Mid-Day Market Update: Nu Skin Dips On Weak Forecast; EOG Resources Shares Jump

Related BZSUM Mid-Morning Market Update: Markets Open Higher; Time Warner Earnings Top Estimates #PreMarket Primer: Wednesday, November 5: Democrats Lose Control Of The US Senate

Midway through trading Wednesday, the Dow traded up 0.46 percent to 17,463.41 while the NASDAQ surged 0.16 percent to 4,631.15. The S&P also rose, gaining 0.45 percent to 2,021.13.

Leading and Lagging Sectors

In trading on Wednesday, utilities shares were relative leaders, up on the day by about 0.94 percent. Top gainers in the sector included NRG Energy (NYSE: NRG), up 3.2 percent, and NextEra Energy (NYSE: NEE), up 2.6 percent.

Technology shares rose by just 0.05 percent on Wednesday. Top losers in the sector included Pegasystems (NASDAQ: PEGA), down 13.4 percent, and HomeAway (NASDAQ: AWAY), off 11 percent.

Top Headline

Time Warner (NYSE: TWX) reported upbeat earnings for the third quarter.

The New York-based company posted a quarterly net profit of $967 million, or $1.11 per share, versus a year-ago profit of $1.18 billion, or $1.26 per share. Adjusted EPS rose to $1.22 from $0.91. However, adjusted earnings, excluding tax benefit, came in at $0.97 per share.

Its revenue climbed 3% to $6.24 billion. However, analysts were expecting earnings of $0.94 per share on revenue of $6.16 billion.

Equities Trading UP

Coupons.com (NYSE: COUP) shares shot up 28.09 percent to $15.94 after the company reported upbeat quarterly results.

Shares of Callidus Software (NASDAQ: CALD) got a boost, shooting up 14.16 percent to $15.56 after the company reported better-than-expected Q3 results and issued a strong revenue forecast.

EOG Resources (NYSE: EOG) shares were also up, gaining 6.67 percent to $96.30 after the company reported better-than-expected quarterly earnings and raised its production growth forecast.

Equities Trading DOWN

Shares of Albany Molecular Research (NASDAQ: AMRI) were down 22.34 percent to $17.61 after the company reported a Q3 loss of $0.02 per share on revenue of $62.47 million.

FireEye (NASDAQ: FEYE) shares tumbled 15.15 percent to $29.06 after the company reported downbeat third-quarter revenue.

Nu Skin Enterprises (NYSE: NUS) was down, falling 16.43 percent to $42.13 after the company issued a weak forecast for the current quarter.

Commodities

In commodity news, oil traded up 1.10 percent to $78.04, while gold traded down 1.70 percent to $1,147.90.

Silver traded down 2.68 percent Wednesday to $15.53, while copper fell 0.38 percent to $3.01.

Eurozone

European shares were higher today. The eurozone’s STOXX 600 climbed 1.65 percent, the Spanish Ibex Index climbed 1.14 percent, while Italy’s FTSE MIB Index jumped 2.60 percent. Meanwhile, the German DAX rose 1.63 percent and the French CAC 40 jumped 1.89 percent while UK shares climbed 1.32 percent.

Economics

The MBA reported that its index of mortgage application activity declined 2.60% in the week ended October 31, 2014.

Private-sector employers added 230,000 jobs in October, versus 225,000 in September. However, economists were expecting an addition of 220,000 jobs.

The final reading of Markit services PMI fell to 57.10 in October, versus a prior reading of 57.30. However, economists were expecting a reading of 57.10.

The ISM non-manufacturing PMI fell to 57.10 in October, versus a prior reading of 58.60. However, economists were expecting a reading of 58.00.

Posted-In: Earnings News Guidance Eurozone Futures Commodities Econ #s Markets

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Herbalife: ‘Messier Than Expected and We Had Expected Messy’

Even those who weren’t expecting great news from Herbalife appear taken aback by its results last night. Canaccord Genuity’s Scott Van Winkle and Mark Sigal, for instance, call Herbalife’s earnings “messier than expected.” They explain:

Bloomberg News

The Q3 results and guidance revisions were messier than we expected and we had expected messy. We expected that more pronounced headwinds in the US and a Venezuela devaluation could materialize and saw these items as the risks to the quarterly report. However, the negative surprise relative to our estimates wasn't confined to these two markets. Similar to Q2, China continues to drive strong growth (China was the only market to meet our revenue forecast), while underlying strength in EMEA (+15% in constant currency) is being masked by foreign exchange. Beyond these two regions, growth is modest or disrupted. The impact of the Herbalife business model debate has clearly impacted the US, but major markets outside of the US, such as Mexico and Brazil, were softer than we would have thought. The net result was a 5% miss in sales and volume points vs. us that was several percentage points worse than we expected, even after adjusting for Venezuela. Moreover, Q4/14 and F2015 guidance came in significantly softer on a volume point basis.

Van Winkle and Sigal also explain the impact of changes to Herbalife’s business that were made following allegations by Pershing Square’s Bill Ackman:

The guidance is set partly as a reflection of a phased implementation of changes to the global compensation plan (fully effective by February 2015) that are anticipated to temper near-term growth. The plan changes include a first order limitation (previously in 18 markets, now to be global), a sales leader qualification restriction whereby all volume for qualification must be purchased directly from Herbalife rather than from upline distributors (implemented November 1), and a lower threshold for supervisor qualification (4,000 volume points over a 12- month period rather than the historic 5,000-point qualification where large volume purchase were front-end loaded). The net result of these changes is greater line of sight on distributor purchases, as well as more gradual and sustained distributor participation; but of course it's a slower build. The prior roll-out of the 12-month volume point qualification program in the original market resulted in ~60% gains in distributor activity and retention for new qualifying supervisors a year later, but impacted initial volumes. Near term, these plan changes will create a sales headwind until fully anniversaried in Q1/16. But also, any compensation plan change carries disruptive risk.

Despite the disappointment, Van Winkle and Sigal maintained their Buy rating on Herbalife’s stock, though they did slash their price target to $60 from $73.

Shares of Herbalife have plunged 18% to $45.75.

OPEC Chief Warns Against Oil Price Panic

This article was written by Oilprice.com, the leading provider of energy news in the world. Also check out these related articles:

OPEC & Russia's Vulnerability and America's Ingenuity
Saudi Arabia: Producing More Crude, Selling Less?

OPEC Secretary-General Abdalla Salem el-Badri says he doesn't expect demand for the cartel's oil or its production levels to change in the coming year, and he is urging member states not to be alarmed by oil's current low prices.

"Don't panic," el-Badri said Oct. 29 at an impromptu news conference in London, where he was attending a conference. "I am sure the market will balance itself."

The concern, if not the panic, already is present. The price of the global petroleum benchmark, Brent crude, plunged a little more than $87 a barrel the day he made those comments -- nearly $30 less than it was in June, a loss of about one-fourth of its value.

Al-Badri shrugged off this loss, saying he wasn't worried because price fluctuations don't reflect "the fundamentals" of the oil market. "Demand is still growing, supply is also growing. OPEC is reviewing the situation," he said. "There is nothing wrong with the market."

Current production limits for OPEC members probably will stay in place in 2015, he said, adding that the cartel isn't likely to lower that cap at its next meeting in Vienna on Nov. 27. He also said he expects individual members won't produce significantly below that cap in the coming year.

El-Badri said the expected demand for OPEC's oil in 2015 also will be about the same as in 2014: between 29.5 million and 30 million barrels of oil per day.

One reason why OPEC members shouldn't panic, el-Badri said, is that persistent lower prices hurt the cartel's members far less than they affect companies extracting shale oil with new, costly technologies such as horizontal drilling and hydraulic fracturing, or fracking. As a result, he said, OPEC has a competitive edge over most of the overall oil market.

"If prices stay at $85, we will see a lot of investment, a lot of oil, going out of the market," el-Badri said. "About 65 percent of the producers, they have high costs. Not OPEC."

Some oil executives have challenged that view. Marianne Kah, the chief economist of ConocoPhillips, said the price of oil would need to plummet to $50 a barrel "to really harm [shale] oil production." Bob Dudley, BP's CEO, said the cost of using the new extraction techniques has come down recently, and noted that the biggest victim of low prices are Russian oil companies, which have been caught in the middle of a dispute with Moscow and the West over the Ukraine crisis.

The European Union and the United States have imposed sanctions on Russia and its oil sector over Moscow's suspected meddling in Ukraine's internal affairs. While they've had an effect, Dudley said, the sanctions alone aren't a concern to Russia.

"It is the lower oil price that puts more pressure on Russia than the sanctions themselves," Dudley said.

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The Global Impact Of Decentralized Banking

Stocks rose sharply in Japan last night, the Nikkei-225 jumping almost 5 percent, thanks to a somewhat surprising move by the Bank of Japan (BoJ) to expand its stimulus program, while Japan's largest pension fund, in a clearly coordinated move, boosted its buying of Japanese equities.

The Nikkei jumped to a multi-year high on the news and helped extend the rally that has its roots in a U.S. rebound. Japan, whose economic policies have been ineffective at boosting growth and warding off deflation, are finally beginning to make sense in the context of both domestic and global economic realities.

The real launching pad for Japanese stocks will come if the Abe Administration decides to forgo the second leg of a planned consumption tax early next year. That would add rocket fuel to the BoJ's easing and give Japanese stocks a real chance to enjoy a sustained stock market rally, which has not occurred despite long-held hopes that Japan was finally on the mend.

The new policies have also had the desired effect of weakening the Japanese yen, now at a seven-year low against the dollar. A weaker yen helps Japanese exporters and also helps to lift inflation toward what has, to date, been an unmet 2-percent target in Tokyo.

A Yen For Global Action

The BoJ's move, meanwhile, has had a global impact, raising expectations of a more forceful round of quantitative easing by the European Central Bank (ECB).

Related Link: Japan's Improving Economy Shows That Inflation Is No Longer An Enemy

So far this week, Poland and Sweden have slashed interest rates in Sweden all the way to zero as northern and eastern Europe join the deflation fight, putting even more pressure on Continental Europe to become a more significant ally in the world's war on deflation.

One has to expect the ECB to become a more muscular force in that fight if it desires a weaker Euro and an end to the deflation invasion.

European stocks are clearly now discounting an expanded QE program from the ECB, while British markets may also be suggesting that the Bank of England could reverse course soon and provide some additional protection to Europe's western flank by cutting interest rates there as well.

From Russia With Love

Moscow, meanwhile, is moving in the other direction, cut off from the world by economic sanctions and effectively crippled by plunging oil prices. Its central bank has just raised interest rates to defend the falling ruble, which will only serve to further weaken Russia's recession-prone economy and put Putin into a deeper corner. While remaining wary of the geopolitical consequences, investors who might otherwise worry about the impact on Europe will likely continue to shun Europe's biggest kleptocracy, keeping their money in safer havens elsewhere in the world.

There is no money to be made there, unless one wants to short the often illiquid Russian markets -- a game of investment roulette, to be sure.

There's Still No Place Like Home

U.S. stocks, meanwhile, are now within striking distance of record highs, aided by stronger than expected economic growth here at home and solid third quarter corporate profits. About 75 percent of companies reporting Q3 results have beaten Wall Street expectations, offsetting any concerns about the Federal Reserve's move to wind down its own QE program earlier this week.

The U.S. has become the engine of global economic growth as other parts of the world try desperately to achieve the successes the U.S. has enjoyed, from enlightened monetary policies that laid the foundation for recovery, to resilient corporate and household balance sheets, to falling fiscal and trade deficits.

The U.S. has gotten it right in the post-recession environment, while the rest of the world is playing catch-up. Domestic equities remain quite attractive, but the catch-up game being played by global central bankers may mean that some overseas markets, like Germany and Japan, could add supplemental upside to a domestically-focused portfolio.

The investment focus should remain on the good ol' USA, but some incremental alpha could be added by taking advantage of the economy-envy that may drive some central bankers to emulate their American counterparts.

Posted-In: Bank of JapanGlobal Top Stories Economics Markets Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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