls. Passive accounts can sell the July $57.50 puts and buy the July $50 puts for a credit of $1.00.
Stop



Earnings



Bearish CMG
Stock Chipotle Mexican Grill, Inc. develops and operates fast-casual, fresh Mexican food restaurants in the United States, Canada, and England. Its restaurants primarily offer burritos, tacos, burrito bowls, and salads.
Set-up The stock gapped down 2 days ago and the 50-day MA is trending lower.
Chart

This stock rallied form $300 in December to $440 in April. Since then, it has been in a steady decline. It is making lower highs and yesterday it broke key horizontal support at $385 on heavy volume. It is down today during a huge market rally and that is another sign of weakness. It looks poised to test $340.
 Outlook

In April, the company said first-quarter net income rose 35 percent to $62.7 million, or $1.97 per share.

Analysts, on average, were looking for a profit of $1.93 per share, according to Thomson Reuters I/B/E/S.

First-quarter revenue rose a better-than-expected 26 percent to $640.6 million.

Sales at restaurants open at least 13 months were up 12.7 percent, blowing past the 10.5 percent rise expected by analysts polled by Thomson Reuters.

Chipotle repeated its forecasts for 2012 growth in sales at established restaurants in the mid-single digit percentage range and a similar rise in food inflation.

The stock trades at a forward P/E of 34.
Tactic

ITG analyst Steve West noted a few days ago that a sales growth seems to be slowing. West said that revenue at restaurants open at least a year seemed to be decelerating, with his forecast for second-quarter growth between 7 percent and 8 percent. That compares with 12.7 percent in the first quarter and 10 percent in the same period last year.

Furthermore, Taco Bell is launching its new upscale Cantina menu. It is trying to take market share away for Chipotle.

I don't feel the new Taco Bell menu is a big threat, but during tough economic times, consumers will trade down. CMG offers $8 burritos and many will get their mexican fix at Taco Bell for less money.

The stock trades at a lofty forward P/E of 34 and investors are taking profits. Shares are rolling over and the stock has breached key horizontal support at $385 on heavy volume. It is down today when the market is up and it is just above the 200-day MA. I like buying the July $365 puts.

Let the current market rally run its course, then get in. Make sure to get out of the stock before earnings (7/19). This is a strong stock so don't get too agressive.
Stop



Earnings