swy

Grocer Safeway Inc. (NYSE: SWY), first recommended on February 20, 2009 at a price of $20.90, remains a Buy, but there are changes to the recommendation, so follow closely.

Most important: Safeway is now a high-risk stock, a demotion from moderate-risk. Don't Buy Safeway's shares if you can't tolerate high risk.

Safeway Inc. (NYSE: SWY), one of North America's largest food retailers, is scheduled to discuss its third quarter 2009 financial results in a conference call Thursday at 11:00 AM ET. You can catch the live webcast of the call on the company's website.

During the three months that ended in September, Safeway appointed new board members, offered seasonal flu shots, and declared a quarterly dividend. Analysts surveyed by Thomson Reuters expect this Pleasanton, Calif.-based grocer to report that earnings fell 34.8% from a year ago to $0.30 per share. Sales for the quarter are expected to be 7% lower to $9.5 billion.

This was a complex call, but I'm Reiterating my Buy rating for Safeway Inc. (NYSE: SWY) first recommended on February 20, 2009 at a price of $20.90.

Safeway is likely to continue to benefit from rising food demand for cheaper food, as the pronounced recession in California -- one of the states hardest hit by the housing downturn -- compels citizens to belt-tighten and seek less expensive food options. The FY2009/FY2010 EPS estimates for SWY are $2.11 to $2.29.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Aeropostale Inc. (NYSE: ARO) beat profit expectations as revenue and same-store sales both increased.
• Aruba Networks Inc. (NASDAQ: ARUN) received an analyst's upgrade following its Q3 report.
• Buckle Inc. (NYSE: BKE) reported better-than-expected Q1 expectations as revenue surged.
• Campbell Soup Co. (NYSE: CPB) higher Q2 earnings beat expectations and sent shares upward.
• Deere & Co. (NYSE: DE) reported better-than-expected Q3 earnings, sending shares higher.

Analyst upgrades:

• UBS upgraded Target (NYSE: TGT) to Buy from Neutral and raised its price target to $52 from $45 citing reduced inventories, some credit stability, and an improved back-to-school period.
• Credit Suisse said concerns regarding Safeway's (NYSE: SWY) price position are overblown and that earnings risk is limited. The firm upgraded shares to Outperform from Neutral and raised the target price to $25 from $22.
• Oppenheimer upgraded Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform as it believes the story is underappreciated following the recent sector rally. The firm has a $14 price target on the stock.
• CME Group (NASDAQ: CME) was upgraded to buy from Neutral at Goldman.
• Freeport McMoRan (NYSE: FCX) was upgraded to Overweight from Neutral at JP Morgan.
• Gilead Sciences (NASDAQ: GILD) was upgraded to Buy from Neutral at FTN Equity.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Campbell Soup Co. (NYSE: CPB) reported solid Q2 numbers despite competition from store brands.
• DreamWorks Animation SKG Inc. (NYSE: DWA) missed Q4 expectations, sending shares lower.
• First Solar Inc. (NASDAQ: FSLR) said Q4 profit more than doubled due to strong demand.
• Garmin Ltd. (NASDAQ: GRMN) posted a lower-than-expected profit on soft sales and lower margins.
• Heidrick & Struggles International Inc. (NASDAQ: HSII) earnings and revenue declined in Q4.
• Home Depot Inc. (NYSE: HD) earnings beat low expectations even as revenue continued to decline.

Safeway (NYSE: SWY - option chain) stock is falling today after the company reported a fourth-quarter profit of $338 million, or 79 cents per share, missing analysts' projections of 81 cents per share. The grocery industry is generally expected to be a strong one during tough economic times, but the past few months have been hard on these stocks too. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on SWY.

This morning, SWY opened at $19.83. So far today the stock has hit a low of $18.18 and a high of $19.84. As of 12:10, SWY is trading at $19.00, down $2.12 (-10.0%). The chart for SWY looks neutral and S&P gives SWY a 3 STARS (out of 5) hold ranking.

Acting boldly in any stock market carries with it considerable risk. Acting boldly in this market, amid the U.S. recession and an unresolved toxic asset situation, and you're looking at a 30-40% haircut up ahead. (Or worse.)

Still, investors capable of tolerating risk would be wise to position themselves in a few defensive plays with decent upside potential. But let's make one thing clear: defensives with an upside are not, strictly speaking, conventional defensive plays. They carry more risk but, one could argue, that risk is reasonable, given the potential for the capital appreciation pop. With the above as a backdrop, grocery chain Safeway (NYSE: SWY) is worth a review.

TheStreet.com's Jim Cramer says big-caps are now mid-caps, mid-caps are now small-caps. The carnage is widespread and remarkable.

If you want revelations, go over the largest-cap companies right now vs. the ones that were the largest-cap last year at this time. The stocks, the losses, the changes, they are staggering.

First, the aggregate: The largest 100 companies a year ago were worth $8 trillion; they're now worth $5 trillion. That's a lot of missing trillions. In the day-to-day drudgery and decline, they seem largely unaccounted for until you look at each line item.

Goldman Sachs Group Inc. (NYSE: GS) is expected to report a fiscal fourth-quarter loss of $3.50-$3.73 a share according to different sources due to the falling value of many of its investments. The whisper number, however, may be worse, not to mention that future earnings and revenue are very much in jeopardy too due to the current climate which doesn't lend itself to people needing the services Goldman has to offer. Update: GS shares jumped over 5% after the bank said it lost $2.1 billion, or $4.97 a share during the fourth quarter.

General Motors Corp. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler may be receiving strong signals from the White House that short-term help in the amount of $15 billion for the latter two is on the way. GM and Ford shares traded over 2% higher in premarket action.

Citigroup Inc. (NYSE: C)'s Japanese subsidiary said it will sell its Japanese trust banking unit to Mitsubishi UFJ Trust and Banking in an all-cash deal, valued at 25 billion yen ($277.6 million). The deal is expected to close around April 1. Citi shares were higher in premarket trade following the announcement. Citi also voiced upbeat view on Dubai.

Best Buy (NYSE: BBY) is also expected report earnings of 25 cents per share before the bell. Update: BBY profit fell, but it reaffirmed outlook; shares climb 6.5% in premarket trade. Adobe Systems Inc. (NASDAQ: ADBE) is due to report after the close and is expected to report profit of 58 cents a share for the latest quarter.

Seems that even this shortened week was full of news and happenings, in the U.S. and around the world. With Citigroup Inc. (NYSE: C) being bailed out by the U.S. government at the beginning of the week and China announcing fiscal and monetary stimulus plans, the Dow industrials finished in positive territory four days in a row.

But as analysts and pundits, as well as each and every economic release -- in the U.S. and around the world -- remind us, we are not out of the woods yet and the rally has really been a bear-market rally.

Investors looking to take advantage of such rallies, or at least feel they hold stable long-term holdings, can search this week's BloggingStocks' contributors' picks:

Apollo Group (NASDAQ: APOL) and Devry Inc. (NYSE: DV) -- It's often been suggested that educators do well in times of recession and high unemployment as workers look to improve or change their education to get a better job. Leo Fasciocco thinks these two are poised for a breakout.

Dollar Tree Inc. (NASDAQ: DLTR) reported stronger-than-expected earnings this week and also hiked its forecast. Not surprisingly, cash-strapped consumers turn more and more to discounters. Dollar Tree may continue to benefit from the economic downturn and the stock could also experience a short-squeeze rally.

"If you're going to stay invested, you should look to defensive sectors," explain Ron Rowland and Brandon Clay, who point to consumer staples as a top pick for the current market environment.

In their Invest with an Edge, the advisors explain, "Perhaps the best way to stay defensive is with the Consumer Staples Select Sector SPDR (NYSE: XLP), an exchange traded fund.

"In a bear market, opportunities are usually limited to certain sectors. Surveying the investment horizon, we think the consumer staples sector has the best opportunity for growth in this economy.

"Regardless how the economy acts, people still eat. Consumers may not shop at Whole Foods, but they'll still buy groceries. Companies like Wal-Mart (NYSE: WMT) and Safeway (NYSE: SWY) will continue to rake in revenues from hungry customers.

"In addition, these companies should continue to receive additional revenue from consumers who normally shop at specialty stores, but can no longer afford to.

"Consumers may not be shopping at Sharper Image any more, but there are other creature comforts that will be difficult for Americans to abandon.

"Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) will still sell products during a prolonged downturn. In addition, companies providing toiletries and convenience like Procter and Gamble and CVS Pharmacy stand to do well during a shifty economy.

Supervalu (NYSE: SVU), whose competitors include Kroger (NYSE: KR), Safeway (NYSE: SWY), and Wal-Mart (NYSE: WMT), reported results for its fiscal second quarter. Net sales unfortunately didn't budge much at all. They came in essentially flat at $10.2 billion. Earnings per share on an adjusted basis were $0.61. According to this article, the expectations were for $0.69 per share. So, as can be seen, Supervalu lost the analyst-expectations game by a wide margin. Last year's adjusted earnings were $0.64 per share. Not only are those numbers disappointing, but comps saw a decrease of over 1%. And the gross margin suffered as well.

So, we have an earnings miss, flat revenue growth, and a decline in the bottom line. What does all that add up to in terms of market reaction? The stock sees a bid. At the time I began writing this piece, it was up 2.5%. As I found with Kroger, the market may be looking at supermarket businesses as defensive plays. Of course, at the time I covered Kroger, that company's numbers were a lot better than Supervalu's.

However, last time I checked the stock before sending this piece in, it was becoming more volatile along with the market, moving from green to red in quick succession. Given the weak data, I can't say that I'd be considering Supervalu right now. It is true that people will continue to shop at supermarkets even during economic downturns, but I'd rather look at something the supermarket sells as opposed to the supermarket itself to get defensive. I'd rather align my portfolio with the stronger brand equity of perhaps a Kraft (NYSE: KFT) or a Procter & Gamble (NYSE: PG) than a Supervalu.

Disclosure: I don't own any company mentioned; positions can change at any time.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Advance Auto Parts Inc. (NYSE: AAP) lowered its Q3 earnings forecast below analysts' estimates.
• Advanced Medical Optics Inc. (NYSE: EYE) lowered guidance led to an analyst's downgrade.
• Alcoa Inc. (NYSE: AA) fell well short of Q3 estimates on lower demand and falling prices.
• Bank of America Corp. (NYSE: BAC) Q3 profits fell more than estimated, and it cut its dividend.
• Brunswick Corp. (NYSE: BC) forecast a full-year loss and accelerated layoffs.
• Costco Wholesale Corp. (NASDAQ: COST) Q4 earnings just missed estimates thought revenues were up.
• Dollar Tree Inc. (NASDAQ: DLTR) earnings results and growth prospects impressed one analyst.
• eBay Inc. (NASDAQ: EBAY) earnings may be diluted by its acquisition of Bill Me Later.
• Ecolab Inc. (NYSE: ECL) earnings prospects led to an analyst's downgrade.
• General Electric Co. (NYSE: GE) results were in line with low expectations, and dividends will be sustained.
• General Mills Inc. (NYSE: GIS) earnings prospects for 2009 impress Jim Cramer.
• Host Hotels & Resorts Inc. (NYSE: HST) Q3 earnings tumbled while revenue slipped.
• IBM Corp. (NYSE: IBM) surprised Wall Street by offering strong Q3 preliminary results.

U.S. stock futures turned higher Wednesday after the Federal Reserve, in a coordinated move with other central banks, cut rates by half a point to 1.5%, in an effort to help credit markets and boost financial markets. Before the rate cut, futures were lower as Wall Street was about to join global markets in a world-wide plunge that saw the Nikkei down 9.4% and European main markets down 5-6%. On the economic front, August pending home sales released later today might crimp the mood somewhat.

Alcoa Inc. (NYSE: AA) kicked off earnings season after the close Tuesday. The world's third-largest aluminum producer reported a 52% drop in third quarter profit as sharply lower aluminum prices and lower demand hurt results. AA shares are down 4% in pre-market trading.

American International Group Inc. (NYSE: AIG) -- in what could only be described as unbelievable nerve, days after the $85 billion federal bailout loan, AIG spent $440,000 on a posh California retreat for its executives that included spa treatments and much more. Lawmakers were enraged over the thousands of dollars AIG spent on executives even as the company was staving off bankruptcy. It seems it is morally bankrupt. AIG stock is recovering 5.4% this morning after the rate cut.