The better-than-expected results prompted management to provide three years’ outlook. The retailer now expects earnings per share to grow at a compounded annual growth rate of 12% to 16% from fiscal 2010 to fiscal 2012 based on annual sales growth rate of 5% to 7% and annual comparable-store sales increase of 2% to 3%.

Big Lots also forecasted first-quarter 2010 earnings between 60 cents and 65 cents a share, and fiscal year 2010 earnings in the range of $2.65 to $2.75.

On a reported basis, including one-time items, Big Lots delivered earnings of $1.27 per share, up 32.3% from 96 cents posted in the year-ago quarter.

The company’s quarterly earnings outperformed the Zacks Consensus Estimate by 2.3%. Earlier, in the third and second quarters of 2009, earnings had topped the Zacks Consensus Estimates by 50% and 12.9%, respectively.

Big Lots operates as a broad line closeout retailer in the United States. The company’s closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at very low prices. Total revenue for the quarter climbed 7% year-over-year to $1,463.3 million.

Big Lots’ point-of-sale register system, store retrofits and new merchandise fixtures position it to drive traffic, meet consumer demand and improve in-store shopping experience.

The company’s sagging comparable-store sales gained momentum in third-quarter 2009, when Big Lots saw its comparable-store sales declining only marginally (0.2%), a substantial improvement from a decline of 2.4% posted in the second-quarter 2009. In the reported quarter, comps grew further 5.1%. Management now expects comps to rise between 4% and 6% in first-quarter 2010, and between 3% and 4% in fiscal year 2010.

Operating profit for the quarter rose 30.3% to $173.5 million, whereas operating margin expanded 220 basis points to 11.9% due to increased efficiencies in distribution and transportation costs, reduced advertising expenses, and decline in depreciation expense. Management now expects fiscal year 2010 operating margins in the range of 7.0% to 7.2%. Big Lots expects an operating margin of nearly 8% by fiscal 2012.

The Columbus, Ohio-based company Big Lots opened 52 stores in fiscal year 2009, and plans to open 80 new stores in 2010. It also expects to close 40 outlets. The company, which currently operates 1,361 stores in 47 states, estimates to have 1,500 outlets by the end of fiscal year 2012.

Big Lots is actively managing its capital. With a strengthening business model, it now expects to generate cash flow of approximately $200 million in fiscal year 2010. In the next three years, cash flow is anticipated to be between $650 million and $700 million. The company generated cash flow of $314 million during fiscal year 2009.

The company anticipates capital expenditure of $115 million for fiscal year 2010, and a cumulative capital expenditure between $300 million and $325 million over the next three years.

Big Lots is also returning much of its free cash to shareholders via share repurchase. After authorizing a share repurchase of $150 million in December 2009, the company recently authorized an additional $250 million, bringing the currently available total to $400 million.

Big Lots ended fiscal year 2009 with cash and cash equivalents of $283.7 million and shareholders’ equity of $1,001.4 million. The company did not have any borrowings under its credit facility. With respect to its three-year outlook, the company forecasts an EBITDA of $525 million to $550 million by fiscal 2012.

Chicago, IL – January 14, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Deutsche Telekom (DT), France Telecom (FTE), Telefonica (TEF), Vodafone (VOD) and Big Lots Inc. (BIG).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday’s Analyst Blog:

Orange/T-Mobile Seeks Approval

European telecom giants Deutsche Telekom (DT) and France Telecom (FTE) have reportedly filed their appeals to the European Commission for approval of the proposed merger of their UK units in a 50-50 joint venture.

The European Commission will review the merger proposal and is expected to provide an initial ruling in February 2010. If eventually approved, Deutsche Telekom’s British subsidiary T-mobile UK will combine with France Telecom’s Orange UK in a historic merger (expected to conclude by mid 2010).

Moreover, the UK competition authorities are currently considering a potential investigation of the said merger as consumer groups are increasingly concerned about the impact of the deal on the competitive scenario in the UK mobile market.

The companies announced their merger plans in September 2009. In the proposed merger, Deutsche Telekom will contribute T-mobile UK including the unit’s 50% stake in the 3G wireless joint venture with Hutchison while France Telecom will also add its UK broadband Internet business besides the wireless operation.

The British mobile market is one of the fiercely competitive markets in Europe. Currently, Spanish telecom giant Telefonica’s (TEF) UK subsidiary O2 leads the market with an approximately 28% share. Vodafone (VOD) and France Telecom’s Orange are the second and third largest operators with 24.7% and 21.5% share, respectively. T-Mobile UK is the fourth largest operator with approximately 16.6 million subscribers and roughly 15% market share. However, the unit contends with declining profit and subscriber erosion.

Big Lots Raises Outlook

Big Lots Inc. (BIG) recently raised its fourth quarter 2009 guidance encouraged by better-than-expected sales results. By categories, electronics, furniture and hardlines experienced an improvement in demand.

The Columbus, Ohio based company Big Lots now expects quarterly comparable-store sales to increase in the range of 3.5% to 4.5%, up from 1.5% to 2.5% forecasted earlier. The shares of Big Lots rose 1.8% or 52 cents to close at $30.21 on Tuesday.

The company’s sagging comparable-store sales gained momentum in third-quarter 2009, when Big Lots saw its comps declining marginally by 0.2%, showing a substantial improvement from a decline of 2.4% posted in the second-quarter 2009.

The company also raised its fourth-quarter earnings guidance. Big Lots stated that it now sees quarterly earnings in the range of $1.19 to $1.24 per share, up from its earlier guidance of $1.09 to $1.14.

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Based in Columbus, Ohio, the company sells women’s intimate and other apparel, beauty and personal care products, home fragrance products and accessories. The company sells its merchandise through specialty retail stores, which are primarily mall-based, and through its websites, catalogue and other channels. The company conducts its business primarily through two reportable segments -– Victoria’s Secret and Bath & Body Works.

Limited Brands’ sustained focus on cost containment, inventory management and merchandise initiatives has enabled the company to manage itself efficiently, even in a difficult consumer environment.

Further, driven by encouraging sales results, Limited Brands seeks to expand aggressively in Canada. The stores are generating sales volumes nearly two and a half times higher than the U.S. average. The company plans to open 30 to 40 Bath & Body Works in fiscal year 2010. The company is also eyeing other international markets, such as Europe and Japan.

However, the company faces stiff competition from chain specialty stores, department stores and discount retailers on attributes such as marketing, design, price, service, quality and brand image. The competitors' larger number of stores, greater market presence, brand recognition and financial resources will likely continue to weigh on LTD's results.

Limited Brands is actively managing its capital. It now expects fiscal year 2009 capital expenditures to be about $225 million, significantly down from $479 million in 2008 and $749 million in 2007, resulting in free cash flow generation between $500 million and $600 million. The company expects to end the year with about $1.5 billion in cash. The company’s strong liquidity will position it to drive future growth.

Big Lots operates as a broad-line closeout retailer in the United States offering food, health, beauty, plastics, paper, chemical and pet products as well as home decorative products, besides other product lines.
 
Big Lots’ closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at very low prices.

Rehabilitation Supply revenues increased 18% year over year to $117.1 million. This was primarily due to Patterson’s internal sales growth and acquisitions.

Patterson expects earnings per share for fiscal 2010 between $1.70 and $1.80. We might reconsider our Neutral recommendation based on the company’s performance in the next quarter.
 
Patterson depends heavily on acquisitions for growth. The company made a number of acquisitions in the past few years like Mobilis Healthcare Group, Columbus Serum Company, Odyssey Veterinary Software LLC, Denesca, Leventhal & Sons Inc., Associated Medical Supply Inc., Metro Medical Inc. etc.

Headquartered in St. Paul, Minnesota, Patterson is a leading distributor of dental, companion-pet veterinarian, and rehabilitation supply in the United States and Canada.

The PATH project consists of a 765-kilovolt transmission line extending from the Amos Substation in Putnam County, West Virginia, to the proposed Kemptown Substation near New Market, Maryland.

The companies made two filings in Maryland and Virginia, designed to coordinate the procedural schedules and to enable the respective commissions to consider the need for the project based on the same facts. In the first filing, Allegheny’s affiliate, the Potomac Edison Company, submitted a new application to the Maryland Public Service Commission requesting authorization to construct the 20-mile Maryland segment.

In an another application, the PATH Allegheny Virginia Transmission Corporation, another Allegheny affiliate, requested the Virginia State Corporation Commission for withdrawal of its application and granting an immediate suspension of the current procedural schedule. PATH plans to file a new application for the 31-mile Virginia segment in early 2010.

The West Virginia Public Service Commission is also reviewing an application for authorization to construct the PATH project in West Virginia, with hearings scheduled for October 2010.

Allegheny Energy and American Electric Power remain committed to the PATH project. According to the most recent analysis by regional grid operator PJM Interconnection, PATH is needed by June 2014 to resolve reliability issues on the existing transmission system.

Headquartered in Greensburg, Pennsylvania, Allegheny Energy is an electric utility company with over $3 billion in annual revenues. The company is engaged in both regulated electricity and natural gas distribution utility operations as well as in the unregulated wholesale energy markets. It owns and operates generating facilities and supplies electricity to approximately 1.6 million customers spread across Pennsylvania, West Virginia, Maryland and Virginia.

American Electric, headquartered in Columbus, Ohio, is one of the largest public utility holding companies catering to approximately 5.2 million customers spread over 11 states. AEP ranks among the nation’s largest generators of electricity, owning more than 38,000 megawatts of generating capacity in the U.S.

This subsidiary of United Technologies Corp. (UTX) will close down its Cheshire, Connecticut, plant by early 2011. From the second quarter of 2010, it will begin shifting some operations from the East Hartford facility to Columbus, Georgia, Singapore and Japan. Pratt & Whitney, which is suffering due to sagging demand from airlines, employs 35,000 workers worldwide, with 11,000 in Connecticut.

The company rejected an offer that the Machinists union valued at more than $80 million in wage and other concessions and a state plan proposing $100 million in economic assistance over five years. Pratt & Whitney has vastly scaled back operations in the state since the 1960s, when more than 20,000 workers were employed.

Pratt & Whitney is a world leader in the design, manufacture and service of aircraft engines, industrial gas turbines and space propulsion systems. The company’s 38,577 employees support more than 9,000 customers in 180 countries around the world. It builds engines for front line fighters, like the F-15 Eagle, F-16 Fighting Falcon, F-22 Raptor and F-35 Joint Strike Fighter, as well as the C-17 Globemaster III military transport.

United Technologies provides high technology products and services to the building systems and aerospace industries worldwide. Its Otis, Carrier and UTC Fire & Security (collectively referred to as the commercial businesses) serve customers in the commercial and residential property industries worldwide. Carrier also serves commercial, industrial, transport refrigeration and food service equipment customers.

Pratt & Whitney, Hamilton Sundstrand and Sikorsky (together called the aerospace businesses) primarily serve commercial and government customers in both the original equipment and aftermarket parts and services markets of the aerospace industry; Hamilton Sundstrand and Pratt & Whitney also serve customers in certain industrial markets. Its major rivals include General Electric Co. (GE) and Boeing Co. (BA).

We currently have a Neutral recommendation on UTX.

The company’s Executive Vice President, Treasurer and Director of Financial Planning Albert Campbell will replace Simon Wadsworth. Campbell joined Mid-America Apartment in 1998 as Vice President of Financial Planning and was later promoted to Senior Vice President and Treasurer of the company in 2003.

Mid-America Apartment owns and manages apartments in the Sunbelt region of the U.S. The company defines its portfolio in two tiers– primary markets and secondary markets. Having a diversified presence in diverse markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.

Primary markets are relatively larger in size compared to secondary markets. On the other hand, secondary markets often have stable fundamentals due to limited new supply. Primary markets include Dallas, Atlanta, Houston, Nashville, Raleigh, Austin, Jacksonville and Tampa. Secondary markets include Memphis, Lexington, Columbus, Greenville, Jackson, Little Rock and Savannah.

Due to conservative use of leverage over the past couple of years, Mid-America Apartment has a healthy balance sheet with low near-term debt maturities and adequate coverage ratios. The company also has moderate unfunded future development costs. We think Mid-America Apartment is well positioned to withstand the current problems in the capital markets and has an able leadership to steer it to future profitability.

The new technology that works on SYNC, SmartGauge with EcoGuide and Ford Work Solutions, will allow the owner to select the time, duration and utility rate for recharging his car on a touch-screen navigation interface and Ford Work Solutions in-dash computer.

The owner could thus choose to accept a charge only during non-peak hours, between midnight and 6 am, when electricity rates are cheaper or when the grid can use renewable sources like wind or solar energy.

Ford said that all 21 of its PHEV Escapes fleet are likely to be equipped with the vehicle-to-grid communications technology. The first batch of specially equipped PHEVs has already been delivered to American Electric Power (AEP) of Columbus, Ohio.

Over the past two years, Ford has consistently focused on technologies based on battery systems, vehicle systems, consumer usage, and grid infrastructure to commercialize electric vehicles. So far, the company and its energy industry partners have logged more than 75,000 miles on the PHEV test fleet.

Ford has formed several partnerships to push its PHEV commercialization strategy. Of all 13 of these partnerships, the company considers the one with Electric Power Research Institute to be vital for the promotion of seamless integration of electric-drive vehicles into the power grid and the transportation sector.

Ford has several new launches in the pipeline that are perfectly in line with this strategy. These include a pure battery electric Transit Connect commercial van (to be launched in 2010), a battery electric Focus compact car (2011) and a plug-in hybrid electric vehicle and next-generation hybrid electric vehicle (2012).

We recommend the shares of Ford as Neutral with a target price of $8.

Weyerhaeuser, one of the largest forest-products companies in the world with operations across 10 countries, reported its fourth straight quarterly loss as it continues to reel from the effect of sluggish demand from the housing industry. However, the company feels that the sector is witnessing signs of stabilization after negotiating the worst of headwinds. The Federal Way, Washington-based company’s sales slumped 36% year over year to $1.39 billion.

Revenue from the Timberlands segment fell 7.1% year over year to $208 million, primarily on a slump in log prices and lower harvest levels driven by the collapse of the California housing market. The Wood Products segment slid 44.5% year over year to $594 million as the company slashed capacity amid weak demand for softwood lumber and depressed prices for engineered products.

Sales from Cellulose Fibers dropped 24.1% year over year to $349 million mainly on account of an extensive boiler repair at a facility in Columbus, Mississippi coupled with annual maintenance outages at two other facilities. The Real Estate segment, which operates under Weyerhaeuser Real Estate Co., reported an almost 44% year-over-year decline to $199 million as traffic decreased 33% and home closings dropped by 47%.

Weyerhaeuser reported gross margin of 24.5%, a decline of 570 basis points over the same quarter last year on lower price realizations and sluggish volumes. Meanwhile, the company’s operating loss came in at $62 million, compared to the loss of $404 million in the year-ago quarter. The narrower loss was caused by cost-restructuring initiatives, including job cuts, which led to a 37.8% year-over-year fall in SG&A expenses to $153 million and a substantial 81% drop in impairment of long-lived assets to $53 million.

Weyerhaeuser’s cash and cash equivalents at the end of the quarter was $1.75 billion, an improvement of $92 million over the previous quarter on higher cash from operations and a gain of $29 million from the sale of non-strategic lands in southwest Washington. The cash was primarily utilized for the payment of dividends ($53 million), capital expenditure ($32 million) and repayment of debt ($18 million).

Moving forward, management continues to expect a difficult third quarter despite signs of stabilization. Weyerhaeuser anticipates the Timberlands unit’s performance to deteriorate further on additional deferrals in timber harvest and lower price realizations.

Continued weakness in demand for Wood Products is expected to be partially offset by slight improvement in prices of certain products. Real Estate is also likely to decline further due to a temporary shift to mid-to-lower priced Arizona properties from higher-priced California homes. Cellulose Fibers is the only division that the company sees benefiting from stabilization in pulp prices and lower downtime.

The full-year Zacks Consensus Estimate, derived from 14 covering analysts, is currently pegged at a loss of $2.46 per share, which has worsened by 4 cents in the past month. The most accurate estimate, however, is slightly better at a loss of $2.35 per share.

Volumes were more than a fifth lower in the industrial segment over the year-ago period, as softer economy has reduced the industrial volumes across the nation. Other utilities like Constellation Energy Group (CEG) and Dominion Resources (D), also reported sharp fall in industrial volumes in the quarter.
 
Tepid economy providing no growth triggers dragged down revenue to $3.2 billion from $3.5 billion in the year-ago period. AEP reiterated its fiscal 2009 outlook and expects EPS of $2.75 – $3.05. This is in-line with our expectation of $2.86 for the current fiscal year.
 
The company’s capital position remains stable with debt-to-capitalization steadily improving to 57.3% after the first half of fiscal 2009 from 63.1% after the end of the previous quarter. Also, with more than $3.5 billion available from revolving credit facilities, AEP has a strong liquidity position close to $3 billion after the first half of the fiscal year.
 
AEP is one of the largest public utility holding companies catering to approximately 5.2 million customers spread over 11 states.  We maintain our cautious Neutral recommendation on AEP.

The company is temporarily resuming production at its MidRange Engine Plant in Columbus with one shift from July 13. The plant makes engines for Dodge Ram pick-up trucks.

The company had shut down the plant in May 2009 after Chrysler abandoned vehicle production during its bankruptcy proceedings. The company is also recalling 400 workers out of the 720 employees it laid off in May. Cummins has eliminated nearly 3,000 workers, mostly in Columbus, since the recession began.

The plant would produce engines for the 2009 Ram Model through mid-August. However, Cummins noted that the facility would again be closed after that, until Chrysler starts building its 2010 truck model in October 2009. Cummins would recall the workers in October 2009.

A softening heavy-duty truck market, which forms over 50% of Cummin’s business, is a matter of concern. The company expects sales to fall across all business segments, with the largest decline expected to come from the Components and the Engine segments in 2009.

Nevertheless, Cummins is likely to benefit from its significant exposure to emerging markets in the event of a global economic recovery. As a result, we rate the shares a Hold and set a target of $32.00.

Company Description

Strayer Education, an education services holding company, owns Strayer University and other assets. The company's mission is to make higher education achievable and convenient for working adults in today's economy.

Strayer offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health care, and public administration to more than 45,000 working adult students at 65 campuses in 14 states, Washington, D.C. and worldwide via the Internet.

Founded in 1892, Strayer University is accredited by the Middle States Commission on Higher Education.

Rising Forecasts

The company, which has outperformed the market over the pas year, is seeing higher estimate revisions on a record first quarter.

Analysts are calling for second-quarter earnings of $1.97 per share, up from $1.81 over the past 60 days.

For the full year, analysts boosted earnings estimates to $7.27 per share from $6.99 over the past 60 days.

For 2010, analysts see earnings of $8.87 per share, versus the 2 months-ago projections of $8.60.

Record Results

The company posted record results in the first quarter. Revenues jumped 28% year-over-year, while earnings per share of $2.08 came in 6% ahead of the consensus estimate and topped the year-prior $1.64. Strayer's Spring 2009 total enrollments were up 22%, and the number for new students increased by 26%.

The company said it continues to expand its geographic footprint with the successful opening of its first two campuses in Ohio, located in Cincinnati and Columbus. Strayer also noted that, as of March 30, its balance sheet showed cash equivalents and marketable securities of $84.0 million with no debt.

The second-quarter report report is scheduled for release on July 16, 2009.

Favorable Industry Comparisons

Strayer boasts a return of equity (ROE) of 51%, soaring past the industry average of 14%. Strayer's net profit margin of 20% is ahead of the industry average of 10%. The company also rewards shareholders with an industry-leading dividend yield of 1%. Zacks Investment Research

Company Description

Strayer Education, an education services holding company, owns Strayer University and certain other assets. The company's mission is to make higher education achievable and convenient for working adults in today's economy.

Strayer offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health care, and public administration to more than 44,000 working adult students at 60 campuses in 12 states, Washington, D.C. and worldwide via the Internet.

Founded in 1892, Strayer University is accredited by the Middle States Commission on Higher Education.

A Record Quarter

The company recently posted record results in the first quarter. Revenues jumped 28% year-over-year, while earnings per share of $2.08 came in 6% ahead of the consensus estimate and topped the year-prior $1.64. Strayer's Spring 2009 total enrollments were up 22%, and the number for new students increased by 26%.

The company said it continues to expand its geographic footprint with the successful opening of its first two campuses in Ohio, located in Cincinnati and Columbus. Strayer also noted that, as of March 30, its balance sheet showed cash equivalents and marketable securities of $84.0 million with no debt.

Thanks to the strong spring enrollment growth, Strayer's second-quarter earnings per share outlook now ranges between $1.95 to $1.97 per share.

11 out of 12 analysts are calling for second-quarter earnings of $1.97 per share, up from last weeks $1.81. For the full year, 13 out of 15 analysts boosted earnings estimates to $7.25 per share from last week's $6.99.

Favorable Industry Comparisons

Strayer boasts a return of equity (ROE) of 51%, more than doubling the industry average of 22%. Strayer's net profit margin of 20% is ahead of the industry average of 15%. The company also rewards shareholders with a dividend yield of 1%. Zacks Investment Research

For an explanation of the contrarian stance that makes Schaeffer's so unique, check out a recent version of Trading Tools.

The Put/Call Ratio Greater than 1.0 screener

Before we begin, let's break down today's stock screener. The filter looks for stocks with a high put/call open interest ratio, indicating a preference for bearish bets among near-term options. Why is this important? Simply put, a high Schaeffer's put/call open interest ratio (SOIR) – measuring options with less than 3 months until expiration – suggests that expectations for the security to rally are extremely low. In other words, a high ratio usually indicates skepticism among short-term options speculators.

Though volume is light, options traders are leery

According to the Zacks filter, Lancaster's SOIR remains relatively high, pointing to a significant amount of pessimism among short-term options players. More specifically, the security's SOIR rests at a lofty 1.62. Compared to similar readings taken during the past year, the current SOIR registers in the 84th percentile. In other words, near-term options traders have been more bearishly biased toward the equity only 16% of the time during the past 52 weeks.

However, after digging deeper into LANC's options configuration, we find that options are very lightly traded on the equity. Peak put open interest in the soon-to-be front-month April series rests at the 40 strike, home to fewer than 650 contracts. This round-number strike is also home to peak call open interest, with only about 400 bullish bets in residence.

Nevertheless, is the cynicism in the options pits warranted? Let's take a look at LANC's recent performance on the charts and find out...

Besting the broad market...

Since tagging a new annual low near the 26 level in November 2008, shares of LANC have been a beacon of hope on the Street, skyrocketing about 60% higher with help from their 10-day and 30-day moving averages. Further demonstrating the security's muscle on the charts is its performance compared to the broad market. During the past 60 trading sessions, the equity has outshined the S&P 500 Index (SPX) by an impressive 47%.

From a longer-term perspective, we find that LANC's recent dash into the black has it poised to close the month atop its 20-month moving average for only the second time since June 2007. Shares are also sitting atop support in the 37-to-38 neighborhood, which contained most of the equity's pullbacks from late 2002 until early 2008. However, the security's quest for new highs could be stalled in the overhead 45 region, which played the part of staunch resistance during the past few years.

Word on the Street

Similar to LANC's short-term options configuration, analyst coverage on the uptrending security is light. What's more, the 2 brokers bothering to rate the shares are skeptically skewed, despite the stock's status as an outperformer. According to Zacks, the equity currently harbors a lukewarm "hold" and a single "sell" rating, with nary a "buy" in sight.

The bottom line

Overall, it's surprising to see how little attention LANC garners on the Street, considering the stock's achievements on the charts. What's more, it seems the modest recognition the security does attract is primarily pessimistic. However, this bit of bearish sentiment could actually act as a boon for the stock in the near term. Should shares of LANC continue their quest for new highs, taking out potential resistance in the 45 neighborhood, the stock could bait more buyers. Plus, an unwinding of skepticism in the options arena – not to mention a fresh wave of positive analyst initiations, upgrades, and/or price-target boosts – could act as catalysts to the upside for the explosive equity.

Zacks Investment Research

This from Money Morning:

While the U.S. government’s plan to invest $250 billion into U.S. financial institutions has been billed as a strategy that will bolster the health of the banking system and also jump-start lending, the recapitalization plan is likely to have a secondary effect – one that whipsawed U.S. taxpayers likely won’t be…

I guess the stock jockeys figured they weren't going to get any bad news out of the credit markets, which were closed, so no news is good news!! The rally was certainly welcomed, and hopefully some of the gains will stick today as we return to a normal trading environment.

And I guess some of the credit for the stock rally has to go to finance ministers around the globe who finally agreed on a plan which seems to be able to work. The leaders of a majority of the worlds largest economies borrowed a page from Warren Buffet's playbook and decided to invest directly into some of their largest financial institutions. The Bush administration announced it would invest $125 billion in nine of the biggest US banks. The US move came after France, Germany, Spain, the Netherlands, and Austria committed $1.8 trillion to guarantee interbank loans and take equity stakes in European banks.

The investment represents a new approach for US Treasury Secretary Henry Paulson, who first promoted a bailout targeted at buying up illiquid mortgage-related assets. The government will obtain its stakes by purchasing preferred shares with warrants similar to investments that Berkshire Hathaway Inc. made recently in Goldman Sachs and General Electric. The move could be just what was needed to 'unfreeze' the credit markets and restore some liquidity in the markets.

I really think the new president should do all he can to try and convince Warren Buffet to at least take an advisory position in the new administration. Now that we have followed his lead on the $125 billion we should see what he suggests for the rest of the $700 billion 'rescue' package. Just think, with his guidance maybe the US taxpayers can come out of this whole episode with a bit of a profit!

The move got the backing of former Federal Reserve Chairman Paul Volcker who said the inevitable recession in the US would be made 'more manageable' by the new government plans to invest directly into American banks. The bailout measures were 'distasteful' and 'not consistent with a capitalistic system,' Volcker said at a lecture in Singapore today. 'But however distasteful, they are necessary to restore stability to the financial system.' But Volcker also warned that the global financial system is in 'intensive care' and will remain there for a considerable time before things return to normal.

The largest mover in the currency markets yesterday was the Australian dollar which has surged up 12% vs. the US$ since late last week; the biggest two day gain since it began trading freely in 1983. The Australian dollar gained as investor's confidence was restored and stock markets rallied. Australian Prime minister Kevin Rudd announced a A$10.4 billion spending package aimed at bolstering Australia's economy, adding to his Oct. 12 pledge to shore up the nation's banks. These moves by the Prime Minister should provide some support under the Australian dollar which had been falling fast. But the Aussie dollar will likely still be subject to some volatile swings, as investors continue to buy the Aussie dollar on carry trade investments, which have proven to be very erratic.

With investors moving back into carry trades, and some confidence returning to the equity markets, the Japanese yen fell against the higher yeilders. The yen headed for a record decline vs. the Australian dollar, but fell less against the US$. Japan's currency has become an excellent gauge of risk appetite in the markets, and the currency has risen as investors exited highly leveraged 'carry trades' over the past few months. But risk appetite has returned as we have exited the 'panic mode' and investors have started to move money back into these leveraged trades.

The Bank of Japan said it will hold an unscheduled monetary policy meeting today to discuss ways to make it easier to add funds to money markets. The bank said yesterday it's considering offering an unlimited amount of dollars to financial institutions, following a move by European counterparts to provide lenders with as much of the currency as they want to reduce short-term borrowing costs.

This recent flood of US$ into the markets has seemed to stabilize them, but what will it do to inflation in the US? One of the first lessons in Economics is that increasing money supply causes an increase in inflation. The billions or trillions (I can't keep up with all of the 'rescue' packages they keep announcing) of US$ which have been placed into the markets will eventually create a big up tick in inflation. And the huge amount of dollars which are being printed and pumped into the credit system will undoubtedly lead to an erosion of the value of the dollar. Simple supply and demand tells you that if we continue to throw unlimited supplies of US$ into the market, the value of these dollars will decrease in value.

And who is holding most of these dollars? China! China's foreign-exchange reserves rose to a world record $1.906 trillion at the end of September. Currency holdings rose 32.9% from a year earlier, the People's Bank of China said on its website yesterday. These reserves have helped to strengthen China's finances as the credit crisis threatens to trigger a global economic slump. The world's fourth biggest economy can still expand 10 percent this year and 9 percent in 2009 according to the central bank. Close to $2 trillion in foreign reserves provides China with a strong foundation and more room to adjust policies to enable it to maintain relatively fast growth. The worlds economic engine will continue to purr despite the slowdown in the US and Europe. Internal demand among these fast growing Asian economies will take the place of some of the exports which will undoubtedly slow. I look for the Chinese currency to continue to be a rock solid performer, with no big movements either way.

In an all out effort to ease the credit freeze, the Federal Reserve recruited help from the ECB, Bank of England, and the Swiss central bank to flood the market with US$. These central banks will auction unlimited dollar funds with maturities of seven days, 28 days, and 84 days at a fixed interest rate. This move is unprecedented, as all previous dollar swaps were capped at a maximum amount while these auctions will be for unlimited funds.

Chuck spoke about these dollar swaps a few weeks ago, explaining that these trades partially account for the huge rally in the US$. Central banks around the world are purchasing US$ to lend out to the markets, at the request of the Federal Reserve.

Policy makers from the G-7 pledged this weekend to take "all necessary steps" to stem the markets' dramatic slide. European leaders agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat after the worst rout in European's stock markets in two decades. But they didn't come up with any coordinated measures, other than saying they need to attach the crisis on a unilateral basis.

Chuck had this to say about the G-7 and G-20 weekend meetings:

"The G-7, G-20 meetings didn't leave the markets much to go on... They issued a communiqué that said, "The will take the necessary steps to stem Global Financial Crisis" I would think that the markets were looking for something with a little more meat to it, don't you? I doubt the credit markets are going to magically unlock on that communiqué... And so the beat goes on... "

The Euro rose the most in three weeks against the dollar in early European trading, moving up over 3 cents from Friday's low of 1.3259. The British pound also advanced against the dollar on speculation the government's bailout plan will avert a banking collapse. In the near term, the plans give investors confidence that there won't be further banking failures. In today's world, everyone is constantly looking for where the next big financial failure will occur, so the European plan to shore up their banks has led to a pretty good rally in the Euro and Pound Sterling.

The Japanese yen, which has been the best currency year to date traded in a rather tight range right around 100 yen per dollar. Some currency research departments are now suggesting that the yen will rally all the way to 95 as investors reverse carry trades. With the global slump in equities, Japanese investors have started selling some of their more than $1.3 trillion in overseas assets to bring money home. Chuck mentioned that he has seen this before, and wanted me to share the following with readers this morning:

"It has been a very tumultuous week, and I just want to make certain that you are aware of this trading pattern that is existing these days... It is Japan circa 1995-1998, when the Japanese stimulus packages and budget junk didn't work, and the economy was circling the bowl. But... The yen was rallying to 85! It was a repatriation of the offshore investments to bring home to squirrel away and have "under the mattress" in case things get even more bleak...

Sound familiar? That's what's going on right now with the dollar... It's a "the worse things get in the U.S. buy the dollar, and if it looks like Armageddon won't happen in the U.S. sell the dollar trend... Nothing more, nothing less..."

Two of the biggest movers over the weekend were the high yielding currencies of Brazil, New Zealand, and South African rand. The Brazilian real was the biggest mover, up over 5% vs. the US$ in the past 24 hours. The rebound in stock market overseas has made investors more comfortable with moving money back into the emerging markets. But this rally could be short lived, as the reality of a global recession sinks in and investors continue to de-leverage their positions. At this point I think it is best to take advantage of rallies in the high yielders to exit and reallocate funds into more 'stable' currencies.

Two which would fit this description are the Norwegian and Swedish currencies which rose against the euro and the dollar on this weekend's news. But these gains could again prove short lived, as Norway's central bank is expected to lower interest rates later this week. Norske Bank pushed forward its regular interest-rate meeting from Oct. 29 to Oct. 15. The bank kept borrowing costs on hold last week while Sweden's Riksbank cut its main rate a half point as part of a coordinated effort by central banks, including the ECB, to revive interbank lending.

Although it is a U.S. based-company, AFL derived nearly 71% of its $15.4 billion 2007 revenue from its Japanese operations (AFLAC Japan) and the rest from its domestic operations. We remain encouraged by the outlook for AFL's Japan operations, as sales through the new channels (Banks and Japan Post network) are expected to gather momentum this year.

After reviewing 2Q08 results, we are maintaining our FY08 and FY09 estimates and our Hold rating on the shares of AFL, with a six-month target price of $62.00 per share. The shares are currently trading at a price-to-book multiple of 3.60x, a 77% premium to the peer group median of 2.04x.

Read the full analyst report on AFL

Company Description

Big Lots operates, through its subsidiaries, as a discount and closeout retailer in the United States. The company offers great bargains on a variety of constantly changing products, making it a one of a kind shopping experience. Big Lots is based in Columbus, Ohio, with over 14,000 employees, and a market cap of $2.5 billion.

Record Inventory Turnover

On August 26th Big Lots announced second-quarter results, including earnings per share of 32 cents, a 52% year-over-year increase. Analysts were forecasting 27 cents per share making this the fourth earnings surprise in the last four quarters, averaging 18%.

Sales were up 1.9%, despite a decrease of 1% in the number of stores, as the company streamlines its distribution centers. Big Lots has improved inventory flow and distribution center productivity leading to a 2% decrease in overall inventory.

Increasing Guidance

Big Lots also increased its guidance for full-year 2008 earnings. The company is anticipating earnings per share of between $1.90 and $2.00, up from between $1.80 and $1.90. Analyst have increased estimates across the board, as most projections are coming in at the upper end of managements expectations.

Seeking Bargains In Tough Times

Many shoppers are seeking better deals in the midst of the current economic down turn. Despite the major indices dropping roughly 20%, Big Lots is up nearly 80% year-to-date.

Even after the gains for 2008, Big Lots maintains a respectable PEG ratio of 1.0, while its competitors average 1.6.

Top Ranked Discount Retailer

Big Lots is the top rated company amongst Discount Retailers on Zacks.com. The industry as a whole is ranked as the 15th out of 217.

The Zacks #1 ranked stock has solid comparisons to its competitors. A 15% 5-year growth rate tops the industry average of 12.6%. The company also has a superior ROE of 23%, easily beating the average of 16.4%.

The Chart

Shares of BIG are trading just under their 52-week high of $34.88, which has developed into a level of resistance. The stock is also setting higher lows for the past couple months, which is a bullish sign. Do not be surprised to see the action consolidate near $32 per share, if it is going to break through the resistance level. Take a look at the chart below.

"CNS" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Goodrich Corporation (GR) manufactures products for the aerospace, defense and homeland security markets, including landing gear, engine control systems, sensors and safety systems.. The company operates 90 facilities in 16 countries.

The company has been landing new contracts. On Aug 18, Goodrich announced it would be providing a landing gear system for the Cessna Model 850 citation Columbus large cabin intercontinental business jet. While Goodrich has supplied Cessna with wheels and brakes in the past, this was the first sale of landing gear to Cessna.

Sales Jump 17% in the Second Quarter

On July 24, Goodrich reported second quarter earnings that beat Wall Street estimates by 32.11%. Net income was $187 million, or $1.46 per share, compared to $125 million, or 98 cents per share, in the second quarter of 2007. Analysts expected $1.09 per share.

Sales grew by 17% to $1.849 billion from $1.576 billion in the year ago period. Growth was led by a 28% increase in sales of large commercial airplane original equipment. Regional, business and general aviation airplane original equipment sales followed close behind, rising 26%. Defense and space sales grew by 11%.

During the quarter, Goodrich was selected by Pratt & Whitney to be the provider of the complete nacelle systems for its new Geared Turbofan engine for both the Mitsubishi Regional Jet (MRJ) and the Bombardier CSeries aircraft families. The contract is expected to create more than $5 billion in both original equipment and aftermarket revenue during the 25-year period after the aircraft enters into service.

Goodrich Raises 2008 Guidance

The company raised full year estimates to $4.80 to $4.95 from $4.30 to $4.45 and expects revenues to be on the high end of previous guidance range of $7.2 billion to $7.3 billion. Sales are expected to grow 14% over 2007.

Consensus Estimates Rise For the Third Quarter and the Full Year

Responding to the bullish second quarter and the higher full year forecast, covering analysts have been raising estimates for both the third quarter and the full year. In the last 60 days, third quarter estimates are up 5 cents to $1.14 from $1.09 per share.

For the full year, estimates jumped 42 cents to $4.93 from $4.51 per share, which is in-line with the company's increased guidance range.

Value Fundamentals

Goodrich is a Zacks #1 Rank (Strong Buy) stock. Its forward P/E is 9.75. GR has a price-to-book of 2.17. The company also has a solid five year average return on equity (ROE) of 16.90%. As an added bonus, the company pays a dividend with a current yield of 1.80%.

"GR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Goodrich Corporation (GR) manufactures products for the aerospace, defense and homeland security markets, including landing gear, engine control systems, sensors and safety systems.. The company operates 90 facilities in 16 countries.

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The company has been landing new contracts. On Aug 18, Goodrich announced it would be providing a landing gear system for the Cessna Model 850 citation Columbus large cabin intercontinental business jet. While Goodrich has supplied Cessna with wheels and brakes in the past, this was the first sale of landing gear to Cessna.

Sales Jump 17% in the Second Quarter

On July 24, Goodrich reported second quarter earnings that beat Wall Street estimates by 32.11%. Net income was $187 million, or $1.46 per share, compared to $125 million, or 98 cents per share, in the second quarter of 2007. Analysts expected $1.09 per share.

Sales grew by 17% to $1.849 billion from $1.576 billion in the year ago period. Growth was led by a 28% increase in sales of large commercial airplane original equipment. Regional, business and general aviation airplane original equipment sales followed close behind, rising 26%. Defense and space sales grew by 11%.

During the quarter, Goodrich was selected by Pratt & Whitney to be the provider of the complete nacelle systems for its new Geared Turbofan engine for both the Mitsubishi Regional Jet (MRJ) and the Bombardier CSeries aircraft families. The contract is expected to create more than $5 billion in both original equipment and aftermarket revenue during the 25-year period after the aircraft enters into service.

Goodrich Raises 2008 Guidance

The company raised full year estimates to $4.80 to $4.95 from $4.30 to $4.45 and expects revenues to be on the high end of previous guidance range of $7.2 billion to $7.3 billion. Sales are expected to grow 14% over 2007.

Consensus Estimates Rise For the Third Quarter and the Full Year

Responding to the bullish second quarter and the higher full year forecast, covering analysts have been raising estimates for both the third quarter and the full year. In the last 60 days, third quarter estimates are up 5 cents to $1.14 from $1.09 per share.

For the full year, estimates jumped 42 cents to $4.93 from $4.51 per share, which is in-line with the company's increased guidance range.

Value Fundamentals

Goodrich is a Zacks #1 Rank (Strong Buy) stock. Its forward P/E is 9.75. GR has a price-to-book of 2.17. The company also has a solid five year average return on equity (ROE) of 16.90%. As an added bonus, the company pays a dividend with a current yield of 1.80%.

"GR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research