KHD Humboldt Wedag International Ltd. (KHD), which provides plant engineering services, said Monday its 2007 profits increased 35% as cement producers in emerging markets increasingly used the Hong Kong-based company's grinding and cooling techniques. Net income for the year climbed to $42.1M, or $1.39 per share, from $31.3M, or $1.03 per share in 2006. Profits from continuing operations surged 49% to $51M, or $1.68 per share, compared to $34.2M, or $1.12 per share for 2006. While discontinued operations brought a loss of nearly $9.4M, or $0.31 per share, KHD reported a one-time gain of $513,000, or $0.02 per share. Revenues jumped to $508.4M from $404.3M, while order backlogs climbed 38% to $919.4M for the year. The company did not release 4Q results but they did release thoughts on the company’s 2008 outlook. On Monday, KHD expects its 2008 profit to increase about 50% as emerging markets will continue to use its grinding and cooling techniques. The company, which said it expects order intake to increase to $1.1 billion from $883.8 million, forecast earnings per share will be in the range of $2.05 to $2.15. The company said its 2008 guidance does not include the effect of any currency fluctuations or the benefits of planned business expansion planned in Eastern Europe and Russia. This year will be company’s first full year as an industrial plant engineering and equipment supply company. The focus in 2008 will be to set the foundation for growth in their traditional markets of cement, coal and minerals processing and to expand the horizons beyond these traditional markets to adjacent industries for sustaining the track record KHD in order to increase shareholder’s value.
KHD Humboldt Wedag International Ltd. operates as an industrial plant engineering and equipment supply company. The company provides proprietary technologies, equipment, and engineering/design services for cement, and coal and mineral processing industries. Its service offerings for the cement industry include plant design; equipment design and development; engineering services; automation services; grinding and pyro-process technologies; and a range of systems automation products, including process control systems and equipment optimization products. The company's services and products for the coal and minerals industry consist of grinding, sorting, and dewatering technology applications; machines and plants for coal separation; machines and plant components for the beneficiation of ore and minerals with focus on crushing, grinding, and separation; coal flotation reagents; and sorting products, such as jigs, screens, centrifuges, float cells, and flocculant products. KHD Humboldt Wedag International has operations in India, the People's Republic of China, Russia, Germany, the Middle East, Australia, South Africa, and the United States. The company was founded in 1951. It was formerly known as MFC Bancorp, Ltd. and changed its name to KHD Humboldt Wedag International, Ltd. in 2005. The company is headquartered in Central, Hong Kong and currently employs 1,000 people.
KHD Humboldt Wedag International has spent two years transforming itself from a financial services company into a global infrastructure company. Prior to November 1st, 2005 the company was known as MFC Bancorp. The transition was completed in the 3Q of 2007 and now the company is focused on their core business of supplying proprietary technologies, equipment and engineering/design services for cement, coal and mineral processing. The share price has fallen significantly recently on no news but there is a positive outlook on their shares. The stock peaked near $46 on Halloween and since then, has lost more than a third of its value simply due to fear. The company has huge long-term potential and the stock could double or triple in price over the next few years. The strength behind KHD's growth is that it has a truly international business. The difference being that KHD receives an even smaller percentage of its sales from the U.S., which has helped to shelter it from some of the worries recently plaguing our markets.
KHD’s primary markets are Asia, Russia and Eastern Europe. It also does business in the Middle East and Africa. All are strong growth areas for infrastructure. Revenues and earnings are growing at 50% to 100% rates over 2006 quarters and year-to-date. The company’s backlog of signed orders is also growing, with backlogs climbing 38% to $919.4M for the year and expectations in order intakes which should increase to $1.1B this year. In addition, the company has a P/E Ratio of 21 on trailing earnings and over $9 a share in cash. The stock is very fairly valued for this type of growth. So you have a $1B market cap, international stock doing infrastructure business in emerging markets, that hasn’t been discovered. Sounds like a recipe for some outstanding stock price appreciation. The infrastructure group has tremendous potential as a growth investment due to the fact that it has little exposure to the domestic U.S. economy, great exposure to energy markets, exposure to petrodollars, and growing backlogs which provide future earnings for the company.
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Monday, March 31, 2008
Friday, March 28, 2008
BetterTrades looks at McDermott International Inc.
McDermott International, Inc. (MDR) announced today that a subsidiary of J. Ray McDermott, S.A. has received a letter of award for the engineering, procurement and construction of 6,500 metric tons of topside modules for the Peregrino floating, production, storage and offloading (FPSO) vessel from A.P. Moller-Maersk A/S. Projects of this nature are typically valued in excess of $250M. This project underscores J. Ray’s ability to draw from its global resources to offer a fast track and cost effective solution. The company’s engineering and procurement resources in Houston combined with their operations in Indonesia will be able to leverage the global footprint of J. Ray to optimize project execution and delivery. Engineering and procurement activities have commenced while the fabrication scope is expected to begin in the 3Q of 2008, along with the construction of the topside modules which will also commence in the 3Q of 2008 at J. Ray’s Batam Island facility in Indonesia, where up to 1,200 Indonesian craftsmen are expected to be employed on this project. The Peregrino FPSO project is expected to be complete by the 4Q of 2009 and will ultimately be operated in the Peregrino field, located in the Campos Basin approximately 85 kilometers offshore Brazil. Under the development plan, the field is to be designed with the FPSO and two drilling platforms.
McDermott International, Inc., through its subsidiaries, operates as an engineering and construction company worldwide. The company operates in three segments: Offshore Oil and Gas Construction, Government Operations, and Power Generation Systems. The Offshore Oil and Gas Construction segment engages in the front-end design and detailed engineering, fabrication, and installation of offshore drilling and production facilities; and installation of marine pipelines and subsea production systems. It also provides project management and procurement services. The Government Operations segment supplies nuclear components, fuels, and assemblies to the U.S. Government, as well as provides various services, including uranium processing, environmental site restoration services, and management and operating services for various U.S. Government-owned facilities primarily within the nuclear weapons complex of the U.S. Department of Energy. The Power Generation Systems segment provides fossil fuel-fired steam generating systems, large replacement commercial nuclear steam generators and components, and environmental equipment and components, as well as related services. It designs, engineers, manufactures, constructs, and services utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications, and other industrial uses. The company was founded in 1923, currently employs more than 28,000 people and is based in Houston, Texas.
Sometimes a company is simply the best in its sector. And yet, it's overlooked. In the infrastructure space, if you look at the numbers, you'll find that McDermott is the cheapest and has the best fundamentals. Within the industry, MDR has the lowest PE of the group despite having the best operating margins, ROA, revenue and growth. Some of others within the same industry may have a faster growing backlog of business, but MDR's book of business is still nothing to ignore, going from $8.6B to $9.3B last quarter. Not bad for a $10B cap company. In addition, MDR is able to achieve 11% operating margins, while the others are lower, and, with no debt and a $700M cash balance, this will only add to the strength of this company. McDermott carries a PE of 20, amazing revenue, up 46% over first 9 months of the fiscal year, and earnings up 123% over the first 9 months of the fiscal year as well, and a Return on Assets (ROA) of nearly 11%.The one number that really pops out in this stock, even better than the earnings growth, is the Return on Equity (ROE). From 2002 until 2004, it was zero. Then in 2005, it went to 11.4%. In 2006, it jumped to 82.5%. This year, for the trailing twelve months, ROE is at 75.5% and analysts are expecting 51.5% next year. You'll have to look long and hard to find a stock with similar or better returns.
In the company’s most recent earnings report, released in late-February, McDermott beat the analysts’ forecasts of $0.64 making $0.70 in the 4Q, while clobbering the revenue forecasts of $1.476B, getting $1.562B. In that same report, MDR posted an operating margin of 12.3% in the final quarter along with an operating margin of 12.7% for the full-year. McDermott already had a lot going for it this quarter. They earned $160M this quarter, while in the 4Q of 2006 they made $125M. That quarter included a one time tax benefit of $43M. Remove that and they doubled their earnings. Also reported were individual sectors within the company and how well they were performing. Offshore Oil & Gas Construction segment revenues were up $700M for the quarter and therefore, up sequentially and year-over-year. However, recent price momentum and earnings reports are useful to investors, but there is no guarantee that what went on in the past will continue or accelerate enough to move a stock. McDermott's daily, weekly and monthly charts are all at least somewhat bearish even though its fundamentals look strong. So all this is good news. But it just might all be in the stock price already. Nothing goes up forever. And when a stock has gone from $1.60 to $94, split adjusted, in 5 years, investors need to curb their enthusiasm. The large jump in earnings, where they doubled for 2 years and then slowed only a little, can't go on. In fact, going from $4.35, expected this year, to $4.85, forecast for next year, is only 11.5%. It's extremely difficult to grow earnings as a company gets larger since the base number is so large to begin with.
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McDermott International, Inc., through its subsidiaries, operates as an engineering and construction company worldwide. The company operates in three segments: Offshore Oil and Gas Construction, Government Operations, and Power Generation Systems. The Offshore Oil and Gas Construction segment engages in the front-end design and detailed engineering, fabrication, and installation of offshore drilling and production facilities; and installation of marine pipelines and subsea production systems. It also provides project management and procurement services. The Government Operations segment supplies nuclear components, fuels, and assemblies to the U.S. Government, as well as provides various services, including uranium processing, environmental site restoration services, and management and operating services for various U.S. Government-owned facilities primarily within the nuclear weapons complex of the U.S. Department of Energy. The Power Generation Systems segment provides fossil fuel-fired steam generating systems, large replacement commercial nuclear steam generators and components, and environmental equipment and components, as well as related services. It designs, engineers, manufactures, constructs, and services utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications, and other industrial uses. The company was founded in 1923, currently employs more than 28,000 people and is based in Houston, Texas.
Sometimes a company is simply the best in its sector. And yet, it's overlooked. In the infrastructure space, if you look at the numbers, you'll find that McDermott is the cheapest and has the best fundamentals. Within the industry, MDR has the lowest PE of the group despite having the best operating margins, ROA, revenue and growth. Some of others within the same industry may have a faster growing backlog of business, but MDR's book of business is still nothing to ignore, going from $8.6B to $9.3B last quarter. Not bad for a $10B cap company. In addition, MDR is able to achieve 11% operating margins, while the others are lower, and, with no debt and a $700M cash balance, this will only add to the strength of this company. McDermott carries a PE of 20, amazing revenue, up 46% over first 9 months of the fiscal year, and earnings up 123% over the first 9 months of the fiscal year as well, and a Return on Assets (ROA) of nearly 11%.The one number that really pops out in this stock, even better than the earnings growth, is the Return on Equity (ROE). From 2002 until 2004, it was zero. Then in 2005, it went to 11.4%. In 2006, it jumped to 82.5%. This year, for the trailing twelve months, ROE is at 75.5% and analysts are expecting 51.5% next year. You'll have to look long and hard to find a stock with similar or better returns.
In the company’s most recent earnings report, released in late-February, McDermott beat the analysts’ forecasts of $0.64 making $0.70 in the 4Q, while clobbering the revenue forecasts of $1.476B, getting $1.562B. In that same report, MDR posted an operating margin of 12.3% in the final quarter along with an operating margin of 12.7% for the full-year. McDermott already had a lot going for it this quarter. They earned $160M this quarter, while in the 4Q of 2006 they made $125M. That quarter included a one time tax benefit of $43M. Remove that and they doubled their earnings. Also reported were individual sectors within the company and how well they were performing. Offshore Oil & Gas Construction segment revenues were up $700M for the quarter and therefore, up sequentially and year-over-year. However, recent price momentum and earnings reports are useful to investors, but there is no guarantee that what went on in the past will continue or accelerate enough to move a stock. McDermott's daily, weekly and monthly charts are all at least somewhat bearish even though its fundamentals look strong. So all this is good news. But it just might all be in the stock price already. Nothing goes up forever. And when a stock has gone from $1.60 to $94, split adjusted, in 5 years, investors need to curb their enthusiasm. The large jump in earnings, where they doubled for 2 years and then slowed only a little, can't go on. In fact, going from $4.35, expected this year, to $4.85, forecast for next year, is only 11.5%. It's extremely difficult to grow earnings as a company gets larger since the base number is so large to begin with.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, March 27, 2008
BetterTrades looks at Pan American Silver Corp.
With silver breaking through to more than $20 per ounce recently for the first time since its famous 1980 spike to around $50, what better time to digest earnings from a silver miner? After witnessing the acceleration in silver's rise right next to gold's in recent weeks, many industry analysts now think that silver is poised to outperform gold. Silver's value is becoming much closer to gold's, breaking out from its recent 50 to 1 gold-to-silver ratio and trending in the direction of its historic range, around 16 to 1. However, investments in silver or gold are not for the faint of heart. These metals can experience gut-wrenching corrections at unexpected points in a bull market cycle. Over the long run, though, the stage appears set for further price appreciation. Silver mining companies bring additional leverage to the equation and could go ballistic if silver breaks out, in particular, Pan American Silver Corporation (PAAS).
Pan American Silver Corp. (Pan American) is engaged in silver mining and related activities, including exploration, extraction, processing, refining and reclamation. The Company's primary product, silver, is produced in Peru, Mexico and Bolivia, along with project development activities in Argentina, Mexico and Bolivia, and exploration activities in South America and Mexico. Pan American's wholly owned and partially owned subsidiaries include Pan American Silver S.A. Mina Quiruvilca, Compania Minera Argentum S.A., Plata Panamericana S.A. de C.V., Minera Corner Bay S.A. and Compania Minera PAS Bolivia S.A. Compania Minera Triton S.A. In January 2006, Pan American Silver S.A.C. merged with Compañia Minera Huaron S.A. to form Pan American Silver S.A. Mina Quiruvilca. All of the Company's operations are within the mining sector, conducted through operations in six countries. Its products include silver, zinc, lead and copper produced from mines located in Mexico, Peru and Bolivia. The company was founded in 1979 and is headquartered in Vancouver, Canada.
In it most recent earnings report, released in late-February, the Canada-based firm reported a decline in 4Q net income due to significant rise in production costs despite 4% increases in revenues for the quarter. PAAS reported quarterly net income of $26.1M, or $0.34 per share compared to $29.7M or $0.39 per share last year. Analysts had expected earnings of $0.33 per share. Sales for the 4Q increased 4% to $85.89M from $82.59M in the previous year. Cost of sales, however, jumped by nearly 17% to $48.8M for the quarter from $41.9M last year. The company's silver production surged 63% year-over-year to 5.1 million ounce, which resulted in a 200% increase in production costs. Production costs for the latest quarter were $34.3M compared to $11.4M in the year ago quarter. Cash flow from operations before changes in non-cash working capital for the latest quarter increased 23% year-over-year to $27.3M. For the full year 2007, Pan American Silver recorded net income of $88.9M or $1.16 per share versus $58.2M or $0.79 per share for 2006. Sales for fiscal 2007 advanced 18% to $301.1M aided by increased silver and gold production and higher realized silver prices.
There have been a number of recent articles exposing how the silver market is experiencing a significant shortage and customers are being asked to wait for months in order to receive their silver due to dealers running out. Silver breaking the $20 level caught investors' attention, and if the supply/demand situation is truly as bad as it seems and even a small amount of investment dollars begin to flow into silver, you could see the price spike to $50 or more. Since the August lows, when silver hit just over $11 an ounce, we have seen silver surge to $21 for a rough gain of 75%. That is a very good return over 7 months or 92% if annualized.
In addition to replacing 100% of the 20.8 million ounces of contained silver that were mined during 2007, the company added new proven and probable silver reserves of 14.5 million ounces and increased measured and indicated silver resources by another 4.9 million ounces. Therefore, Pan American has not only replaced what they have mined, but they have added to their proven and probable silver reserves. In the last two years PAAS has discovered, upgraded and added through acquisitions of joint venture interests over 86 million ounces of silver, before considering ore mined. In anyone’s book, this represents significant value creation. In 2007, the Company drilled over 95,000 meters, almost exclusively at its existing mines. The full results of the Company’s 2007 drilling programs have been incorporated into the year-end silver reserve. In 2008, the Company plans another plus 90,000 meter exploration drilling program and while much of this effort will again be focused on increasing proven and probable reserves at operating mines, it will also include for the first time in many years testing of a number of newly acquired, highly prospective Greenfield projects in Peru and Mexico.
Looking ahead, the company expects silver production to rise by 14% to 19.5 million ounces in 2008. It said that production of by-product zinc and lead are also expected to increase in 2008, while gold output is projected to be significantly higher due to new production from Manantial Espejo mines in Argentina. Consolidated cash costs are forecast to be $4.31 per ounce, while capital expenditures are expected to be $152.1M for 2008, most of which are targeted to complete construction at Manantial Espejo and the expansion of San Vicente in Bolivia. Pan American Silver Corp. closed Thursday's regular trading session at $39.57, down $0.88 from Wednesday's close of $40.45. Today’s price represents a 10.3% margin from its all-time trading high of $44.10 established on March 14th.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Pan American Silver Corp. (Pan American) is engaged in silver mining and related activities, including exploration, extraction, processing, refining and reclamation. The Company's primary product, silver, is produced in Peru, Mexico and Bolivia, along with project development activities in Argentina, Mexico and Bolivia, and exploration activities in South America and Mexico. Pan American's wholly owned and partially owned subsidiaries include Pan American Silver S.A. Mina Quiruvilca, Compania Minera Argentum S.A., Plata Panamericana S.A. de C.V., Minera Corner Bay S.A. and Compania Minera PAS Bolivia S.A. Compania Minera Triton S.A. In January 2006, Pan American Silver S.A.C. merged with Compañia Minera Huaron S.A. to form Pan American Silver S.A. Mina Quiruvilca. All of the Company's operations are within the mining sector, conducted through operations in six countries. Its products include silver, zinc, lead and copper produced from mines located in Mexico, Peru and Bolivia. The company was founded in 1979 and is headquartered in Vancouver, Canada.
In it most recent earnings report, released in late-February, the Canada-based firm reported a decline in 4Q net income due to significant rise in production costs despite 4% increases in revenues for the quarter. PAAS reported quarterly net income of $26.1M, or $0.34 per share compared to $29.7M or $0.39 per share last year. Analysts had expected earnings of $0.33 per share. Sales for the 4Q increased 4% to $85.89M from $82.59M in the previous year. Cost of sales, however, jumped by nearly 17% to $48.8M for the quarter from $41.9M last year. The company's silver production surged 63% year-over-year to 5.1 million ounce, which resulted in a 200% increase in production costs. Production costs for the latest quarter were $34.3M compared to $11.4M in the year ago quarter. Cash flow from operations before changes in non-cash working capital for the latest quarter increased 23% year-over-year to $27.3M. For the full year 2007, Pan American Silver recorded net income of $88.9M or $1.16 per share versus $58.2M or $0.79 per share for 2006. Sales for fiscal 2007 advanced 18% to $301.1M aided by increased silver and gold production and higher realized silver prices.
There have been a number of recent articles exposing how the silver market is experiencing a significant shortage and customers are being asked to wait for months in order to receive their silver due to dealers running out. Silver breaking the $20 level caught investors' attention, and if the supply/demand situation is truly as bad as it seems and even a small amount of investment dollars begin to flow into silver, you could see the price spike to $50 or more. Since the August lows, when silver hit just over $11 an ounce, we have seen silver surge to $21 for a rough gain of 75%. That is a very good return over 7 months or 92% if annualized.
In addition to replacing 100% of the 20.8 million ounces of contained silver that were mined during 2007, the company added new proven and probable silver reserves of 14.5 million ounces and increased measured and indicated silver resources by another 4.9 million ounces. Therefore, Pan American has not only replaced what they have mined, but they have added to their proven and probable silver reserves. In the last two years PAAS has discovered, upgraded and added through acquisitions of joint venture interests over 86 million ounces of silver, before considering ore mined. In anyone’s book, this represents significant value creation. In 2007, the Company drilled over 95,000 meters, almost exclusively at its existing mines. The full results of the Company’s 2007 drilling programs have been incorporated into the year-end silver reserve. In 2008, the Company plans another plus 90,000 meter exploration drilling program and while much of this effort will again be focused on increasing proven and probable reserves at operating mines, it will also include for the first time in many years testing of a number of newly acquired, highly prospective Greenfield projects in Peru and Mexico.
Looking ahead, the company expects silver production to rise by 14% to 19.5 million ounces in 2008. It said that production of by-product zinc and lead are also expected to increase in 2008, while gold output is projected to be significantly higher due to new production from Manantial Espejo mines in Argentina. Consolidated cash costs are forecast to be $4.31 per ounce, while capital expenditures are expected to be $152.1M for 2008, most of which are targeted to complete construction at Manantial Espejo and the expansion of San Vicente in Bolivia. Pan American Silver Corp. closed Thursday's regular trading session at $39.57, down $0.88 from Wednesday's close of $40.45. Today’s price represents a 10.3% margin from its all-time trading high of $44.10 established on March 14th.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, March 26, 2008
BetterTrades looks at Check Point Software Technologies Ltd.
Check Point Software Technologies Ltd. (CHKP), the worldwide leader in securing the Internet, recently announced the release of Check Point Endpoint Security, the first and only single agent for total endpoint security that combines the highest-rated firewall, network access control (NAC), program control, antivirus, anti-spyware, data security and remote access. The new solution protects PCs by providing superior security and eliminates the need to deploy and manage multiple agents, reducing total cost of ownership. Designed to protect company laptops and PCs against malware, data loss and theft and other threats while enabling secure remote access to the corporate network, Check Point Endpoint Security dramatically simplifies security by providing a single software agent, single management console and single installation easily deployed and managed by a single administrator. The unification of these leading security technologies under a single, centrally managed agent, not only benefits enterprises with increased security, but also reduces complexity as well as deployment, management and audit costs. With Check Point Endpoint Security's unique SmartDefense Program Advisor service administrators can effectively control which programs are allowed to run on corporate PCs by leveraging a dynamic database of hundreds of thousands of known good and bad programs to automate policy decisions and terminate malicious programs.
Check Point Software Technologies, Ltd. and its subsidiaries develop, market, and support a range of software and hardware products, and services for information technology security worldwide. The company's products include firewall and VPN security gateways and appliances; dedicated security gateways, including secure remote access solutions and intrusion detection and prevention systems; endpoint security comprising integrity products and SecureClient products, as well as ZoneAlarm security suite; data security products, such as Pointsec PC disk encryption, Pointsec for mobile devices, and Pointsec removable media product family; and security management solutions, which consist of SmartCenter, Eventia, Provider-1, and Security Management Portal. Check Point's products provide protection for network perimeter that enables authorized users to access network resources and to detect and thwart attacks; against internal threats protecting customers' networks and endpoints from the threats; for Web-based communications allowing remote and mobile employees to securely connect to their organizations' networks through Web browser; for network endpoints with security solutions that address the risks posed by hackers, worms, spyware, and other threats to the internal and remote computers; for data security protecting corporate information stored on mobile computing devices, such as laptops, PDAs, smartphones, and removable media, and controlling data that traverses through security gateways. The company serves enterprises, service providers, small and medium-sized businesses, and consumers. It has strategic relationships with Crossbeam Systems, Inc.; Dell, Inc. (DELL); Hewlett-Packard Co. (HPQ); International Business Machines Corporation (IBM); Nokia Corporation (NOK); Nortel Networks Corp. (NT); Siemens AG (SI); and Sun Microsystems, Inc. (JAVA). The company was founded in 1993, currently employs nearly 2,000 workers and is headquartered in Tel Aviv, Israel.
In the company’s most recent quarterly report, released in late January, the company beat analysts’ expectations as profits increased 11% in the 4Q. Net income, for the company, advanced to $87.9M, or $0.39 a share, compared with $79.5M, or $0.35 a share, a year ago. That included acquisition related charges of $10.3M, or $0.05 a share, and equity-based compensation expenses of $8.8M or $0.04 a share. Excluding those charges, Check Point earned $102.5M, or $0.46 a share, compared with $90.6M, or $0.40 a share, in the 4Q of 2006. Analysts were expecting the company to report EPS of $0.45 a share. In addition, revenues increased 29% to $206.7M, compared with $160.1M a year ago, and higher than analysts' expectations of $202.3M. Network security accounted for $182.5M in revenues, a 14% increase over the 4Q of 2006 and data security contributed $24.2M in revenues. For its upcoming fiscal 1Q, Check Point guided revenues in the range of $184M to $193M, and excluding charges, the company expects to report earnings between $0.39 and $0.42 a share. Meanwhile, analysts are expecting revenues of $185.4M and EPS of $0.40 a share. In addition to a strong outlook on the company’s earnings report, Check Point has also announced that they have authorized the repurchase of up to $400M in common stock. Since its initial share repurchase program announced in October 2003 through the end of 2007, Check Point said it purchased 54.8 million shares for a total of about $1.1B.
Due to the company’s strong financial and business standing, Barron's has named Check Point as an acquisition target for the software giants, but it appears to be unaware that for the time being, the company's founders and managers, are not interested in selling, and would rather grow into a large but independent security software company. It would not make sense for anyone to mount a hostile bid for Check Point, despite its tempting mountain of cash, currently $5.50 per share, as it is an Israeli company, and any bidder would have to secure a 75% majority of Check Point's shareholders, and without the consent of the owners, that is virtually impossible. The reasons why companies are looking at Check Point for a takeover are obvious. CHKP has experienced solid double-digit growth in network and data security units, as well as doubling services revenues. This has clearly become a strong growth driver for the company, and look for continued growth in this unit. The key factor that will continue to drive the recent momentum in sales is the ability to execute. The integration of Pointsec and the development of new sales channels will represent an intriguing stronghold for the company. In conclusion, it's very hard to find merchandise like this that is so worth its stock market price.
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Check Point Software Technologies, Ltd. and its subsidiaries develop, market, and support a range of software and hardware products, and services for information technology security worldwide. The company's products include firewall and VPN security gateways and appliances; dedicated security gateways, including secure remote access solutions and intrusion detection and prevention systems; endpoint security comprising integrity products and SecureClient products, as well as ZoneAlarm security suite; data security products, such as Pointsec PC disk encryption, Pointsec for mobile devices, and Pointsec removable media product family; and security management solutions, which consist of SmartCenter, Eventia, Provider-1, and Security Management Portal. Check Point's products provide protection for network perimeter that enables authorized users to access network resources and to detect and thwart attacks; against internal threats protecting customers' networks and endpoints from the threats; for Web-based communications allowing remote and mobile employees to securely connect to their organizations' networks through Web browser; for network endpoints with security solutions that address the risks posed by hackers, worms, spyware, and other threats to the internal and remote computers; for data security protecting corporate information stored on mobile computing devices, such as laptops, PDAs, smartphones, and removable media, and controlling data that traverses through security gateways. The company serves enterprises, service providers, small and medium-sized businesses, and consumers. It has strategic relationships with Crossbeam Systems, Inc.; Dell, Inc. (DELL); Hewlett-Packard Co. (HPQ); International Business Machines Corporation (IBM); Nokia Corporation (NOK); Nortel Networks Corp. (NT); Siemens AG (SI); and Sun Microsystems, Inc. (JAVA). The company was founded in 1993, currently employs nearly 2,000 workers and is headquartered in Tel Aviv, Israel.
In the company’s most recent quarterly report, released in late January, the company beat analysts’ expectations as profits increased 11% in the 4Q. Net income, for the company, advanced to $87.9M, or $0.39 a share, compared with $79.5M, or $0.35 a share, a year ago. That included acquisition related charges of $10.3M, or $0.05 a share, and equity-based compensation expenses of $8.8M or $0.04 a share. Excluding those charges, Check Point earned $102.5M, or $0.46 a share, compared with $90.6M, or $0.40 a share, in the 4Q of 2006. Analysts were expecting the company to report EPS of $0.45 a share. In addition, revenues increased 29% to $206.7M, compared with $160.1M a year ago, and higher than analysts' expectations of $202.3M. Network security accounted for $182.5M in revenues, a 14% increase over the 4Q of 2006 and data security contributed $24.2M in revenues. For its upcoming fiscal 1Q, Check Point guided revenues in the range of $184M to $193M, and excluding charges, the company expects to report earnings between $0.39 and $0.42 a share. Meanwhile, analysts are expecting revenues of $185.4M and EPS of $0.40 a share. In addition to a strong outlook on the company’s earnings report, Check Point has also announced that they have authorized the repurchase of up to $400M in common stock. Since its initial share repurchase program announced in October 2003 through the end of 2007, Check Point said it purchased 54.8 million shares for a total of about $1.1B.
Due to the company’s strong financial and business standing, Barron's has named Check Point as an acquisition target for the software giants, but it appears to be unaware that for the time being, the company's founders and managers, are not interested in selling, and would rather grow into a large but independent security software company. It would not make sense for anyone to mount a hostile bid for Check Point, despite its tempting mountain of cash, currently $5.50 per share, as it is an Israeli company, and any bidder would have to secure a 75% majority of Check Point's shareholders, and without the consent of the owners, that is virtually impossible. The reasons why companies are looking at Check Point for a takeover are obvious. CHKP has experienced solid double-digit growth in network and data security units, as well as doubling services revenues. This has clearly become a strong growth driver for the company, and look for continued growth in this unit. The key factor that will continue to drive the recent momentum in sales is the ability to execute. The integration of Pointsec and the development of new sales channels will represent an intriguing stronghold for the company. In conclusion, it's very hard to find merchandise like this that is so worth its stock market price.
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Tuesday, March 25, 2008
BetterTrades looks at Thornburg Mortgages Inc.
Mortgage lender and investor Thornburg Mortgage Inc. (TMA) announced Tuesday that the company will raise $1.35B through a private-placement deal to help keep the company in business and avoid bankruptcy. The private placement of senior subordinated notes will carry an initial interest rate of 18%, which can be reduced to 12% depending on certain requirements. Thornburg will also offer the investors in the new debt an option to purchase future shares of common stock for $0.01 per share. The exact number of new shares offered to the investors will be determined based on the number of shares outstanding at the time of the offer, but will equal about 48% of all outstanding shares at the time. Facing potential bankruptcy, Thornburg is raising the money to help alleviate margin calls and demands for more collateral from its creditors. Thornburg's creditors agreed to suspend any future margin calls for about a year if the company raises $948M by Thursday. Had Thornburg faced more demands from its creditors, it's unlikely it would have been able to stay in business. As delinquencies and defaults across certain types of mortgages have risen, investors have shied away from purchasing nearly all types of loans in the secondary market. The thin market for debt backed by mortgages has caused prices to plummet. As those prices fell, companies like Thornburg have been forced to reduce the value of their holdings, regardless of actual performance. Those declining prices also have lenders making margin calls. Tuesday's deal replaces a previously sought plan whereby Thornburg tried to raise about $1B in convertible notes with an interest rate of 12%. The offering of those notes was unsuccessful and terminated. Thornburg is seeking a waiver from the New York Stock Exchange to complete the deal without shareholder approval in an attempt to ensure it meets the creditors' deadline. Shares of Thornburg advanced $0.46, or 36.2%, to $1.73 in Tuesday’s trading.
Thornburg Mortgage, Inc. operates as a residential mortgage lending company. It originates, acquires, and retains investments in adjustable and variable rate mortgage (ARM) assets. The company's ARM assets consist of purchased ARM assets and ARM loans, including traditional ARM assets and hybrid ARM assets. It acquires and originates assets, through correspondent lending, wholesale lending, direct retail lending, and bulk acquisition programs. Thornburg Mortgage, Inc. acquires ARM assets from investment banking firms, broker-dealers, mortgage bankers, mortgage brokerage firms, banks, savings and loan institutions, credit unions, home builders, and other entities involved in originating, securitizing, packaging, and selling mortgage-backed securities and mortgage loans. It operates as an externally advised real estate investment trust (REIT). As a REIT, the company would not be subject to federal corporate income tax, provided it distributes at least 90% of taxable income to its shareholders. Thornburg Mortgage, Inc. was founded in 1992, currently employs more than 400 people and is based in Santa Fe, New Mexico.
On Wednesday, after the close, Thornburg Mortgage a high quality and well respected originator and a vehicle which securitizes jumbo mortgages, those more than $417,000, announced in a filing with the SEC that JP Morgan (JPM) had notified it that it would exercise its rights in an event of default to collect on $320M owed to it by Thornburg. This event has triggered defaults on all of the company’s other reverse repurchase agreements and secured loan agreements. In other words, the company failed to meet its obligations under a loan with JP Morgan, and JPM has decided to exercise its rights under the agreement to collect on the $320M that it is owed. Thornburg is heavily leveraged and its large portfolio of mortgage backed securities is financed by debt. If it has to pay all that debt back immediately, it will have to sell large parts of its portfolio at fire sale prices in order to meet its obligations, resulting in massive losses. Over the past year, the fall in home prices, and the subsequent rise in the default on loans made to sub-prime borrowers has significantly weakened the secondary market for mortgage loans, and mortgage backed securities. Securities which are not backed by the Government Sponsored Enterprises (GSE) are dropping in value since investors fear that the home owners will default and not pay back the principal.
The stock price is more a reflection of confidence now and has nothing to do with fundamentals. However, this has not helped Thornburg since the market price of the collateral it has posted to its lenders is falling. This price has little to do with the underlying value of the cash-flow, principal and interest payments, represented by the loans and the securities. It just reflects the pessimism and the lack of liquidity in the secondary market. Investors are not willing to risk their capital to buy these assets since they are afraid that the price will fall further and mark-to-market rules will force them to book a loss on the value of their holdings. Market forces have been unable to resolve the problem and the big banks do not have the cash on their balance sheet to step in to be the buyer of last resort. One of the proposals being considered is for Federal Institutions to purchase mortgage-backed securities and provide a bid. This will prevent the slide in the price of these securities and help stabilize the market.
Thornburg, on Tuesday, restated 2007 results to reflect a $676.6M write-down for adjustable-rate mortgages, 58% more than it had projected just four days earlier. On March 7th, the company projected a $427.8M write-down. The lender said it increased the amount to comply with accounting rules, because it may be unable to hold the affected home loans to maturity. Thornburg is now reporting a 4Q loss of $605.9M, or $4.74 per share, after previously reporting a profit of $0.33 per share in February. The full-year net loss increased to $12.97 per share from $7.48. Thornburg's business has nothing to do with sub-prime loans, which have default rates of 10%-plus, while TMA's default rate is less than 0.5%. If TMA gets valued at a P/E Ratio of 10 as market conditions improve and margin calls are done with, its stock value would be about $13. Thus, at $1.73, a very good risk-reward ratio exists. Also, it is worth noting that TMA was valued at $13 a share less than one month ago, and unlike many other lenders, their underlying business hasn't imploded.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thornburg Mortgage, Inc. operates as a residential mortgage lending company. It originates, acquires, and retains investments in adjustable and variable rate mortgage (ARM) assets. The company's ARM assets consist of purchased ARM assets and ARM loans, including traditional ARM assets and hybrid ARM assets. It acquires and originates assets, through correspondent lending, wholesale lending, direct retail lending, and bulk acquisition programs. Thornburg Mortgage, Inc. acquires ARM assets from investment banking firms, broker-dealers, mortgage bankers, mortgage brokerage firms, banks, savings and loan institutions, credit unions, home builders, and other entities involved in originating, securitizing, packaging, and selling mortgage-backed securities and mortgage loans. It operates as an externally advised real estate investment trust (REIT). As a REIT, the company would not be subject to federal corporate income tax, provided it distributes at least 90% of taxable income to its shareholders. Thornburg Mortgage, Inc. was founded in 1992, currently employs more than 400 people and is based in Santa Fe, New Mexico.
On Wednesday, after the close, Thornburg Mortgage a high quality and well respected originator and a vehicle which securitizes jumbo mortgages, those more than $417,000, announced in a filing with the SEC that JP Morgan (JPM) had notified it that it would exercise its rights in an event of default to collect on $320M owed to it by Thornburg. This event has triggered defaults on all of the company’s other reverse repurchase agreements and secured loan agreements. In other words, the company failed to meet its obligations under a loan with JP Morgan, and JPM has decided to exercise its rights under the agreement to collect on the $320M that it is owed. Thornburg is heavily leveraged and its large portfolio of mortgage backed securities is financed by debt. If it has to pay all that debt back immediately, it will have to sell large parts of its portfolio at fire sale prices in order to meet its obligations, resulting in massive losses. Over the past year, the fall in home prices, and the subsequent rise in the default on loans made to sub-prime borrowers has significantly weakened the secondary market for mortgage loans, and mortgage backed securities. Securities which are not backed by the Government Sponsored Enterprises (GSE) are dropping in value since investors fear that the home owners will default and not pay back the principal.
The stock price is more a reflection of confidence now and has nothing to do with fundamentals. However, this has not helped Thornburg since the market price of the collateral it has posted to its lenders is falling. This price has little to do with the underlying value of the cash-flow, principal and interest payments, represented by the loans and the securities. It just reflects the pessimism and the lack of liquidity in the secondary market. Investors are not willing to risk their capital to buy these assets since they are afraid that the price will fall further and mark-to-market rules will force them to book a loss on the value of their holdings. Market forces have been unable to resolve the problem and the big banks do not have the cash on their balance sheet to step in to be the buyer of last resort. One of the proposals being considered is for Federal Institutions to purchase mortgage-backed securities and provide a bid. This will prevent the slide in the price of these securities and help stabilize the market.
Thornburg, on Tuesday, restated 2007 results to reflect a $676.6M write-down for adjustable-rate mortgages, 58% more than it had projected just four days earlier. On March 7th, the company projected a $427.8M write-down. The lender said it increased the amount to comply with accounting rules, because it may be unable to hold the affected home loans to maturity. Thornburg is now reporting a 4Q loss of $605.9M, or $4.74 per share, after previously reporting a profit of $0.33 per share in February. The full-year net loss increased to $12.97 per share from $7.48. Thornburg's business has nothing to do with sub-prime loans, which have default rates of 10%-plus, while TMA's default rate is less than 0.5%. If TMA gets valued at a P/E Ratio of 10 as market conditions improve and margin calls are done with, its stock value would be about $13. Thus, at $1.73, a very good risk-reward ratio exists. Also, it is worth noting that TMA was valued at $13 a share less than one month ago, and unlike many other lenders, their underlying business hasn't imploded.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, March 20, 2008
BetterTrades looks at L-3 Communications Holdings Inc.
Defense contractor L-3 Communications Holdings Inc. (LLL) announced early Thursday it won a $326M contract from the U.S. Marines to supply tactical video capture systems at military training sites in the U.S. and overseas. Under the three-year contract, L-3 will lead a team of suppliers to implement Praetorian, a new 3D video observation system. The system allows users to view multiple sites under surveillance in real-time and on recorded 3D video. In addition to today’s announcement, L-3 stated that it has agreed to become a subcontractor to Global Linguist Solutions (GLS) for the supply of translation and interpretation services in Iraq. This contract is under the Translation and Interpretation Management Services (TIMS) contract with the U.S. Army Intelligence and Security Command (INSCOM). The annual sales from the subcontract are expected to be approximately $150M depending on INSCOM’s requirements. Separately, L-3’s current contract to provide linguists in support of the U.S. military’s operations in Iraq was extended by INSCOM from March 9th to June 9th, during which time linguist services will be transitioned to Global Linguist Solutions.
L-3 Communications Holdings, Inc., through its subsidiaries, provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems, and aircraft modernization and maintenance, and government services primarily in the United States. Its C3ISR segment offers fleet management sustainment and support, including procurement, systems integration, sensor development, modifications, and periodic depot maintenance for signals intelligence and ISR special mission aircraft, and airborne surveillance systems, strategic and tactical signals intelligence systems, secure data links, secure terminal and communication network equipment and encryption management and communication systems. The company's Government Services segment provides communication software support, information technology services, and various engineering development services and integration support, engineering and information systems support services, teaching and training services, human intelligence support and other services, aviation and maritime services, and technical and management services. L-3 Communications' Aircraft Modernization and Maintenance segment offers modernization, upgrades and sustainment, maintenance, and logistics support services for military and various government aircraft and other platforms. The company's Specialized Products segment provides power and control systems, microwave components, training and simulation, electro-optic/infrared products, precision engagement, security and detection systems, propulsion systems, undersea warfare products, and telemetry products. Its customers include the U.S. Department of Defense and its prime contractors, the U.S. Government intelligence agencies, the U.S. Department of Homeland Security, the U.S. Department of State, the U.S. Department of Justice, allied foreign governments, and other U.S. federal, state, and local government agencies. The company was founded in 1997, employs more than 64,000 workers and is based in New York, New York.
What better place to be defensive when the markets are selling off than the defense industry? While the defense sector has underperformed the market, losing 10% since the sell-off began, compared to a 6.4% decline for the S&P 500, large cap defense names actually beat the S&P 500, losing only 4.8%. Small and mid-cap defense names meanwhile, lost 11.5%.While the sector as a whole is rated as a “neutral”, it does offer a low volatility play for those expecting the current market turmoil to continue. Fears of slowing economic growth in the U.S. should not dampen investor sentiment, since the defense stocks are driven by budget cycles, not economic ones. As for the deteriorating credit environment, these companies’ balance sheets are heavy with cash and they have minimal debt. The cash makes all-cash Merger & Acquisitions deals much easier, particularly given the fact that 17 small and mid-cap defense names have a total market cap of just $17B. The aerospace and defense sector, whose companies continue to report record earnings, record levels of cash on hand, historical share buybacks totaling in the billions of dollars, which will improve earnings per share over time, and a backlog that some firms are measuring not in months but years is falling in step with the rest of the market. The backlog for orders at LLL stood at $7.9B at the end of last quarter, up from $7.0B a year ago. In the company’s most recent earnings report, released in January, L-3 reported that its sales increased 12.4%, earnings were up 19%, and the company raised their outlook for 2008 by $0.07 to $6.48 to $6.62 per share.
L-3 does most of its business with the US government, particularly the military, but L-3 has used acquisitions to expand its commercial offerings to include products like flight recorders, i.e. black boxes, display systems, and wireless telecom gear. L-3 has added to its aircraft repair, overhaul, and technical services as well as airport security systems. The stock priced marched upward from early 2003, when it traded as low as $36, to an all-time high above $115 late last-calendar year. Now it's fetching $106.64. While that hardly sounds like a bargain, its valuation is relatively cheap compared to recent years. LLL is trading at 14.6 times next year's projected earnings, and with a market cap of $13.05B it is valued at just 0.95 of sales. Over the past five years, L-3's Price/Sales Ratio has averaged 1.1. L-3 Communications is one beneficiary of increased defense spending. If you believe the U.S.'s commitment will only get larger, then take some time and look at more of these numbers. The stock has gone up and down but mostly sideways for the past few months. There are some uncertainties that have held it back, but this company has a lot of business on the books and billions more in the order pipeline.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
L-3 Communications Holdings, Inc., through its subsidiaries, provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems, and aircraft modernization and maintenance, and government services primarily in the United States. Its C3ISR segment offers fleet management sustainment and support, including procurement, systems integration, sensor development, modifications, and periodic depot maintenance for signals intelligence and ISR special mission aircraft, and airborne surveillance systems, strategic and tactical signals intelligence systems, secure data links, secure terminal and communication network equipment and encryption management and communication systems. The company's Government Services segment provides communication software support, information technology services, and various engineering development services and integration support, engineering and information systems support services, teaching and training services, human intelligence support and other services, aviation and maritime services, and technical and management services. L-3 Communications' Aircraft Modernization and Maintenance segment offers modernization, upgrades and sustainment, maintenance, and logistics support services for military and various government aircraft and other platforms. The company's Specialized Products segment provides power and control systems, microwave components, training and simulation, electro-optic/infrared products, precision engagement, security and detection systems, propulsion systems, undersea warfare products, and telemetry products. Its customers include the U.S. Department of Defense and its prime contractors, the U.S. Government intelligence agencies, the U.S. Department of Homeland Security, the U.S. Department of State, the U.S. Department of Justice, allied foreign governments, and other U.S. federal, state, and local government agencies. The company was founded in 1997, employs more than 64,000 workers and is based in New York, New York.
What better place to be defensive when the markets are selling off than the defense industry? While the defense sector has underperformed the market, losing 10% since the sell-off began, compared to a 6.4% decline for the S&P 500, large cap defense names actually beat the S&P 500, losing only 4.8%. Small and mid-cap defense names meanwhile, lost 11.5%.While the sector as a whole is rated as a “neutral”, it does offer a low volatility play for those expecting the current market turmoil to continue. Fears of slowing economic growth in the U.S. should not dampen investor sentiment, since the defense stocks are driven by budget cycles, not economic ones. As for the deteriorating credit environment, these companies’ balance sheets are heavy with cash and they have minimal debt. The cash makes all-cash Merger & Acquisitions deals much easier, particularly given the fact that 17 small and mid-cap defense names have a total market cap of just $17B. The aerospace and defense sector, whose companies continue to report record earnings, record levels of cash on hand, historical share buybacks totaling in the billions of dollars, which will improve earnings per share over time, and a backlog that some firms are measuring not in months but years is falling in step with the rest of the market. The backlog for orders at LLL stood at $7.9B at the end of last quarter, up from $7.0B a year ago. In the company’s most recent earnings report, released in January, L-3 reported that its sales increased 12.4%, earnings were up 19%, and the company raised their outlook for 2008 by $0.07 to $6.48 to $6.62 per share.
L-3 does most of its business with the US government, particularly the military, but L-3 has used acquisitions to expand its commercial offerings to include products like flight recorders, i.e. black boxes, display systems, and wireless telecom gear. L-3 has added to its aircraft repair, overhaul, and technical services as well as airport security systems. The stock priced marched upward from early 2003, when it traded as low as $36, to an all-time high above $115 late last-calendar year. Now it's fetching $106.64. While that hardly sounds like a bargain, its valuation is relatively cheap compared to recent years. LLL is trading at 14.6 times next year's projected earnings, and with a market cap of $13.05B it is valued at just 0.95 of sales. Over the past five years, L-3's Price/Sales Ratio has averaged 1.1. L-3 Communications is one beneficiary of increased defense spending. If you believe the U.S.'s commitment will only get larger, then take some time and look at more of these numbers. The stock has gone up and down but mostly sideways for the past few months. There are some uncertainties that have held it back, but this company has a lot of business on the books and billions more in the order pipeline.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, March 18, 2008
BetterTrades looks at GameStop Corp.
GameStop Corp. (GME), the biggest retailer of video games, announced Tuesday that the company’s fiscal 4Q earnings climbed 46% as demand for popular games such as Guitar Hero III and Call of Duty 4 led to a surge in sales. Net income in the quarter advanced to $189.8M, or $1.14 per share, from $129.8M, or $0.81 per share, in the year-ago period. The result was better than the $1.12 expected by analysts. Sales increased 24% to $2.9M from $2.3M last year, in line with Wall Street estimates. For the year, profits jumped to $288.3M, or $1.75 per share, from $158.3M, or $1 per share, and sales increased to $7.1B from $5.3B. In trading, GameStop shares gained $1.55, or 3.3%, to $48.55 after closing at $47 Monday. For the 1Q, GameStop sees comparable store sales increasing by 24% to 25%, and expects its earnings per share to more than double to $0.32 to $0.33 a share, beating the analysts' view of $0.29 a share. The company also forecasts strong results for the upcoming quarter, citing solid demand for new games such as Nintendo's Super Smash Bros. Brawl for the Wii, and said it plans to open up to 600 stores this year.
GameStop Corp. (GameStop) is a retailer of video game products and personal computers (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. GameStop operates 4,778 stores in the United States, Canada, Australia and Europe, primarily under the names GameStop and EB Games. It also operates electronic commerce Websites under the names gamestop.com and ebgames.com, publishes Game Informer, a multi-platform video game magazine in the United States, with approximately 2.7M subscribers. GameStop is a holding company that was created to facilitate the combination of GameStop Holdings Corp. and Electronics Boutique Holdings Corp., which it refers to as Historical GameStop and Electronics Boutique (EB), respectively. GameStop purchases new video game software directly from manufacturers, including Sony Computer Entertainment of America, Nintendo of America, Inc. and Microsoft Corp., as well as over 40 third-party game publishers, such as Electronic Arts, Inc. and Activision, Inc. The Company generally carries over 1,000 stock keeping units (SKUs) of new video game software at any given time across a range of genres, including Sports, Action, Strategy, Adventure/Role Playing and Simulation. The Company also operates a refurbishment center, where defective video game products can be tested, and repaired, relabeled, repackaged and redistributed back to stores. GameStop offers the video game platforms of all major manufacturers, including Sony PlayStation 2 and 3 and PSP, Microsoft Xbox and Xbox 360, Nintendo Wii, DS, GameCube and Game Boy Advance SP. The Company also offers extended service agreements on video game hardware and software. Video game hardware sales are generally driven by the introduction of new platform technology and the reduction in price points as platforms mature. Due to its relationships with the manufacturers of these platforms, GameStop often receives disproportionately large allocations of new release hardware products. GameStop publishes Game Informer, a monthly video game magazine featuring reviews of new title releases, tips and secrets about existing games and news regarding developments in the electronic game industry. The magazine is sold through subscription and through displays in the Historical GameStop stores. In addition, GameStop offers the GameStop loyalty card as a bonus with each paid subscription, providing its subscribers with a discount on selected merchandise. The Company operates electronic commerce Websites at www.gamestop.com and www.ebgames.com that allows its customers to buy video game products and other merchandise online. The sites also offer customers information and content about available games, release dates for upcoming games, and access to store information, such as location and product availability. GameStop competes with Wal-Mart Stores, Inc., Target Corporation, Best Buy Co., Inc., Circuit City Stores, Inc., Toys R Us, Inc., Movie Gallery Inc., Blockbuster, Inc., Game Group PLC, K-Mart, Target, Myer Department stores, Big W discount department stores and Dick Smith electronics stores.
Hardware accounted for 22.4% of the remaining nine-month revenues. GME also sells new videogame software, which produced 37.7% of sales. Related accessories and peripherals such as controllers and memory cards produced 15.3% of sales. Remaining revenues were derived from a rapidly growing business selling pre-owned games and hardware. According to market research, videogame sales jumped 43% in 2007 to $17.94B. GME’s sales through the first nine months of fiscal 2008 were up 40.3% to $4.23B. Same store sales climbed 30.2%. Price cuts on the Xbox 360 and PS3 helped boost new hardware sales by 102.5% to $949.1M. New software sales grew 39.8% to $1.59B, while sales of other products increased 22.7% to $647.6M and used product sales climbed 18.2% to $1.04B. The company’s operating profit margin improved 110 basis points to 4.93%. GME said fiscal 1Q results will come in above prior expectations due to higher than expected holiday demand and strong follow through in past couple of months. The company has exceeded analysts’ earnings expectations in six out of the past eight quarters along with GME having a return on equity of 15.72%, compared to 9% for the industry.
Despite encouraging financial results, the stock has fallen since the start of the year, no doubt due to concerns about slowing trends in consumer spending. Greater competition from large format retailers who discount popular new game titles also poses a risk. Yet no rival can touch GME’s used game business. Expect strong growth to continue due to more family-oriented games and new innovations such as motion detection technology. Finally, GME sales could see a nice boost in the second half of the year as consumers start spending their federal tax rebate checks. Shares in GameStop had otherwise staged an impressive bull run over the past year, more than doubling in value from the 2007 March low of $24.95. Another driving force behind GameStop is the customers themselves. The average game player is 33 years old and has been playing games for 12 years, while the average age of the most frequent game buyer is 40 years old. 93% of computer game buyers and 83% of console game buyers were over the age of 18, with 44% of those gamers being between the ages of 18 to 49, 25% of them are age 50 or older and 38% of all game players are women. The great thing about this company is that no matter which game console or software titles eventually win out, GME will succeed by selling the most popular consoles and titles in its stores.
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GameStop Corp. (GameStop) is a retailer of video game products and personal computers (PC) entertainment software. The Company sells new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise. GameStop operates 4,778 stores in the United States, Canada, Australia and Europe, primarily under the names GameStop and EB Games. It also operates electronic commerce Websites under the names gamestop.com and ebgames.com, publishes Game Informer, a multi-platform video game magazine in the United States, with approximately 2.7M subscribers. GameStop is a holding company that was created to facilitate the combination of GameStop Holdings Corp. and Electronics Boutique Holdings Corp., which it refers to as Historical GameStop and Electronics Boutique (EB), respectively. GameStop purchases new video game software directly from manufacturers, including Sony Computer Entertainment of America, Nintendo of America, Inc. and Microsoft Corp., as well as over 40 third-party game publishers, such as Electronic Arts, Inc. and Activision, Inc. The Company generally carries over 1,000 stock keeping units (SKUs) of new video game software at any given time across a range of genres, including Sports, Action, Strategy, Adventure/Role Playing and Simulation. The Company also operates a refurbishment center, where defective video game products can be tested, and repaired, relabeled, repackaged and redistributed back to stores. GameStop offers the video game platforms of all major manufacturers, including Sony PlayStation 2 and 3 and PSP, Microsoft Xbox and Xbox 360, Nintendo Wii, DS, GameCube and Game Boy Advance SP. The Company also offers extended service agreements on video game hardware and software. Video game hardware sales are generally driven by the introduction of new platform technology and the reduction in price points as platforms mature. Due to its relationships with the manufacturers of these platforms, GameStop often receives disproportionately large allocations of new release hardware products. GameStop publishes Game Informer, a monthly video game magazine featuring reviews of new title releases, tips and secrets about existing games and news regarding developments in the electronic game industry. The magazine is sold through subscription and through displays in the Historical GameStop stores. In addition, GameStop offers the GameStop loyalty card as a bonus with each paid subscription, providing its subscribers with a discount on selected merchandise. The Company operates electronic commerce Websites at www.gamestop.com and www.ebgames.com that allows its customers to buy video game products and other merchandise online. The sites also offer customers information and content about available games, release dates for upcoming games, and access to store information, such as location and product availability. GameStop competes with Wal-Mart Stores, Inc., Target Corporation, Best Buy Co., Inc., Circuit City Stores, Inc., Toys R Us, Inc., Movie Gallery Inc., Blockbuster, Inc., Game Group PLC, K-Mart, Target, Myer Department stores, Big W discount department stores and Dick Smith electronics stores.
Hardware accounted for 22.4% of the remaining nine-month revenues. GME also sells new videogame software, which produced 37.7% of sales. Related accessories and peripherals such as controllers and memory cards produced 15.3% of sales. Remaining revenues were derived from a rapidly growing business selling pre-owned games and hardware. According to market research, videogame sales jumped 43% in 2007 to $17.94B. GME’s sales through the first nine months of fiscal 2008 were up 40.3% to $4.23B. Same store sales climbed 30.2%. Price cuts on the Xbox 360 and PS3 helped boost new hardware sales by 102.5% to $949.1M. New software sales grew 39.8% to $1.59B, while sales of other products increased 22.7% to $647.6M and used product sales climbed 18.2% to $1.04B. The company’s operating profit margin improved 110 basis points to 4.93%. GME said fiscal 1Q results will come in above prior expectations due to higher than expected holiday demand and strong follow through in past couple of months. The company has exceeded analysts’ earnings expectations in six out of the past eight quarters along with GME having a return on equity of 15.72%, compared to 9% for the industry.
Despite encouraging financial results, the stock has fallen since the start of the year, no doubt due to concerns about slowing trends in consumer spending. Greater competition from large format retailers who discount popular new game titles also poses a risk. Yet no rival can touch GME’s used game business. Expect strong growth to continue due to more family-oriented games and new innovations such as motion detection technology. Finally, GME sales could see a nice boost in the second half of the year as consumers start spending their federal tax rebate checks. Shares in GameStop had otherwise staged an impressive bull run over the past year, more than doubling in value from the 2007 March low of $24.95. Another driving force behind GameStop is the customers themselves. The average game player is 33 years old and has been playing games for 12 years, while the average age of the most frequent game buyer is 40 years old. 93% of computer game buyers and 83% of console game buyers were over the age of 18, with 44% of those gamers being between the ages of 18 to 49, 25% of them are age 50 or older and 38% of all game players are women. The great thing about this company is that no matter which game console or software titles eventually win out, GME will succeed by selling the most popular consoles and titles in its stores.
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Monday, March 17, 2008
BetterTrades looks at Concur Technologies Inc.
Concur Technologies Inc. (CNQR) shares advanced Monday after a Piper Jaffray analyst said its domestic and international markets remain under-penetrated. The analyst raised their rating to "Buy" from "Neutral" and boosted the price target to $37 from $32. Concur has plenty of "runway" on which to grow, with less than 10% market penetration for small businesses and less than 30% for large businesses. Real cost savings will likely be realized from the implementation of an automated expense management product, which will likely lead to worker reallocation or layoffs. Shares of CNQR increased $0.76, or 2.7%, to $28.73 in Monday’s trading. Also today, Learn.com, the leader in on-demand workforce development and productivity, announced today that Concur, the world's leading provider of on-demand Employee Spend Management services has selected the LearnCenter platform to deliver product training to its globally dispersed employee base. The LearnCenter platform manages the entire pre-hire to retire lifecycle by creating a cost effective, high quality training, development and measurement environment designed to empower users with visibility into and control of their career planning while providing management with real-time business intelligence.
Concur Technologies, Inc. provides employee spend management solutions. Its software solutions include Concur Travel & Expense, a corporate travel procurement and expense reporting solution; Concur Expense, which provides the process and information for management to reduce manual processing, improve internal controls, increase business policy compliance, speed up reimbursement, and increase expense report accuracy; Concur Cliqbook Travel, an online travel management solution that automates corporate travel procurement and processing; and Concur Vendor Payment, which enables companies to streamline payment requests, facilitating approval processes, and automatic updating of accounts payable systems. The company offers Concur ExpenseLink, which automates the expense management process, including expense filing and approval, corporate card integration, payment services, imaging services, audit services, and reporting and analysis; and Concur Travel Manager that enables customers to navigate the regulatory and compliance related complexities of the public sector. It also provides Concur Meeting, a Web-based service that enables organizations to manage the planning of corporate events and group travel; Concur Audit that provides expense report auditing services to streamline the process of managing and substantiating expense receipts; Concur Reporting with report authoring features to analyze, manage, and reduce corporate expenses; Concur Direct Reimbursement, which enables the direct deposit of reimbursable employee expenses; and Concur Compliance Solution that provides customers with enhanced fraud detection capabilities. In addition, the company offers consulting, customer support, and training services. It markets its solutions worldwide to public companies and single-location private companies through its direct sales organization, as well as strategic reseller and referral partners. The company was founded in 1993, employs nearly 600 people and is headquartered in Redmond, Washington.
Concur Technologies is an on-demand, Software-as-a-Service (SaaS) provider that brings together travel and expense management for employees of an enterprise. It basically provides a system to reimburse employees’ expenses as well as pay invoices from vendors. Through the Concur Vendor Payment system, vendors can access a web-based platform to submit their invoices. Concur’s financial performance over the years reflects the growing acceptance of its solutions. The company has been featured in Fortune’s list of 100 fastest growing small businesses for the past two years. On January 30th, Concur reported its 1Q 2008 financial results. Revenue grew 69% (yoy) and 38% from the previous quarter to $49.4M, driven by 83% growth in subscription revenue. Net income was $3.4M, or $0.07 per share up 240% (yoy). During the quarter, it added 400 customers. For 2Q, Concur expects revenues to be $50.0M, 60% growth, and EPS to be $0.04. For 2008, it raised its guidance from revenues of $194.5M to $204M. EPS guidance has been raised from $0.15 to $0.22. It expects the economic slowdown to work in its favor as companies would be more likely go for automating processes that control costs. Its stock is trading around $30, and its market cap is around $1.3B.
Most companies are going to great lengths to reduce employee travel and business expenses. In many cases, the reporting of this non-core activity is being outsourced to outside firms or companies utilize third party software packages to track this information. Concur is a leading provider of employee spending management solutions. The business of outsourced travel and entertainment accounting is expected to grow to $7B over the next five years and Concur is positioned directly in the middle of this growth segment. Concur Technologies recently acquired its primary competitor, Gelco, through the acquisition of H-G Holdings in a $160M cash deal in October of 2007. The firm has a $1.25B market cap with a 2008 sales estimate of $200M. The company has minimal debt and strong operating cash flow. Even near $30, Concur is not cheaply priced. The company sports a trailing P/E of nearly 115 and a forward P/E of 44. CNQR will have to execute perfectly to hit expectations of growth and earnings to maintain these rich valuations. However there is a strong belief in the analyst community that the company will hit the expectations of 55% growth expectations for revenues and income. Concur Technology shows the attributes of a stock with exceptional price potential, that being a strong balance sheet, excellent growth prospects in a booming industry, and a history of solid execution.
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Concur Technologies, Inc. provides employee spend management solutions. Its software solutions include Concur Travel & Expense, a corporate travel procurement and expense reporting solution; Concur Expense, which provides the process and information for management to reduce manual processing, improve internal controls, increase business policy compliance, speed up reimbursement, and increase expense report accuracy; Concur Cliqbook Travel, an online travel management solution that automates corporate travel procurement and processing; and Concur Vendor Payment, which enables companies to streamline payment requests, facilitating approval processes, and automatic updating of accounts payable systems. The company offers Concur ExpenseLink, which automates the expense management process, including expense filing and approval, corporate card integration, payment services, imaging services, audit services, and reporting and analysis; and Concur Travel Manager that enables customers to navigate the regulatory and compliance related complexities of the public sector. It also provides Concur Meeting, a Web-based service that enables organizations to manage the planning of corporate events and group travel; Concur Audit that provides expense report auditing services to streamline the process of managing and substantiating expense receipts; Concur Reporting with report authoring features to analyze, manage, and reduce corporate expenses; Concur Direct Reimbursement, which enables the direct deposit of reimbursable employee expenses; and Concur Compliance Solution that provides customers with enhanced fraud detection capabilities. In addition, the company offers consulting, customer support, and training services. It markets its solutions worldwide to public companies and single-location private companies through its direct sales organization, as well as strategic reseller and referral partners. The company was founded in 1993, employs nearly 600 people and is headquartered in Redmond, Washington.
Concur Technologies is an on-demand, Software-as-a-Service (SaaS) provider that brings together travel and expense management for employees of an enterprise. It basically provides a system to reimburse employees’ expenses as well as pay invoices from vendors. Through the Concur Vendor Payment system, vendors can access a web-based platform to submit their invoices. Concur’s financial performance over the years reflects the growing acceptance of its solutions. The company has been featured in Fortune’s list of 100 fastest growing small businesses for the past two years. On January 30th, Concur reported its 1Q 2008 financial results. Revenue grew 69% (yoy) and 38% from the previous quarter to $49.4M, driven by 83% growth in subscription revenue. Net income was $3.4M, or $0.07 per share up 240% (yoy). During the quarter, it added 400 customers. For 2Q, Concur expects revenues to be $50.0M, 60% growth, and EPS to be $0.04. For 2008, it raised its guidance from revenues of $194.5M to $204M. EPS guidance has been raised from $0.15 to $0.22. It expects the economic slowdown to work in its favor as companies would be more likely go for automating processes that control costs. Its stock is trading around $30, and its market cap is around $1.3B.
Most companies are going to great lengths to reduce employee travel and business expenses. In many cases, the reporting of this non-core activity is being outsourced to outside firms or companies utilize third party software packages to track this information. Concur is a leading provider of employee spending management solutions. The business of outsourced travel and entertainment accounting is expected to grow to $7B over the next five years and Concur is positioned directly in the middle of this growth segment. Concur Technologies recently acquired its primary competitor, Gelco, through the acquisition of H-G Holdings in a $160M cash deal in October of 2007. The firm has a $1.25B market cap with a 2008 sales estimate of $200M. The company has minimal debt and strong operating cash flow. Even near $30, Concur is not cheaply priced. The company sports a trailing P/E of nearly 115 and a forward P/E of 44. CNQR will have to execute perfectly to hit expectations of growth and earnings to maintain these rich valuations. However there is a strong belief in the analyst community that the company will hit the expectations of 55% growth expectations for revenues and income. Concur Technology shows the attributes of a stock with exceptional price potential, that being a strong balance sheet, excellent growth prospects in a booming industry, and a history of solid execution.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, March 14, 2008
BetterTrades looks at Zumiez Inc.
Zumiez Inc. (ZUMZ), a sports-focused clothing and accessories retailer, has a compelling growth story and the potential to more than double its store base, an analyst said Friday after the company posted a 10% jump in 4Q profits. An Oppenheimer & Co. analyst maintained an "Outperform" rating on shares. They said any dip in same-store sales may hold back growth, but thinks the stock already reflects such expectations. Same-store sales or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones. Longer term, Oppenheimer & Co. continues to believe that Zumiez remains a compelling growth story with an operating margin upside and the opportunity to more than double its store base. Oppenheimer & Co. has kept their $20 price target, implying that they expect the stock to increase to about 42% over Thursday's $14.10 close. A Piper Jaffray analyst kept a "Neutral" rating, predicting same-store sales growth will likely be flat to negative in the next seven months. They maintained their $17 price target. Shares jumped $1.14, or 8%, to $15.24 in trading Friday, having closed Thursday at $14.10.
Zumiez, Inc., a mall-based specialty retailer, provides action sports-related apparel, footwear, equipment, and accessories. The company's stores offer apparel, which includes tops, bottoms, and outerwear, as well as accessories, such as caps, belts, and sunglasses; footwear, which primarily consists of athletic shoes and sandals; hard goods, including skateboards, snowboards, bindings, components, and other equipment; and other items, such as miscellaneous novelties and DVDs to young men and women between the ages of 12 and 24. Its stores also provide private label products across various apparel product categories. As of February 3rd, 2007, Zumiez operated 235 stores under the Zumiez brand name primarily in shopping malls in 23 states. In addition, it operates a Web site, which sells merchandise online. The company was founded in 1978, currently employs nearly 800 people and is based in Everett, Washington.
Zumiez remained stagnant for years, but is now the fastest growing teen retailer around. Capitalizing on snowboard and skateboard apparel, it really began to ramp up growth in the middle of 2005 and hasn't looked back. Year over year earnings have increased about 55% over the past couple years and while expected to slow a bit, earnings are expected to remain strong at around 30% to 35% over the next couple years. Its profit margins are just average for its industry, but ROE is outstanding, 23%, and continues to rise, indicating strong management. Technically, volume levels over the past few months indicate tremendous demand for the stock. If there is one negative in the chart, it's the magnitude of the decline in the base, dropping from a high of $38.85 to a low of $14, nearly a 64% drop. Typically, you don't want the base to be deeper than about a 35% correction. What this probably means is that the stock will need to spend some time going sideways from here. It's a bit extended now, but may offer a great opportunity on a retest of the 50 day moving average.
Zumiez is a niche brand that has taken the world of extreme sports by storm. While some might balk at the thought of this being an undervalued retailer, there are some reasons for a different proclamation. ZUMZ is a small-cap with a market cap of less than $500M, and it boasts sales growth of almost 39% over the last 3 years and same store sales growth of almost 20% in recent months. The company is also expected to grow at over 30% over the next 5 years, which if it does, makes it a $2B company by 2011. With the gaining popularity of Winter Olympics, and introduction of Winter X Games and Summer X Games, we are entering a new era of extreme sports and ZUMZ, with its in-store video game stations and an enhanced shopping experience, has one up on its competition. Zumiez enjoys considerable brand loyalty among its shoppers and many would gladly invest at today's levels. Zumiez, which grew its earnings 61% over the last 12 months, currently trades hands at 1 x growth, on a PEG basis. Because the firm is debt free and in high growth mode, look for investors to pay little or no premium for these shares.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Zumiez, Inc., a mall-based specialty retailer, provides action sports-related apparel, footwear, equipment, and accessories. The company's stores offer apparel, which includes tops, bottoms, and outerwear, as well as accessories, such as caps, belts, and sunglasses; footwear, which primarily consists of athletic shoes and sandals; hard goods, including skateboards, snowboards, bindings, components, and other equipment; and other items, such as miscellaneous novelties and DVDs to young men and women between the ages of 12 and 24. Its stores also provide private label products across various apparel product categories. As of February 3rd, 2007, Zumiez operated 235 stores under the Zumiez brand name primarily in shopping malls in 23 states. In addition, it operates a Web site, which sells merchandise online. The company was founded in 1978, currently employs nearly 800 people and is based in Everett, Washington.
Zumiez remained stagnant for years, but is now the fastest growing teen retailer around. Capitalizing on snowboard and skateboard apparel, it really began to ramp up growth in the middle of 2005 and hasn't looked back. Year over year earnings have increased about 55% over the past couple years and while expected to slow a bit, earnings are expected to remain strong at around 30% to 35% over the next couple years. Its profit margins are just average for its industry, but ROE is outstanding, 23%, and continues to rise, indicating strong management. Technically, volume levels over the past few months indicate tremendous demand for the stock. If there is one negative in the chart, it's the magnitude of the decline in the base, dropping from a high of $38.85 to a low of $14, nearly a 64% drop. Typically, you don't want the base to be deeper than about a 35% correction. What this probably means is that the stock will need to spend some time going sideways from here. It's a bit extended now, but may offer a great opportunity on a retest of the 50 day moving average.
Zumiez is a niche brand that has taken the world of extreme sports by storm. While some might balk at the thought of this being an undervalued retailer, there are some reasons for a different proclamation. ZUMZ is a small-cap with a market cap of less than $500M, and it boasts sales growth of almost 39% over the last 3 years and same store sales growth of almost 20% in recent months. The company is also expected to grow at over 30% over the next 5 years, which if it does, makes it a $2B company by 2011. With the gaining popularity of Winter Olympics, and introduction of Winter X Games and Summer X Games, we are entering a new era of extreme sports and ZUMZ, with its in-store video game stations and an enhanced shopping experience, has one up on its competition. Zumiez enjoys considerable brand loyalty among its shoppers and many would gladly invest at today's levels. Zumiez, which grew its earnings 61% over the last 12 months, currently trades hands at 1 x growth, on a PEG basis. Because the firm is debt free and in high growth mode, look for investors to pay little or no premium for these shares.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, March 13, 2008
BetterTrades looks at General Dynamics Corp.
The U.S. Army awarded a unit of defense contractor General Dynamics Corp. (GD) a $15.7M contract to identify improvements and replace obsolete parts on the Abrams battle tank, the company said Wednesday. General Dynamics Land Systems will complete study of the U.S. military tank by the end of 2011, the company said. The work will involve personnel in the company's Sterling Heights, Mich., facility. In addition, a unit of General Dynamics Corp. received an $87.8M contract to supply small-caliber ammunition to the Army. General Dynamics-Ordnance and Tactical Systems, a unit within General Dynamics' Combat Systems Group, will complete the work by August of 2010. Finally, the General Dynamics Land Systems, a unit of General Dynamics Corp., has won a $32.7M Army contract to perform engineering and manufacturing work for its Stryker armored fighting vehicles, the Defense Department said late last week. The division will perform the work on its Stryker mobile gun system and nuclear biological chemical reconnaissance vehicle.
General Dynamics Corporation provides business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services. The company operates through four segments: Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology. The Aerospace segment designs, manufactures, and services mid-size and large-cabin business-jet aircraft for corporate, government, and individual customers. The Combat Systems segment offers wheeled armored combat and tactical vehicles; tracked main battle tanks and infantry fighting vehicles; guns and ammunition-handling systems; ammunition and ordnance; mobile bridge systems; passive, active, and reactive armor; chemical, biological, and explosive detection systems; electronic counter-measures; and composite products primarily for the United States military and its allies. The Marine Systems segment designs, builds, and supports submarines and surface ships for the U.S. Navy and commercial ships. It offers products, including nuclear-powered submarines; surface combatants; auxiliary and combat-logistics ships; commercial ships; engineering design support; and overhaul, repair, and support services. The Information Systems and Technology segment designs, manufactures, and delivers communications network systems, ruggedized computers, command-and-control systems, and operational hardware; wireline and wireless voice, video, and data networks; and mission simulation and training services. In addition, the company provides signals and information collection, processing, and distribution systems; special-purpose computing; data mining and fusion; special-mission satellites and payloads; and information operations services. It operates in North America, Europe, the Middle East, South America, Africa, and Asia/Pacific. General Dynamics Corporation was founded in 1899, currently employs more than 83,000 people and is based in Falls Church, Virginia.
What better place to be defensive when the markets are selling off than the defense industry? While the defense sector has underperformed the market, losing 10% since the sell-off began on last July, compared to a 6.4% decline for the S&P 500, large cap defense names actually beat the S&P 500, losing only 4.8%, while small and mid-cap defense names meanwhile, lost 11.5%, In the company’s most recent earnings report, released in late January, GD provided information relating to their 4Q earnings and full-year 2007 results. GD's earnings from continuing operations in the 4Q, which ended December 31st, was $578M, or $1.42 per share, compared to 2006 4Q earnings from continuing operations of $463M, or $1.13 per share. Revenues for the quarter were $7.5B, compared to 4Q 2006 revenues of $6.5B. For the full-year, earnings from continuing operations for 2007 were $2.1B, or $5.10 per share, compared with $1.7B, or $4.20 per share, in 2006. This is an increase of 21.6%. Revenues for the full year 2007 were $27.2B, compared with $24.1B for 2006, an increase of 13.2%. The company's funded backlog grew by $292M in the 4Q to $37.2B, compared to year-end 2006 funded backlog increase of $3.2B. Total backlog at year-end 2007 was $46.8B.
The defense sector still has a number of underlying positive trends that bears consideration. Even as the defense budget shows flattening growth, the forecast is for at least $30B in new monies by 2013. On top of this are supplemental appropriations of nearly $8 billion per month for as long as we are in Iraq and Afghanistan at the current strength. But with the defense sector down some 17% from its highs, we may start seeing investors increase their positions in aerospace and defense. Looking ahead, the firm expects Combat Systems to significantly benefit from exposure to the Army supplemental, which may be better than our previous expectations. According to the latest budget documents, they believe GD stands to benefit from a $3.0B budget. The firm expects Congress to pass a total of $160B to $170B in supplemental funding. Through Combat Systems, GD has greater exposure to the U.S. Army, more than any of the other large-cap defense primes. The military's increasing emphasis on networking and electronics, a strong demand for land combat vehicles and changes in the naval fleet are trends that, due to global unrest, will be long-term drivers for General Dynamics’ products. The firm believes this should fuel greater-than-peer top-line growth in defense businesses over the next several years. The firm's price objective has gone up to $87 from $80.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
General Dynamics Corporation provides business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services. The company operates through four segments: Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology. The Aerospace segment designs, manufactures, and services mid-size and large-cabin business-jet aircraft for corporate, government, and individual customers. The Combat Systems segment offers wheeled armored combat and tactical vehicles; tracked main battle tanks and infantry fighting vehicles; guns and ammunition-handling systems; ammunition and ordnance; mobile bridge systems; passive, active, and reactive armor; chemical, biological, and explosive detection systems; electronic counter-measures; and composite products primarily for the United States military and its allies. The Marine Systems segment designs, builds, and supports submarines and surface ships for the U.S. Navy and commercial ships. It offers products, including nuclear-powered submarines; surface combatants; auxiliary and combat-logistics ships; commercial ships; engineering design support; and overhaul, repair, and support services. The Information Systems and Technology segment designs, manufactures, and delivers communications network systems, ruggedized computers, command-and-control systems, and operational hardware; wireline and wireless voice, video, and data networks; and mission simulation and training services. In addition, the company provides signals and information collection, processing, and distribution systems; special-purpose computing; data mining and fusion; special-mission satellites and payloads; and information operations services. It operates in North America, Europe, the Middle East, South America, Africa, and Asia/Pacific. General Dynamics Corporation was founded in 1899, currently employs more than 83,000 people and is based in Falls Church, Virginia.
What better place to be defensive when the markets are selling off than the defense industry? While the defense sector has underperformed the market, losing 10% since the sell-off began on last July, compared to a 6.4% decline for the S&P 500, large cap defense names actually beat the S&P 500, losing only 4.8%, while small and mid-cap defense names meanwhile, lost 11.5%, In the company’s most recent earnings report, released in late January, GD provided information relating to their 4Q earnings and full-year 2007 results. GD's earnings from continuing operations in the 4Q, which ended December 31st, was $578M, or $1.42 per share, compared to 2006 4Q earnings from continuing operations of $463M, or $1.13 per share. Revenues for the quarter were $7.5B, compared to 4Q 2006 revenues of $6.5B. For the full-year, earnings from continuing operations for 2007 were $2.1B, or $5.10 per share, compared with $1.7B, or $4.20 per share, in 2006. This is an increase of 21.6%. Revenues for the full year 2007 were $27.2B, compared with $24.1B for 2006, an increase of 13.2%. The company's funded backlog grew by $292M in the 4Q to $37.2B, compared to year-end 2006 funded backlog increase of $3.2B. Total backlog at year-end 2007 was $46.8B.
The defense sector still has a number of underlying positive trends that bears consideration. Even as the defense budget shows flattening growth, the forecast is for at least $30B in new monies by 2013. On top of this are supplemental appropriations of nearly $8 billion per month for as long as we are in Iraq and Afghanistan at the current strength. But with the defense sector down some 17% from its highs, we may start seeing investors increase their positions in aerospace and defense. Looking ahead, the firm expects Combat Systems to significantly benefit from exposure to the Army supplemental, which may be better than our previous expectations. According to the latest budget documents, they believe GD stands to benefit from a $3.0B budget. The firm expects Congress to pass a total of $160B to $170B in supplemental funding. Through Combat Systems, GD has greater exposure to the U.S. Army, more than any of the other large-cap defense primes. The military's increasing emphasis on networking and electronics, a strong demand for land combat vehicles and changes in the naval fleet are trends that, due to global unrest, will be long-term drivers for General Dynamics’ products. The firm believes this should fuel greater-than-peer top-line growth in defense businesses over the next several years. The firm's price objective has gone up to $87 from $80.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, March 12, 2008
BetterTrades looks at Caterpillar Inc.
Caterpillar (CAT) looks like it is one of the Dow Industrials that has a good chance to rally once the worst of the bear market is over. In other words, CAT looks like a good watch list stock for market timers who don't want to buy anything in a bear market. The average analyst has a hold on CAT with a few giving the stock a buy or strong buy and only a couple saying sell. CAT's executives say that in 2008 earnings are expected to rise 5% to 15% while sales and revenues are expected to grow 5% to 10%. Those wide ranges reflect the company's uncertainty about the North American and world economies. The company is assuming GDP will grow 1% in the U.S. this year. In their most recent conference call with analysts, CAT executives said the company has long backlogs for its big machinery and engines and is expanding production capacity for those products. At the end of 2007, CAT's order backlog was up more than 20% from a year earlier. Demand for lighter equipment is down in the face of the housing construction depression in the U.S. and increasingly more in Europe, while the demand for truck engines are also down. Executives said they think the down cycle in demand for machinery could end by 2009, but they gave no guidance for next year except to indicate that the 35% increase in capital expenditures this year is likely to be maintained for several years. Long term, world wide infrastructure spending is likely to continue for at least another 10 years, the company believes, thus the increased spending on research and development and capital projects.
Caterpillar, Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. Its machinery business includes the design, manufacture, marketing, and sale of construction, mining, and forestry machinery, such as track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, and related parts. The company also engages in the design, manufacture, remanufacture, maintenance, and services of rail-related products, as well as offers logistics services. The company's engines business comprises the design, manufacture, marketing, and sale of engines for its machinery; electric power generation systems; on-highway vehicles and locomotives; and marine, petroleum, construction, industrial, agricultural, and other applications, as well as comprise related parts. Caterpillar, Inc. also engages in the remanufacture of the company's engines, and various machine and engine components, as well as provides remanufacturing services for other companies. Its financial products business includes the provision of various financing alternatives to customers and dealers for the company's machinery and engines, solar gas turbines, and other equipment and marine vessels. In addition, the company offers various forms of insurance products to customers and dealers to support the purchase and lease of its equipment; and invests in independent power projects using the company's power generation equipment and services. Caterpillar, Inc. markets its products through distribution centers. The company was founded in 1925 under the name Caterpillar Tractor Co. and changed its name to Caterpillar, Inc. in 1986. Caterpillar, Inc. is headquartered in Peoria, Illinois and currently employs more than 100.000 workers.
During Caterpillar’s most recent earnings report, released in mid-February, the company announced the fifth straight year of record sales and revenues and the fourth consecutive year of record profit. For 2007, sales and revenues were $45B, up 8%, and profits per share were up 4% from 2006. The company also reported record 4Q sales and revenues of $12B, 10% higher than the 4Q of 2006, while profits per share were up 14% from a year ago. CAT's PEG ratio is a cheap 0.83. Its PE is 13.5, and it is trading for 1.06 times sales and 6 times cash flow, compared with a three-year average price to cash flow of about 8.98. Morningstar shows that CAT returned about 14% over the last 12 months, compared with a three-year average return of 17%. The firm says CAT's expected annual three-year total rate of return is 12%. CAT's dividend yield is 1.9%. Return on Assets (ROA) is only 6.31% while return on equity is 45%. Caterpillar is estimating its earnings per share in 2008 to grow 5% to 15% with sales also forecasted to rise at a similar pace. The company also expects sales and revenues to approach $60B by 2010 with profits per share growth in 15% to 20% range starting from 2005 to 2012. Furthermore, to capitalize on various growth opportunities, Caterpillar plans to invest $2.3B in capital expenditure in 2008.
While the charts suggest the stock could go to $90, the call options are pointing to about $82 while the puts are saying the stock could touch $66 before the options expire. Morningstar.com gives the stock three out of a possible five stars, which means CAT is near the advisory firm's estimated fair value of $77. Morningstar says consider buying CAT at $57.80 and consider selling at $100. CAT's 52-week high was $87 and its low was $59.60. The company said it expects overseas sales to drive solid profit growth this year as well, with the United States teetering on recession. Global markets for mining, energy and infrastructure development are booming. CAT is forecasting 2008 to be the sixth consecutive year of record sales and revenues driven by strength in the economies outside North America, strong worldwide engine demand and a slight rebound in on-highway truck engine sales. These factors will more than offset continued weakness in the North American machinery market. We expect 2008 to be the fifth consecutive year of record profit per share, a reflection of our broad global footprint and diverse products and services. Caterpillar's story seems increasingly common. Despite a slowdown in U.S. sales, CAT's global sales are strong, more than offsetting weakness in the North American market, allowing U.S.-based Multi-National Companies like CAT to remain profitable and healthy in spite of weakness here at home.
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Caterpillar, Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. Its machinery business includes the design, manufacture, marketing, and sale of construction, mining, and forestry machinery, such as track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, and related parts. The company also engages in the design, manufacture, remanufacture, maintenance, and services of rail-related products, as well as offers logistics services. The company's engines business comprises the design, manufacture, marketing, and sale of engines for its machinery; electric power generation systems; on-highway vehicles and locomotives; and marine, petroleum, construction, industrial, agricultural, and other applications, as well as comprise related parts. Caterpillar, Inc. also engages in the remanufacture of the company's engines, and various machine and engine components, as well as provides remanufacturing services for other companies. Its financial products business includes the provision of various financing alternatives to customers and dealers for the company's machinery and engines, solar gas turbines, and other equipment and marine vessels. In addition, the company offers various forms of insurance products to customers and dealers to support the purchase and lease of its equipment; and invests in independent power projects using the company's power generation equipment and services. Caterpillar, Inc. markets its products through distribution centers. The company was founded in 1925 under the name Caterpillar Tractor Co. and changed its name to Caterpillar, Inc. in 1986. Caterpillar, Inc. is headquartered in Peoria, Illinois and currently employs more than 100.000 workers.
During Caterpillar’s most recent earnings report, released in mid-February, the company announced the fifth straight year of record sales and revenues and the fourth consecutive year of record profit. For 2007, sales and revenues were $45B, up 8%, and profits per share were up 4% from 2006. The company also reported record 4Q sales and revenues of $12B, 10% higher than the 4Q of 2006, while profits per share were up 14% from a year ago. CAT's PEG ratio is a cheap 0.83. Its PE is 13.5, and it is trading for 1.06 times sales and 6 times cash flow, compared with a three-year average price to cash flow of about 8.98. Morningstar shows that CAT returned about 14% over the last 12 months, compared with a three-year average return of 17%. The firm says CAT's expected annual three-year total rate of return is 12%. CAT's dividend yield is 1.9%. Return on Assets (ROA) is only 6.31% while return on equity is 45%. Caterpillar is estimating its earnings per share in 2008 to grow 5% to 15% with sales also forecasted to rise at a similar pace. The company also expects sales and revenues to approach $60B by 2010 with profits per share growth in 15% to 20% range starting from 2005 to 2012. Furthermore, to capitalize on various growth opportunities, Caterpillar plans to invest $2.3B in capital expenditure in 2008.
While the charts suggest the stock could go to $90, the call options are pointing to about $82 while the puts are saying the stock could touch $66 before the options expire. Morningstar.com gives the stock three out of a possible five stars, which means CAT is near the advisory firm's estimated fair value of $77. Morningstar says consider buying CAT at $57.80 and consider selling at $100. CAT's 52-week high was $87 and its low was $59.60. The company said it expects overseas sales to drive solid profit growth this year as well, with the United States teetering on recession. Global markets for mining, energy and infrastructure development are booming. CAT is forecasting 2008 to be the sixth consecutive year of record sales and revenues driven by strength in the economies outside North America, strong worldwide engine demand and a slight rebound in on-highway truck engine sales. These factors will more than offset continued weakness in the North American machinery market. We expect 2008 to be the fifth consecutive year of record profit per share, a reflection of our broad global footprint and diverse products and services. Caterpillar's story seems increasingly common. Despite a slowdown in U.S. sales, CAT's global sales are strong, more than offsetting weakness in the North American market, allowing U.S.-based Multi-National Companies like CAT to remain profitable and healthy in spite of weakness here at home.
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Tuesday, March 11, 2008
BetterTrades looks at Jacobs Engineering Group Inc.
On a busy day of announcements, Jacobs Engineering Group Inc. (JEC) stated that the company has ventured into three separate deals that will help with the company’s business. The first deal, JEC said that its joint venture with Atkins received a contract to design and provide construction services for a roadway completion project in Glasgow, Scotland. The project, which includes the creation of a four-lane urban highway and 12 bridges, will help provide a through route from England to Scotland's west coast. Terms of the deal were not disclosed. The second deal, JEC received a $550M, three-year contract from the Louisiana Department of Education for program and construction management services. Jacobs will be joined on the project by joint venture partner CSRS Inc. and local subcontractors Bright Moments and Gotech Inc. The companies will be responsible for providing services such as schedule management and quality assurance for a multi-site facilities program that involves school repairs and renovations related to Hurricane Katrina and new school construction and temporary education sites. And finally, JEC received a three-year contract from Canadian Natural Resources Ltd. (CNQ) to manage and maintain its new plant. Jacobs will support the initial phase of the Fort McMurray, Alberta, plant and will shift to a maintenance position as the plant ramps up operations. Terms were not disclosed.
Jacobs Engineering Group, Inc. provides technical, professional, and construction services to industrial, commercial, and governmental customers worldwide. The company designs and engineers modern process plants, including projects for clients in the chemicals and polymers, pharmaceuticals and biotechnology, oil and gas refining, food and consumer products, and basic resources industries, buildings, such as facilities for healthcare, education, and criminal justice markets, as well as other buildings for clients in the private sector; infrastructure projects, including highways, roads, bridges, and other transportation systems, as well as water and wastewater treatment plants, water resources facilities, and other plants and facilities. They also fabricate technology and manufacturing facilities for clients in the aerospace, automotive, defense, semiconductor, and electronics industries, consumer products manufacturing facilities and pulp and paper plants. It also offers consulting services, such as performing pricing studies, market analyses, and financial projections in determining the feasibility of a project, performing gasoline reformulation modeling, analyzing and evaluating layout and mechanical designs, analyzing automation and control systems, analyzing, designing, and executing biocontainment strategies, developing and performing process protocols with respect to Federal Drug Administration-mandated qualification and validation requirements, providing consultation on proposed railway and airport expansion projects, and performing geological and metallurgical studies. In addition, Jacobs Engineering Group provides traditional field construction services, environmental remedial construction services, and modular construction technology services. Further, it offers operations and maintenance services, such as management and support services, including subcontractors and other onsite personnel. The company was founded in 1957, currently employs nearly 50,000 workers and is based in Pasadena, California.
In the company’s most recent earnings report, released at the end of January, the company posted net income which increased to $98.4M, or $0.79 per share, from $61.3M, or $0.51 per share, in the year-ago period. Excluding a gain of $5.4M, or $0.04 per share, from the sale of an investment, earnings increased 52% to $93M, or $0.75 per share. Analysts expected profits of $0.70 per share. Sales at JEC increased 25% to $2.5B from $2B last year, surpassing Wall Street expectations for $2.44B. Jacobs also announced backlog totaling $15B, including a technical professional services component of $6.2B. This compares to total backlog and technical professional services backlog of $10.4B and $5.2B, respectively at the end of 2006. During the current quarter, the Company booked an additional $1.9B relating to the previously-announced refinery expansion project for Motiva Enterprises LLC. It seems like every week they win a new contract for something or the other, and with clients like Wyeth (WYE), Lyondell Chemical (LYO), Novartis AG (NVS), Total SA (TOT), various federal governments, state and city municipalities, JEC is in a unique position to take advantage of global economic expansion. In fact, the company has operations in North America, the United Kingdom, Europe, India, Australia, and Asia.
Based on these strong figures, the company now expects to earn $2.95 per share to $3.25 per share in the year ending Sept. 30th, including a gain of $0.04 per share booked in the 1Q. In November of 2007, the company told Wall Street analysts to expect profits between $2.70 and $3.10 per share. Considering Jacobs has been beating estimates guidance by 7% a quarter for most of the year, projected 2008 earnings should be coming in somewhere in the $3.20s. The outlook for 2008 should continue to track above their target 15% average growth. At $72, this gives the stock a forward P/E of 19.3, certainly not cheap but how many companies/industries in this environment have such visibility to future revenues. Of course people will say well the end is near, this can't continue. Just as they said it last quarter, or two quarters ago, or three quarters ago, or just like crude can't continue past $40, or gold past $600. Why shouldn’t you buy companies that beat estimates every quarter, are growing 25% on top line, and 50% on bottom line, that is increasing margins, and raise guidance, along with a backlog which is up 50% over last year, and now is 1.5 years worth of business?
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Jacobs Engineering Group, Inc. provides technical, professional, and construction services to industrial, commercial, and governmental customers worldwide. The company designs and engineers modern process plants, including projects for clients in the chemicals and polymers, pharmaceuticals and biotechnology, oil and gas refining, food and consumer products, and basic resources industries, buildings, such as facilities for healthcare, education, and criminal justice markets, as well as other buildings for clients in the private sector; infrastructure projects, including highways, roads, bridges, and other transportation systems, as well as water and wastewater treatment plants, water resources facilities, and other plants and facilities. They also fabricate technology and manufacturing facilities for clients in the aerospace, automotive, defense, semiconductor, and electronics industries, consumer products manufacturing facilities and pulp and paper plants. It also offers consulting services, such as performing pricing studies, market analyses, and financial projections in determining the feasibility of a project, performing gasoline reformulation modeling, analyzing and evaluating layout and mechanical designs, analyzing automation and control systems, analyzing, designing, and executing biocontainment strategies, developing and performing process protocols with respect to Federal Drug Administration-mandated qualification and validation requirements, providing consultation on proposed railway and airport expansion projects, and performing geological and metallurgical studies. In addition, Jacobs Engineering Group provides traditional field construction services, environmental remedial construction services, and modular construction technology services. Further, it offers operations and maintenance services, such as management and support services, including subcontractors and other onsite personnel. The company was founded in 1957, currently employs nearly 50,000 workers and is based in Pasadena, California.
In the company’s most recent earnings report, released at the end of January, the company posted net income which increased to $98.4M, or $0.79 per share, from $61.3M, or $0.51 per share, in the year-ago period. Excluding a gain of $5.4M, or $0.04 per share, from the sale of an investment, earnings increased 52% to $93M, or $0.75 per share. Analysts expected profits of $0.70 per share. Sales at JEC increased 25% to $2.5B from $2B last year, surpassing Wall Street expectations for $2.44B. Jacobs also announced backlog totaling $15B, including a technical professional services component of $6.2B. This compares to total backlog and technical professional services backlog of $10.4B and $5.2B, respectively at the end of 2006. During the current quarter, the Company booked an additional $1.9B relating to the previously-announced refinery expansion project for Motiva Enterprises LLC. It seems like every week they win a new contract for something or the other, and with clients like Wyeth (WYE), Lyondell Chemical (LYO), Novartis AG (NVS), Total SA (TOT), various federal governments, state and city municipalities, JEC is in a unique position to take advantage of global economic expansion. In fact, the company has operations in North America, the United Kingdom, Europe, India, Australia, and Asia.
Based on these strong figures, the company now expects to earn $2.95 per share to $3.25 per share in the year ending Sept. 30th, including a gain of $0.04 per share booked in the 1Q. In November of 2007, the company told Wall Street analysts to expect profits between $2.70 and $3.10 per share. Considering Jacobs has been beating estimates guidance by 7% a quarter for most of the year, projected 2008 earnings should be coming in somewhere in the $3.20s. The outlook for 2008 should continue to track above their target 15% average growth. At $72, this gives the stock a forward P/E of 19.3, certainly not cheap but how many companies/industries in this environment have such visibility to future revenues. Of course people will say well the end is near, this can't continue. Just as they said it last quarter, or two quarters ago, or three quarters ago, or just like crude can't continue past $40, or gold past $600. Why shouldn’t you buy companies that beat estimates every quarter, are growing 25% on top line, and 50% on bottom line, that is increasing margins, and raise guidance, along with a backlog which is up 50% over last year, and now is 1.5 years worth of business?
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Monday, March 10, 2008
BetterTrades looks at Chevron Corporation
Chevron Corp. (CVX), the second biggest U.S. oil company, announced early Monday that the company plans to develop a liquefied natural gas (LNG) export venture based on its Wheatstone field off northwestern Australia. Chevron aims to start engineering and design work for an initial 5.5M U.S. tons per year natural gas facility in 2009. The facility will be built on the northwest coast of mainland Australia and startup is scheduled for the first-quarter of 2011. Chevron is already involved in a separate Australian LNG venture dubbed Gorgon with Royal Dutch Shell PLC (RDS-A) and its bigger U.S. rival Exxon Mobil Corp. (XOM) that would be based on nearby Barrow Island. That venture has been delayed well beyond its original 2006 start target because of lengthy environmental approvals and cost pressures. In Australia, there is still uncertainty as to when Chevron and its partners will approve Gorgon, which would be that nation's biggest resource development. Gorgon's last cost estimate of 11B Australian Dollars was made more than four years ago and some analysts say a revised figure would be roughly double. The partners have spent around 1B Australian Dollars over the past two decades on exploration, development and marketing of the Greater Gorgon fields, which are estimated to contain more than 40 trillion cubic feet of gas. The Australian government predicts that LNG exports from the nation could quadruple to more than 50 million tons by the second half of next decade, fueled mainly by increased consumption in China, Japan, India and South Korea. Wheatstone, in contrast, is much smaller, with Chevron planning to tap an estimated 4.5 trillion cubic feet of gas. Discovered in 2004, Wheatstone is the latest Australian LNG project targeting Asia's rising demand for the fuel.
Separately on Monday, Chevron said it plans to begin construction of a $3.1B natural gas project in the Gulf of Thailand. The Platong Gas II development is designed to boost natural gas processing capacity by 420 million cubic feet per day. Chevron stated that the project has the capacity to meet 14% of Thailand's demand for natural gas. Chevron holds a 69.8% stake in the Thailand project. Mitsui Oil Exploration Co. Ltd. (MITSY) owns 27.4% and PTT Exploration and Production Public Co. Ltd. hold 2.8%. Chevron Corporation operates as an integrated energy company worldwide. The company's Petroleum operations include the exploration, development, production, and marketing of crude oil and natural gas; refining, marketing, and transportation operations include refining crude oil into finished petroleum products; marketing crude oil and products derived from petroleum; and transporting crude oil, natural gas, and petroleum products by pipeline, marine vessel, motor equipment, and rail car. Its chemical operations include manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives. The company also engages in coal mining, power generation, insurance, and real estate activities. The company was founded in 1879. It was formerly known as Standard Oil Company of California and changed its name to Chevron Corporation in 1984. Further, it changed its name to ChevronTexaco Corporation in 2001 and to Chevron Corporation in 2005. Chevron Corporation is based in San Ramon, California.
With crude oil prices effectively doubling last year, including briefly touching $107 a barrel in the last trading session, anyone could have seen the companies' earnings would leap. On a pure percentage growth basis, Chevron actually outdid Exxon. Its quarterly profits rose to $4.88B, up 29% from the $3.77B a year earlier. The per-share numbers looked like $2.32, vs. $1.74 for the December 2006 quarter, $0.06 above the analysts’ expectations. Revenues for the company increased by the same percentage as net income did. Chevron also more than doubled Exxon's 32% growth upstream, posting exploration and production profits 66% higher than a year ago. Unfortunately, it also saw its downstream profits dip by a somewhat disturbing 79%. Chemicals earnings were also on the downside to the tune of 44%.Chevron also said that the company had its best year ever in 2007. For the full year, Chevron posted record profit of $18.69B, or $8.77 per share, representing a 9% rise from 2006 earnings of $17.14B, or $7.80 per share. Analysts had expected a profit of $8.35 per share, on average. Also for the year, revenues climbed 5% to $220.9B from $210.12B. But Chevron hasn’t given an outlook for upcoming financial results, although Chevron mentioned that "major" project delays have lowered its outlook for 2008 production by about 150,000 barrels of oil per day to 2.65 million barrels. Investors should understand that CVX is diversified and has a strong business profile in volatile, cyclical and capital intensive segments of the energy industry. That performance will also depend on its ability to realize synergies following competing energy prices, fluctuating industry inventory levels, regional supply interruptions that may be caused by military conflicts or civil unrest, and production quotas imposed by OPEC.
Chevron has also announced recently that it plans to build a pre-commercial plant at its refinery in Pascagoula, Miss., to test the technical and economic viability of a breakthrough heavy-oil upgrading technology. This proprietary technology, called Vacuum Resid Slurry Hydrocracking (VRSH), has the potential to significantly increase yields of gasoline, diesel and jet fuel from heavy and ultra-heavy crude oils and could be used to increase and upgrade production of heavy oil resources. This project will advance Chevron’s heavy-oil upgrading capability and is an important research and development initiative for the company. Given the increasing role of heavy oil in meeting the world’s growing energy demand and our significant heavy oil resources, this technology could provide a unique pathway to increase supplies of clean-burning fuels for the marketplace. The Pascagoula pre-commercial plant will have a capacity of 3,500 barrels per day. All necessary permits have been secured, and construction is expected to begin later this year. The Pascagoula Refinery, Chevron’s largest wholly owned petroleum refinery, has been operating in Mississippi for over 40 years. Chevron has been actively developing VRSH technology since 2003. The patented process has undergone successful preliminary testing on a wide range of feedstocks in multiple pilot plants at Chevron’s research center in Richmond, Calif. Chevron’s research shows the technology can achieve up to 100% conversion of the heaviest feedstock, while the best current commercial refining technology achieves less than 80% conversion.
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Separately on Monday, Chevron said it plans to begin construction of a $3.1B natural gas project in the Gulf of Thailand. The Platong Gas II development is designed to boost natural gas processing capacity by 420 million cubic feet per day. Chevron stated that the project has the capacity to meet 14% of Thailand's demand for natural gas. Chevron holds a 69.8% stake in the Thailand project. Mitsui Oil Exploration Co. Ltd. (MITSY) owns 27.4% and PTT Exploration and Production Public Co. Ltd. hold 2.8%. Chevron Corporation operates as an integrated energy company worldwide. The company's Petroleum operations include the exploration, development, production, and marketing of crude oil and natural gas; refining, marketing, and transportation operations include refining crude oil into finished petroleum products; marketing crude oil and products derived from petroleum; and transporting crude oil, natural gas, and petroleum products by pipeline, marine vessel, motor equipment, and rail car. Its chemical operations include manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives. The company also engages in coal mining, power generation, insurance, and real estate activities. The company was founded in 1879. It was formerly known as Standard Oil Company of California and changed its name to Chevron Corporation in 1984. Further, it changed its name to ChevronTexaco Corporation in 2001 and to Chevron Corporation in 2005. Chevron Corporation is based in San Ramon, California.
With crude oil prices effectively doubling last year, including briefly touching $107 a barrel in the last trading session, anyone could have seen the companies' earnings would leap. On a pure percentage growth basis, Chevron actually outdid Exxon. Its quarterly profits rose to $4.88B, up 29% from the $3.77B a year earlier. The per-share numbers looked like $2.32, vs. $1.74 for the December 2006 quarter, $0.06 above the analysts’ expectations. Revenues for the company increased by the same percentage as net income did. Chevron also more than doubled Exxon's 32% growth upstream, posting exploration and production profits 66% higher than a year ago. Unfortunately, it also saw its downstream profits dip by a somewhat disturbing 79%. Chemicals earnings were also on the downside to the tune of 44%.Chevron also said that the company had its best year ever in 2007. For the full year, Chevron posted record profit of $18.69B, or $8.77 per share, representing a 9% rise from 2006 earnings of $17.14B, or $7.80 per share. Analysts had expected a profit of $8.35 per share, on average. Also for the year, revenues climbed 5% to $220.9B from $210.12B. But Chevron hasn’t given an outlook for upcoming financial results, although Chevron mentioned that "major" project delays have lowered its outlook for 2008 production by about 150,000 barrels of oil per day to 2.65 million barrels. Investors should understand that CVX is diversified and has a strong business profile in volatile, cyclical and capital intensive segments of the energy industry. That performance will also depend on its ability to realize synergies following competing energy prices, fluctuating industry inventory levels, regional supply interruptions that may be caused by military conflicts or civil unrest, and production quotas imposed by OPEC.
Chevron has also announced recently that it plans to build a pre-commercial plant at its refinery in Pascagoula, Miss., to test the technical and economic viability of a breakthrough heavy-oil upgrading technology. This proprietary technology, called Vacuum Resid Slurry Hydrocracking (VRSH), has the potential to significantly increase yields of gasoline, diesel and jet fuel from heavy and ultra-heavy crude oils and could be used to increase and upgrade production of heavy oil resources. This project will advance Chevron’s heavy-oil upgrading capability and is an important research and development initiative for the company. Given the increasing role of heavy oil in meeting the world’s growing energy demand and our significant heavy oil resources, this technology could provide a unique pathway to increase supplies of clean-burning fuels for the marketplace. The Pascagoula pre-commercial plant will have a capacity of 3,500 barrels per day. All necessary permits have been secured, and construction is expected to begin later this year. The Pascagoula Refinery, Chevron’s largest wholly owned petroleum refinery, has been operating in Mississippi for over 40 years. Chevron has been actively developing VRSH technology since 2003. The patented process has undergone successful preliminary testing on a wide range of feedstocks in multiple pilot plants at Chevron’s research center in Richmond, Calif. Chevron’s research shows the technology can achieve up to 100% conversion of the heaviest feedstock, while the best current commercial refining technology achieves less than 80% conversion.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, March 07, 2008
BetterTrades looks at LifeCell Corporation
Shares of LifeCell Corp. (LIFC) advanced Friday, as a Friedman Billings Ramsey analyst said LifeCell could handily beat Wall Street estimates if sales of its Strattice tissue graft are strong. The company’s analyst started covering the stock with a rating of "Outperform," or "Buy," and a price target of $56 per share. They think the Strattice graft is superior to competing products, which will lead to stronger sales than other analysts expect. On average, analysts think LifeCell will earn $1.04 per share in 2008, on $239.6M in sales. The unnamed analyst said LifeCell's sales could rise as high as $1.21 per share, with sales of up to $256M, because surgeons will choose Strattice over rival products. He added that Strattice will replace LifeCell's AlloDerm graft in some procedures. In addition, the company will drive sales by striking a partnership to sell Strattice worldwide. The Strattice graft is taken from pigs, and is designed for use in hernia repair and breast reconstruction. By the end of the first quarter, LifeCell should announce an international distribution agreement, potentially doubling the global procedure opportunity. Analysts do not expect any competing products to hit the market this year, and said Strattice will be more popular than two rival grafts that were launched in 2007. In today’s trading, the stock gained $0.32, or 0.8%, to close at $40.35. The price target implies that shares will increase 39.2% over the next 12 months.
LifeCell Corporation engages in the development and marketing of tissue-based products for use in reconstructive, orthopedic, and urogynecologic surgical procedures to repair soft tissue defects in the United States and internationally. The company's reconstructive tissue products include AlloDerm for plastic reconstructive, general surgical, burn, and periodontal procedures; and Cymetra, a particulate form of AlloDerm suitable for injection to replace damaged or inadequate integumental tissue, such as correction of soft tissue defects and depressed scars, or to replace integumental tissue lost through atrophy. Its orthopedic tissue repair products comprise GraftJacket, for repairing damaged or inadequate integumental tissue in orthopedic surgical procedures, such as for rotator cuff tendon reinforcement, as well as for the treatment of lower extremity wounds; and AlloCraft DBM, a human tissue-based bone-grafting product used as a bone void filler in various orthopedic surgical procedures. The company's urogynecologic tissue repair products include Repliform used in urogynecologic procedures as a bladder sling in the treatment of stress urinary incontinence and for the repair of pelvic floor defects. LifeCell Corporation sells its products to plastic surgeons, general surgeons, and burn surgeons, as well as ear, nose, and throat surgeons through independent sales, marketing agents, and distributors. It has strategic sales and marketing partnerships with Boston Scientific (BSX); Wright Medical Group, Inc. (WMGI); Stryker Corporation (SYK); and BioHorizons. The company was founded in 1986, employs more than 440 people and is headquartered in Branchburg, New Jersey.
LIFC is a company with a history of posting excellent growth. Over the past three years, the company has posted year over year earnings growth of 180%, 100% and 111% and a whopping 1,571% over the past five years. Sales growth has been impressive as well, with consistent sales growth in the neighborhood of 50% in that time. With this kind of growth, it's no surprise that margins and ROE are well above industry averages. Ideally, you would like to see net margin a bit higher for leading companies, but 15% is quite good. ROE has been rising steadily for several years and sits at around 19%. Since April 2007, when the stock traded around $24.75 per share, price has stayed very tight to the 10-day Moving Average for support. 200-day Moving Average support has been wholly consistent as well, as volume continues to climb, pushing past its average of 280,000 shares consistently. LifeCell is a consecutively profitable company because of the growing demand for its patented technology. Over the past six quarters, they have been able to increase their revenue at 32% or higher clips. Year-to-date for 2007, revenues are at $191.13M, up 58% compared to the same six-month period in 2006. Net income is currently $0.778 per share, or $26.88 million.
LifeCell is uniquely positioned in an industry with no real viable competitors for their specialized service and the demographics support continued growth. The company has proved that it can continue to turn strong quarterly profits based on its patent technology and specialized biotech field. Continued investor support can make this stock worth $70 per share as it begins to market its new products. The recent announcement only bolsters the company's previous strong performance and, as everyone knows, the Health/Biotech stocks trade on pipeline growth way out in the future. Even though LIFC won't see an immediate impact to their bottom line, 2008 is going to be a year of significant earnings increases. No competition and growing demographics equals a buy, especially when the stock has still not even breached its previous highs of $48.28. Overall, this can be a volatile stock at times and the big, high volume drop in the left side of the base back in October is of some concern. However, initiating a small position and using a tight stop may prove to be a worthy trade. After all, this is a company with a proven history of outstanding growth.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
LifeCell Corporation engages in the development and marketing of tissue-based products for use in reconstructive, orthopedic, and urogynecologic surgical procedures to repair soft tissue defects in the United States and internationally. The company's reconstructive tissue products include AlloDerm for plastic reconstructive, general surgical, burn, and periodontal procedures; and Cymetra, a particulate form of AlloDerm suitable for injection to replace damaged or inadequate integumental tissue, such as correction of soft tissue defects and depressed scars, or to replace integumental tissue lost through atrophy. Its orthopedic tissue repair products comprise GraftJacket, for repairing damaged or inadequate integumental tissue in orthopedic surgical procedures, such as for rotator cuff tendon reinforcement, as well as for the treatment of lower extremity wounds; and AlloCraft DBM, a human tissue-based bone-grafting product used as a bone void filler in various orthopedic surgical procedures. The company's urogynecologic tissue repair products include Repliform used in urogynecologic procedures as a bladder sling in the treatment of stress urinary incontinence and for the repair of pelvic floor defects. LifeCell Corporation sells its products to plastic surgeons, general surgeons, and burn surgeons, as well as ear, nose, and throat surgeons through independent sales, marketing agents, and distributors. It has strategic sales and marketing partnerships with Boston Scientific (BSX); Wright Medical Group, Inc. (WMGI); Stryker Corporation (SYK); and BioHorizons. The company was founded in 1986, employs more than 440 people and is headquartered in Branchburg, New Jersey.
LIFC is a company with a history of posting excellent growth. Over the past three years, the company has posted year over year earnings growth of 180%, 100% and 111% and a whopping 1,571% over the past five years. Sales growth has been impressive as well, with consistent sales growth in the neighborhood of 50% in that time. With this kind of growth, it's no surprise that margins and ROE are well above industry averages. Ideally, you would like to see net margin a bit higher for leading companies, but 15% is quite good. ROE has been rising steadily for several years and sits at around 19%. Since April 2007, when the stock traded around $24.75 per share, price has stayed very tight to the 10-day Moving Average for support. 200-day Moving Average support has been wholly consistent as well, as volume continues to climb, pushing past its average of 280,000 shares consistently. LifeCell is a consecutively profitable company because of the growing demand for its patented technology. Over the past six quarters, they have been able to increase their revenue at 32% or higher clips. Year-to-date for 2007, revenues are at $191.13M, up 58% compared to the same six-month period in 2006. Net income is currently $0.778 per share, or $26.88 million.
LifeCell is uniquely positioned in an industry with no real viable competitors for their specialized service and the demographics support continued growth. The company has proved that it can continue to turn strong quarterly profits based on its patent technology and specialized biotech field. Continued investor support can make this stock worth $70 per share as it begins to market its new products. The recent announcement only bolsters the company's previous strong performance and, as everyone knows, the Health/Biotech stocks trade on pipeline growth way out in the future. Even though LIFC won't see an immediate impact to their bottom line, 2008 is going to be a year of significant earnings increases. No competition and growing demographics equals a buy, especially when the stock has still not even breached its previous highs of $48.28. Overall, this can be a volatile stock at times and the big, high volume drop in the left side of the base back in October is of some concern. However, initiating a small position and using a tight stop may prove to be a worthy trade. After all, this is a company with a proven history of outstanding growth.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, March 06, 2008
BetterTrades looks at Joy Global Inc.
Mining equipment maker Joy Global Inc. (JOYG) announced Thursday its fiscal 2008 1Q earnings increased 19% on continued international strength and improving U.S. coal market demand. The company earned $71.1M, or $0.65 per share, compared with $59.7M, or $0.51 per share, in the year-ago quarter. Revenues increased 14% to $640.3M, from $560.5M in the prior-year period. While U.S. sales of underground and surface mining equipment were virtually flat at $289.4M, international sales climbed almost 30% to $351M. The company also states that orders advanced 54% to $870M, on continued demand for mining equipment internationally and improving demand and prices in the domestic coal market. Analysts had expected profits of $0.65 per share on revenues of $639.3M. The events of the past few months have clearly demonstrated that the mining industry's production capacity has fallen behind the growth in commodity demand, resulting in supply shortages and dramatic increases in commodity prices. The price increase underlies the expectation that it will take several years and significant investment for capacity to catch up to demand.
Joy Global, Inc. engages in the manufacture and servicing of mining equipment for the extraction of coal, and other minerals and ores. The company operates in two segments, Underground Mining Machinery and Surface Mining Equipment. The Underground Mining Machinery segment manufactures underground mining equipment for the extraction of coal and other bedded minerals, as well as operates service locations near mining regions worldwide. Its product line includes continuous miners; longwall shearers; powered roof supports; armored face conveyors; shuttle cars; flexible conveyor trains; complete longwall mining systems, consisting of powered roof supports, an armored face conveyor, and a longwall shearer; feeder breakers; continuous haulage systems; battery haulers; and roof bolters. The Surface Mining Equipment segment produces electric mining shovels, rotary blasthole drills, and walking draglines for open-pit mining operations. These products are used in mining copper, coal, iron ore, oil sands, silver, gold, diamonds, phosphate, and other minerals and ores. This segment also provides a range of parts and services to mines; offers electric motor rebuilds, and other products and services to the non mining industrial segment; and sells used electric mining shovels in other markets. In addition, it designs, manufactures, installs, and services conveyor systems for bulk material handling in mining and other industrial applications. The company was founded in 1884, currently employs more than 9,000 people and is headquartered in Milwaukee, Wisconsin.
Joy Global enjoys one of the most unheralded duopolies in any industry. Perhaps of even greater importance, a duopoly that seems to have no end in sight as barriers to entry in this industry make it cost prohibitive for any firm to mount a meaningful challenge. This overly-volatile mining-machinery stock is up 19% in the past three months, and up 1,427% in the past five years, thanks in part to the solid earnings visibility the company enjoys into 2010. As a result, investors have caught on as shares of JOYG have rallied some 27% since trading around $52.50 on January 23rd. Joy's manufacturing capacity is completely booked in 2008, nearly booked in 2009, and is already being filled for 2010 giving them significant visibility on earnings growth through the end of the decade. Joy Global has enjoyed a great run in price of its stock in what can only be describes as a less than stellar overall market since the start of the year. There is little question that the company has become very profitable, enjoying the rising tide in an industry which is dominated by two firms, the other being Bucyrus International (BUCY).
With prices at record highs and demand soaring, there's no end in sight to bullish energy forecasts. Coal is widely used as a solid fuel for generating electricity, but it is also considered a dirtier fuel than petroleum and natural gas. Its reputation as a major contributor to climate change is well-deserved, because this black gold is the largest source of carbon dioxide emissions. Yet despite these problems, coal use is growing rapidly, in large part because it is inexpensive and in abundant supply. Joy Global, the world's largest manufacturer of mining equipment, has positioned themselves to meet the increasing global need for such commodities as coal and copper, in addition to creating a strong demand for their services. Around 45% of Joy Global's revenue comes from U.S. coal miners, who have suffered from large inventories due to the winter's unseasonably warm weather. U.S. electricity demand, half of it supplied by coal-fired generators, was little changed in '07. But coal inventories are declining, and coal miner stocks are reacting positively and Joy Global doesn't rely on just coal. They also produce machinery for the extraction of gold, copper, and oil sands. The overseas market, responsible for 50% of the firm's sales, is regarded as a long-term source of growth. China, for example, is expected to have a 50% increase in power demand by 2010, with about a 60% market share and relatively low debt, the stock's currently low valuation is attracting large institutional investors.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Joy Global, Inc. engages in the manufacture and servicing of mining equipment for the extraction of coal, and other minerals and ores. The company operates in two segments, Underground Mining Machinery and Surface Mining Equipment. The Underground Mining Machinery segment manufactures underground mining equipment for the extraction of coal and other bedded minerals, as well as operates service locations near mining regions worldwide. Its product line includes continuous miners; longwall shearers; powered roof supports; armored face conveyors; shuttle cars; flexible conveyor trains; complete longwall mining systems, consisting of powered roof supports, an armored face conveyor, and a longwall shearer; feeder breakers; continuous haulage systems; battery haulers; and roof bolters. The Surface Mining Equipment segment produces electric mining shovels, rotary blasthole drills, and walking draglines for open-pit mining operations. These products are used in mining copper, coal, iron ore, oil sands, silver, gold, diamonds, phosphate, and other minerals and ores. This segment also provides a range of parts and services to mines; offers electric motor rebuilds, and other products and services to the non mining industrial segment; and sells used electric mining shovels in other markets. In addition, it designs, manufactures, installs, and services conveyor systems for bulk material handling in mining and other industrial applications. The company was founded in 1884, currently employs more than 9,000 people and is headquartered in Milwaukee, Wisconsin.
Joy Global enjoys one of the most unheralded duopolies in any industry. Perhaps of even greater importance, a duopoly that seems to have no end in sight as barriers to entry in this industry make it cost prohibitive for any firm to mount a meaningful challenge. This overly-volatile mining-machinery stock is up 19% in the past three months, and up 1,427% in the past five years, thanks in part to the solid earnings visibility the company enjoys into 2010. As a result, investors have caught on as shares of JOYG have rallied some 27% since trading around $52.50 on January 23rd. Joy's manufacturing capacity is completely booked in 2008, nearly booked in 2009, and is already being filled for 2010 giving them significant visibility on earnings growth through the end of the decade. Joy Global has enjoyed a great run in price of its stock in what can only be describes as a less than stellar overall market since the start of the year. There is little question that the company has become very profitable, enjoying the rising tide in an industry which is dominated by two firms, the other being Bucyrus International (BUCY).
With prices at record highs and demand soaring, there's no end in sight to bullish energy forecasts. Coal is widely used as a solid fuel for generating electricity, but it is also considered a dirtier fuel than petroleum and natural gas. Its reputation as a major contributor to climate change is well-deserved, because this black gold is the largest source of carbon dioxide emissions. Yet despite these problems, coal use is growing rapidly, in large part because it is inexpensive and in abundant supply. Joy Global, the world's largest manufacturer of mining equipment, has positioned themselves to meet the increasing global need for such commodities as coal and copper, in addition to creating a strong demand for their services. Around 45% of Joy Global's revenue comes from U.S. coal miners, who have suffered from large inventories due to the winter's unseasonably warm weather. U.S. electricity demand, half of it supplied by coal-fired generators, was little changed in '07. But coal inventories are declining, and coal miner stocks are reacting positively and Joy Global doesn't rely on just coal. They also produce machinery for the extraction of gold, copper, and oil sands. The overseas market, responsible for 50% of the firm's sales, is regarded as a long-term source of growth. China, for example, is expected to have a 50% increase in power demand by 2010, with about a 60% market share and relatively low debt, the stock's currently low valuation is attracting large institutional investors.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, March 05, 2008
BetterTrades looks at RehabCare Group Inc.
Hospital Management Company RehabCare Group Inc. (RHB) announced early Wednesday that the company’s 4Q earnings more than doubled led by reduced insurance and liability expenses. The company earned $5.1M, or $0.29 per share, compared with $2.1M, or $0.12 per share, in the year-ago quarter. Revenues declined 5% to $173.6M, from $182.2M in the prior-year period. Analysts expected a profit of $0.26 per share on revenues of $172.8M. The company said results were aided by a reduction in self-insurance expenses of $1.4M, or $0.05 per share. RehabCare said it paid out less in professional liability and workers' compensation claims, but more in health insurance claims. For the full year, the company posted a profit of $12.7M, or $0.73 per share, compared with $7.3M, or $0.42 per share, in 2006, while revenues increased 16% to $711.7M for the year. For 2008, the company stated that they will not provide earnings or revenue predictions but expects the 1Q to be hurt by costs associated with management incentive plans, health insurance, professional liability and workers' compensation.
RehabCare Group, Inc. provides rehabilitation program management services in hospitals, nursing homes, outpatient facilities, and other long-term care facilities in the United States. It operates in three segments: Program Management Services, Freestanding Hospitals, and Other Healthcare Services. The Program Management Services segment provides acuity rehabilitation centers for conditions, such as strokes, orthopedic conditions, and head injuries, skilled nursing units for conditions, such as stroke, cancer, heart failure, burns, and wounds; and outpatient therapy programs for hospital-based and satellite programs. This segment also offers contract therapy services that include rehabilitation services in freestanding skilled nursing, long-term care, and assisted living facilities for neurological, orthopedic, and other medical conditions. The Freestanding Hospitals segment operates rehabilitation hospitals, which provide interdisciplinary rehabilitation services to patients on an inpatient and outpatient basis, and therapeutic and clinical care to patients with medically complex diagnoses. It operates three long-term acute care hospitals and five rehabilitation hospitals. The Other Healthcare Services segment provides strategic and financial consulting services, and therapist and nurse staffing services for healthcare providers in the United States. RehabCare Group provides its services to approximately 1,400 hospitals and skilled nursing facilities in 43 states, the District of Columbia, and Puerto Rico. The company was founded in 1982, currently employs nearly 7,000 people and is headquartered in St. Louis, Missouri.
While the first few months of 2008 haven’t started the way the company envisioned, in relation to their market standing, the company is still profitable. From the middle of January, the company, after recently establishing a new 52-week high of $26.19, began to take a downturn that has lead to their current market standing. During which time, the company’s stock has fallen more than 30%, including losing more than $3.00 during today’s trading session. This has deterred a few investors, but others are looking at it as a discount value now. The final six months of last year, RehabCare’s stock increased nearly 46% based on a strong financial standing within the company. Bouncing off of a trading price of $13.71 in late-July, RHB put together a strong run in price which was attributed to the company posting quarterly earnings growth of nearly 70% year-over-year, while posting positive profit and operating margins. Included in the company’s strong run, is the fact that the company, despite opening new hospitals, is able to keep the total debt of the company to a minimum. That results in them being able to boast $46M in operating cash flow and posting a gross profit of $117M over the past twelve months.
Looking forward into 2008, RehabCare Group expects strong consolidated net earnings growth for full year 2008, but expects its quarterly consolidated operating earnings to be uneven with all quarters impacted by hospital start-up/ramp-up costs. Additionally, the Company expects to achieve operational improvements in the 1Q inside the company’s core business. The Contract Therapy division expects to achieve a modest net increase in the number of units and operating earnings margins of 4.5% to 5.5% during 2008 driven by same store revenue growth and improved operating efficiencies. The Hospital Rehabilitation Services division expects to experience a modest increase in units during 2008 and to achieve operating earnings margins of 12% to 15%. Same store discharges are expected to improve 3% to 5% as the division returns to a more stable operating environment following the recently enacted legislation. The Hospital division expects EBITDA to be negatively impacted by start-up and ramp-up costs associated with four new majority owned joint venture hospitals planned for 2008. The five hospitals in operation for less than one year are expected to generate an EBITDA pull-down of $4.5M to $5.5M during 2008. The impact of this pull-down on earnings per share will be partially offset by the respective minority partners’ shares of these costs. The eight hospitals that have been in operation for more than one year are expected to achieve 13% to 15% EBITDA margins before corporate overhead in 2008.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
RehabCare Group, Inc. provides rehabilitation program management services in hospitals, nursing homes, outpatient facilities, and other long-term care facilities in the United States. It operates in three segments: Program Management Services, Freestanding Hospitals, and Other Healthcare Services. The Program Management Services segment provides acuity rehabilitation centers for conditions, such as strokes, orthopedic conditions, and head injuries, skilled nursing units for conditions, such as stroke, cancer, heart failure, burns, and wounds; and outpatient therapy programs for hospital-based and satellite programs. This segment also offers contract therapy services that include rehabilitation services in freestanding skilled nursing, long-term care, and assisted living facilities for neurological, orthopedic, and other medical conditions. The Freestanding Hospitals segment operates rehabilitation hospitals, which provide interdisciplinary rehabilitation services to patients on an inpatient and outpatient basis, and therapeutic and clinical care to patients with medically complex diagnoses. It operates three long-term acute care hospitals and five rehabilitation hospitals. The Other Healthcare Services segment provides strategic and financial consulting services, and therapist and nurse staffing services for healthcare providers in the United States. RehabCare Group provides its services to approximately 1,400 hospitals and skilled nursing facilities in 43 states, the District of Columbia, and Puerto Rico. The company was founded in 1982, currently employs nearly 7,000 people and is headquartered in St. Louis, Missouri.
While the first few months of 2008 haven’t started the way the company envisioned, in relation to their market standing, the company is still profitable. From the middle of January, the company, after recently establishing a new 52-week high of $26.19, began to take a downturn that has lead to their current market standing. During which time, the company’s stock has fallen more than 30%, including losing more than $3.00 during today’s trading session. This has deterred a few investors, but others are looking at it as a discount value now. The final six months of last year, RehabCare’s stock increased nearly 46% based on a strong financial standing within the company. Bouncing off of a trading price of $13.71 in late-July, RHB put together a strong run in price which was attributed to the company posting quarterly earnings growth of nearly 70% year-over-year, while posting positive profit and operating margins. Included in the company’s strong run, is the fact that the company, despite opening new hospitals, is able to keep the total debt of the company to a minimum. That results in them being able to boast $46M in operating cash flow and posting a gross profit of $117M over the past twelve months.
Looking forward into 2008, RehabCare Group expects strong consolidated net earnings growth for full year 2008, but expects its quarterly consolidated operating earnings to be uneven with all quarters impacted by hospital start-up/ramp-up costs. Additionally, the Company expects to achieve operational improvements in the 1Q inside the company’s core business. The Contract Therapy division expects to achieve a modest net increase in the number of units and operating earnings margins of 4.5% to 5.5% during 2008 driven by same store revenue growth and improved operating efficiencies. The Hospital Rehabilitation Services division expects to experience a modest increase in units during 2008 and to achieve operating earnings margins of 12% to 15%. Same store discharges are expected to improve 3% to 5% as the division returns to a more stable operating environment following the recently enacted legislation. The Hospital division expects EBITDA to be negatively impacted by start-up and ramp-up costs associated with four new majority owned joint venture hospitals planned for 2008. The five hospitals in operation for less than one year are expected to generate an EBITDA pull-down of $4.5M to $5.5M during 2008. The impact of this pull-down on earnings per share will be partially offset by the respective minority partners’ shares of these costs. The eight hospitals that have been in operation for more than one year are expected to achieve 13% to 15% EBITDA margins before corporate overhead in 2008.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
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