Early last week, I wrote an article discussing five names that had major upcoming catalysts. A couple of the items discussed were to occur last week, while a few others did not have specific times set. Well, there has been some major news regarding these names, and I'm back today to discuss what it all means.
When it comes to Apple, there's always news to discuss. We did get a lot of major news lately, although it was not to everyone's liking. Here's a brief recap of what happened:
- Announced the new iPhone 5S.
- Announced a cheaper iPhone, the 5C, available in colors, and it will replace the iPhone 5.
- Announced a deal with Japan's DoCoMo.
- Got a license to run phones on China Mobile's network.
- Carl Icahn added to his Apple position.
While a China Mobile (CHL) deal was not announced, I've stated that I believe it will come eventually. Apple did get a license for China Mobile's network, which is the next stage in the process, and it also got a key deal in Japan. While I understand the criticism of Apple not jumping into emerging markets, it's another process. Things take time. The company went part of the way this year with the 5C, and next year I think it will go a little further. Apple had to protect its brand as well, something I discussed immensely in the article above. However, despite a couple of negative Apple notes, including one regarding China order data on Monday, analyst estimates have risen. Here's how analyst estimates have fared since my original catalyst article, and you can see all current estimates here.
- Fiscal Q4 2013 (ending September 2013) revenue estimate increased from $35.92 billion to $36.11 billion. EPS number hiked from $7.61 to $7.66.
- Fiscal 2013 (ending September 2013) revenue estimate increased from $169.40 billion to $169.59 billion. EPS number increased from $39.08 to $39.17. There's a different number of analysts who give full year numbers as opposed to quarterly ones, which is why you won't always see the exact same moves between the Q4 and FY numbers.
- Fiscal 2014 (ending September 2014) revenue estimate increased from $180.51 billion to $180.76 billion. EPS number has risen from $42.32 to $42.50.
It's not been enough though in the eyes of Wall Street. Apple shares topped out at $513.74 on August 19th and were still above $507 on the day of the iPhone announcement. Since then, it has been all downhill, with shares barely holding $447 the past two days before rebounding a little on Tuesday.
The biotech name that brings you the prostate cancer treatment Provenge got the news it was waiting for. Dendreon was granted marketing authorization for Provenge in the European Union. While original thoughts were for this decision to come a few months ago, it's better late than never. There are still a number of questions to be answered here, so we'll have to see what information we get from the company going forward and at the next earnings report.
While this is positive news for Dendreon, and shares rose 5.03% on the news Tuesday, Dendreon is not out of the woods yet. The company is still losing tons of money and revenues have been a tremendous disappointment. This was the positive news we were waiting for, and now Dendreon needs to take advantage of it. We'll see what analysts think over the next few weeks, and I'm interested to see if Dendreon decides to raise some cash here. I'll have more on that angle in the next couple of days.
One of the set date events I was referring to was the Canadian apparel retailer's earnings report, which came last week. The company's second quarter results beat on both the top and bottom line. Revenues of $344.5 million beat by nearly $2 million, and were at the top end of the company's $340 million to $345 million guidance. Earnings per share came in at $0.39, beating analyst estimates for $0.35 and well ahead of the $0.33 to $0.35 guidance range. The company also added to its cash pile, which stands at $610 million, up from $444 million a year ago.
However, it was not all good news. The company cut its yearly outlook, providing new guidance that was below analyst expectations. This has led to questions about rising competition as well as the company's rebound from its pants problem earlier this year. The new forecast implies about 19% revenue growth, below the key 20% level, and earnings per share growth of less than 6% (impacted heavily by the pants problem).
Shares initially fell on the guidance miss and lack of a new CEO announcement, which I said could be critical to shares going higher. Friday morning's low was $63.50 during the day, but shares have rebounded about 10% since. The latest report was nothing thrilling, and a little disappointing. For now, the way to play this name continues to be the same. Buy at $60 and short at $80.
Philip Morris (PM):
The cigarette giant also had a fixed date event, the announcement of its dividend, expected to be a raise. The important question was how much would it be raised? Well, last Wednesday, the company went from $0.85 to $0.94 per quarter. This raise was a penny above the top end of my $0.90 to $0.93 prediction, which narrows the gap to the rest of PM's industry peers (which have much higher yields).
This dividend news has sparked a new confidence in my opinion. Philip Morris shares had been trending lower after a poor second quarter. After that report, a number of questions were asked about declining cash flow and rising debt. This dividend raise, being higher than my prediction, shows confidence in the long-term strength of this business. The company has been hurt by currency issues in recent years, but a higher than expected dividend leads me to believe results could start to turn soon. The company is also buying back roughly $6 billion a year in stock, so the more than 4.25% yield is a nice add on. Investors have obviously found this dividend raise to be positive, as Philip Morris shares are up 4.74% over the past week, and on Tuesday closed at their highest point in more than a month.
These four names have had some major events lately. Apple's new phone lineup seems okay, but investors have been disappointed and the stock has dropped. Dendreon got its positive news from Europe, but still has some major questions ahead. Canadian apparel retailer lululemon had a good quarter, but disappointing guidance and no new CEO did not spark the stock. Philip Morris raised its dividend nicely and shares have rallied on increased confidence in the name.
Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.