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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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The Week In Review

10/29-11/2/12

November 2, 2012
Today's session started on a higher note after the nonfarm payrolls report exceeded expectations, and pointed to 171,000 jobs added during October. However, the bullish sentiment faded quickly, and the major averages headed into the red. The S&P 500 crossed its flat line 60 minutes into the session and held just below that level for the remainder of the morning. The afternoon brought out additional sellers as the index headed further into negative territory before ending with a loss of 0.9%. The afternoon weakness was largely driven by Apple (AAPL 576.80, -19.74) which lost 3.3%. Stocks in the materials space saw the biggest weakness. Looking deeper into the sector, packaging and mining stocks underperformed. Rock-Tenn (RKT 67.49, -7.03) slid 9.4% after reporting mixed earnings. During the fourth quarter, the package manufacturer earned $1.39, which was $0.02 better than the Capital IQ consensus estimate. However, RKT's revenue of $2.35 billion was below analyst expectations. The management commented on the past quarter by saying that a containerboard price hike was implemented, and its full effects are not expected to be realized until the end of the March quarter. Peer AptarGroup (ATR 49.49, -3.64) slumped 6.9% after beating revenue estimates and missing on earnings. Among miners, Newmont Mining (NEM 48.74, -4.48) lost 8.4% after the company's earnings of $0.86 and revenue of $2.48 fell short of the Capital IQ consensus forecast. Also of note, steel stocks were broadly weaker. Worthington (WOR 21.43, -1.26), and Cliffs Natural Resources (CLF 36.27, -1.45) saw respective losses of 5.6% and 3.8%. Consumer discretionary stocks outperformed due to strong earnings from several components. Priceline (PCLN 634.74, +48.64) spiked 8.3% after beating on the top and bottom lines. The travel site operator reported earnings of $12.40, which was $0.58 ahead of the Capital IQ consensus estimate. Meanwhile, the third quarter revenue of $1.71 billion represented a 17.4% year-over-year increase, and was ahead of analyst expectations. Regarding the upcoming quarter, the company expects its earnings to be in-line with expectations. Peer TripAdvisor (TRIP 35.12, +5.71) jumped 19.4% after reporting earnings of $0.46, which was $0.04 ahead of the Capital IQ consensus estimate. The company's revenue was in-line with expectations. Starbucks (SBUX 50.84, +4.22) rose by 9.1% after reporting mixed earnings. During the fourth quarter, the coffee shop operator earned $0.46, which was $0.01 ahead of the Capital IQ consensus estimate. However, the company's revenue of $3.36 billion did not meet expectations. SBUX management said it continues to target roughly 10-13% revenue growth and it plans to open 1,300 new stores during fiscal-year 2013. Elsewhere, Ralph Lauren (RL 160.75, +1.71) added 1.1% after beating on earnings and revenue. The company reported earnings of $2.45, which was $0.29 better than the Capital IQ consensus estimate. Revenue of $1.86 billion was also ahead of analyst estimates. In addition, the company anticipates third quarter net revenue below consensus. Looking at social media stocks, Yelp (YELP 20.51, -3.52) slid 14.7% despite beating on earnings. The company's revenue of $36.4 million was in-line with the September preannouncement, and ahead of the Capital IQ consensus estimate. Regarding fourth quarter revenue, the company expects a top line result between $40 and $40.5 million. OpenTable (OPEN 45.30, -2.06) slipped 4.4% despite beating on the bottom line. The company's earnings of $0.42 were $0.06 better than the Capital IQ consensus forecast while its revenue $39.74 was in-line with expectations. Following the earnings report, The Benchmark Company raised its price target for OPEN to $52 from $49.

One year ago, Groupon (GRPN 3.83, -0.20) began trading as a public company. Today, the stock fell 5.0% and traded at an all-time low. Focusing on companies which made their public debut today, Restoration Hardware (RH 31.10, +7.10) settled 29.6% above its initial public offering price of $24. Two energy stocks also began trading publically today. Southcross Energy Partners (SXE 22.35, +2.35) gained 11.8% after its 9-million share IPO was priced at $20, which was in-line with the expected range. Meanwhile, Delek Logistics Partners (DKL 22.35, +1.35) advanced 6.4% after shares priced at $21, which was at the high end of the expected price range. In today's economic data, nonfarm private payrolls added 184K against the 130K consensus. The unemployment rate was reported at 7.9%, in-line with expectations. Hourly earnings were unchanged while the expectations called for an uptick of 0.2%. Meanwhile, the average workweek was reported at 34.4, which was slightly lower than the 34.5 expected by the Briefing.com consensus.

November 1, 2012
Stocks began the day with a bullish sentiment as the three major averages spent the first 90 minutes on a steady upward climb. After reaching session highs, the S&P 500 leveled off and held its gains into the afternoon before ending with a gain of 1.1%. The technology sector was one of the top performers, and the SPDR Technology Select Sector ETF (XLK 29.34, +0.46) settled higher by 1.6%. However, the biggest tech component, Apple (AAPL 596.53, +1.21), underperformed with a gain of just 0.2%. In notable tech earnings, Visa (V 143.88, +5.12) advanced 3.7% after beating on the top and bottom lines. The payment processor earned $1.54, which was $0.04 better than the Capital IQ consensus estimate. Visa's revenue of $2.73 billion represents a 14.6% year-over-year increase, and was reported ahead of expectations. In addition, the company announced a new $1.5 billion repurchase program. Elsewhere, JDA Software (JDAS 44.76, +6.61) surged 17.3% after announcing plans to merge with RedPrairie. Per the agreement, JDA stockholders will receive $45 per share, which represents a 33.0% premium to JDA's closing price on October 26. This was the day before speculation regarding a sale started circulating. In addition, JDA reported third quarter earnings of $0.53 on $164.5 million in revenue. The earnings may not be comparable to the Capital IQ analyst estimate of $0.54, while the company's revenue fell short of expectations. In other M&A news, auto parts manufacturer, Williams Controls (WMCO 15.36, +4.45), soared 40.8% after agreeing to be acquired by Curtis-Wright (CW 31.50, +0.63). Per the agreement, Williams Controls stockholders will receive $15.42 per share, which represents a 41.3% premium to WMCO's Wednesday closing price. Also of note, Advance Auto Parts (AAP 81.00, +10.06) spiked 14.2% after CNBC reported the company has hired Blackstone to explore a sale. The total price tag may be over $6 billion, which would equate to about $82 per share. Peers Autozone (AZO 380.34, +5.34), O'Reilly Automotive (ORLY 88.05, +2.20), and Pep Boys (PBY 10.47, +0.48) all moved higher on the news. As the new month begins, retailers are reporting their October same store sales. Out of the eighteen companies which already reported, twelve beat consensus estimates while six missed. However, half of the names which missed reported upside third quarter guidance. Among the names which exceeded expectations, Bon-Ton Stores (BONT 13.49, +1.23) led the group higher with a gain of 10.0%. Meanwhile, Costco (COST 97.13, -1.30) and Stein Mart (SMRT 7.52, -0.34) saw respective losses of 1.3% and 4.3% despite reporting sales ahead of expectations.
On the downside, Zumies (ZUMZ 21.13, -4.19) slid 16.6% after reporting a 0.6% increase in same store sales. The reading was a disappointment as the Retail Metrics consensus expected the company to post a 4.4% increase. The company pointed to Europe as the reason for anemic growth, and issued downside guidance. Following the news, Piper Jaffray downgraded the stock to 'underweight' from 'neutral.' Looking at automakers which reported their sales, Ford Motor (F 11.25, +0.09) gained 0.8% after reporting October sales of 168,456 vehicles. The figure represents a 0.4% year-over-year growth. Toyota Motor (TM 78.05, +0.58) added 0.8% after reporting monthly sales of 155,242, which is a 15.8% increase on a daily selling rate basis and on an unadjusted raw volume basis. Also of note, a story out of Reuters indicated the company's October sales in China fell by 44.0%. Honda Motor (HMC 30.35, +0.19) advanced 0.6% after its October sales increased by 8.8% year-over-year, to 106,973 units. A number of economic data points came through today and most figures were largely in-line with expectations. The October Challenger Job Cuts report showed a 12.0% year-over-year increase. This follows the prior reading which indicated a 70.8% decline. According to today's ADP National Employment Report, employment in the nonfarm private business sector rose by 158K in October. This was above the 143K increase expected by Briefing.com consensus. The latest weekly initial jobless claims count totaled 363,000, which was lower than the 375,000 that had been expected by the Briefing.com consensus. The tally was below the revised prior week count of 372,000. As for continuing claims, they rose to 3.263 million from 3.254 million. The consumer confidence reading for October came in at 72.2 while economists polled by Briefing.com expected a reading of 72.0. This follows prior month's 70.3 print. The October ISM Index came in better-than-expected at 51.7 versus the 51.0 Briefing.com consensus, and up from September's reading of 51.5. Meanwhile, September construction spending rose by 0.6% month-over-month, against the expected increase of 0.8%. Lastly, third quarter unit labor costs decreased by 0.1% which was lower than the 1.4% rise that had been widely anticipated. During the same period, productivity increased by 1.9%, according to the preliminary reading. An increase of 1.6% had been broadly forecast. Tomorrow's economic data will focus on jobs as October nonfarm payrolls, nonfarm private payrolls, the unemployment rate, hourly earnings, and average workweek will all be announced at 8:30 ET.

October 31, 2012
Equities began the session on a strong note. However, the bullish sentiment failed to hold as major averages began sliding off their highs shortly after the open. The key indices then marked their respective lows in the early afternoon before rallying in the final hour to finish mixed. The S&P 500 finished flat, while Nasdaq lost 0.4%. Looking at tech companies, the SPDR Technology Select Sector ETF (XLK 28.87, -0.11) slid 0.4%. The biggest sector component, Apple (AAPL 595.32, -8.68), lost 1.4% after announcing the departure of Scott Forstall, who was the company's head of mobile software products.Seagate Technology (STX 27.33, -0.58) shed 2.1% after reporting disappointing earnings. During the first quarter, the hard drive manufacturer earned $1.45, which was $0.25 worse than the Capital IQ consensus estimate. In addition, the company's revenue of $3.73 billion also fell short of analyst expectations. Western Union (WU 12.72, -5.20) plunged 29.0% after reporting in-line earnings. However, the company's revenue of $1.42 billion fell short of the $1.47 billion expected by the Capital IQ consensus. In addition, the company announced a 25.0% increase in quarterly dividend to $0.125. Following the earnings release, Western Union received six analyst downgrades. Facebook (FB 21.11, -0.83) lost 3.5% after another lockup expiry took place. A handful of names within the software industry made notable moves. Commvault Systems (CVLT 62.37, +8.90) soared 16.6% after beating on the top and the bottom line. During the second quarter, the software company earned $0.38 on $118.2 million in revenue. Both figures were ahead of the Capital IQ consensus estimates. In addition, the Board of Directors authorized a $50 million increase to the existing stock repurchase program. Elsewhere, JDA Software (JDAS 38.15, +4.23) spiked 12.5% after reports from Reuters indicated JDA is exploring a sale, and has hired JPMorgan as an advisor. OPNET Technologies (OPNT 42.05, +9.95) surged 31.0% after entering into a definitive agreement to be acquired by Riverbed Technology (RVBD 18.47, -4.15). Per the agreement, Riverbed will pay $43 per share, representing a 34.0% premium to OPNET's Friday closing price. In other M&A news, Warnaco Group (WRC 70.58, +19.70) will be acquired by PVH (PVH 109.96, +18.46) in a transaction valued at $2.9 billion. Warnaco stockholders will receive $68.43 per share, which represents a 34.0% premium to Warnaco's last closing price. Following the acquisition, PVH issued upside guidance as the company now expects third quarter and full-year earnings near the top range of its prior guidance of $2.28-2.30. Meanwhile, the Capital IQ consensus expects the company to earn $2.29 per share. The Dow Jones Transportation Average settled higher by 0.7% with trucking stocks leading the complex. Landstar System (LSTR 50.60, +2.47) was the top performer, and settled higher by 5.1% after Goldman initiated coverage of the stock with a 'neutral' rating. Con-way (CNW 29.11, +1.12) rose by 4.0% after Goldman resumed coverage with a 'buy' rating. Meanwhile, other freight carriers also saw strength. JB Hunt Transport (JBHT 58.70, +1.54) and CH Robinson (CHRW 60.31, +0.90) advanced 2.7% and 1.5%, respectively. On the downside, railroads saw general weakness. Norfolk Southern (NSC 61.35, -0.92) and Union Pacific (UNP 123.03, -0.58) shed 1.5% and 0.5%, respectively. Two automakers moved higher after reporting strong earnings. General Motors (GM 25.50, +2.22) surged 9.5% after reporting earnings of $0.90, which was $0.30 ahead of the Capital IQ consensus estimate. The automaker's revenue of $37.6 billion represented a 4.6% year-over-year decrease, but the figure was ahead of analyst estimates. Meanwhile, Ford Motor (F 11.16, +0.85) jumped 8.2% after reporting mixed earnings. During the third quarter, the company earned $0.40, which was $0.10 better than the Capital IQ consensus estimate. However, the company's revenue of $30.20 billion fell short of analyst expectations. Regarding the fourth quarter outlook, management said it expects production volume to increase in all regions except Europe. Today's buying has lifted the shares to levels not seen since early May. The weekly MBA Mortgage Index registered a 4.8% decrease in new mortgage applications over the past week. This follows last week's 12.0% decrease. Third quarter Employment Cost Index increased by 0.4%, which was slightly worse than the 0.5% increase that was widely forecast. Today's reading follows prior quarter's increase of 0.5%. October Chicago PMI of 49.9 surprised to the downside as economists surveyed by Briefing.com had generally expected a reading of 50.9 to follow the prior month's 49.7. Looking at tomorrow's economic data, automakers will be reporting their sales throughout the day and October Challenger Job Cuts will be announced at 7:30 ET. October ADP Employment Change Survey will be released at 8:15 ET. In addition, weekly initial and continuing claims, third quarter unit labor costs and preliminary productivity will all be released at 8:30 ET. Lastly, the ISM Index, construction spending, and consumer confidence will all hit the wires at 10:00 ET.

October 30, 2012
Closed for Hurricane Sandy

October 29, 2012
Closed for Hurricane Sandy