Today's Market: M&A, New Concepts And Lowered Guidance Moving These Stocks

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 |  Includes: AAPL, CAR, CMG, HTZ, PETM, YUM
by: Matthew Smith

Summary

Look at the issues facing Hertz and why the stock is down sharply this morning.

Highlight the recent move higher in PetSmart shares and the company's recent acquisition.

Discuss the new concept that Taco Bell is testing in California, as the company and its parent Yum! Brands look to enter the fast casual market.

In the last 18 hours, investors have gotten a consistent flow of bad news, which surprisingly has not impacted the overall market as much as we would have imagined. Most of the pain is in the retail sector, with earnings misses and certain companies which already lowered their guidance having missed those lowered figures. This quarter is further evidence that one cannot extrapolate good results from one company in retail to its direct competitors because the US consumer is very selective in how they utilize their discretionary income.

Chart of the Day:

With yesterday's move, Apple (NASDAQ:AAPL) shares finished at fresh highs and broke through the psychologically important $100/share level. The move helped push tech funds higher as well as the Nasdaq 100.

Click to enlarge

Source: Yahoo Finance

We have economic news today, and it is as follows:

  • MBA Mortgage Index (7:00 a.m. EST): Act: 1.4%
  • Crude Inventories (10:30 a.m. EST): Est: N/A
  • FOMC Minutes (2:00 p.m. EST): Est: N/A

The Asian markets are higher today:

  • All Ordinaries - up 0.19%
  • Shanghai Composite - down 0.23%
  • Nikkei 225 - up 0.03%
  • NZSE 50 - up 0.51%
  • Seoul Composite - up 0.08%

In Europe, the markets are lower this morning:

  • CAC 40 - down 0.82%
  • DAX - down 0.74%
  • FTSE 100 - down 0.57%
  • OSE - down 0.40%

Car Rental Companies Lower

Both Hertz Global (NYSE:HTZ) and Avis Budget Group (NASDAQ:CAR) are lower this morning after Hertz, the industry leader, announced that the company would miss the low end of their previous guidance and withdrew guidance for the year. Hertz blamed the record recalls from automakers and a review of the company's accounting as the key reasons actual results would not hold up against previous guidance. The company is also experiencing problems with their commercial equipment rental business and fully integrating their latest purchase in the automobile rental market.

Hertz shares are sharply lower today after withdrawing full-year guidance. With the hedge funds and activist investors already involved here, there are some saying that the company's CEO may not last much longer.

Click to enlarge

Source: Yahoo Finance

M&A Update

PetSmart (NASDAQ:PETM) rose sharply in the latter half of yesterday's session, as the company confirmed that it is looking at strategic alternatives; something that the activist shareholders have been asking for. The company's results for the quarter were strong and the company announced an acquisition which is aimed at increasing online sales. The acquisition of Pet360, a website focused on helping pet owners get information on their pets, should allow further interaction with customers as well as offer PetSmart the opportunity to expand its online presence.

Taco Bell Goes Upstream

Yum! Brands (NYSE:YUM) is moving into the fast casual market with a new concept that looks to capitalize on the company's history in the taco business with Taco Bell. The new concept is called US Taco Co., and its first store is now open in California. The move is obviously targeted to compete with Chipotle Mexican Grill (NYSE:CMG) while offering a lower price point for consumers.

There are a number of fast casual Mexican and Tex/Mex restaurants out there, with the vast majority of those being regional and local operators. The long-term plan is to test this concept with its first store and if successful to then begin to roll out the concept into other areas. Taco Bell's Greg Creed thinks that US Taco Co. could ultimately have 1,000-1,500 locations nationwide; which is currently around the same size as Chipotle.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: AAPL has previously been recommended.