wall street

DUN & BRADSTREET CORP., $74.49, New York symbol DNB, rose 3% this week on reports that the company may be trying to sell itself. Dun & Bradstreet provides credit reports on over 210 million companies. Its clients use these reports to make lending and buying decisions. The company recently cut its full-year revenue outlook for 2012 because the slowing economy is hurting demand for its credit reports. However, an ongoing cost-cutting plan should continue to push up its earnings....

Almost three months ago, on May 18, Facebook issued one of the most highly-publicized Initial Public Offerings (IPO) in the history of Wall Street. A week before, Pat McKeough had already issued his own investment advice on the stock. He advised investors to take a pass. Just as Pat predicted, Facebook shot up briefly, only to reverse course and head into a decline that hasn’t ended yet. This week it disappointed investors again with bad earnings (as did another Internet issue that has taken a beating, games specialist Zynga Inc.). There’s a cautionary message for investors in this and it relates directly to one of Pat’s core principles: Avoid stocks that bask in the broker/media limelight. Stocks like these can cause investor expectations to rise so high that downturns can be brutal—which is exactly what happened in this instance. Here is Pat’s original warning about Facebook from May 11....

LOBLAW CO. $32.56 (Toronto symbol L; Shares outstanding: 281.4 million; Market cap: $9.2 billion; TSINetwork Rating: Above Average; Dividend yield: 2.6%; www.loblaw.ca) starting selling its popular Joe Fresh clothing and accessories in its supermarkets in 2006. It has also opened 12 stand-alone Joe Fresh stores in Canada and six in the U.S. Loblaw has formed a new partnership with J.C. Penney (New York symbol JCP). Under this deal, Loblaw will build Joe Fresh boutiques in 700 of Penney’s 1,100 U.S. department stores. (J.C. Penney is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks.) These outlets should open in April 2013. Penney will also sell Joe Fresh products through its website. Loblaw is a buy....

While a high p/e ratio can be a sign that a stock is overvalued, it can also be a signal that investors recognize the company’s future earnings potential. One example of a well-established stock with a high p/e ratio is the world’s most recognizable fast-food chain. MCDONALD’S CORP. (New York symbol MCD; www.mcdonalds.com) is the world’s largest fast-food company by sales. Its 33,735 restaurants in 119 countries serve a wide variety of foods, but they are best known for their hamburgers and french fries....

APPLE INC., $585.16, Nasdaq symbol AAPL, fell 3% this week after the company reported lower-than-expected revenue and earnings. That’s mainly because it will probably launch a new version of its hugely popular iPhone smartphone later this year. As a result, demand for the current model is falling. The iPhone now accounts for nearly 50% of Apple’s revenue. In its 2012 third quarter, which ended June 30, 2012, Apple sold 26.0 million iPhones, up 28.0% from 20.3 million a year earlier. However, that’s down 25.8% from the 35.1 million iPhones it sold in the second quarter....

CANADIAN PACIFIC RAILWAY LTD., $83.18, Toronto symbol CP, reported higher-than-expected earnings this week. That caused the stock to rise 10%. In the three months ended June 30, 2012, the company’s earnings fell 19.5%, to $103 million, or $0.60 a share. It earned $128 million, or $0.75 a share, a year earlier. A nine-day strike by CP’s locomotive engineers, conductors and yard workers cut its earnings by around $0.30 a share in the latest quarter. In addition, the company paid severance costs to its previous CEO and other expenses related to the hiring of Hunter Harrison as its new chief executive. These costs cut CP’s earnings by a further $0.30 a share....

INTERNATIONAL BUSINESS MACHINES CORP., $192.45, New York symbol IBM, reported higher-than-expected earnings for the latest quarter. It also raised its earnings forecast for all of 2012. That’s why the stock rose 3% this week. In the three months ended June 30, 2012, the company earned $3.9 billion. That’s up 5.9% from $3.7 billion a year earlier. IBM spent $3.0 billion on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 11.3%, to $3.34 from $3.00. Without unusual items, mainly costs to integrate recently purchased companies, IBM’s earnings per share would have risen 13.6%, to $3.51 from $3.09. On this basis, the latest earnings beat the consensus estimate of $3.43 a share....

Natural gas prices recently dropped below $2 U.S. per million British thermal units (BTUs), a 10-year low. Prices have since moved up somewhat, to $2.87. Shale gas discoveries continue to increase supply. At the same time, demand is slowing due to the weak global economy. Shale gas is trapped in rock formations. To extract it, producers pump water and chemicals into the rock. This fractures the rock and releases the natural gas. Gas production is also growing as a by-product of drilling for more profitable crude oil and natural gas liquids, such as propane and butane....

ALCOA INC., $8.42, New York symbol AA, reported better-than-expected revenue and earnings this week. Even so, the aluminum producer’s shares fell 4%. In the three months ended June 30, 2012, Alcoa earned $61 million, or $0.06 a share. These figures exclude several unusual items, such as costs related to a fire at one of its smelters and a $45-million offer to settle a lawsuit from an aluminum producer in Bahrain. Alcoa warned that it might have to pay an extra $75 million to settle this suit, which accuses the company of overcharging for raw materials. On this basis, the latest earnings beat the consensus estimate of $0.05 a share. A year earlier, Alcoa earned $326 million, or $0.28 a share....

FORD MOTOR CO., $9.50, New York symbol F, reports that its U.S. sales rose 7.0% in June 2012, to 207,759 vehicles from 194,114 in June 2011. That was higher than the consensus estimate of a 4.4% rise. The company recently launched a new version of its Escape sport utility vehicle. That helped spur a 24.8% jump in Ford’s overall SUV sales. Truck sales rose 1.2%, while sales of passenger cars rose 0.3%. The company also warned that its overseas operations would probably lose $570 million (before taxes) in the second quarter of 2012, mainly because the uncertain European economy is hurting its sales on the continent. These businesses had a pre-tax loss of $190 million in the first quarter....