EMCOR Group (NYSE: EME) plans, installs, operates and maintains the systems that create facility environments. These include installations for power generation, power distribution, lighting, security, communications, plumbing, waste treatment, heating, ventilation, refrigeration and air-conditioning. The firm also provides facilities management and maintenance support. It serves commercial, industrial and institutional clients such as Bristol-Myers Squibb (NYSE: BMY) and Wachovia Corporation (NYSE: WB). Johnson Controls (NYSE: JCI) is a major competitor.
The Street was surprised last week, when EMCOR guided FY08 EPS from $2.08-$2.28 to $2.22-$2.42 and FY08 revenues from $6.3-$6.5 billion to $6.8-$7.0 billion. Analysts had been looking for $2.31 and $6.76 billion. The CEO cited "solid order activity" and a "strong contract backlog" for the favorable view.
After hitting a one-year high of $32.35 in July, the stock hit a one-year low of $19.43 last week. BMY opened this morning at $20.06. So far today the stock has hit a low of $20.00 and a high of $20.60. As of 12:50, BMY is trading at $20.45, up 78 cents (4.0%). The chart for BMY looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $17.50 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 11.1% return in just three months as long as BMY is above $17.50 at September expiration. BMY would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
BMY hasn't been below $19.40 at all in the past year and has shown support around $19.50 recently. This trade could be risky if the company's earnings (due out on 7/24) disappoint, but even if that happens, this position could be protected by the support the stock might find from bargain hunters looking for defensive stocks. Brent Archer is an options analyst and writer at Investors Observer.
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 BMY.
MOST NOTEWORTHY: Wright Medical, Bristol-Myers and Tibco were today's noteworthy upgrades:
Thomas Weisel upgraded shares of Wright Medical (NASDAQ: WMGI) to Overweight from Market Weight after transferring coverage to another analyst, as they believe the company is well-positioned for continued good near-term performance.
Bernstein upgraded Bristol-Myers (NYSE: BMY) to Outperform from Market Perform citing valuation, growth, and views the company as a potential M&A target.
Jefferies upgraded Tibco (NASDAQ: TIBX) to Hold from Underperform as they believe investor expectations for a buyout will keep the stock steady despite the company's deteriorating fundamentals.
OTHER UPGRADES:
Independent Bank (NASDAQ: IBCP) was raised to Perform from Underperform at Oppenheimer.
Brinker (NYSE: EAT) was raised at Goldman to Neutral from Sell.
Piper upgraded The9 (NASDAQ: NCTY) to Buy from Neutral.
Credit Suisse downgraded Nokia (NYSE:NOK) from "outperform" to "neutra", according toBriefing.com. The news service also reports that Bernstein upgraded Bristol-Myers (NYSE:BMY).
McAfee (NYSE:MFE) was started as "outperform" at R.W.Baird, according to Briefing.com. The financial website also reports that Motorola (NYSE:MOT) was started as "underperform" at Credit Suisse.
Alkermes (NASDAQ: ALKS) is a biotechnology company that makes extended-release products for the treatment of chronic diseases. The firm developed and manufactures Vivitrol, a treatment for alcohol dependence that partner Cephalon (NASDAQ: CEPH) markets in the United States. It also makes Risperdal Consta, a long-acting version of Janssen's schizophrenia medication Risperdal. Alkermes' pipeline includes extended-release injectable, pulmonary and oral products for the treatment of central nervous system disorders, addiction and diabetes. Bristol-Myers Squibb (NYSE: BMY) and Johnson & Johnson (NYSE: JNJ) are competitors.
The firm pleased investors earlier in the week, when it expanded its stock repurchase program by $40 million. Management also guided FY09 EPS to 11-16 cents and FY09 revenues to $200-$225 million. Analysts had been looking for a 10 cent per share loss and $194.89 million. Fiscal year cash flow from operations was expected to total $25-$30 million, as compared to an original $1-$5 million estimate.
The Pediatric Ethics Subcommittee of the Pediatric Advisory Committee will meet at 8:30 am to discuss the application of 21 CFR 50.52 (Clinical investigations involving greater than minimal risk but presenting the prospect of direct benefit to individual subjects) to FDA-regulated research. The discussion will be illustrated with hypothetical case examples of research involving HIV vaccines in adolescents and controlled trials of inhaled corticosteroids in children with asthma.
The Pediatric Ethics Subcommittee will meet at 8:00 am to discuss the application of 21 CFR 50.52 to FDA-regulated research illustrated with a hypothetical case example of research using stem cells for treating periventricular white matter injury in children.
Cisco Systems (NASDAQ: CSCO) to hold conference call at 11:00 am to discuss business video innovation.
"You can invest for all the right reasons and still get the wrong result," notes long-standing turnaround stock expert George Putnam, referring to the poor performance of the pharmaceutical sector in recent years.
Here, in his industry-leading The Turnaround Letter, he offers a fascinating review of 10 leading drug stocks which he now believes offer a combination of growth potential at "pretty cheap" valuations. Here is his overview.
"In 2000 and 2001, when the Internet boom was becoming a bust, many smart investors turned away from technology stocks and put their money into drug stocks. How could you go wrong with the big pharmaceutical companies?
"Demand for their products was growing as the population aged. These companies had huge research and development programs that seemed to keep cranking out new blockbuster drugs. And most of them had great balance sheets, with many paying handsome dividends.
"Much of this reasoning has been borne out in the intervening years. Many large drug manufacturers have rung up substantial revenue gains over the last decade. So what's happened to the big drug stocks? With few exceptions they have gone sideways or down – in some cases down a lot.
It's a nice day for shareholders of Kosan Biosciences Inc. (NASDAQ: KOSN), which is a cancer therapeutics company. The stock price is up 230% to $5.44.
That is, Bristol-Myers Squibb Company (NYSE: BMY) has agreed to purchase Kosan for $190 million. The transaction will be structured as a cash tender offer.
Founded in 1995, Kosan has two key anticancer agents in clinical development -- heat shock protein 90 (Hsp90) inhibitors and epothilones. Some of the treatments include multiple myeloma and metastatic breast cancer.
Basically, Kosan didn't have the wherewithal to take these drugs to market (after all, the capital markets have been fairly skittish lately). So, a partnership with Bristol-Myers does make a lot of sense. Keep in mind that the company has a large oncology business.
Interestingly enough, the parties also announced a separate licensing agreement to market Kosan's epothilone compounds. The deal involves an upfront $25 million payment as well as milestone payments.
Although, the agreement is only triggered if the merger falls through. In other words, Kosan has a nice backstop on the transaction.
Almost everyone these days has encountered cancer in one way or another. While the rate of cancer incidence has stabilized to declined since the early 1990s and, with newer and better treatments as well as early detection, cancer death rates have also declined, the war on cancer is still far from won.
It is no surprise, then, that a few days ago, IMS Health (NYSE: RX) -- a provider of market intelligence to the pharmaceutical and healthcare industries -- said that cancer drugs sales will nearly double by the year 2012. Assuming a compound growth rate of 12-15% a year, sales will grow from $48 billion in 2008 to $80 billion by 2012.
The main contributors to growth, according to the study, are an increasing number of patients on chemotherapy, not just in major markets but in emerging markets, too, as well as longer treatment periods for growing numbers of patients. Also fueling growth are the increased use of targeted therapeutic agents, along with first-time innovations coming to the market. Expensive new biotechnology drugs, and the increasing use of combination therapies that contribute to the exploding cost of treatment will also fuel cancer drugs sales growth.
The overall pharmaceutical market grew at a 6.4% pace in 2007, meaning that with its double-digit growth rate, the cancer drug market -- today contributing 17% to global pharmaceutical sales -- will only represent a greater proportion and emphasis. Of course, there will be factors moderating growth, such as drugs losing exclusivity and financial constraints of payers.
Cancer-fighting drugs can reach the market twice as fast as the average medicine, and companies can charge as much as $50,000 for a single course of treatment. It is no surprise then that with more and more drugs coming off patent many pharma companies are turning their attention to cancer. But can it save them?
History is repeating itself. After facing generic competition in the United States to its second-biggest product in 2006, Sanofi-Aventis is now dealing with a similar threat in Europe. Competition concerns came after Switzerland's Schweizerhall Holding AG announced it would launch a copy of the Plavix blood thinner that could be bought for a lower price. Schweizerhall said it expects German regulators to approve its generic version of Plavix, called clopidogrel.
Sanofi-Aventis's fears about generic competition are justified as the company had to fight against a similar situation less than a year ago. Back in 2006, Bristol-Myers Squibb Co. (NYSE: BMY), which develops the product with Sanofi, saw a big plunge in its sales after Canadian generics company Apotex Inc. launched a cut-price copy of the drug.
Activision (NASDAQ: ATVI) late Thursday reported a fourth-quarter profit that handily beat expectations as video games sales nearly doubled with strong demand for Guitar Hero 3 and Call of Duty 4 games. ATVI shares are up over 4.5% in premarket trading.
Bristol-Myers Squibb (NYSE: BMY) and Sanofi-Aventis (NYSE: SNY) are about to face a generic threat from Swiss drug firm, Schweizerhall Holding, that said it's going to soon launch a generic version in Germany of Plavix blood-thinning drug.
Clear Channel (NYSE: CCU) reported its profit soared to $799.7 million or $1.61 per share in the first quarter while revenues rose 4% to $1.56 billion. The results beat expectation even when taken excluding one-time items that have earnings rising 70% to $161.4 million or 32 cents a share.
The third-largest U.S. drugmaker has cut 8,100 jobs globally since the beginning of its restructuring plan, Plan to Win, in late 2005. But as Cordaptive, which was supposed to offset some of the losses Merck is expecting from generics coming into the market, fell through, the cost cutting side of the plan took on an added urgency.
Cordaptive and generics aren't Merck's only problem. The FDA also recently suggested its other cholesterol pills, Zetia and Vytorin, aren't any better than an older, cheaper treatment. Merck said it expects to lose as much as 61% of sales for these drugs.
So none of this comes as no surprise really; not in light of Merck's problems, and not in light of the industry's. Other drugmakers, including Pfizer Inc. (NYSE: PFE), Bristol-Myers Squibb Co. (NYSE: BMY), Wyeth (NYSE: WYE) and Johnson & Johnson (NYSE: JNJ) have announced job cuts as they face more competition from generic substitutions. Merck is also planning some plant closures.
Merck's shares lost nearly 33% of their value year-to-date, as it was partly down with the overall market and partly due to the string of bad news that seemed to have hit most hard recently. It is trading not far from its 52-week low.
While Merck is saying it will still fight the FDA decision on Cordaptive and try to convince doctors about Vytorin, the actions it is taking seem reactive, not proactive. Without much to offer in its arsenal of upcoming possibilities, Merck, at least for now, seems to have lost the potential for meaningful growth.
ConvaTec, which focuses on wound care, has been a star performer over the years. What's more, the deal will allow Bristol-Myers to devote its resources to its core pharma business, which certainly has some challenges – especially as drugs come off patent.
In addition, the deal has a global flavor as Nordic Capital is in Europe and Avista in the US.
It also looks like Bristol-Myers is not finished with its own dealmaking. For example, the company says it plans to launch a public offering of its Mead Johnson division.
What this really looks like, however, is that all these actions, for the most part, may just be a prelude for Bristol-Myers to sell itself to a mega pharma company.
Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported a 64% drop in quarterly profit late Friday. At the company's annual meeting this past weekend, the legendary investor said that while a Berkshire unit has bought portfolios of subprime mortgages (and has frozen resets that were due to send interest rates on those loans higher) he warned investors that housing-market weakness isn't over yet and predicted more losses for banks. At the same time, Buffett said Sunday he will consider investing in the insurance business of U.K. banking giant Royal Bank of Scotland (NYSE: RBS) and is close to buying a medium-sized company in the country.
Hovnanian Enterprises Inc. (NYSE: HOV) estimated on Monday it would take $225 million to $275 million of land-related charges for the that fiscal second-quarter and said that home deliveries dropped 21% to 2,494 homes in the period. The company also turned cash-flow positive faster than it expected and tripled its full-year estimate of cash flow.
After being rejected by Continental Airlines Inc. (NYSE: CAL) last month, United Airlines parent UAL Corp. (NYSE: UAUA) is intensifying merger talks with US Airways Group Inc. (NYSE: LCC), according to The Wall Street Journal. A deal is said could emerge in as soon as 10 days. In light of rising fuel costs, the more than $1.5 billion in potential cost savings and revenue enhancements the companies see from joining forces is no doubt appealing more and more.
installs, operates and maintains the systems that create facility environments. These include installations for power generation, power distribution, lighting, security, communications, plumbing, waste treatment, heating, ventilation, refrigeration and air-conditioning. The firm also provides facilities management and maintenance support. It serves commercial, industrial and institutional clients such as Bristol-Myers Squibb (NYSE: BMY) and Wachovia Corporation (NYSE: WB). Johnson Controls (NYSE: JCI) is a major competitor.
.gif){kind=logo}
It's a nice day for shareholders of 
and 
. He also operates 
Almost everyone these days has encountered cancer in one way or another. While the 
Shares of French drug maker 
It's been slow, but the private equity folks are starting to warm up to dealmaking. In fact, a key deal came last week as 
and 
. He also operates 
Here are some highlights from this past week's 
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
Starbucks: The next McDonald's
