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Hot Stock Minute: KPMG Scandal, Making Sense of Penney, Budget Battle Back

Dan Berman
Hot Stock Minute

The KPMG insider trading scandal may prove to be a powder-keg. The wrongdoing at the accounting firm has unleashed major concerns. Herbalife (HLF) has been down nearly 5% in premarket trading. That's on top of nearly a 4% drop yesterday after a halt on trading was lifted. The fall follows news that a senior partner at KPMG was fired for passing along inside information about both Herbalife and Skechers (SKX). So far Skechers has withstood the news better. Shares were up almost 2% yesterday once it was allowed to resume trading.

J-C Penney (JCP) will open this morning at a 12-year low. The stock dropped more than 12% yesterday. It was traders' first chance to digest the news that Myron Ullman is beginning his second stint as CEO of the beleaguered retailer.

President Obama will unveil a new budget plan later this morning. The President is expected to call for $3.77 trillion in spending for the fiscal year that starts in October. That would be a 6% increase. He wants to limit deductions and close loopholes for top earners as a way to collect $580 billion. The plan also calls for changing how the consumer-price index is calculated to curb cost-of-living increases for programs like social security.


We begin this morning with a look at Life Tech (LIFE). The company may extend a deadline for takeover bids which ended last night. An alliance including Blackstone Group, Carlyle Group, and KKR was working into the night trying to come up with funds for an $11-billion bid, but so far no word on the outcome. Meanwhile, Thermo Fisher Scientific has already made an offer for Life Tech. The company is considered an attractive target because of its strength in advanced diagnostics and gene sequencing. The stock is up nearly 75% since last spring and hit a new 52-week high yesterday on the takeover speculation.

Next, Bed Bath and Beyond (BBBY) reports earnings after the closing bell. Analysts expect the company to get a boost from the improving housing market. They say that should offset increasing competition from Amazon (AMZN) and the biggest box retailers like Wal-Mart (WMT). Consensus is for earnings per share of $1.69 up from $1.48 a year ago. Revenue is expected to climb 24% to $3.39 billion. Bed Bath and Beyond has been trading at around $64 a share, right in the middle of its 52-week range.

Also reporting today is beer importer Constellation (STZ) brands. The company is perhaps best known for its portfolio of Corona products, but is looking for the right to market brands owned by competitor Groupo Modelo here in the U-S. The deal is actually part of Anheuser-Busch In-Bev's (BUD) effort to acquire Groupo Modelo which the Justice Department originally shot down. Constellation is expected to post earnings of 45-cents a share with a 6% climb in revenue.

First Solar (FSLR) is coming off a 45% spike yesterday. The climb occurred after the company said saying revenue and earnings for the next three years would be much higher than estimates. First solar had been white hot with traders until it started facing a glut of competition for solar panels. Yesterday's jump was the biggest percentage gain in the company's history, but at less than $40 a share First Solar is trading at barely 1/10 of where it stood five years ago.