Stocks in the News: UPS Ditches Spouses From Insurance in Wake of Obamacare

Crista Huff
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Posted: Aug 22, 2013 12:01 AM
Stocks in the News: UPS Ditches Spouses From Insurance in Wake of Obamacare

Stock number one is: 

United Parcel Service Inc., (SYMBOL: UPS) and the headline says: UPS to drop 15,000 spouses from insurance, cites Obamacare – Atlanta Business Chronicle

In direct contrast to government claims that Obamacare will make health insurance more affordable to individuals and employers, UPS is planning to drop 15,000 spouses from healthcare coverage in 2014 due to increased costs.

UPS said in a memo to employees that rising medical costs, “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost.”

Earnings at UPS are projected to grow 5, 15, 12 percent over the next three years.  The long-term debt ratio is high at 62%, and the dividend yield is 2.88%.  The stock price broke past long-term resistance this year, and is trading sideways between roughly $85 and $88.

Our Ransom Note trendline says:  HOLD UPS.

UPS Chart

UPS data by YCharts

Stock number two is: 

Staples Inc., (SYMBOL: SPLS) and the headline says: Earnings Miss on Lower Topline and Margins – Citi Research

Office products retailer Staples Inc. missed earnings estimates on disappointing  second quarter revenues and margins; and increased operating expenses.  International revenues were down 8.3% and online revenues rose 3% year-over-year.

Staples revised its full-year outlook downward to reflect a 12% drop in earnings, which assumes additional poor quarters this year.

The stock fell precipitously today, and will likely trade between $14 and $17 for a while.  With neither earnings growth nor bullish chart on the horizon, we see no reason for investors to own Staples shares.

Our Ransom Note trendline says..... SELL STAPLES

SPLS Chart

SPLS data by YCharts

Stock number three is:

Lowe's Companies, Inc., (SYMBOL: LOW ) and the headline says: Strong Second Quarter Results Tick All the Boxes and Reinforce Optimism – Morgan Stanley

Home-improvement retailer Lowe’s Companies reported much higher than expected second quarter earnings per share and same store sales.  The company raised its earnings outlook for the full year, and repurchased $1 billion of stock this quarter, as it also did last quarter.

Lowe’s earnings are expected to grow 20-22% per year for the next three years. The dividend yield is 1.55%; and the PE is 22, in a nine-year range of 11 – 23.

Lowe’s shares are up 14.3% since we reiterated our buy recommendation on June 20.  The stock has reached new highs all year, most recently trading between $43 and $46.  The chart and earnings are strong, but the PE is high.  Investors should buy on price dips.

Our Ransom Note trendline says....  ACCUMULATE LOWE’S.

LOW Chart

LOW data by YCharts

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.