BetterTrades looks at Landstar System Inc.

Trucking company Landstar System Inc. (LSTR) acknowledged Thursday its 4Q profit rose 1% to beat Wall Street estimates. 4Q earnings increased to $29M, or $0.54 per share, from $28.7M, or $0.50 per share, in the prior-year period, while quarterly revenues grew 5% to $642.9M from $611.3M. For the full fiscal year, Landstar earnings fell 3% to $109.7M, or $1.99 per share, from $113.1M, or $1.93 per share, the year before. Full-year revenue dipped 1% to $2.49B, from $2.51B in 2006. Landstar noted that its year-over-year comparison was affected the Federal Aviation Administration contract, which contributed more revenue during the fourth quarter of 2006. The FAA contract was a deal that granted the government agency emergency support vehicles usually used after natural disasters.

Landstar System, Inc. is a non-asset based transportation and logistics services company. The company, through its subsidiaries, provides transportation capacity and related transportation services to shippers in the United States, Canada, between the United States and Canada, Mexico, and internationally. The company operates in three segments: Carrier, Global Logistics, and Insurance. The Carrier segment provides transportation services to the truckload markets for general commodities utilizing dry and specialty vans, unsided trailers, flatbed, drop deck, and specialty vehicles. This segment also provides short-to-long haul movement of containers by truck; dedicated power-only truck capacity; and truck brokerage. The Global Logistics segment provides transportation and logistics services that include the arrangement of multimodal, such as ground, air, ocean, and rail moves, contract logistics, truck brokerage, emergency and expedited ground, air, and ocean freight; bus brokerage, and warehousing. The Insurance segment provides risk and claims management services to Landstar's operating subsidiaries. This segment reinsures risks of the company's business capacity owner independent contractors, and provides property and casualty insurance to Landstar's operating subsidiaries. The company provides truckload transportation utilizing dry vans of various sizes, flatbeds, drop decks and light specialty trailers, and temperature-controlled vans and containers; land and air delivery of time-critical freight; and the movement of containers via ocean. It serves various industries, including iron and steel, automotive products, paper, lumber and building products, aluminum, chemicals, foodstuffs, heavy machinery, retail, electronics, ammunition and explosives, and military hardware, as well as logistics and less-than-truckload service providers. The company was founded in 1968, currently employs nearly 1,300 people and is headquartered in Jacksonville, Florida.

If you were to look at the chart for Landstar, you should be able to see that the past several months for them have been less than the company was expecting. In fact, much of that time, the stock remained within a relatively narrow trading channel up until its modest breakout in late January. Its steady gains were in direct correlation to the company’s earnings report and the huge strides the markets made over the past few weeks. Landstar also stated that the company forecasted 1Q and full-year earnings and revenues to grow, along with a solid strengthening in volume for the first half of the year. LSTR is forecasting 1Q earnings per share of $0.41 to $0.46 on revenues just above $577M while analysts are expecting 1Q earnings to be $0.44 a share on $587M in revenues. For 2008, Landstar expects earnings per share of $2.00 to $2.25. The company anticipates full-year revenue growth in the high single to low double-digits, compared with $2.49B in fiscal 2007. Analysts, meanwhile, are forecasting 2008’s earnings to be $2.18 per share on revenue of $2.59B. In addition to a positive outlook, Landstar System has been able to achieve a return on equity (ROE) in the mid 40% range over the past three years. In 2006, ROE was an extraordinary 47%. They have been able to do this with a long-term debt/equity ratio of just 17%.Net profit margins have also increased over the past five years from 3.3% to 4.5%. LSTR is a cash-generating machine, in that at the end of 2006, the company had $288M in free cash flow. Another way of looking at it is that 11.5% of revenue turned into cash that went straight to the bottom line. If the economy does slip into a recession, LSTR should weather the storm due to its non-asset-based business model.

One of the hidden gems about Landstar is that rather than owning its own trucks, they outsource the loads to owner-operators who provide their own rigs. As of today, Landstar currently has more than 30,000 rigs in their network. This means that the owner-operators get the lion’s share of the revenues for each load delivered, but it also encourages them to delivery as many loads as they can. The main benefit is that the revenue-sharing process means that most of Landstar's expenses are variable rather than fixed. When business is slowing for the trucking industry as a whole, Landstar's expenses fall in proportion to any decline in revenues, and the company is able to remain profitable. Over the last 12 months, Landstar has generated $167M in free cash flow. Nearly all of their operating cash goes to share repurchases and dividends since the company isn't buying trucks. In regards to the previous statement, Landstar is currently in the midst of a 2M share repurchase program and since 2002, the company has bought back over 9M shares, decreasing the shares outstanding by over 13%. The company has also declared a quarterly dividend of $0.0375 per share. If LSTR can grow earnings at only 16% per year, currently growing at 29%, and maintain a P/E ratio of 18, the stock will reward investors handsomely throughout the next five years.


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BetterTrades looks at Informatica Corp.

Data integration software provider Informatica Corp. (INFA) announced Tuesday after the markets were closed, that its profits jumped 48% in the 4Q, as both its service and license businesses posted strong growth. The company's net income climbed to $20.6M, or $0.21 per share, from $13.9M, or $0.15 per share a year ago. Excluding one-time expenses, its profit increased to $0.25 per share. Revenues grew 24%, to $113.9M from $91.8M. Informatica's license revenue grew 28%, to $54.9M, and service revenue increased 20%, to $58.9M. The results came in ahead of estimates from analysts, while on average they had forecasted an adjusted profit of $0.22 per share on $109.3M in revenues. Along with a strong showing in their earnings report, Informatica was also recently awarded the top "Gold Winner" honors for their release 8.5 in the category of Data Integration as part of SearchDataManagement.com's prestigious 2007 Products of the Year awards. Informatica 8.5 is a comprehensive release encompassing Informatica's data integration and data quality platforms: Informatica PowerCenter 8.5, Informatica PowerExchange 8.5, and Informatica Data Quality 8.5. All of which provide the mission-critical platform for any type of data integration initiative, within and between enterprises along with broad access to all forms of enterprise data including difficult-to-access mainframe data.

Informatica Corporation provides enterprise data integration software and services in the United States and internationally. Its software offers various enterprise data integration initiatives, including data warehousing, data migration, data consolidation, data synchronization, and the establishment of data hubs, data services, and enterprise data exchanges. The company offers PowerCenter 8 Standard Edition, an enterprise data integration platform that consists of global metadata infrastructure and graphical user interface based development and administration tools; and PowerCenter 8 Advanced Edition offering metadata analysis, team-based development, data analyzer, and Web-based reporting. Its PowerExchange software provides access to data in various enterprise data systems, including mainframe, midrange, and file-based systems. This software also simplifies data integration for various data sources. The company also provides data quality and data profiling software. In addition, Informatica offers product-related customer support, consulting, and education services. It serves energy and utilities, financial services, government and public sector, healthcare, high technology, insurance, manufacturing, retail, services, telecommunications, and transportation sectors. The company distributes its products through direct sales, systems integrators, resellers, distributors, and original equipment manufacturers in North America, Europe, Asia-Pacific, and Latin America. Its strategic partners include Accenture, BearingPoint, Capgemini, Deloitte Consulting, EDS, Hewlett-Packard, Infosys, Lockheed Martin, Oracle, SAP, Tata Consultancy Services, Teradata, and Wipro. The company was founded in 1993, currently employs more than 460 people and is headquartered in Redwood City, California.

Over the past several months, INFA has been able to put together a strong run in their stock’s price. Despite trading within a channel at the start of 2007, Informatica made impressive strides in the market beginning in mid-March, which lasted through much of July. During this time, INFA’s stock was able to gain nearly 30% in their price. Some of their success can be attributed to the deal they struck with SAP AG (SAP) that granted SAP applications to use Informatica’s software enabling its customers to integrate and track data from non-SAP, third-party and legacy systems. The original equipment manufacturer contract now makes Informatica a major supplier to both business software giants SAP and Oracle (ORCL). You can make an argument that either company or other large analytics or applications players would be interested in buying up Informatica's integration capabilities. With a buyout set aside, INFA took a hit in August as the markets traded violently and unpredictable. During this time, INFA lost 7% of their market share before turning it around and making its most pertinent run off the year.

From the start of September through to the end of 2007, Informatica put together a run that would see its stock gain another 30% in price, going from $13.83 a share to just over $18 a share. INFA’s continued success was directly related to the company’s 3Q earnings which saw the company post revenues of $96M, a 22% increase over the same quarter a year ago. Their bottom line also looked strong. 3Q net income came to $14.4M, or $0.15 per share, which compares to net income of $9.4M, or $0.10 per share, in the same period a year ago. The balance sheet, during this time, was also solid with $150M in cash and cash equivalents. The long-term prospects for Informatica look promising. Some of the key drivers include the trend of strategic global mergers, as well as the emergence of new technologies, such as on-demand software. These all require data integration, and Informatica continues to improve its product line. With a big chunk of cash, Informatica has opportunities for stock buybacks or even some deal-making. But in light of its actions so far, it's a good bet that the company will make sure it continues to grow its core business at a healthy rate.


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BetterTrades looks at Chattem Inc.

Over-the-counter drug maker Chattem Inc. (CHTT) announced Tuesday its 4Q profit tripled due to strong sales of Gold Bond powder and revenue from five newly-acquired brands. For the quarter ending Nov. 30th, net income increased to $14.8M, or $0.76 per share, from $4.9M, or $0.26 per share in the prior-year quarter. Analysts polled expected earnings per share of $0.65. Revenue rocketed nearly 55% to $100.6M from $65.1M in the final quarter of 2006. Analysts had predicted revenue of $101.5M. Sales of medicated skin products, which makes up the largest part of the company's overall revenue and include Gold Bond medicated powder, jumped 78%. Sales of oral care products and internal over-the-counter drugs also soared. For the year, profits for Chattem jumped 32% to $59.7M, or $3.08 per share, from $45.1M, or $2.34 per share in the prior year. Revenue jumped 41% to $423.4M from $300.5M in 2006.

Chattem, Inc., through its subsidiaries, engages in the manufacture, sale, and marketing of a portfolio of over-the-counter (OTC) healthcare products, toiletries, and dietary supplements. The company markets its products under various brand names in categories, such as topical pain care, medicated skin care products, medicated dandruff shampoos, dietary supplements, and other OTC and toiletry products. Topical pain care products include Icy Hot, Icy Hot Pro-Therapy, Aspercreme, Flexall, Capzasin, Sportscreme, and Arthritis Hot. Medicated Skin Care products include Gold Bond, Cortizone, and Balmex. The company offers medicated dandruff shampoos under the brand names Selsun Blue and Selsun Salon. Its dietary supplements include Dexatrim diet pills, Garlique cholesterol health supplements, Melatonex sleep aids, New Phase menopausal supplements, and Omnigest EZ digestive aid products. The company's other OTC and toiletry products include Pamprin and Prmsyn PMS for internal analgesics, Bullfrog, Sun-In, and UltraSwim seasonal products, ACT, Herpecin-L, and Benzodent oral care products, and other products, such as Unisom sleep-aid products, Kaopectate anti-diarrhea products, and Mudd facial masques. Chattem markets its products to mass merchandisers, and drug and food retailers in the United States, Canada, Europe, and Latin America. The company was founded in 1879 and is headquartered in Chattanooga, Tennessee and they currently employ nearly 450 workers.

As the chart illustrates for CHTT, the past several months have been an up-and-down ride for the stock. Beginning in late-August, and into early September, the company’s stock was bouncing off of lows and trading around $55 a share. Throughout the month of September, Chattem would continue to expand its market prowess as it would march upwards into setting new yearly highs around $75 a share. Much of the company’s success can be attributed to the company posting 3Q earnings at this time with revenues of $109M and quarterly earnings of $0.85 a share, a 98% increase from the same quarter a year ago. The second break for Chattem near this time was the acquisition of five new brands from Johnson & Johnson (JNJ) which needed to sell some brands in order to acquire Pfizer’s (PFE) consumer health care products. Included in the purchase were brands like sleep aid Unisom and anti-itch medication Cortizone, ACT mouthwash, Kaopectate anti-diarrhea and Balmex, used for diaper rash. With the strength of the company’s current brands, along with the new product line, Chattem was poised to improve their gross margins for the proceeding quarter.

Despite the downturn the stock took throughout November, the company was able to rebound nicely while establishing a support level at around $65 a share by the end of the month and gain much needed momentum leading into December and into the New Year. Once the stock bounced from its support level, the stock maintained a solid stream of price increases leading into a 21% gain in price which culminated into Chattem setting a new 52-week high of $78.51 set earlier this month. After posting solid 4Q earnings, Chattem has raised their 2008 profit guidance along with proclaiming that the company will take more aggressive advertising measures for their top brands. The company now expects 2008 earnings per share of $4.00 to $4.20, while the company previously expected of $3.90 to $4.10. With that, Chattem may just be the right medicine to counter-balance stern volatility as companies like Chattem tend to post stable results regardless of the economic environment.


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BetterTrades looks at McDonald's Corporation

Before Monday's opening bell, McDonald's (MCD) reported a 3% higher quarterly profit, but said December same-store sales were flat in the U.S. because of winter weather and a desire among consumers to cut back on their spending. McDonald's is poised to gain from international exposure, as 55% of earnings before interest and taxes originate from outside the U.S. along with Europe and Asia same-store sales being strong as well in December. McDonald’s strategic structure, based upon the restaurant’s three-tiered menu of premium, core and dollar menu options, positions the company to grow both in sales and customer loyalty in the coming year.

For McDonald’s abroad, the British government has given the restaurant chain the power to award the equivalent of advanced high-school qualifications as part of a plan to improve young people’s skills. Operating more than 1,000 stores across Britain, McDonald’s will begin to train employees for their qualification in basic staff management which will give them the potential of using their financial and practical skills in order to run their own McDonald’s restaurant. McDonald's training will include courses on finance, hygiene and human resources.

McDonald's Corporation operates as a foodservice retailer worldwide. It operates and franchises McDonald's restaurants, which offer various food items, and soft drinks and other beverages. The company also operates Boston Market, a home-meal replacement concept, and has a minority interest in the U.K.-based Pret A Manger, a quick-service food concept. As of December 31, 2006, it operated approximately 31,045 restaurants in 118 countries. Founded in 1948 and based in Oak Brook, Illinois, McDonald’s currently employs more than 465,000 employees.

In the last half of 2007, MCD made a strong run in their stock’s price leading up to their present standing. As shown in the company’s chart, since September, through the start of the New Year, MCD stock gained nearly 20% in price while at the same time, establishing a new 52-week high of $63.69 in mid-December. The New Year brought some concerns to the stock as investors were cautious to see where MCD stocks would land in the future. Because of this concern, the stock retreated for much of January as the price lost 17% in less than a month.

Some of McDonald’s saving grace as of recently was the company’s earning report which was released at the beginning of the week. In that report, MCD announced that Net Income for the 4Q increased to $1.27B from $1.24B from the same period a year ago. In addition, earnings per share also increased from $1.00 per share to $1.06 per share. Along with a jump in income, the company also saw an increase in revenues, which rose more than 6%, from $5.45B to $5.75B from the 4Q in 2006. For the full-year, McDonald's stated that their profits fell 32% to $2.4B while revenue climbed 9% to a record-high of $22.8 billion. Even though MCD is not a growth stock, it is a value stock that has a 2.8% dividend yield which allows investors to gain from marginal gains made by the company.


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