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Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
After hitting a one-year high of $52.40 in January, the stock dipped to a one-year low of $26.21 in August. CAL opened this morning at $35.30. So far today the stock has hit a low of $35.25 and a high of $36.98. As of 10:50, CAL is trading at $36.30, up $0.85 (2.4%). The chart for CAL looks neutral and deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 11 weeks as long as CAL is above $25 at December expiration. Continental would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
Continental Airlines, Inc. (NYSE: CAL) announced this morning that traffic, capacity, and occupancy figures all rose for the month of August, giving shares a solid lift to start the day. If you think this means that the company likely not to fall too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
After hitting a one year high of $52.40 in January, the stock had been gradually sliding over the past eight months until finding support and bouncing in mid-August. CAL opened this morning at $35.04. So far today the stock has hit a low of $34.90 and a high of $36.00. As of 10:55, CAL is trading at $34.91, up $0.28 (0.8%). The chart for CAL looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 4.2% return in just 6 weeks as long as CAL is above $25 at October expiration. Continental would have to fall by more than 28% before we would start to lose money.
Continental Airlines, Inc. (NYSE: CAL) opened at $26.95. So far today the stock has hit a low of $26.55 and a high of $28.06. As of 10:55, CAL is trading at $27.90, up $1.45 (5.5%).
After hitting a one year high of $52.40 in January, the stock has been sliding over the past eight months. Rising crude oil futures brought airlines down hard in yesterday's market, with CAL dropping a whopping 17%. Today the stock is climbing back with crude oil prices retreating in early trading, but it has a lot of ground to make up after yesterday's plunge. An analyst also said today that he expects CAL to rebound above $35. Technical indicators for CAL are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $22.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make an 11.1% return in just 5 weeks as long as CAL is above $22.50 at September expiration. CAL would have to fall by more than 18% before we would start to lose money.
CAL hasn't been below $22.50 at all in the past year and has shown support around $26.50 recently. This trade could be risky if oil prices rise again to crazy levels, but even if that happens, CAL may find historical support just below $25.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAL.
In another lap tray to the belly, customers of Milwaukee-based Midwest Air Group (NYSE: MEH), repeatedly named as one of the nation's best airlines for customer service and comfort, learned today that the airline will be purchased by a group led by TPG Capital. The investor group includes Midwest's competitor Northwest Airlines (NYSE: NWA), which is reviled by passengers for its cattle-car seating, lack of timeliness and failure to understand the concept of customer service
The acquisition offers little in the way of synergy to the two airlines. They duplicate many routes, and Midwest flies the Boing 717, while Northwest uses 747s and 757s. What the deal does accomplish is to block the expansion of a potential competitor in Northwest's upper midwest routes. While the deal secures the present management of Midwest, I suspect it's just a matter of time before the malaise reaches Milwaukee.
Midwest has been fighting off suitor Airtran Holdings' (NYSE: AAI) hostile takeover attempt, which reached $15.75 and $389 million before it folded its cards late last week. TPG, which grew out of the Continental Airlines (NYSE: CAL) takeover in 1993, is offering $16 per share, or over $400 million, to take the company private. The Midwest board voted Sunday to go forward with the TPG offer, and an agreement is expected by midweek.
Continental Airlines, Inc. (NYSE: CAL) opened at $32.85. So far today the stock has hit a low of $32.26 and a high of $33.21. As of 10:50, CAL is trading at $32.38, up $0.70 (2.2%).
After hitting a one year high of $52.40 in January, the stock has slid downward over the past eight months. CAL is leading all the airlines up today after reporting July traffic rose by 3.6%. Technical indicators for CAL are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make an 8.7% return in just seven weeks as long as CAL is above $25 at September expiration. CAL would have to fall by more than 22% before we would start to lose money.
CAL has hasn't been below $25 since last August and has shown support around $31.50 recently. This trade could be risky if fuel prices continue to rise, but with crude oil at all-time highs, there should be some decrease in demand and price on the horizon. Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAL.
AMR Corporation (NYSE: AMR) opened at $27.50. So far today the stock has hit a low of $27.40 and a high of $28.45. As of 10:30, AMR is trading at 28.20, up 1.14 (4.2%).
After hitting a one year high of $41.00 in February, the stock has crept downward to flatten out just above 25 over the past few months. Continental (NYSE: CAL) is leading airlines up this morning following an upgrade from Soleil Securities. The industry is also being helped by falling oil futures. Recent technical indicators for AMR have been neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $25 range. AMR hasn't been below $25 since October and has shown support around $26 recently. This trade could be risky if crude oil prices spike even higher over the next few weeks, but even if that happens, it looks like this stock could find support right near $25, where the stock has bounced three times since April.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMR or CAL.
Imagine a car industry that only offered two models, a Mercedes-Benz (NYSE: DCX) S600 and a Chevrolet (NYSE: GM) Aveo. A restaurant industry that forced you to choose between Taco Bell (NYSE: YUM) and Smith and Wollensky (NASDAQ: SWRG), with nothing in between. A clothing industry that offered only K-Mart (NASDAQ: SHLD) house brands and designer labels, no Old Navy (NYSE: GPS) or Crocs (NASDAQ: CROX).
Intolerable, right? We middle-class shoppers demand products with a modest price but acceptable quality.
So how did we end up with an airline industry that offers only two real choices, cattle car or royalty? Where are the middle-class offerings? My wants are not complicated. I want a little more room. I want quicker check-in. I want to talk to real people when my flight is delayed. I want the kind of service I would receive at Applebee's (NASDAQ: APPB), or a Holiday Inn (NYSE: IHG), or (to shoot for the moon), Nordstrom (NYSE: JWN)
MOST NOTEWORTHY: Continental Airlines, Inc (CAL), Molson Coors Brewing Co (TAP), Watsco, Inc (WSO), K-V Pharmaceutical Co (KV.A), Progressive Corp (PGR) and Color Kinetics (CLRK) were today's noteworthy downgrades:
Goldman downgraded shares of Continental Airlines, Inc (NYSE: CAL) to Neutral from Buy on valuation, higher oil prices and a weak domestic market.
Goldman also downgraded Molson Coors Brewing Co (NYSE: TAP) to Neutral from Buy based on the increase in analyst estimates, valuation and the potential for margin pressure in the summer.
BB&T cut Watsco, Inc (NYSE: WSO) to Hold from Buy based on valuation and catalysts that are already reflected in the share price.
Roth Capital downgraded shares of K-V Pharmaceutical Co (NYSE: KV.A) to Hold from Buy, telling clients they have learned that Par Pharmaceuticals Cos (PRX) has launched generics of 50, 100 and 200mg Toprol-XL. The firm expects a material impact to KV's 100 and 200mg strength generics.
Stifel expects investor enthusiasm regarding Progressive's Corp (NYSE: PGR) recapitalization plan to fade as underwriting fundamentals deteriorate and cut shares to Sell from Hold.
Color Kinetics (NASDAQ: CLRK) was downgraded to Hold from Sell at Needham on valuation...
Continental Airlines Inc. (NYSE: CAL) was downgraded to Neutral from Buy at Goldman Sachs due to valuation, a weak domestic market and oil prices.
Gun-maker Smith & Wesson Holding Corp. (NASDAQ: SWHC) shares are up 6.5% in pre-market trading (8:17 a.m.) after the company topped analyst estimates when it reported fourth-quarter results yesterday. The company also raised its 2008 outlook on expectations of strong sales for pistols, as well as a new range of shotguns and rifles. In numbers, Smith & Wesson earned $5.2 million, or 12 cents a share, on net product sales of $82.6 million, a 59.3% rise. Analysts were expecting earnings of 10 cents a share, before items, on sales of $72.9 million, according to Reuters Estimates.
Boeing Co. (NYSE: BA) CEO James McNerney told newspapers today in Paris ahead of the airshow that he is confident the company can meet its goal to roll its first 787 "Dreamliner" jet off the production line on July 8. I, for one, doubt he would still maintain this to be the case such a short time before the promised date if didn't feel he could deliver. Well, I guess we will know soon enough though.
GE Money, the consumer lending unit of General Electric Co. (NYSE: GE), said it will offer eBay MasterCard in partnership with eBay Inc. (NASDAQ: EBAY) in late June.
Adobe Systems Inc. (NASDAQ: ADBE) is seeing some pressure early this morning after the company reported a 24% rise in profits yesterday after the close to $152.51 million, or 25 cents a share. Excluding certain items, Adobe said earnings per share were 37 cents, beating analysts expectation of 35 cents a share. The lower end of the forecast for the next quarter, however, was below analysts' estimates.
While Apple Inc. (NASDAQ: AAPL) yesterday said over 1 million copies of its Safari for Windows were downloaded within 48 hours of its introduction, many on the blogosphere wonder what was the purpose of creating this in the first place. While the most common arguments are: "1) this is a challenge to Microsoft, and; 2) this is a strategic platform for Apple to offer its own web-based application suite." I, Cringely has a few other reasons in mind.
Sen. Hillary Rodham Clinton and her husband, liquidated a blind trust valued at $5 million to $25 million in April hoping to avoid any possible conflict of interest as the fund included investments in oil and drug companies like Pfizer Inc. (NYSE: PFE), Exxon Mobil Corp. (NYSE: XOM), Wal-Mart Stores Inc. (NYSE: WMT) and more.
Last week we discussed airline seating, and which airlines were trying to stuff two hundred pounds of American into a 100 lb. bag. This week, thanks to U.S. News and World Report, we consider what airports to avoid.
While most of the time travelers buzz from one terminal to another, barely noting the bad food and overpriced golf clothes for sale along the way, every once in a great while a snowstorm or terrorist attack traps thousands of visitors for days at a time. Where would you rather sleep on the floor?
USNWR's Airport Misery Index, developed in cooperation with The Boyd Group, breaks their subject into two classes, large airports and small. The candidates for the most miserable large airports:
Detroit, MI -- Detroit Metro Wayne Co (DTW) --Hub --Northwest
Newark, NJ -- Liberty Intl (EWR) (The airport People's Airlines made famous has brought ignominity upon the Garden State. Ask most people what they know of NJ, and they'll likely refer to the Newark Airport and Tony Soprano, neither favorably.) -- Hub -- Continental (NYSE: CAL)
The best large airports? Apparently, the west has it all over the east.
Oakland, CA -- Metro Oakland Intl (OAK)
Houston TX -- Wm. P. LHobby (HOU)
San Jose CA -- Norman Y. Mineta San Jose Intl (SJC)
Dallas, TX -- Love Field (DAL) -- Hub -- Southwest (NYSE: LUV)
St. Louis, MO -- Lambert Intl (STL) -- Hub -- American
Next -- the nation's best and worst small airports.
AMR Corporation (NYSE: AMR) opened at $25.60. So far today the stock has hit a low of $25.60 and a high of $26.80. As of 2:15, AMR is trading at $26.53, up $1.15 (4.5%).
After hitting a one year high of $41.00 in January, the stock has trickled downward over the past four months. Soleil upgraded the airline industry as a whole today, and specifically American Airlines, from hold to buy, giving shares a boost. Also mentioned was Continental Airlines (NYSE: CAL). Oil futures, which are finally relaxing somewhat over the past two weeks are also helping airline stocks. Recent technical indicators for AMR have been bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $20 range. AMR hasn't been below $20 since September and has shown support around $24. This trade could be risky if fuel prices rise again, but even if that happens, this position could be protected by the support the stock formed around $20 in August.
Brent Archer is an options analyst and writer at Investors Observer. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You When To Dump A Stock. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMR or CAL.
Virgin Atlantic Airlines, the empire built by Brit Richard "Rocketman" Branson, is planning to grab a larger share of the world's most profitable air traffic, the business class North America-Europe traveler. According to Bloomberg.com, it will take advantage of the new 'open skies' agreement between the U.S. and the E.U. to commence service from continental airports within the next two years. This is part of its overall strategy to extend the Virgin brand worldwide.
The new agreement will permit Virgin to launch flights to the U.S. from any European airport. In the past, Virgin has been restricted to its home turf in the U.K. The change in regulations will allow other players in the trans-Atlantic picture, including Air France and Lufthansa, to expand their services as well. Almost 21,000 flights with 5.25 million available seats flew the route in January of this year.
MOST NOTEWORTHY: Circuit City Stores (CC), select airline stocks and General Electric (GE) were today's noteworthy downgrades:
Citigroup downgraded shares of Circuit City Stores NYSE: CC) to Hold from Buy and lowered their target to $17 from $26 following management's second guidance cut in one month; the firm thinks there is more bad news to come. The electronics-retailer was also downgraded to Market Perform from Outperform at Raymond James and to Neutral from Buy at Robinson Humphries. Circuit City was cut to Sell from Hold at Soleil.
UBS downgraded six airline stocks on fuel price concerns and their belief that demand may fall as economic growth slows in the domestic market. Downgrades are as follows: AMR Corp. (NYSE: AMR), UAL Corp. (NASDAQ: UAUA) and U.S. Airways Group (NASDAQ: LCC) were downgraded to Reduce from Buy; Southwest Airlines Co (NYSE: LUV) and Continental Airlines (NYSE: CAL) were downgraded to Neutral from Buy; JetBlue Airways Corp (NASDAQ: JBLU) was downgraded to Reduce from Neutral.
General Electric (NYSE: GE) was removed from Goldman Sachs' Americas Conviction Buy list on valuation.
OTHER DOWNGRADES:
Prudential expects Sprint Nextel Corp's (NYSE: S) company-specific problems to continue and weigh on shares and downgraded the phone-giant to Underweight from Neutral.
Banc of America downgraded shares of LSI Corp (NYSE: LSI) to Neutral from Buy.
Buckingham cut Best Buy Co (NYSE: BBY) to Neutral from Strong Buy.
MOST NOTEWORTHY: RF Micro Devices, Inc (RFMD), Bristol-Myers Squibb Co (BMY), Colgate-Palmolive Co (CL), EarthLink. Inc (ELNK) and Hutchinson Technology Inc (HTCH) were today's more noteworthy upgrades:
CIBC upgraded shares of RF Micro Devices Inc (NASDAQ: RFMD) to Sector Outperformer from Sector Performer as the firm expects the company to benefit from improving late CY07 trends.
Deutsche Bank upgraded shares of Bristol-Myers Squibb Co (NYSE: BMY) as the firm believes strong Q1 results suggest sustained earnings recovery may be ahead.
AG Edwards believes Colgate's (NYSE: CL) cost cutting efforts have been paying off, creating a greater "position of strength" for the company, upgrading shares of to Buy from Hold.
Cowen raised EarthLink Inc (NASDAQ: ELNK) to Neutral from Underperform, believing downside was limited given core business cash flow.
Hutchinson Technology Inc (NASDAQ: HTCH) was upgraded to Hold from Sell at W.R. Hambrecht, believing their thesis has played out and that further risks to estimates are priced into shares at current levels...
OTHER UPGRADES:
Ciena Corp (NASDAQ: CIEN) was upgraded to Overweight from Market Weight at Thomas Wiesel, citing accelerated strength growth specific opportunities and improving sector fundamentals.
Banc of America raised shares of M&T Bank Corp (NYSE: MTB) to Neutral from Sell.
Verizon Communications Inc. (NYSE: VZ) reported an 8.4% drop in first-quarter earnings to $1.5 billion, or 51 cents a share. Excluding charges, net income totaled $1.63 billion or 56 cents a share, for the latest quarter, down from a year-ago equivalent profit of $1.75 billion, or 60 cents a share. Operating revenue rose 6.4% in the latest three months to $22.58 billion. Analysts estimated Verizon to earn 53 cents a share on revenue of $22.49 billion. VZ shares are up 1.2% in pre-market trading.
RadioShack Corp. (NYSE: RSH) reported a first-quarter profit surge on lower costs and improved margins. Net income was $42.5 million, or 31 cents per share, beating analysts estimates of 14 cents earnings per share. Revenue dropped to $992.3 million and same-store sales dropped 9.2%. RSH shares are up 6.4% in pre-market.
Continental Airlines Inc. (NYSE: CAL) was upgraded by Goldman Sachs to Buy from Sell, saying it believes the airline might beat 2007 consensus forecasts. CAL shares are up 2.6% in pre-market.
Merrill Lynch & Co., Inc. (NYSE: MER) announced that its board of directors has authorized the share repurchase of up to $6 billion. MER shares are up 1.4% in pre-market.
The battle of the organic continues. With an estimated $23 billion value for the natural foods market back in 2005, Whole Food Market, Inc. (NASDAQ: WFMI) and Wild Oats Markets, Inc. (NASDAQ: OATS) are trying to differentiate themselves from the low-end offerings of Wal-Mart Stores, Inc. (NYSE: WMT) and other supermarkets. They do that often by offering local products.
Will GE's iconic lightbulb soon be a thing of the not-so-green past?
Holiday shopping season started early -- Is it that time of year already?
Latest rally: Déjà vu all over again?
Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
In another lap tray to the belly, customers of Milwaukee-based 
Imagine a car industry that only offered two models, a Mercedes-Benz (NYSE: 
Main market news 
Last week we discussed airline seating, and which airlines were trying to stuff two hundred pounds of American into a 100 lb. bag. This week, thanks to U.S. News and World Report, we consider what airports to avoid.
Main market news 
