5 stocks to watch for next week
Auto, truck, and chain store sales will be announced. New Year's Eve ushers in 2013 with adult beverages. Mosaic and Family Dollar report earnings.
1) Auto and truck sales data due January 2
What's happening: Analysts will pay close attention to December vehicle sales data to be released on Wednesday. Last month, the report was positive and illustrated that consumers were shrugging off concern over the looming fiscal cliff. All of the major automakers reported strong November sales, with Ford (F) reporting a 6.5% increase in sales versus 2011. The company had strong demand for its more fuel-efficient vehicles, and November was its best month ever for sales of electric cars. After last month's positive results, Ford's stock accelerated strongly to the upside.
Technical analysis: F was recently trading at $12.79, down just $0.26 from its 12-month high and $3.97 above its 12-month low. Technical indicators for F are bullish and the stock is in a strong upward trend. The stock has recently seen support above $11.25. Of the 16 analysts who cover the stock, 10 rate it a "strong buy," two rate it a "buy" and four rate it a "hold." The stock receives Standard & Poor's 4 STARS "buy" ranking.
Analysts' thoughts: We believe that a strong December sales report will help Ford carry its current momentum into the New Year. Due to the steep appreciation of the stock over the past month it may have limited upside potential. Having said that, there is still some value in the stock, and we believe 2013 is going to get off to a strong start as a positive December sales report should keep the stock trending higher.
2) Mosaic reports fiscal Q2 results January 4
What's happening: After a steep sell-off between September and the middle of November, Mosaic (MOS) stock has been trading sharply higher over the past month. There has been a significant amount of investor concern regarding its large exposure in China and India where growth has been slowing. However, these regions could turn into a positive for the company, with analysts expecting to see new contracts being signed in the next few months. The company's last earnings report came on October 1, with Mosaic widely missing estimates for $1.15 a share by reporting just $1.01. Goldman Sachs recently advised its clients to look for any weakness following the company's fiscal second quarter report as a buying opportunity.
Technical analysis: MOS was recently trading at $56.01, down $5.96 from its 12-month high, and $11.59 above its 12-month low. Technical indicators for MOS are bullish and the stock is in a weak upward trend. The stock has recently seen support above $55.75 and resistance below $58.00. Of the 18 analysts who cover the stock 12 rate it a "strong buy" and six rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.
Analysts' thoughts: While we may not see exceptionally strong quarterly earnings, we believe that we are going to get positive news on new contracts in China, which will be more than enough to push the stock higher following the report. Despite the recent gains in share price, it is still trading relatively cheap with a P/E of just 13.8, so there is still plenty of room on the upside if earnings do come in better than expected.
3) Chain store sales data due January 3
What's happening: Every month there is a lot of attention paid to chain store sales data, but this report will garner added attention because of the holiday season. Retail plays such a huge role in the nation's economy and the chain store sales reading is a good barometer for the overall retail sector. Macy's (M) stock was a strong performer during the latter part of 2012, but it ran into trouble in mid-November and has slid since. The first issue weighing down M was investor fear over the looming fiscal cliff, which hurt most sectors, but it has been compounded for Macy's on reports of 2012 being the weakest holiday shopping season since 2008.
Technical analysis: M was recently trading at $37.13, down $5.04 from its 12-month high, and $5.03 above its 12-month low. Technical indicators for M are bearish and the stock is in a weak downward trend. The stock has support above $35.00, and resistance at $38.75. Of the 14 analysts who cover the stock nine rate it a "strong buy," one rates it a "buy," and four rate it a "hold." The stock receives Standard & Poor's 3 STARS "Hold" ranking.
Analysts' thoughts: While the holiday shopping numbers we have seen pre-Christmas have been weak, we do expect to see the full-month numbers for chain stores to be decent. The week following Christmas is a big week for retailers, as they see a rush of consumers redeeming gift cards, many of whom wind up spending more than their gift cards are worth. Should we indeed see even a decent chain store sales report, Macy's stock is in prime position to accelerate sharply higher due to the severity of the selling over the last month.
4) Family Dollar reports Q1 earnings January 3
What's happening: Discount retailer Family Dollar (FDO) will report its fiscal first quarter results on January 3. Going into its first quarter report, analysts are expecting to see earnings of $0.75 per share, up from $0.68 during the same period last year. The stock has been strong over the past two years as the economic crisis created a more cost-conscious consumer, but has recently sold off in sympathy to its main competitor Dollar General (DG). Earlier this month Dollar General reported better than expected earnings, but warned that it is seeing tougher competition and a more cautious consumer. This pulled the entire discount retail sector down and Family Dollar with it. Family Dollar has been capitalizing on current trends perfectly and used the current economic climate as an opportunity to expand its business. Family Dollar expects to see earnings grow in the double-digit range over the next 3 to 5 years and expects to open around 500 new stores during fiscal 2013.
Technical analysis: FDO was recently trading at $62.60, down $12.13 from its 12-month high and $9.57 above its 12-month low. Technical indicators for FDO are bearish and the stock is in a strong downward trend. The stock has recently seen support above $61.50 and resistance below $66.00. Of the 20 analysts who cover the stock four rate it a "strong buy," three rate it a "buy," 11 rate it a "hold," one rates it a "sell," and one rates it a "strong sell." The stock receives Standard & Poor's 4 STARS "Buy" ranking.
Analysts' thoughts: We believe that the recent selloff in Family Dollar is overdone and expect to see the opposite trend take root at the start of 2013, especially if its fiscal first quarter report comes in better than expected, or even just in-line with analyst estimates. We believe that as long as Family Dollar does not issue a disappointing forecast, buyers will return to the stock. With the steep selloff in recent months, the stock has room to really take off.
5) On New Year's Eve, don't forget the beverages
What's happening: Diageo plc (DEO), like all spirits-makers will see a seasonal boost in sales during the New Year's Eve holiday. This should not factor in the stock's pricing, but the market for adult beverages has been a growth industry in recent years due to strong growth in alcohol sales worldwide. Diageo has enjoyed a strong year in 2012, but has recently seen some profit taking after hitting a new 52-week high on December 10. Over the past 13 years, beer sales have lost market share to liquor sales each year, and Diageo has benefitted due to its highly-diverse product line. Diageo thinks there is more room for expansion in the industry as demonstrated by paying $2.1 billion for a majority stake in United Spirits in November.
Technical analysis: DEO was recently trading at $116.71, down $4.68 from its 12-month high, and $32.27 above its 12-month low. Technical indicators for DEO are bearish with the stock showing a possible trend reversal. The stock has recently seen support above $116.10 and resistance below $120.00. Of the eight analysts who cover the stock, four rate it a "strong buy," two rate it a "buy," and two rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.
Analysts' thoughts: We believe that the recent selling of DEO is probably a result of year-end profit taking. In the past investors sold losing stocks at the end of the year to take a tax write-off, but with capital gains taxes potentially increasing in 2013, we are seeing the opposite trend in 2012. Because of this, we expect to see a quick reversal of DEO stock at the start of 2013 once there is no reason to sell shares. Liquor sales should continue to rise in 2013 and with some of the most recognizable brand names, so will Diageo.
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At the time of writing, Mr. Fowlkes has a long position in F and does not have direct ownership in any of the other stocks mentioned.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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