A friend of mine -- who recently came to LA -- ordered a Papa John's Int'l, Inc. (Nasdaq: PZZA) pizza. She used the Internet. All in all, it was pretty efficient.
Well, according to a recent report, Papa John's has sold about $1 billion in pizzas (over the past seven years). That's certainly a lot of dough, huh? And, as should be no surprise, the growth rate has been stunning: about 50% per year.
There is lots of competition, such as Dominos Pizza (Nasdaq: DPZ) and Pizza Hut. And interestingly enough, Pizza Hut plans to launch a web-enabled widget so you can get pizza at super-fast speeds (I'm sure this will be a big hit for Web 2.0 programmers, who tend to eat pizza at about 2 a.m.).
But, as my friend has experienced, there are some glitches. Ordering online it took two hours for her to get her pizza.
Most annoying ads? The wing man series by Pizza Hut is a recent annoyance, but Domino's still, in my mind, has not lived down the ignominy of its Noid commercials in the 1980s.
Most obscene side-dishes? What in the hell are dipping strips? Like we don't realize they're just pizza dough with goo indistinguishable from the plaque clogging our arteries. Bad Pizza Hut! Bad!
Size? Pizza Hut -- 12,800 outlets in 90 countries. Domino's -- 8,624 outlets in 55 countries.
The New York Times reports that Americans in the economic middle are eating pasta instead of meat and staying at Hampton's Inn instead of Hilton as they try to keep their families together in the face of flat income and skyrocketing costs. As a result, some companies are suffering and others are benefiting. Let's look at two that are benefiting and 10 that are hurting:
Here are two companies that are doing better thanks to their lower prices:
MOST NOTEWORTHY: Analog Semiconductors, OrthoVita and First Solar were today's noteworthy initiations:
Morgan Stanley initiated Analog Semiconductors with an In Line rating. The firm assumed National Semiconductor Corp (NYSE: NSM) with an Overweight rating and $26 target and is the firm's top pick; Analog Devices (NYSE: ADI) and Linear Tech (NASDAQ: LLTC) were initiated with Equal Weight ratings and a $32 target and $34 target, respectively.
Barrington believes OrthoVita (NASDAQ: VITA) is the market share and technological leader of the biomaterials market. The firm assumed shares with an Outperform rating and $4 target.
Canaccord Adams believes First Solar's (NASDAQ: FSLR) management and business model are among the best of any PV company and that execution has led to strong profitability plus a successful aggressive capacity ramp. Shares were started with a Buy rating and $325 target.
OTHER INITIATIONS:
Morgan Stanley initiated Yum! Brands (NYSE: YUM) and Domino's Pizza (NYSE: DPZ) with Equal Weight ratings and targets of $40 and $15, and also initiated McDonald's (NYSE: MCD) and Burger King (NYSE: BKC) with Overweight ratings and targets of $65 and $34.
Lehman initiated Alcoa (NYSE: AA) with an Overweight rating and $44 target.
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As expected, the Federal Reserve today cut its key interest rate by one-quarter point to 4.5%. Is this a pause or a hint of more cuts to come?
Unlike Alan Greenspan, Chairman Ben Bernanke doesn't go for grand gestures, but as the accompanying statement indicates, policy makers are concerned about the financial markets. The statement, which had a dissent from a member that didn't want any rate cut, mentions that increased energy prices may put "renewed upward pressure on inflation," but did mention that economic growth was "solid" and that strains on financial markets had eased "somewhat on balance."
At first, the stock market didn't know what to make of the Fed's move. The Dow Jones Industrial Average bounced around in the minutes following the release of the statement. Eventually, Wall Street decided that it liked what the Fed had to say and sent the Dow Jones industrial average higher by triple digits. Maybe people were expecting more cuts to come, though that's far from a certainty.
Some pundits seemed to expect a 50-basis-point cut. The Fed has already done quite a bit. As Bloomberg News notes, "Policy makers have now lowered their target rate for overnight loans between banks by 0.75 percentage point in six weeks, the most aggressive easing since the economy was emerging from its last recession in 2001."
The stock market had its biggest drop today in a month as investors absorbed a plethora of earnings disappointments, cuts in profit outlooks and pessimistic comments about the economy.
The statistics speak for themselves. The Dow Jones industrial average fell more than 340 points. Bloomberg News notes that, "Ten industry groups in the S&P 500 decreased today, with 458 of the index's members posting declines. Thirteen stocks dropped for every one that gained on the New York Stock Exchange."
Bad news was so plentiful today that it's tough to single out one reason for the market's sell-off. Caterpillar Inc. (NYSE: CAT) reported disappointing results and lowered its earnings forecast. Honeywell Inc. (NYSE: HON) spooked investors with talk of slowing growth. Shares of Schlumberger Ltd. (NYSE: SLB) fell after the oil field services company said it drilling projects would be delayed. Even shares of 3M Co. (NYSE: MMM), which reported better-than-expected results, got sucked into the downward spiral as investors were concerned about a planned price cut for its optical films.
Then there's the continued worry about consumer spending that hurt companies ranging from Harley-Davidson Inc. (NYSE: HOG) to Domino's Pizza Inc. (NYSE: DPZ) to Hershey Co. (NYSE: HSY) this week. Financial shares continue to get pummeled on concerns about the subprime mortgage meltdown. Wachovia Corp. (NYSE: WB) reported ugly earnings earlier today. About the only sector that seems to be holding on is tech, thanks to yet another blowout quarter from Google Inc. (NASDAQ: GOOG).
Wall Street isn't just worried about the future, it's nearly petrified waiting for the next shoe to drop from the flow of earnings reports coming over the next few weeks. Pundits, such as David Joy of RIverSource Investments, weren't expecting things to get better anytime soon.``When you have earnings expectations that are negative going into the third-quarter reporting season and you start to get some disappointments on top of that after five years of double-digit earnings growth, this market's going to struggle,'' Joy told Bloomberg News.
I almost forgot to mention skyrocketing oil prices that seem headed to $100 per barrel and beyond, which helped push up the big oil companies including ExxonMobil Corp. (NYSE: XOM).
Domino's Pizza, Inc. (NYSE: DPZ) saw its Q3 profit drop by a staggering 55% as reported this morning. Domino's management explained the root causes as weak consumer spending added with cost pressures. Cost pressures? Apparently, either the cost of making pizza has changed big-time in the last three months, or gas prices and commodity food product prices have gone up. I'll take the latter -- you?
For the Q3 period, Domino's net income dropped to $10.99 million or $0.17 per share from $24.5 million or $0.39 per share in the year-ago quarter. Most analysts expecting about $0.23 EPS. The food company's quarterly revenue rose 3.2% to over $337 million as international sales became the star of the quarter. CEO David Brandon suggested that trying to mix increasing prices with declining traffic was a challenge in the quarter. Also mentioned was ... wait for it ... higher food costs. Milk prices (cheese) indeed went up, but at the butt-end of Q3, not during the whole period. Could this be an excuse?
While weak domestic consumer spending hampered sales, international sales did just the opposite, increasing 8.3% for the quarter. Have Domino's done enough in the Q3 period to goose more sales from customers, if that was even possible? I'll say that Papa John's International (NYSE: PZZA) advertised like crazy in my area this past quarter -- on television, newspapers and in other areas. I saw next to nothing from Domino's. I wonder if the company is masking "declining sales" with "losing business to the competition?"
MOST NOTEWORTHY: Lululemon, Domino's Pizza, Kenexa, Omniture and News Corp were today's noteworthy initiations:
Lululemon (NASDAQ: LULU) was initiated with a Neutral rating at Merrill Lynch. CIBC believes the company is well-positioned to replace its Canadian success in the U.S. market and started shares with a Sector Outperformer rating and $39 target. The stock was started at Wachovia with a Market Perform rating on valuation.
Citigroup finds Domino's Pizza (NYSE: DPZ) compelling for long-term investors given the company's solid cash flows, above-average margins, and international growth opportunity. The firm initiated shares with a Buy rating and $22 target.
RBC Capital started shares of Kenexa Corporation (NASDAQ: KNXA) with a Sector Perform rating and $32 target, citing lack of visibility into the company's product roadmap.
RBC initiated shares of Omniture Inc (NASDAQ: OMTR) with an Outperform rating and $33 target. The firm believes Omniture is well-positioned given cross selling opportunities, best in class products, strong secular trends, and expanding client roster.
News Corporation (NYSE: NWS) was initiated with a Buy rating and added to Stifel's Select List. The firm believes the FOX TV Network, stations and FOX News can garner an incremental recurring 100% margin retransmission and affiliate fees totaling $1B by 2010, adding that its sum-of-the-parts model for News Corp captures the value of $8B of "hidden" assets, yielding a fair market value of $30-$31.
OTHER INTIATIONS:
CRT Capital initiated shares of Navistar (NASDAQ: NAVZ) with a Buy rating and $75 target.
JP Morgan started shares of Dice Holdings (NYSE: DHX) with an Overweight rating.
Think Equity started shares of Whole Foods Market Inc (NASDAQ: WFMI) with an Accumulate rating and $51 target.
Morningstar.com, Inc. (NASDAQ-MORN) volatility was flat as MORN rallied 19% on 44% increase in second quarter revenue. Morningstar.com, a provider of independent investment research, was recently up $10.02 to $58.93. MORN reported a second quarter earnings per share (EPS) of 38 cents verses a consensus estimate of 35 cents. MORN reported consolidated Q2 revenue of $109 million, up 44% from Q2 2006. MORN generated $32.2 million in Q2 free cash flow. MORN September option implied volatility of 32 is near its 26-week average according to Track Data, suggesting non-directional risks.
Volatility Index S&P 500 Options: VIX down 2.41 to 21.26.
Burger King (NYSE: BKC) has licensed its brand name for a line of chips to Inventure Group (NASDAQ: SNAK), USA Today reports. This fall, junk-food lovers can try new Ketchup & Fries or Flame-Broiled burger-flavored chips. "It's a fun fit," BK's chief marketer, Russ Kline, says. "This makes great sense for us. When you think about the sheer impressions of our trademark that this will create, the value is gigantic."
"Fun" fit? "Gigantic" value?
This looks like a direct marketing campaign to get children attached to the BK brand name. While the chips, sold in two-ounce and five-ounce packs, are expected to sell in stores, Inventure Group plans to market a one-ounce, 100-calorie pack in vending machines.
"We've got our own business objectives," Kline says. "You'll never see me interested in how Burger King Ketchup & Fries stacks up against Doritos in some Nielsen report."
Is it a stretch to think this is a direct attempt to attract kids? Is it also a stretch to think the new 100-calorie packs could be marketed for America's schools?
Today, I met with a friend who is involved in a business that provides background checks on employees. He said the business is doing well – except for the Fortune 500 customers. Why? Perhaps these companies are cutting back jobs.
And, could that be the result of private equity? After all, with large amounts of capital, private equity firms are targeting mega companies like TXU (NYSE: TXU) and First Data Corp (NYSE: FDC). What's more, private equity deals often involve job cuts.
Well, Congress is thinking about these issues and even had a hearing today.
MOST NOTEWORTHY: Netflix, Inc (NFLX), Blockbuster Inc (BBI), The Mosaic Company (MOS) and Domino's Pizza, Inc (DPZ) were some of today's noteworthy downgrades:
First Albany cut Netflix Inc (NASDAQ: NFLX) to Neutral from Buy to reflect weak industry subscriber additions.
Pacific Crest downgraded Linear Technology Corp (NASDAQ: LLTC) to Sector Perform from Outperform based on secular headwinds and an increase in DOI to 82 days.
A friend of mine -- who recently came to LA -- ordered a Papa John's Int'l, Inc. (Nasdaq: PZZA) pizza. She used the Internet. All in all, it was pretty efficient. 
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Manic Monday meet Twisted Tuesday.
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Morningstar.com, Inc.
Today, I met with a friend who is involved in a business that provides background checks on employees. He said the business is doing well – except for the Fortune 500 customers. Why? Perhaps these companies are cutting back jobs.
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
