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Ticker Shock: Four Reasons to Steer Clear of JDS Uniphase


Tuesday's top stories and stocks with potential to move.

Quick but funny story: This morning I'm in the shower and washing up as usual. Then for some reason, just before I get out, I apparently put more shampoo in my hair. (Why, I have no idea since I've already washed my hair.) Somehow I manage to forget about it and step out, dry off, get dressed, and proceed to get hair gel out when I immediately realize something is terribly wrong. The back of my head is filled with suds.

Sure, it's unny now, but not so much this morning as it cost me a good 10 minutes. (I'm known for running late in the a.m.)

Asian stocks rose overnight, but just a little bit. The Hang Seng and the Nikkei were up 0.84% and 0.16%, respectively. Meanwhile European stocks were in positive territory earlier this morning, too. And here in the US, we're currently trading higher.

Here's what I'm seeing this morning:

JDS Uniphase (JDSU):
After the close tomorrow, the California-based and one-time high-flying company is due to report its fourth-quarter earnings. The estimate is for a $0.02 loss.

I don't plan on getting in deep, or even dipping my toe in the water.

Here's why:

1. The company is expected to earn $0.18 this year and next. And although numbers in the black are always welcome, with the stock north of $5, I'm not crazy about it.

2. Speaking of that stock price, if it slips below $5, it will likely slip off a bunch of radar screens, too.

3. If I were looking to dabble in tech, why would I look here? The stock has been in a funk, and I'm not seeing any major catalyst. In addition, insiders don't appear to be bellying up in the open market.

4. Even it does beat, unless management paints one heck of a pretty picture, why would the masses come knocking?

Cardinal Health (CAH):
I'm not sure it's the perfect picture of health. But to its credit, the company did manage to meet Street estimates (excluding items) in its fourth quarter.

And maybe even more importantly, its CEO offered up the following quote within the release that I think will draw plenty of eyes: "As we look forward to fiscal 2010 for 'new' Cardinal Health, we expect low single-digit revenue growth and non-GAAP diluted earnings per share from continuing operations in the range of $1.90 to $2.00, which is a slight increase from the implied range of $1.87 to $1.91 provided at our Investor Day on June 2."

My thoughts:

While I see the shares doing well today, I'm lukewarm on the situation overall. My concerns are simple: At a little bit over 18 times the 2010 estimate, there are better deals to be had out there.

2. In addition, I'm wondering what big catalyst is going to drive this stock to the next level.

3. If it does pull back at some point and make a new low, I'm concerned that the stock would sag even further.
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No positions in stocks mentioned.

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