Stocks in the News: Rite Aid Making a Comeback

Posted: Sep 20, 2013 12:01 AM

Stock number one is:

Agilent Technologies Inc., (SYMBOL: A) and the headline says: Agilent Technologies to Separate Into Two Public Companies -- Reuters

Agilent Technologies plans to spin-off its electronic measurement business from its life sciences & diagnostic business in 2014. Both companies have “strong balance sheets and investment-grade profiles,” reports Reuters. Morgan Stanley said, “Agilent has a multi-year margin [expansion] opportunity that is largely insensitive to economic conditions.”

Earnings are expected to fall 9% this year, then rise 11 and 13% in the next two years.

We told traders to buy Agilent in mid-August. The share price could pause at medium-term resistance at $55. Traders who jump out at $54 will have made 15% profit. Everybody else should hold their shares for the prospect that the spin-off will contribute to additional capital gains.

Our Ransom Note trendline says: HOLD AGILENT TECHNOLOGIES.

A Chart

A data by YCharts

Stock number two is:

Oracle Corp., (SYMBOL: ORCL) and the headline says: Oracle's First Quarter Earnings Beat; Revenues Miss -- Zacks

Database software leader Oracle reported a mixed first quarter and a weaker outlook for its second quarter, and the market shrugged it off. Oracle is achieving software growth from cloud computing solutions; focusing on recurring revenue and closing deals; and expects declining hardware sales to stabilize. Morgan Stanley thinks the market is underestimating both potential revenue and earnings growth going forward.

Earnings growth is moderate, the PE is low at 11, the dividend yield is 1.4%, and there’s a $12 billion repurchase plan in place. Shares are trading at a record 25% discount to the S&P.

Value investors and traders could buy on a dip to $32, but expect the stock to trade between $32 and $36 for the time being. We wouldn’t jump in at the current price.

Our Ransom Note trendline says..... HOLD ORACLE.

ORCL Chart

ORCL data by YCharts

Stock number three is:


Drugstore chain Rite Aid reported a second quarter profit amidst Wall Street expectations of a net loss; and forecast higher annual profit and revenue, sending the shares up about 15% this morning. S&P said “non-pharmacy gross margins widened more than we expected.”

After many consecutive years of net losses, Rite Aid is expected to be profitable this year, and see earnings per share grow very aggressively going forward. The PE is quite low in comparison to the earnings growth, but the debt levels are extremely high.

The stock price has tripled since January. Investors should expect volatility and use stop-loss orders.

Our Ransom Note trendline says.... HOLD RITE AID.

RAD Chart

RAD 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.