Wall Street Stock Forecaster Hotline – Friday, August 26, 2011

APPLE INC., $383.58, Nasdaq symbol AAPL, announced this week that Steve Jobs has resigned as its chief executive officer. However, he will continue as chairman of Apple’s board of directors.

Jobs’ health has been an ongoing risk factor for Apple investors. That’s because has played a large role in developing some of Apple’s most successful products, such as the iPhone and iPad.

The stock fell 6% on the news, but quickly recovered. That’s because Jobs has hired executives who will probably continue to create innovative products.

Apple is still a hold.

Apple was recently covered in the July 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Apple was recently covered the Wall Street Stock Forecaster Hotline for July 22, 2011. Click here to access it.

BHP BILLITON LTD. ADRs, $81.96, New York symbol BHP, earned $21.7 billion, or $7.87 per ADR, in the fiscal year ended June 30, 2011 (each American Depositary Receipt represents two BHP common shares).

That’s up 73.9% from $12.5 billion, or $4.48 per ADR, in fiscal 2010. Even so, the latest earnings missed the consensus forecast of $7.16 per ADR. Revenue rose 35.9%, to $71.7 billion from $52.8 billion.

Strong economic growth in China, Brazil and other developing counties continues to push up prices for many of the commodities BHP produces, such as iron ore, coal, copper, aluminum and diamonds.

In addition, BHP is expanding its oil and gas operations. It recently paid $4.75 billion to Chesapeake Energy Corp. (New York symbol CHK) for shale-gas properties in Arkansas. (Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas.)

In July 2011, BHP agreed to pay $12.1 billion for Petrohawk Energy Corp. (New York symbol HK). Petrohawk produces oil and natural gas from properties in Texas and Louisiana. This purchase should close by September 30, 2011.

These projects have big potential. However, BHP is facing higher costs for labour and mining equipment. That could hurt the profitability of these and other new projects. Moreover, the Australian government is considering new taxes on mining companies. That adds risk.

BHP Billiton is still a hold.

BHP Billiton was recently covered in the July 2011 issue of Wall Street Stock Forecaster. Click here to access it.

BHP Billiton was recently covered in the Wall Street Stock Forecaster Hotline for July 15, 2011. Click here to access it.

H.J. HEINZ CO., $51.10, New York symbol HNZ, continues to see strong demand for its foods in China, Brazil and other fast-growing markets. The company now gets 70% of its sales from outside the U.S.

Strong demand from overseas markets pushed up Heinz’s sales by 14.9% in the three months ended July 27, 2011, to $2.8 billion from $2.5 billion a year earlier. Emerging markets accounted for 23% of sales, up from 18% a year earlier. The company also raised its selling prices to offset rising ingredient costs.

Heinz earned $226.1 million in the quarter, down 6.0% from $240.4 million a year earlier. Earnings per share fell 6.7%, to $0.70 from $0.75, on more shares outstanding. If you exclude costs to integrate a recent acquisition and severance costs related to an ongoing restructuring plan, Heinz would have earned $0.78 a share, up 4.0% from $0.75. The latest earnings beat the consensus estimate of $0.76 a share.

The company still expects to earn $3.24 to $3.32 a share in fiscal 2012. The stock trades at a reasonable 15.6 times the midpoint of that range.

Heinz is a buy.

Heinz was recently covered in the Wall Street Stock Forecaster Hotline for May 27, 2011. Click here to access it.

YUM! BRANDS INC., $52.77, New York symbol, has opened its first KFC fast-food restaurant in Nairobi, Kenya.

U.S. fast-food companies have avoided East Africa, mainly because there aren’t enough suitable franchisees. However, Yum has found a local investor for the Nairobi restaurant. As well, the company had to delay opening in Kenya while it worked with local food suppliers to make sure their products were up to Yum’s standards.

The company aims to open two more outlets in Nairobi this year, and eventually expand to other countries, such as Tanzania and Uganda. East Africa could become as profitable for Yum as China, India and other fast-growing markets.

Yum Brands is a buy.

Yum was recently covered in the May 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Yum was recently covered in the Wall Street Stock Forecaster Hotline for June 15, 2011. Click here to access it.

FORD MOTOR CO., $10.40, New York symbol F, and TOYOTA MOTOR CO. ADRs, $71.65, New York symbol TM, are teaming up to develop a new hybrid engine for pick-up trucks and sport utility vehicles (SUVs). Both companies already make hybrid-powered passenger cars.

It will probably take several years for Ford and Toyota to complete this engine. Still, better hybrid engines help both carmakers comply with tougher new U.S. fuel-economy standards. In addition, trucks and SUVs continue to sell well, and lower gas mileage from these new hybrid engines could attract even more buyers.

Ford is a buy, but Toyota is still a hold.

Ford was recently covered in the August 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Ford was recently covered in the Wall Street Stock Forecaster Hotline for June 10, 2011. Click here to access it.

Toyota was recently covered in the June 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Toyota was recently covered in the Wall Street Stock Forecaster Hotline for April 15, 2011. Click here to access it.

Our next Hotline will go out on Friday, September 2, 2011.