Daily Report

This report is posted right here every trading day one hour before "the close". We run all of the searches and select our most bullish and bearish candidate of the day. This report includes live updates for stocks in our watch list that are on the move.

Issue     05/25/2012 Recent Reports     Past Reports    

Bullish MTH
Stock Please honor the men and women who have given their lives to make this country great.

Happy Memorial Day.

Meritage Homes Corporation engages in designing and building single-family detached homes. It provides various homes under the Meritage Homes and Monterey Homes names for a range of homebuyers, including first-time, move-up, luxury, and active adult buyers.
Set-up Looks for stocks that are in a strong uptrend and have paused for a few days. Yesterday the stock resumed the rally and made a 10-Day high. Today the stock is continuing higher.
Chart

This stock has been in a strong rally since October. It broke through $24 resistance in January and it hit $29 in February. After a few months of consolidation, the stock has broken out to a new 52-week high. It has been able to rally in a weak market and it wants to move higher.
 Outlook

Meritage narrowed its net loss to $4.8 million or ($0.15) per diluted share for the first quarter of 2012, compared to a net loss of $6.7 million or ($0.21) per diluted share for the first quarter of 2011, due to increased closings and revenue, combined with lower overhead and interest expense.

"We have been operating around break-even for the last two years, excluding the impairments related to winding down our Las Vegas operations, and just a small number of home closings can make the difference between being profitable in a quarter," said Mr. Hilton. "We expected to report a loss in the first quarter due to our seasonally low fourth quarter sales and backlog entering the quarter.

The company reported the highest quarterly sales orders since 2Q 2009 and the highest total sales value since 2Q 2008, with year over year sales gains in every state except Nevada.

It had the highest average sales per community since the first quarter of 2008 -- 29% increase over 1Q 2011.

The backlog was the highest in units and value since the first quarter of 2010.

The stock trades at a forward P/E of 19.
Tactic

"Our spring selling season got off to a strong start, as evidenced by our 36% increase in sales in the first quarter," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Consumer confidence has improved, and more buyers are searching for homes while inventories of existing homes have declined substantially in many of our markets. Our new website and national Contact Center are driving traffic to our well-positioned communities, where our sales teams have done an excellent job converting that traffic to sales. Our monthly sales have grown progressively since November last year, and March was our best sales month since June of 2008."

"As demand has strengthened, we've begun to raise prices in most of our communities this year," said Mr. Hilton. "While certain of our best communities have seen several price increases in 2012 already, most increases have been modest to date, but demonstrate that the market is getting stronger."

The total value of orders in backlog at March 31, 2012 increased by 44% over March 31, 2011, due to a 38% increase in units and a 4% increase in average sales prices, mainly reflecting a shift toward higher-priced states and communities, in addition to modest price increases.

This company has been able to breakeven after the biggest housing bubble since the Great Depression. The industry is starting to recover and better time lie ahead.

Home sales are up, backlogs are growing and home prices are starting to increase. The stock has been in a steady up trend since April. It has not given back gains during the recent market decline and it is breaking out to a new 52-week high. The stock has consolidated and now it has moved through resistance.

I love the stock, but the market looks weak. I like selling the July $25 puts, buying the July $30 calls and selling the July $35 calls for a net debit of $1.20. If the market breaks below the the 200-day MA, get out and wait for a better entry point. This stock should continue to grind higher.
Stop



Earnings



Bearish PAY
Stock Verifone Systems, Inc. designs, markets, and services electronic payment solutions in North America and internationally. It provides system solutions, including countertop electronic payment systems that accepts magnetic, smart card and contactless/ radio frequency identification(RFID) cards.
Set-up Looks for stocks that have been in a downtrend but have recently rebounded. Today the stock is attempting to resume the sell-off and it is making a 10-Day low.
Chart

This stock rallied above $45 resistance in February and it ran up to $54 in April. It pulled back sharply in May and it found support at $45. Today, the stock gaped below horizontal support and the 200-Day MA on heavy volume. The selling should continue for a few more days.
 Outlook

Yesterday, the company said non-GAAP net revenues for Q2 FY12 were $479 million, compared to $425 million in the previous quarter and $293 million for the comparable period of fiscal 2011 (“Q2 FY11”), a 64% year-over-year increase. GAAP net revenues were $472 million for the latest quarter, $420 million for the prior quarter, and $292 million for Q2 FY2011.

Non-GAAP net income per diluted share for Q2 FY12 was $0.64, compared to $0.58 in the prior quarter and $0.46 for Q2 FY11, a 39% year-over-year increase. GAAP net income per diluted share for the latest quarter was $0.13 income, compared to a $0.03 loss in the prior quarter and $0.27 income in Q2 FY11.

The stock trades at a forward P/E of 11.
Tactic

"We are very pleased with our performance, particularly the acceleration in organic growth and the increase in Hypercom-brand sales,” said Douglas G. Bergeron, Chief Executive Officer. “We remain confident in our outlook for the year. VeriFone is continuing to prove that widespread incumbency combined with market-leading innovation is a winning formula for the payments marketplace.”

For the third quarter ending July 31, 2012, VeriFone expects to report non-GAAP net revenues in the range of $495 million to $500 million. Non-GAAP net income per diluted share is projected to range from $0.68 to $0.70. For the full year of fiscal 2012, VeriFone expects to report non-GAAP net revenues in the range of $1.900 billion to $1.925 billion. Non-GAAP net income per diluted share is expected to range from $2.60 to $2.66 in FY12.

On average, analysts expected earnings of 70 cents per share on $501.9 million in revenue, according to FactSet.

In a conference call with analysts and investors, VeriFone Chief Financial Officer Robert Dykes said demand should remain strong, but its revenue is being hurt because the euro and other currencies are weakening relative to the dollar. That affects its sales in overseas markets.

The fundamentals for the company are strong, but the guidance was light. The stock gapped below the 200-Day MA on heavy volume and the selling pressure should continue for a few more days. I like buying the June $40 puts. If the stock closes above $40, stop the trade out. It should have another $1-$2 of downside in the next day or two.
Stop



Earnings