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  • Baltic Morning News

     

    Tallink (Neutral) posts full report. The Estonian shipping company published its Q1/06-07 full report yesterday. Since the market already knew the preliminary top and bottom line, everyone was looking for some additional information. First, it was nice to see that the relatively healthy bottom line was not due to some positive one-offs. It was actually the opposite - according to the company, the net income includes non-recurring integration costs in the total amount of EEK 56.6m. The company also said that the redundancies should lead to ca EEK 98m yearly savings on overhead costs. In contrast, the company's bottom line amounted to EEK 115m in Q1. Tallink also added that they are on track with the previously announced sales and earnings targets (sales 750m EUR and EPS 0.54 EUR). Hence, if the company is able to meet its EPS forecast, Tallink is trading at just 10.6x 2007 PE, which looks quite cheap, given that all the other companies are trading at 18+ levels. Most probably some upside adjustments have to be made in our relatively conservative estimates as well.

    Tallink's bonus issue ex-date. Tallink (Neutral) will close the list of shareholders for bonus issue on Jan 31 2007. Hence, the shares are trading ex-rights for bonus issue starting from today. Tallink will issue three new shares per each existing share.

    World Bank: sharpest decline expected in Estonia and Latvia. The World Bank said in its report that Estonia and Latvia will experience the sharpest decline this year in growth rates among EU 10 new states. According to World Bank forecast, GDP growth is expected to slow down from 11% to 8.3% and 9% in Estonia and Latvia, respectively. Inflation is expected to remain high as growth rates are overheating. Also, the Baltic counties face the growth of regulated prices, wages and credit.

    Mandatory bid on PST shares. The Lithuanian construction company PST announced yesterday that by the decision of Panevezys District Court, the principal shareholders of the company (AB Panevezio Keliai and the group of natural persons) are obligated to make the official bid for purchasing shares of minority shareholders. According to the law, the price of a mandatory tender offer may not be lower than the highest price of the securities which the offeror acquired over one year before exceeding the threshold. However, Panevezio Keliai has appealed the court decision, and the complaint was put on the table of court on January 1st, 2007 to be investigated. In addition, the takeover bid is expected at around LTL 3 per share, i.e. we don't see any attractive trading case here.

    PKN buys remaining shares. Yesterday PKN Orlen submitted to the Vilnius Stock Exchange a purchase order with respect to all shares in Mazeikiu Nafta owned by the minority shareholders. Since PKN is acting in concert with Lithuanian government (they have a total of 99%), they have the right to require that everyone sells their shares. The purchase order will remain open until the company gets all the remaining shares. The price has not changed - it is still LTL 10.25 per share. As of yesterday, PKN had 89.26% of Mazeikiu.

  • Citigroup assumes Nortel (NT 26.08) with a Buy from Hold

    Citigroup assumes Juniper Networks (JNPR 18.46) with a Buy from Hold

    Citigroup downgrades Cisco (CSCO 26.22) to Hold from Buy

    BofA upgrades Wachovia (WB 55.76) to Buy from Neutral

    CIBC upgrades Alvarion (ALVR 6.22) to Sector Outperformer and maintains $8 tgt, as the trend for WiMAX has been gaining headline momentum as new deployments and contract wins dominate wireless news and the firm believes the trend will accelerate in the 2H07 as Intel introduces 802.16e chipsets and Sprint begins WiMAX deployment

    Prudential initiates Boyd Gaming (BYD 47.04) with an Overweight and sets a $64 tgt, based on an attractive growth pipeline, including Echelon Place resort, supported by a diversified portfolio.

    Prudential initiates Life Time Fitness (LTM 54.15) with an Underweight and sets a $46 tgt, based on valuation

    Friedman, Billings upgrades Lockheed Martin (LMT 97.44) to Outperform from Market Perform and raises their tgt to $110 from $88, following Q406 results that included another strong quarter of revenues and margin expansion, with both revenues and EPS beating consensus estimates

    Baird upgrades Stanley Works (SWK 52.85) to Outperform from Neutral and raises their tgt to $61 from $54, following Q406 EPS that was above firm estimates

    J.P Morgan assumes Deere (DE 97.17), Paccar (PCAR 64.16), and Agco (AG 32.65) with Overweights

    Jefferies initiates Express Scripts (ESRX 69.87) with a Hold and $77 tgt. Although long-term PBM industry growth trends remain solid, they have concerns regarding near-term visibility associated with ESRX's unsolicited bid for CMX. Firm also cites valuation

    J.P Morgan assumes Caterpillar (CAT 59.63) and Terex (TEX 58.36) with underweights

    Citigroupi arvamus Microsofti (MSFT) kohta:

    ➤ FQ2 beat both our top/bottom line ests- $300M ahead on rev ($12.5bn vs$12.2bn) and $0.02 better on earnings ($0.26 vs our $0.24).➤ Overall positive FY07 guidance – our ests remain unchanged. MSFT tweakedFY07 EPS to $1.45-$1.47 (CIR unchanged at $1.46). But MSFT trims last q’s$50.9bn high-end rev guidance by $200M (now $50.2-$50.7bn, CIR est$50.7bn) to account for lower than est Xbox 360 sales (12M, vs 13-15M origFY07est) to account for drawdown of “reasonable inventory.”➤ MSFT’s largest challenge remains its online biz.With only 5% growth and anop loss of $155M during Q2, MSFT may need to embrace external acquisitionsto help fill a critical gap that is key to augmenting the desktop success.➤ Raising our TP to $33 (prior $30).We believe there are N-T catalysts (Vistaconsumer launch 1/30, investor day 2/15 in NYC) to potentially push the stock8% higher over the next several months.

  • Watch the News Reaction

    By Rev Shark
    RealMoney.com Contributor
    1/26/2007 8:50 AM EST
    Click here for more stories by Rev Shark

    "Most of our so-called reasoning consists in finding arguments for going on believing as we already do."

    -- James Harvey Robinson

    The extremely choppy action of the market in recent days has given both bears and bulls plenty of ammunition to support their views. The breakout of the DJIA and S&P 500 to new recent highs on Wednesday convinced many bulls that this market is in good shape to continue the impressive rally that started back in July. The sharp reversal yesterday convinced the bears that conditions are finally changing and that we have some downside coming in the near future.

    In the stock market it generally pays to stick with the prevailing trend as long as possible. Markets always seem to keep going further than seems reasonable and if you try to get too cute with timing a turn you are most likely going to find yourself acting prematurely.

    However, at some point conditions do change and if you don't act quickly it can become very costly very quickly. The big question for us to confront this morning is whether recent market action is indicative of a change in trend or just a minor squall on the road to higher prices.

    The problem with the bearish arguments for the market is that they are the very same arguments that have been around for months now. The issue isn't the factual data. It really doesn't matter all that much what the earnings or economic reports may show or the arguments that are being made about consumers, housing, interest rates, the FOMC and the dozens of other things that drive the market. What matters is one thing: the mood of market participants. If they are ready to act nothing much is going to stop them from doing so.

    The way to determine the mood of market players is to watch how they act as news and events occur. Do they use the news flow to embrace the market or do they use it as an excuse to sell? My hypothesis for earnings season has been that market players would be inclined to use earnings news as an excuse for selling and that would trigger a pullback.

    We have seen that to some degree and today we have a major test of that theory as we watch the reaction to Microsoft. The initial reaction the Big Boy of Software has been slightly positive but the real test will come later today once the ardor of the emotional, reflexive market players has cooled.

    The reversal yesterday of Wednesday's big breakout was a major technical negative. It indicated a glaring lack of confidence and an erosion of speculative interest. It could be wiped out quickly with yet another reversal back up today but at the moment it is the bears' advantage to lose.

    We have durable goods, new-home sales and consumer confidence data this morning that will serve as catalysts, but the real key to this market is whether Microsoft and other earnings reports are enough to inspire buyers to keep on putting capital to work. The charts are showing us that they have some doubts about that proposition.

    We have a mixed start shaping up. Overseas markets were mostly down overnight in sympathy with the U.S. markets. China is talking about ways to cool its economy. Oil is trading up as OPEC makes noise about cuts and gold is down.

    --------------------

    Ülespoole avanevad:

    Gapping up on strong earnings/guidance: CALD +10%, WFR +9.5% (also multiple price tgt increases), COLM +6.1% (also multiple upgrades), NTY +6% (also AG Edwards upgrade), VPRT +6%, TPX +6%, PKTR +5.7%, IRF +5.7%, VSEA +5%, ATVI +4.6%, OPLK +4.5% (also Roth upgrade), SWK +4.1% (also Baird upgrade), MCK +3.9%, CAT +2%, MSFT +1.9%, FMD +1.2%... Other News: ZANE +129% (announces Homeland Security contract), OFI +10% (extends yesterday's 47% move following announcement of major contract), MRVC +8.4% (co says it will take Luminent public), NVL +8%, IMCL +5.2% (FBR upgrade), USBE +4.2% (bounces after recent weakness), GNVC +4.2% (announces that the first patient treated using TNFerade), BOBJ +4% (stock jumps on Oracle bid talk - Reuters), HMC +1.3%, JNPR +1.1% (Citigroup upgrade).

    Allapoole avanevad:

    Gapping down on disappointing earnings/guidance: XPRT -23% (guidance only), TNL -14%, PLXT -14%, CDWC -8.1%, INFA -6%, CRS -5.9%, HAR -4.8%, SYNA -5.4%, BEBE -5%, FO -4.2%, SWKS -3.7% (also OpCo downgrade), AMGN -3.2%, PMCS -2.4% (also Merrill downgrade), HAL -1.3%... Other News: BPA -7% (profit taking after recent move), NTRI -5.1% (Thomas Weisel downgrade), ID -4.6% (extends yesterday's weaknes on a downgrade), KPN -2.6% (traded sharply lower in Europe), CAL -2.4% (Goldman downgrade), BEZ -2.3% (prices offering).

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