With the current state of the Investment Bank being in utter disarray, today’s announcement from the Federal Reserve may have taken a bit of pressure off the ongoing credit crunch that has had a stranglehold on the national economy. Through the current program, the Fed has made it known that banks will now be able to look upon central banks for cash through January 30th of 2008, rather than the initial cutoff of mid-September, while also allowing investment firms to exchange high risk vehicles for safer Treasury bonds, also extended through January 2008.
Additionally, starting August 11th, the Fed will make available 84-day cash loans, along with the normal 28-day loans, in which banks will have the opportunity to bid on. From the midway point last year, the mortgage crisis has lead to a sharp decrease in the value of bonds and for specific debt which are backed by those loans. One such bank that has seen the brunt of poor credit is that of Oppenheimer Holdings Inc. (OPY) which reported earnings today in which the company’s earnings plummeted almost 90% for their 2Q.
In the report, Oppenheimer announced that their net income plunged from $15.8M or $1.16 a share, to $1.6M, or $0.12 a share. In addition, revenues for the bank declined nearly 48% to $70.2M. The major down force on earnings for the company was continued acquisition costs, to the tune of $12.4M during the quarter, for Oppenheimer’s recent purchase of CIBC World Markets’ U.S. portion business back in January.
Although the current condition of Oppenheimer’s stock has seen better day, those days actually came from the beginning of 2006, up until mid-2007, when the current credit epidemic began. During that time, the stock tripled in price, going from $20 a share up to nearly $60 per share. Since the time of the aforementioned acquisition, shares of OPY have declined some 35%, so was that the correct move for Oppenheimer? With all said, Oppenheimer paid out $10M in cash, and is responsible for another $25M over the next 5 years to CIBC. Today, shares of OPY surged, up nearly 11%, or $2.88, to close at $29.61 a share.
Many other companies have been hurt from the ongoing concerns with banks and lending businesses, one being Merrill Lynch (MER), which announced their financial position just a week ago. in their company report, the company stated negative revenues of $2.11B and negative earnings per share of $4.97, compared to the prior year’s period of a gain of $9.46B, or $2.24 a share. In a direct response to the write-downs and poor earnings release, Merrill Lynch, just yesterday, acknowledged that the company will now take part in raising nearly $8.5B in capital while selling their mortgage securities at a discount. How much of a discount, well the bank has sold over $30B in debt obligations for just over $6.7B, that turns out to be $0.22 on the dollar.
Globally, it has been estimated that the total number of write-down throughout the investment banking community has already eclipsed $300B and has been projected that the final number should exceed $1 trillion before any reconciliation within the credit industry. This certainly isn’t the first time that banks have seen large amount of mortgage sales within the marketplace, which in turn, translates into losses on their own financial statements.
While banks rely on consumers for the lion’s share of their business, if economic conditions continue, consumer spending will more than likely dwindle to nearly nothing, thus making the turnaround in the financial market much more difficult and could likely lead to more bank closures along the way. Many analysts believe that the only way for this turnaround to take place is to initiate another stimulus package in order to vamp up consumer spending, while others think the way to go is to take on more personal loans and mortgages. Either way, the economy is in serious trouble and someone needs to find a way to get it back on track.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, July 30, 2008
Tuesday, July 29, 2008
BetterTrades looks at National Oilwell Varco Inc. - July 29, 2008
National Oilwell Varco (NOV), the biggest U.S. maker of oil field equipment, announced earlier today that the company’s 2Q profits surged 32% as soaring oil and natural-gas prices increased demand for rigs and drilling supplies. Net income for the firm climbed to $421.7M, or $1.04 a share, from $318.5M, or $0.89, a year earlier. Excluding one-time items, the current results beat the average analysts’ expectations by $0.06. Revenues, meanwhile, increased 39% to $3.32B, along with the company's order backlog advancing to $10.8B at the end of the quarter, an increase of 9.1% from $9.9B at the end of the 1Q. Contributing to the higher backlog were record new orders of $2.2B, the company confirmed. Revenues from backlog, a figure that can be affected by the timing of shipments to customers, jumped 18% from the 1Q and 40% from a year earlier. National Oilwell expanded its North American product business with its April acquisition of rival Grant Prideco for $7.35B. With 25 manufacturing sites worldwide, Grant Prideco controlled 60% of the global drill-pipe market at the time the acquisition was announced in December. The 2Q results also included pretax costs of $62.5M for the purchase of Grant Prideco and $7.2M in pretax income from a Grant Prideco business that was sold during the quarter. Excluding those one-time items and $29M in additional tax provisions, profits were $1.20 a share. On that basis, the company was expected to earn $1.14 by the analysts who following the company’s progress more closely. In addition to the offshore market, National Oilwell is poised for increased orders as U.S. gas producers target shale formations considered more difficult to drill. National Oilwell stock rose 52% in the 2Q, the sixth-best performance among companies in the Standard & Poor's 500 Index and the best in the benchmark Philadelphia Oil Service Sector Index. By the close of today’s markets, shares of NOV were slightly higher, adding $0.94, or 1.3%, to conclude the session at $75.05 a share.
National Oilwell Varco, Inc. engages in the design, construction, manufacture, and sale of systems, components, and products to the oil and gas industry worldwide. It operates in three segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services. The Rig Technology segment designs, manufactures, sells, and services systems for the drilling, completion, and servicing of oil and gas wells. It offers equipment that automates well construction and management operations, such as offshore and onshore drilling rigs; derricks; pipe lifting, racking, rotating, and assembly systems; coiled tubing equipment and pressure pumping units; well workover rigs; wireline winches; and cranes. The Petroleum Services & Supplies segment provides various consumable goods and services used to drill, complete, remediate, and workover oil and gas wells and service pipelines, flowlines, and other oilfield tubular goods. It manufactures, rents, and sells various products and equipment, including transfer pumps, solids control systems, drilling motors and downhole tools, rig instrumentation systems, and mud pump consumables. This segment also provides oilfield tubular services, including the provision of inspection and internal coating services, and equipment for drillpipe, linepipe, tubing, casing, and pipelines, as well as offers coiled tubing pipes and composite pipes for applications in corrosive environments. The Distribution Services segment offers maintenance, support, repair, and operating supplies, as well as spare parts to drill site and production locations. National Oilwell Varco serves drilling contractors, shipyards and other rig fabricators, well servicing companies, national oil companies, independent oil and gas companies, supply stores, and pipe-running service providers. The company was founded in 1862. It was formerly known as National-Oilwell, Inc. and changed its name to National Oilwell Varco, Inc. in 2005. The company is based in Houston, Texas and currently employs nearly 27,000 workers.
National Oilwell Varco has its name on some portion of 90% of all offshore rigs, and while the rig market is booming, the fact that NOV added a huge sum to its backlog is convincing evidence. More impressively, 88% of those orders came from outside the U.S. The business of building deepwater rigs is hot right now, and there are numerous reasons why it is going to stay that way. First, current offshore rigs are old, with an average rigs’ age globally being 25 years old, which means that either new ones need to be built or existing rigs must be renovated, which in turn, is good news for NOV being a huge part of both of those businesses. Secondly, the demand for oil is not fading anytime soon, and with the slight possibility that there may be provisions of drilling in the Gulf of Mexico, that in turn would result in numerous new orders for National Oilwell. Current supplies of offshore drilling platforms and ships are already low and would move lower on this announcement. The most important factor for this sort of drilling is that it is not a want, but a need.
The numbers are currently unyielding as NOV is trading at about 18 times next year’s earnings which are not bad for a company that the S&P predicts will enjoy an earnings-per-share growth rate of 42% over the next three years. Operating margins are an above industry average 21.2% and profit margins are a stellar 14.15%. In addition to that, the company has $2.14B dollars in cash and only $743M in long term debt, one of the many reasons that the S&P has given them an A- credit rating. NOV also sports a very healthy backlog, nearly $11B entering into the 3Q, which means the company is going to be plenty busy for a long time to come. The current trend for this stock is bullish from a chart perspective. They are holding their current trading pattern and if the trend continues, analysts’ stand fast on a price objective of $105. Even if oil prices remain stable or decline slightly from current levels, oil service firms and drillers like National Oilwell should have strong earnings growth through 2008. Cash flows at the oil companies should also remain strong, and it will still be very worthwhile to explore for and develop oil fields, resulting in a strong demand for the group.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
National Oilwell Varco, Inc. engages in the design, construction, manufacture, and sale of systems, components, and products to the oil and gas industry worldwide. It operates in three segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services. The Rig Technology segment designs, manufactures, sells, and services systems for the drilling, completion, and servicing of oil and gas wells. It offers equipment that automates well construction and management operations, such as offshore and onshore drilling rigs; derricks; pipe lifting, racking, rotating, and assembly systems; coiled tubing equipment and pressure pumping units; well workover rigs; wireline winches; and cranes. The Petroleum Services & Supplies segment provides various consumable goods and services used to drill, complete, remediate, and workover oil and gas wells and service pipelines, flowlines, and other oilfield tubular goods. It manufactures, rents, and sells various products and equipment, including transfer pumps, solids control systems, drilling motors and downhole tools, rig instrumentation systems, and mud pump consumables. This segment also provides oilfield tubular services, including the provision of inspection and internal coating services, and equipment for drillpipe, linepipe, tubing, casing, and pipelines, as well as offers coiled tubing pipes and composite pipes for applications in corrosive environments. The Distribution Services segment offers maintenance, support, repair, and operating supplies, as well as spare parts to drill site and production locations. National Oilwell Varco serves drilling contractors, shipyards and other rig fabricators, well servicing companies, national oil companies, independent oil and gas companies, supply stores, and pipe-running service providers. The company was founded in 1862. It was formerly known as National-Oilwell, Inc. and changed its name to National Oilwell Varco, Inc. in 2005. The company is based in Houston, Texas and currently employs nearly 27,000 workers.
National Oilwell Varco has its name on some portion of 90% of all offshore rigs, and while the rig market is booming, the fact that NOV added a huge sum to its backlog is convincing evidence. More impressively, 88% of those orders came from outside the U.S. The business of building deepwater rigs is hot right now, and there are numerous reasons why it is going to stay that way. First, current offshore rigs are old, with an average rigs’ age globally being 25 years old, which means that either new ones need to be built or existing rigs must be renovated, which in turn, is good news for NOV being a huge part of both of those businesses. Secondly, the demand for oil is not fading anytime soon, and with the slight possibility that there may be provisions of drilling in the Gulf of Mexico, that in turn would result in numerous new orders for National Oilwell. Current supplies of offshore drilling platforms and ships are already low and would move lower on this announcement. The most important factor for this sort of drilling is that it is not a want, but a need.
The numbers are currently unyielding as NOV is trading at about 18 times next year’s earnings which are not bad for a company that the S&P predicts will enjoy an earnings-per-share growth rate of 42% over the next three years. Operating margins are an above industry average 21.2% and profit margins are a stellar 14.15%. In addition to that, the company has $2.14B dollars in cash and only $743M in long term debt, one of the many reasons that the S&P has given them an A- credit rating. NOV also sports a very healthy backlog, nearly $11B entering into the 3Q, which means the company is going to be plenty busy for a long time to come. The current trend for this stock is bullish from a chart perspective. They are holding their current trading pattern and if the trend continues, analysts’ stand fast on a price objective of $105. Even if oil prices remain stable or decline slightly from current levels, oil service firms and drillers like National Oilwell should have strong earnings growth through 2008. Cash flows at the oil companies should also remain strong, and it will still be very worthwhile to explore for and develop oil fields, resulting in a strong demand for the group.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, July 28, 2008
BetterTrades looks at Sohu.com Inc. - July 28, 2008
Sohu.com Inc. (SOHU), a popular Chinese Web portal, announced early Monday that the company’s quarterly profit rocketed 600% over the same period last year on strong advertising and online games revenues ahead of Augusts’ Beijing Olympics. Sohu, the official Web portal for the Olympic Games, also confirmed plans for an initial public stock offering (IPO) for its online games unit, Changyou.com. Earnings for the three months for Sohu were $40.2M, or $1.02 per share, the company announced. However, the company could not give any comparative figures for the past-year’s period but stated that the latest quarter represented a 604% increase. The company also claimed that their revenues jumped 162% from the year-earlier period to $102M, exceeding their own forecasts. Sohu offers online media, communications, search, mobile value-added services and games, and the company’s quarterly advertising revenues increased 53% over the year-earlier period to $41.7M, along with the firm’s game revenues climbing more than 11-times to $47.9M. China's recent population of Internet users has increased to 253 million people, surpassing the U.S. to become the worlds’ largest concentration of users, and Nielsen Online, a research firm, estimated that the U.S.’s online population to be around 223.1 million Internet users, according to a report released in June. China's online industries still lag those of the U.S., South Korea and other countries in financial terms, but spending per user on games, music downloads and online commerce is growing exponentially in China. Sohu announced that revenues for their multiplayer online role-playing game Tian Long Ba Bu increased 17% from the previous quarter to $45.5M. Furthermore, Sohu is considering submitting plans to U.S. securities regulators for an IPO by its games unit, Changyou.com that would let the parent company focus on its other businesses while Changyou focuses solely on production of their games. Sohu has made it known that they would remain Changyou's majority shareholder. The size of the total online market should grow from $5.9B in 2007 to an estimated $20B by 2010. By the close of today’s markets, shares of Sohu were lower on the day, down $4.21, or 5.1%, to close at $78.61 per share.
Sohu.com, Inc. provides a range of online products and services to consumers and businesses in the People's Republic of China. Its products and services comprise brand advertising, sponsored search, online game, and wireless services. The company's products and services to users include comprehensive content on various topics, including news, business and finance, entertainment, sports, information technology, automobile, real estate, and women; online video products and services; communication and community tools, such as alumni clubs, blogs, email, picture galleries, message boards, and Web messenger; search and directory services consisting of Web page search, music search, news search, say board, picture search, and map search; online games; and wireless products with a focus on entertainment, information, and communications. Its Web properties and proprietary search engines include sohu.com, a mass portal and online media destination; sogou.com, an interactive proprietary search engine; 17173.com, a games information portal; focus.cn, a real estate Web site; chinaren.com, an online alumni club; go2map.com, an online mapping service provider; and goodfeel.com.cn, a wireless service provider. The company was founded in 1996 and was formerly known as Internet Technologies China Incorporated before changing their name to Sohu.com, Inc. in 1999. The company is based in Beijing, the People's Republic of China and currently employs nearly 2,400 people.
Since the beginning of ’08, Sohu has become the superstar of the internet sector as the stock has managed to gain nearly 51% since the start of the New Year. Although many investors and analysts alike have posted concerns about possibly missing out on the stock current run, there are others out there which continue to see other numerous opportunities for Sohu shares to appreciate, due in large part, to the company’s stellar earnings reports over the past several quarters. Sohu has been able to beat analysts’ estimates by an increasing percentage each of the last four quarters and the current trend is that they have beaten estimates by 15%, 19%, 25% and 48% over those quarters. Recently, just a few weeks ago, a Merrill Lynch (MER) analyst reiterated that the firm maintains their “Buy” recommendation and has set their target price for Sohu’s stock at $95. Merrill Lynch believes that the company has been communicating the same message for a few months, that being an increase in revenues due to the Olympic Games and a decrease thereafter. The company believes that they should post a 22% increase in sales and believes that the current range is inline, if not better, than most analysts’ estimates. Also released recently, a new report from the Research Institute Data Center of China Internet claims that online spending in China surpassed $37.5B in the first six months of the year, representing a 58.2% jump over the same period in 2007. The report goes on to predict that overall spending online in China will surpass $86B for all of 2008.
Sohu is still a relatively small company with just a $3.06B market cap in comparison, with Baidu.com (BIDU) which is currently at $11.68B. Many experts think that Sohu can get to $5B to $6B market cap rather easily, especially with them on track to make $3.35 per share nest year, fiscal 2009. Put a 23.27x P/E on next year's earnings estimate, lower than the industry’s average, investors could see the stock go as high as $150 a share. In comparison, BIDU sells at 48.71x 2009 expected earnings, so there are genuine possibilities that Sohu could get a much higher valuation, which in turn, will help propel the price of the stock. Analysts are currently projecting $1.54 per share for 2008 estimates, but Sohu already commented that they should beat next quarter's $0.67 by $0.11 to $0.13, so that already takes us to $1.65 to $1.67 full year territory. The one risk with this name is the Chinese Olympics should drive advertising business for the next few quarters, which by the end of the games, could cause panic in advertising revenues. With that being said, Sohu’s online advertising business will record significant growth in 2008. Moreover, the online game business will contribute a lot of revenue in 2008 due to the popularity of its in-house developed online game.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Sohu.com, Inc. provides a range of online products and services to consumers and businesses in the People's Republic of China. Its products and services comprise brand advertising, sponsored search, online game, and wireless services. The company's products and services to users include comprehensive content on various topics, including news, business and finance, entertainment, sports, information technology, automobile, real estate, and women; online video products and services; communication and community tools, such as alumni clubs, blogs, email, picture galleries, message boards, and Web messenger; search and directory services consisting of Web page search, music search, news search, say board, picture search, and map search; online games; and wireless products with a focus on entertainment, information, and communications. Its Web properties and proprietary search engines include sohu.com, a mass portal and online media destination; sogou.com, an interactive proprietary search engine; 17173.com, a games information portal; focus.cn, a real estate Web site; chinaren.com, an online alumni club; go2map.com, an online mapping service provider; and goodfeel.com.cn, a wireless service provider. The company was founded in 1996 and was formerly known as Internet Technologies China Incorporated before changing their name to Sohu.com, Inc. in 1999. The company is based in Beijing, the People's Republic of China and currently employs nearly 2,400 people.
Since the beginning of ’08, Sohu has become the superstar of the internet sector as the stock has managed to gain nearly 51% since the start of the New Year. Although many investors and analysts alike have posted concerns about possibly missing out on the stock current run, there are others out there which continue to see other numerous opportunities for Sohu shares to appreciate, due in large part, to the company’s stellar earnings reports over the past several quarters. Sohu has been able to beat analysts’ estimates by an increasing percentage each of the last four quarters and the current trend is that they have beaten estimates by 15%, 19%, 25% and 48% over those quarters. Recently, just a few weeks ago, a Merrill Lynch (MER) analyst reiterated that the firm maintains their “Buy” recommendation and has set their target price for Sohu’s stock at $95. Merrill Lynch believes that the company has been communicating the same message for a few months, that being an increase in revenues due to the Olympic Games and a decrease thereafter. The company believes that they should post a 22% increase in sales and believes that the current range is inline, if not better, than most analysts’ estimates. Also released recently, a new report from the Research Institute Data Center of China Internet claims that online spending in China surpassed $37.5B in the first six months of the year, representing a 58.2% jump over the same period in 2007. The report goes on to predict that overall spending online in China will surpass $86B for all of 2008.
Sohu is still a relatively small company with just a $3.06B market cap in comparison, with Baidu.com (BIDU) which is currently at $11.68B. Many experts think that Sohu can get to $5B to $6B market cap rather easily, especially with them on track to make $3.35 per share nest year, fiscal 2009. Put a 23.27x P/E on next year's earnings estimate, lower than the industry’s average, investors could see the stock go as high as $150 a share. In comparison, BIDU sells at 48.71x 2009 expected earnings, so there are genuine possibilities that Sohu could get a much higher valuation, which in turn, will help propel the price of the stock. Analysts are currently projecting $1.54 per share for 2008 estimates, but Sohu already commented that they should beat next quarter's $0.67 by $0.11 to $0.13, so that already takes us to $1.65 to $1.67 full year territory. The one risk with this name is the Chinese Olympics should drive advertising business for the next few quarters, which by the end of the games, could cause panic in advertising revenues. With that being said, Sohu’s online advertising business will record significant growth in 2008. Moreover, the online game business will contribute a lot of revenue in 2008 due to the popularity of its in-house developed online game.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, July 24, 2008
BetterTrades looks at Apple (AAPL)
Today we take a look at the recent concerns in the Apple (AAPL) camp. Apple has been a significant market player for a number of years now. A good portion of the success of the company can be directly linked to one man...Steve Jobs. Mr. Jobs has been the the key to Apple's success in the past, the present and possibly the future.
Back in 2004 Mr. Jobs had a tumor removed from his pancreas, and his health has been a concern among investors ever since. Recently, when Mr. Jobs appeared at a June conference to show off the new iPhone 3G, many felt he appeared a little too thin. This has driven rumors and speculation that his previous health issues may have returned.
Apple did not help the situation any when, during this weeks earning conference call, they were unwilling to discuss Mr. Jobs health. This put some fear into investors and AAPL shares experienced a sell off. After calm reflection, and a review of the record 3rd quarter sales, the stock recovered.
We wish Mr. Jobs the best of health and hope all is well with his future. As an investor/trader, however, it is good to keep in mind that when a company has a dynamic and effective CEO at the helm, and the companies culture is built around the CEO, the loss of that CEO can have an enormous impact on the companies future.
Today AAPL closed at 159.03. It is in a downtrend and is trading below its 10, 20, 50 and 200 day moving averages. The chart technicals do not seem to indicate it has yet reached an oversold condition.
Back in 2004 Mr. Jobs had a tumor removed from his pancreas, and his health has been a concern among investors ever since. Recently, when Mr. Jobs appeared at a June conference to show off the new iPhone 3G, many felt he appeared a little too thin. This has driven rumors and speculation that his previous health issues may have returned.
Apple did not help the situation any when, during this weeks earning conference call, they were unwilling to discuss Mr. Jobs health. This put some fear into investors and AAPL shares experienced a sell off. After calm reflection, and a review of the record 3rd quarter sales, the stock recovered.
We wish Mr. Jobs the best of health and hope all is well with his future. As an investor/trader, however, it is good to keep in mind that when a company has a dynamic and effective CEO at the helm, and the companies culture is built around the CEO, the loss of that CEO can have an enormous impact on the companies future.
Today AAPL closed at 159.03. It is in a downtrend and is trading below its 10, 20, 50 and 200 day moving averages. The chart technicals do not seem to indicate it has yet reached an oversold condition.
Tuesday, July 22, 2008
BetterTrades looks at NVR Inc. - July 22, 2008
NVR, Inc. (NVR), one of the nation's largest homebuilding and mortgage banking companies, announced that earnings per share for its 2Q decreased 39% and net income decreased 43% when compared to the 2007 quarter. Net income was $51M, or $8.64 per share, compared to net income of $90M, $14.14 per share, for the same period of 2007. Consolidated revenues for the 2Q totaled $955M, a 27% decrease from $1.3B for the comparable 2007 quarter. For the six months, consolidated revenues were $1.8B, 23% lower than the $2.4B reported for the same period of 2007. Net income for the six months was $94.7M, a decrease of 46% when compared to the six months in 2007. Earnings per share for the six months were $16.10, a decrease of 41% from $27.11 per share for the comparable period of 2007, while new orders in the quarter decreased 29% to 2,670 units, when compared to 3,745 units in the 2Q of 2007. New order units and gross profit margins continue to be negatively impacted by high levels of new and existing home inventories, affordability issues, a more restrictive mortgage lending environment and declining homebuyer confidence. The cancellation rate in the quarter was 19% compared to 16% in the 2Q of 2007 and 22% in the 1Q of 2008. Homebuilding revenues for the three months totaled $941M, 27% lower than the year earlier period. Gross profit margins decreased to 17.9% in the quarter compared to 18.1% for the same period in 2007, as gross profit margins were impacted by land deposit impairments of approximately $5.8M in the quarter, and $55M in the year ago period. Gross profit margins excluding the impairments were 18.5% in the quarter compared to 22.4% for the same period in 2007. This decline in gross profit margin excluding impairments was due to continued pricing pressure in many of today’s markets. The company's backlog of homes sold but not settled at the end of the quarter decreased on a unit basis by 32% to 5,331 units and 41% on a dollar basis to $1.8B when compared to the same period last year. Mortgage-closed loan production of $593M for the three months was 30% lower than the same period last year, while operating income for the mortgage banking operations decreased 39% to $7.1M when compared to $11.7M reported for the same period of 2007. By the end of today’s trading session, shares of NVR were up nearly 15%, or $75.22, to close at $578.40.
NVR, Inc. is engaged in the construction and sale of single-family detached homes, town homes and condominium buildings. It is also engaged in the mortgage banking business. The company conducts the homebuilding activities directly, except for Rymarc Homes, which is operated as a wholly owned subsidiary. The mortgage banking operations are operated through a wholly owned subsidiary, NVR Mortgage Finance, Inc. (NVRM). The segments of the company include Mid Atlantic comprising Maryland, Virginia, West Virginia and Delaware; North East comprising New Jersey, Ohio and western Pennsylvania, and South East comprising North Carolina, South Carolina, and Tennessee. The home building operations includes the construction and sale of single-family detached homes, town homes and condominium buildings under four trade names Ryan Homes, NVHomes, Fox Ridge Homes and Rymarc Homes. The Ryan Homes, Fox Ridge Homes, and Rymarc Homes products are marketed to homeowners and move-up buyers. The Ryan Homes product is sold in twenty metropolitan areas located in Maryland, Virginia, West Virginia, Pennsylvania, New York, North Carolina, South Carolina, Ohio, New Jersey, Delaware and Kentucky. The company offers single-family detached homes, town homes and condominium buildings with many different basic home designs. The homes combine traditional or colonial exterior designs with contemporary interior designs and amenities, include two to four bedrooms, and range from approximately 900 to 7,300 square feet. NVR is not engaged in the land development business. In addition to building and selling homes, the company also provides a number of mortgage-related services through the mortgage banking operations. The mortgage banking operations also include separate subsidiaries that broker title insurance and perform title searches in connection with mortgage loan closings.
The housing industry is very cyclical, and when the housing cycle turns again, NVR will be one of the first in the industry to benefit. One of the main reasons for this is that NVR possesses a unique market niche in that they sell primarily to first-time buyers as well as first-time move up buyers, a segment of the population which keeps growing, either from generation Y or from newly immigrated citizens. Although many of them are renting, the large majority would like to own a home, and with many of them saving their money, eventually they're going to buy a home as soon as they are psychologically and monetarily ready. NVR is the top home builder play because it's technically the strongest and fundamentally the only home builder to remain profitable every quarter throughout the housing meltdown. It was also the first housing stock to break a downward trend back in November and busted through its resistance again in December. Investors don't buy NVR for immediate returns, and while the housing market will stay hindered in its current depression for some time, no one really knows for how long. But long term investors may want to dig into NVR with an eye on the future, for when the housing market returns to normal, this company should profit handily when the markets turn.
Looking at the fundamentals of NVR, the company reported a profit of $54.14 a share last year, not a loss as so many other builders did. This year, analysts think earnings per share will be $36.88, and for the September quarter $10.23per share, while next year, EPS are anticipated to rocket to $61.66. Granted there is only one analyst forecasting next year's number, so it's not like there's a large following in this stock, while there are only 2 analysts predicting this year's level. Additionally, cash flow continues to be strong enough for the company to buy back its stock, and at the end of June, there was $766M in cash at the ready. Return on Equity (ROE) is stellar and currently stands at just under 24%, along with the company boasting a trailing P/E Ratio of 10.76 and a forward P/E of 12.08. While the price to sales (P/S0 is 0.55, and their book value per share is $232, the company doesn’t provide dividends. The price range for the stock in the last 52 weeks has been $398.96 to $728.45, and there are currently 5.29 million shares outstanding and any repurchase program the company decides on will help bolster the bottom line.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
NVR, Inc. is engaged in the construction and sale of single-family detached homes, town homes and condominium buildings. It is also engaged in the mortgage banking business. The company conducts the homebuilding activities directly, except for Rymarc Homes, which is operated as a wholly owned subsidiary. The mortgage banking operations are operated through a wholly owned subsidiary, NVR Mortgage Finance, Inc. (NVRM). The segments of the company include Mid Atlantic comprising Maryland, Virginia, West Virginia and Delaware; North East comprising New Jersey, Ohio and western Pennsylvania, and South East comprising North Carolina, South Carolina, and Tennessee. The home building operations includes the construction and sale of single-family detached homes, town homes and condominium buildings under four trade names Ryan Homes, NVHomes, Fox Ridge Homes and Rymarc Homes. The Ryan Homes, Fox Ridge Homes, and Rymarc Homes products are marketed to homeowners and move-up buyers. The Ryan Homes product is sold in twenty metropolitan areas located in Maryland, Virginia, West Virginia, Pennsylvania, New York, North Carolina, South Carolina, Ohio, New Jersey, Delaware and Kentucky. The company offers single-family detached homes, town homes and condominium buildings with many different basic home designs. The homes combine traditional or colonial exterior designs with contemporary interior designs and amenities, include two to four bedrooms, and range from approximately 900 to 7,300 square feet. NVR is not engaged in the land development business. In addition to building and selling homes, the company also provides a number of mortgage-related services through the mortgage banking operations. The mortgage banking operations also include separate subsidiaries that broker title insurance and perform title searches in connection with mortgage loan closings.
The housing industry is very cyclical, and when the housing cycle turns again, NVR will be one of the first in the industry to benefit. One of the main reasons for this is that NVR possesses a unique market niche in that they sell primarily to first-time buyers as well as first-time move up buyers, a segment of the population which keeps growing, either from generation Y or from newly immigrated citizens. Although many of them are renting, the large majority would like to own a home, and with many of them saving their money, eventually they're going to buy a home as soon as they are psychologically and monetarily ready. NVR is the top home builder play because it's technically the strongest and fundamentally the only home builder to remain profitable every quarter throughout the housing meltdown. It was also the first housing stock to break a downward trend back in November and busted through its resistance again in December. Investors don't buy NVR for immediate returns, and while the housing market will stay hindered in its current depression for some time, no one really knows for how long. But long term investors may want to dig into NVR with an eye on the future, for when the housing market returns to normal, this company should profit handily when the markets turn.
Looking at the fundamentals of NVR, the company reported a profit of $54.14 a share last year, not a loss as so many other builders did. This year, analysts think earnings per share will be $36.88, and for the September quarter $10.23per share, while next year, EPS are anticipated to rocket to $61.66. Granted there is only one analyst forecasting next year's number, so it's not like there's a large following in this stock, while there are only 2 analysts predicting this year's level. Additionally, cash flow continues to be strong enough for the company to buy back its stock, and at the end of June, there was $766M in cash at the ready. Return on Equity (ROE) is stellar and currently stands at just under 24%, along with the company boasting a trailing P/E Ratio of 10.76 and a forward P/E of 12.08. While the price to sales (P/S0 is 0.55, and their book value per share is $232, the company doesn’t provide dividends. The price range for the stock in the last 52 weeks has been $398.96 to $728.45, and there are currently 5.29 million shares outstanding and any repurchase program the company decides on will help bolster the bottom line.
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Monday, July 21, 2008
BetterTrades looks at Hasbro Inc. - July 21, 2008
Toymaker Hasbro Inc. (HAS) announced early Monday morning that the company’s 2Q profits surged, which was helped in large part by stronger demand for products related to the recent movies including "Iron Man" and "Star Wars." The Pawtucket, R.I.-based company confirmed that their profits advanced to $37.5M, or $0.25 per share, from $4.8M, or $0.03 per share, a year earlier. Excluding a one-time year-ago expense related to repurchasing some warrants, net income did slip 9%. Despite that, results bettered the $0.22 per share that analysts, on average, were predicting. Sales for Hasbro climbed 13% to $784.3M from $691.4M, while U.S. and Canada sales increased 11% and International sales advanced 15%. Meanwhile, analysts had expected sales of $675.4M during the recent quarter. Hasbro confirmed that their boys’ business sales increased 13%, boosted by sales of "Star Wars" products, "Indiana Jones and the Kingdom of the Crystal Skull" as well as Marvel products related to "Iron Man" and "The Hulk." Revenues in the girls’ category climbed 24%, helped by sales of The Littlest Pet Shop Products, along with the Tweens’ business sales increasing 5%, driven by Nerf product sales, but the company stated that demand for its I-Dog products weakened over the past three months. Preschool sales surged 11%, motivated by Playskool sales, and games and puzzle sales gained 12%, on strong demand for Monopoly and other board games. Looking forward, the company is gearing up for two more major movie releases next year, with a new "Transformers" movie slated for June and a "G.I. Joe: Rise of the Cobra" movie directed by "The Mummy" director Stephen Sommers due in early August. Despite a strong quarterly earnings report, shares slipped $0.64, or 1.7%, to $37.35 by the end of the trading session. The stock has traded between $21.57 and $39.98 during the past year.
Hasbro, Inc. engages in the design, manufacture, and marketing of games and toys. The company principally provides children's and family leisure time and entertainment products and services. It offers various games, including traditional board, card, hand-held electronic, trading card, role-playing, plug and play, and DVD games, as well as electronic learning aids and puzzles. The company's toy products include boy's action figures, vehicles and play sets, girl's toys, electronic toys, plush products, preschool toys and infant products, children's consumer electronics, electronic interactive products, creative play products, and toy related specialty products. Hasbro also licenses certain of its trademarks, characters, and other property rights to third parties for use in connection with consumer promotions and for the sale of non-competing toys and games, and non-toy products. The company offers its products under Playskool, Transformers, My Little Pony, Littlest Pet Shop, Tonka, Super Soaker, Milton Bradley, Parker Brothers, Tiger, and Wizards of the Coast brand names. Hasbro markets its products to various customers, including wholesalers, distributors, chain stores, discount stores, mail order houses, catalog stores, department stores, and other retailers, as well as Internet-based e-tailers. It has strategic partnership with Universal Studios, Inc. to produce motion pictures; and strategic licensing alliance with Electronic Arts, Inc. (EA), which provides EA with the exclusive worldwide rights to create digital games for various platforms, including mobile phones, personal computers, and game consoles. Hasbro sells its products through its own sales force and distributors primarily in the United States, Canada, Mexico, Europe, the Asia Pacific, Latin America, and South America. The company was founded in 1923, currently employs nearly 6,000 people and is headquartered in Pawtucket, Rhode Island.
Hasbro shares have been bucking the market trend in 2008, with its share price logging steady gains and advancing from just above $21, set back in January, to its current price just under $40. Much of the strength has been built on the company's strong 1Q results, which were reported in late-April. Revenues during the 1Q were up 13% from the same quarter last year to $704.2M, while net income was also up 13% from last year, increasing to $37.5M. These results produced earnings of $0.25 per share, which were well ahead of analysts’ estimates of $0.15 per share. As aforementioned, recently, shares have been bucking up against a formidable level of resistance just below $40, which is also the 52-week and all-time high for Hasbro. The company’s all-time and 52-week high of $39.98 was established just this past Friday. Pressures have appeared to be building beneath this level, as it has been tested a number of times over the last five weeks. Hasbro has made a habit out of surprising and beating analyst estimates, having done so by an average of $0.07, or 31% over the last four quarters. Hasbro also recently noted that the company experienced particularly strong growth from its European segment, with sales up 15% from last year to $231.8M, with 12% of these gains came from favorable currency exchanges.
After the solid quarter, Hasbro re-affirmed that it remains on target to hit its full-year financial goals. This warrants particular importance because many companies operating in the retail discretionary industry have lowered their earnings projections due to the weakened consumer environment. Analysts continue to revise their estimates upward, with the current-year estimate adding $0.17 in the last 60 days and advancing to its current projection of $2.16 per share. Other analysts have been noted that they believe that Hasbro is a well-positioned company, given their strong financial position, along with the company's strong product line-up and lucrative product associations with popular motion pictures, and that Hasbro should continue to trade at a premium in comparison to their peers and to their primary competitor, Mattel Inc. (MAT). The stock is attractively valued at about 17x this year's estimates of $1.34 per share. The most accurate estimate for next quarter shows 33% upside to the current estimate, along with the company registering a 21.6% average surprise over the past four quarters. In addition, Hasbro has a relatively valued PEG Ratio of 1.7.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Hasbro, Inc. engages in the design, manufacture, and marketing of games and toys. The company principally provides children's and family leisure time and entertainment products and services. It offers various games, including traditional board, card, hand-held electronic, trading card, role-playing, plug and play, and DVD games, as well as electronic learning aids and puzzles. The company's toy products include boy's action figures, vehicles and play sets, girl's toys, electronic toys, plush products, preschool toys and infant products, children's consumer electronics, electronic interactive products, creative play products, and toy related specialty products. Hasbro also licenses certain of its trademarks, characters, and other property rights to third parties for use in connection with consumer promotions and for the sale of non-competing toys and games, and non-toy products. The company offers its products under Playskool, Transformers, My Little Pony, Littlest Pet Shop, Tonka, Super Soaker, Milton Bradley, Parker Brothers, Tiger, and Wizards of the Coast brand names. Hasbro markets its products to various customers, including wholesalers, distributors, chain stores, discount stores, mail order houses, catalog stores, department stores, and other retailers, as well as Internet-based e-tailers. It has strategic partnership with Universal Studios, Inc. to produce motion pictures; and strategic licensing alliance with Electronic Arts, Inc. (EA), which provides EA with the exclusive worldwide rights to create digital games for various platforms, including mobile phones, personal computers, and game consoles. Hasbro sells its products through its own sales force and distributors primarily in the United States, Canada, Mexico, Europe, the Asia Pacific, Latin America, and South America. The company was founded in 1923, currently employs nearly 6,000 people and is headquartered in Pawtucket, Rhode Island.
Hasbro shares have been bucking the market trend in 2008, with its share price logging steady gains and advancing from just above $21, set back in January, to its current price just under $40. Much of the strength has been built on the company's strong 1Q results, which were reported in late-April. Revenues during the 1Q were up 13% from the same quarter last year to $704.2M, while net income was also up 13% from last year, increasing to $37.5M. These results produced earnings of $0.25 per share, which were well ahead of analysts’ estimates of $0.15 per share. As aforementioned, recently, shares have been bucking up against a formidable level of resistance just below $40, which is also the 52-week and all-time high for Hasbro. The company’s all-time and 52-week high of $39.98 was established just this past Friday. Pressures have appeared to be building beneath this level, as it has been tested a number of times over the last five weeks. Hasbro has made a habit out of surprising and beating analyst estimates, having done so by an average of $0.07, or 31% over the last four quarters. Hasbro also recently noted that the company experienced particularly strong growth from its European segment, with sales up 15% from last year to $231.8M, with 12% of these gains came from favorable currency exchanges.
After the solid quarter, Hasbro re-affirmed that it remains on target to hit its full-year financial goals. This warrants particular importance because many companies operating in the retail discretionary industry have lowered their earnings projections due to the weakened consumer environment. Analysts continue to revise their estimates upward, with the current-year estimate adding $0.17 in the last 60 days and advancing to its current projection of $2.16 per share. Other analysts have been noted that they believe that Hasbro is a well-positioned company, given their strong financial position, along with the company's strong product line-up and lucrative product associations with popular motion pictures, and that Hasbro should continue to trade at a premium in comparison to their peers and to their primary competitor, Mattel Inc. (MAT). The stock is attractively valued at about 17x this year's estimates of $1.34 per share. The most accurate estimate for next quarter shows 33% upside to the current estimate, along with the company registering a 21.6% average surprise over the past four quarters. In addition, Hasbro has a relatively valued PEG Ratio of 1.7.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, July 18, 2008
BetterTrades looks at Satyam Computer Services Ltd. - July 18, 2008
Satyam Computer Services Ltd. (SAY) reported early this morning that the company’s 1Q net income came in at $126.6M, a 36% increase from last year. Basic earnings per American Depositary Shares (ADS) for the recent quarter were $0.38, an increase of 35.7% from last year, along with revenue increasing 40.9% to $637.3M. Analysts, on average, had expected earnings of $0.37 per share on revenues of $634.49M. For the 2Q, under U.S. GAAP, revenues for Satyam are expected to be between $645.6M and $651.9M, implying a growth rate of 3.5% to 4.5% for the upcoming quarter. Basic earning per ADS for the 2Q is expected to be $0.35, with analysts expecting earnings of $0.33 per share on revenues of $661.34M. For fiscal 2009, under U.S. GAAP, revenues for Satyam are expected to be between $2.65B and $2.69B, implying a growth rate of 24% to 26% over fiscal 2008’s revenues. Basic earning per ADS for fiscal 2009 is expected to be between $1.45 and $1.48, implying a growth rate of 16% to 18.4% over fiscal 2008’s earnings per share, while analysts are expecting earnings of $1.45 per share on revenues of $2.72B for the full year. Although the company posted strong 1Q earnings, investors viewed the report differently, sending Satyam’s shares down by the close, finishing lower by $1.42, or 6.1%, to conclude at $22.04.
Satyam Computer Services Limited provides information technology services and business process outsourcing (BPO) services in North America, Europe, the Asia Pacific, the Middle-East, Australia, Africa, and South America. It offers consulting, systems design, software development, system integration, and application maintenance services. The company's services include application development and maintenance, consulting and enterprise business solutions, extended engineering solutions, and infrastructure management services. It also provides eBusiness services, which include designing, developing, integrating, and maintaining Internet-based applications, such as eCommerce Web sites, as well as involves in implementing packaged software applications, such as customer or supply chain management software applications. In addition, the company's BPO services include human resources, finance and accounting, customer contact, and transaction processing. It serves aerospace and defense, automotive, banking, chemicals, education, energy and utilities, financial services, healthcare, industrial equipment, insurance, infrastructure, life sciences, manufacturing, media and entertainment, public services, retail and CPG, semiconductor, telecom, travel and logistics, and engineering services industries. To address Satyam's customers' specific requests to provide infrastructure and technology support, it provides solutions and services that range from routine maintenance of hardware and software to complex security solutions. The Company's services include administration, infrastructure management, migration, upgrades, configuration, backup, security management, performance management, operations monitoring and consolidation services for a variety of operating systems and platforms, data, voice and video networks and mail servers. Satyam offers services that cover a range of hardware platforms (IBM, HP and Sun) and environments (UNIX, AIX, Solaris, HP-UX and Windows). The Company has also built alliances with over seven infrastructure and technology product vendors. Through its data center facility in Columbus, Ohio, in the United States, the Company provides various hosting services to its customers. The company was founded in 1987 and is headquartered in Hyderabad, India.
In fiscal 2008, Satyam recorded 46% year-over-year revenue growth versus its original 28% to 30% guidance, while the operating margin declined only 90 basis points despite stiff currency headwinds. Satyam credited its performance to deeper client partnerships and a wider service offering. IT services provider Satyam Computer Services Ltd, has been ranked as the world's leading engineering services outsourcing vendor by the Brown-Wilson Group. A Brown-Wilson Group survey analyzed 872 information technology and engineering outsourcing vendors in 63 countries and its results showed that Satyam led in several categories, including vendor overall preference, flexible pricing and brand image. The latest quarter was strong and the company raised guidance, and the longer-term view is equally impressive with steady revenue growth, earnings growth, and even dividend growth. And despite outstanding shares being relatively stable and free cash flow being positive, the balance sheet has remained solid over the past several earnings reports.
Reviewing the financials on Satyam, we can see a balanced picture of revenue growth from $459M in 2003 to $1.97B in 2008, while earnings during this same period increased from $0.26 per share in 2003 to $1.15 per share in 2008. The company initiated dividends in 2005 at $0.10 per share and has increased it regularly to $0.14 per share reported in 2008. Meanwhile, outstanding shares have barely budged, increasing from 319 million shares in 2003 to 335 million in 2008. The balance sheet for Satyam is also unyielding, with $1.08B in cash and $21M in other current assets, compared to $211M in current liabilities and the relatively small amount of long-term liabilities totaling $50M. Thus, calculating the current ratio, we obtain a result of 4.6, a very healthy ratio from an investor’s perspective. Free cash flow is positive and increasing recently with $261M reported in 2007 and $308M reported in 2008. Additionally, it is apparent to see that this is a large cap stock with a market capitalization of $7.59B, which possesses a trailing P/E Ratio of a moderate 19.70, with a forward P/E of 13.48. The PEG Ratio confirms the reasonable valuation of this stock with a value of 0.79. Within more fundamental analysis, we can see that Satyam is fully valued in terms of the Price/Sales (ttm) Ratio which comes in at 4.00, relative to the industry average of 3.32. In terms of the Return on Equity (ROE)(ttm), SAY does a bit better with a figure of 26.08% compared to the industry average of 25.50%. The company also does better on Return on Assets (ROA)(ttm) with 13.29% figure, relative to the industry average of 12.48%. Valuation-wise, the company sells at a modest P/E with a great PEG ratio reported. Price/Sales are a bit rich but the company is more profitable than its peers as judged by the ROE and ROA ratios.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Satyam Computer Services Limited provides information technology services and business process outsourcing (BPO) services in North America, Europe, the Asia Pacific, the Middle-East, Australia, Africa, and South America. It offers consulting, systems design, software development, system integration, and application maintenance services. The company's services include application development and maintenance, consulting and enterprise business solutions, extended engineering solutions, and infrastructure management services. It also provides eBusiness services, which include designing, developing, integrating, and maintaining Internet-based applications, such as eCommerce Web sites, as well as involves in implementing packaged software applications, such as customer or supply chain management software applications. In addition, the company's BPO services include human resources, finance and accounting, customer contact, and transaction processing. It serves aerospace and defense, automotive, banking, chemicals, education, energy and utilities, financial services, healthcare, industrial equipment, insurance, infrastructure, life sciences, manufacturing, media and entertainment, public services, retail and CPG, semiconductor, telecom, travel and logistics, and engineering services industries. To address Satyam's customers' specific requests to provide infrastructure and technology support, it provides solutions and services that range from routine maintenance of hardware and software to complex security solutions. The Company's services include administration, infrastructure management, migration, upgrades, configuration, backup, security management, performance management, operations monitoring and consolidation services for a variety of operating systems and platforms, data, voice and video networks and mail servers. Satyam offers services that cover a range of hardware platforms (IBM, HP and Sun) and environments (UNIX, AIX, Solaris, HP-UX and Windows). The Company has also built alliances with over seven infrastructure and technology product vendors. Through its data center facility in Columbus, Ohio, in the United States, the Company provides various hosting services to its customers. The company was founded in 1987 and is headquartered in Hyderabad, India.
In fiscal 2008, Satyam recorded 46% year-over-year revenue growth versus its original 28% to 30% guidance, while the operating margin declined only 90 basis points despite stiff currency headwinds. Satyam credited its performance to deeper client partnerships and a wider service offering. IT services provider Satyam Computer Services Ltd, has been ranked as the world's leading engineering services outsourcing vendor by the Brown-Wilson Group. A Brown-Wilson Group survey analyzed 872 information technology and engineering outsourcing vendors in 63 countries and its results showed that Satyam led in several categories, including vendor overall preference, flexible pricing and brand image. The latest quarter was strong and the company raised guidance, and the longer-term view is equally impressive with steady revenue growth, earnings growth, and even dividend growth. And despite outstanding shares being relatively stable and free cash flow being positive, the balance sheet has remained solid over the past several earnings reports.
Reviewing the financials on Satyam, we can see a balanced picture of revenue growth from $459M in 2003 to $1.97B in 2008, while earnings during this same period increased from $0.26 per share in 2003 to $1.15 per share in 2008. The company initiated dividends in 2005 at $0.10 per share and has increased it regularly to $0.14 per share reported in 2008. Meanwhile, outstanding shares have barely budged, increasing from 319 million shares in 2003 to 335 million in 2008. The balance sheet for Satyam is also unyielding, with $1.08B in cash and $21M in other current assets, compared to $211M in current liabilities and the relatively small amount of long-term liabilities totaling $50M. Thus, calculating the current ratio, we obtain a result of 4.6, a very healthy ratio from an investor’s perspective. Free cash flow is positive and increasing recently with $261M reported in 2007 and $308M reported in 2008. Additionally, it is apparent to see that this is a large cap stock with a market capitalization of $7.59B, which possesses a trailing P/E Ratio of a moderate 19.70, with a forward P/E of 13.48. The PEG Ratio confirms the reasonable valuation of this stock with a value of 0.79. Within more fundamental analysis, we can see that Satyam is fully valued in terms of the Price/Sales (ttm) Ratio which comes in at 4.00, relative to the industry average of 3.32. In terms of the Return on Equity (ROE)(ttm), SAY does a bit better with a figure of 26.08% compared to the industry average of 25.50%. The company also does better on Return on Assets (ROA)(ttm) with 13.29% figure, relative to the industry average of 12.48%. Valuation-wise, the company sells at a modest P/E with a great PEG ratio reported. Price/Sales are a bit rich but the company is more profitable than its peers as judged by the ROE and ROA ratios.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, July 17, 2008
BetterTrades looks at Illinois Tool Works Inc. - July 17, 2008
Industrial products and equipment manufacturer Illinois Tool Works Inc. (ITW) stated early Thursday that the company’s 2Q earnings advanced 4%, which was helped by an acquisition and foreign currency exchange gains. Illinois Tool Works earned $528.1M, or $1.01 per share, compared with $505.6M, or $0.90 per share, a year earlier. Revenues for the manufacturer increased 11% to $4.57B, from $4.14B in the prior-year period. Meanwhile, analysts were expecting, on average, a profit of $0.97 per share on revenues of $4.58B. The company also issued a 3Q earnings prediction which came in-line with expectations and also raised the company’s outlook for the year. ITW is expecting 3Q earnings from continuing operations of $0.93 to $0.99 per share, assuming there are sales growth of about 10% to 14% from the 3Q of 2007. At the same time, analysts are predicting a profit of $0.95 per share for the 3Q. For the full-year, ITW expects earnings from continuing operations of $3.40 to $3.52 per share, compared with a previous prediction of $3.35 to $3.49 per share, as the new forecast is based on sales growth of 9% to 12%. Analysts forecast income of $3.64 per share for the year. Shares of ITW managed a positive day, closing higher, up $0.45, or 1%, to conclude the session at $47.00 per share.
Illinois Tool Works, Inc. manufactures a range of industrial products and equipment. It offers industrial packaging products, including steel and plastic strapping, plastic stretch film and related equipment, paper and plastic products that protect goods in transit, and metal jacketing and other insulation products; power systems and electronics, such as arc welding equipment, metal arc welding consumables and related accessories, metal solder materials for PC board fabrication, equipment and services for microelectronics assembly, electronic components and component packaging, and airport ground support equipment; and components and assemblies for automobiles and trucks, fasteners, fluids and polymers for maintenance and appearance, fillers and putties for auto body repair, and polyester coatings and patch and repair products for the marine industry. The company also provides warewashing, cooking, refrigeration, food processing, and kitchen exhaust, ventilation, and pollution control systems; decorative surfacing materials for countertops, flooring, furniture, and other applications; tools, fasteners, and other products for construction applications; and adhesives, chemical fluids, epoxy and resin-based coatings, hand wipes and cleaners, and die-cut components. In addition, Illinois Tool Works offers plastic resealable packages and bags, consumables, plastic and metal fasteners and components, equipment and related software for testing of materials and structures, software and related services for industrial and health care applications, foil and film used to decorate consumer products, product coding and marking equipment, paint spray equipment, and static and contamination control equipment, as well as swabs, wipes, and mats for clean room usage. The company was founded in 1912, currently employing more than 60,000 workers and is based in Glenview, Illinois.
The company has been around since WWI and operates 825 units in 8 divisions, and for a company that uses Mergers & Acquisitions advantageously, the balance sheet is surprisingly strong. The company has equity of $9.25B, although $5.8B is intangible/goodwill, while the company’s total debt of $2.78B is largely offset, somewhat, by over $920M in cash. The company generates tremendous free cash flow, $1.8B in 2007, along with the company aggressively repurchasing stock, which is reducing the float by 6% over the past year. Additionally, this manufacturer of diversified industrial goods is currently aggressively growing its business, primarily through acquisitions of both domestic and international companies, and in fact, the company has acquired 56 companies over the past year alone. ITW's revenues have also increased in correlation, as the company has posted double-digit growth for the past two quarters. This current trend, which has been steady over the past two years, looks to continue as ITW seems to be staying the course with its growth-by-acquisition strategy.
The unheard of advantage that ITW possesses is that, in conjunction with being a component of the S&P 500, the company is also a masterful dividend play. As a fact, the company has been increasing its dividends for the past 44 consecutive years, and from 1998 up until 2007, this dividend growth stock has delivered an annual average total return of 8% to its shareholders. At the same time, the company has managed to deliver a 10.8% average annual increase in its earnings per share since 1998. Annual dividend payments have increased over the past 10 years by an average of 15.7% annually, which is much higher than the company’s growth in EPS. A 16% growth in dividends translates into the dividend payment doubling almost every four and a half years. That’s outstanding. There are, of course, worries that any industry that is tied to U.S. construction is at risk in this fragile housing market. However, ITW has been able to easily offset the current downturn in the construction market with its international sales, which make up almost 45% of its revenue, and this looks to continue as ITW expands in the booming construction markets of China and India.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Illinois Tool Works, Inc. manufactures a range of industrial products and equipment. It offers industrial packaging products, including steel and plastic strapping, plastic stretch film and related equipment, paper and plastic products that protect goods in transit, and metal jacketing and other insulation products; power systems and electronics, such as arc welding equipment, metal arc welding consumables and related accessories, metal solder materials for PC board fabrication, equipment and services for microelectronics assembly, electronic components and component packaging, and airport ground support equipment; and components and assemblies for automobiles and trucks, fasteners, fluids and polymers for maintenance and appearance, fillers and putties for auto body repair, and polyester coatings and patch and repair products for the marine industry. The company also provides warewashing, cooking, refrigeration, food processing, and kitchen exhaust, ventilation, and pollution control systems; decorative surfacing materials for countertops, flooring, furniture, and other applications; tools, fasteners, and other products for construction applications; and adhesives, chemical fluids, epoxy and resin-based coatings, hand wipes and cleaners, and die-cut components. In addition, Illinois Tool Works offers plastic resealable packages and bags, consumables, plastic and metal fasteners and components, equipment and related software for testing of materials and structures, software and related services for industrial and health care applications, foil and film used to decorate consumer products, product coding and marking equipment, paint spray equipment, and static and contamination control equipment, as well as swabs, wipes, and mats for clean room usage. The company was founded in 1912, currently employing more than 60,000 workers and is based in Glenview, Illinois.
The company has been around since WWI and operates 825 units in 8 divisions, and for a company that uses Mergers & Acquisitions advantageously, the balance sheet is surprisingly strong. The company has equity of $9.25B, although $5.8B is intangible/goodwill, while the company’s total debt of $2.78B is largely offset, somewhat, by over $920M in cash. The company generates tremendous free cash flow, $1.8B in 2007, along with the company aggressively repurchasing stock, which is reducing the float by 6% over the past year. Additionally, this manufacturer of diversified industrial goods is currently aggressively growing its business, primarily through acquisitions of both domestic and international companies, and in fact, the company has acquired 56 companies over the past year alone. ITW's revenues have also increased in correlation, as the company has posted double-digit growth for the past two quarters. This current trend, which has been steady over the past two years, looks to continue as ITW seems to be staying the course with its growth-by-acquisition strategy.
The unheard of advantage that ITW possesses is that, in conjunction with being a component of the S&P 500, the company is also a masterful dividend play. As a fact, the company has been increasing its dividends for the past 44 consecutive years, and from 1998 up until 2007, this dividend growth stock has delivered an annual average total return of 8% to its shareholders. At the same time, the company has managed to deliver a 10.8% average annual increase in its earnings per share since 1998. Annual dividend payments have increased over the past 10 years by an average of 15.7% annually, which is much higher than the company’s growth in EPS. A 16% growth in dividends translates into the dividend payment doubling almost every four and a half years. That’s outstanding. There are, of course, worries that any industry that is tied to U.S. construction is at risk in this fragile housing market. However, ITW has been able to easily offset the current downturn in the construction market with its international sales, which make up almost 45% of its revenue, and this looks to continue as ITW expands in the booming construction markets of China and India.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, July 15, 2008
BetterTrades looks at Imperial Sugar Co. - July 15, 2008
Imperial Sugar Company (IPSU) today announced that it has increased its ownership stake in Wholesome Sweeteners, Incorporated, and also acquired an option to purchase the remaining equity interest. Wholesome, an organic and natural sweetener company based in Sugar Land, Texas, was formed as a venture in 2001 between Imperial Sugar and Edward Billington & Son, a diversified agriculture and food company based in the United Kingdom. Under the terms of the agreement, Imperial paid $4M in cash to purchase 5% of Wholesome’s common stock from Billington, increasing Imperial’s ownership position from 45% to 50%. The $4M investment also includes an option to acquire the remaining 50% interest owned by Billington and is exercisable between September 1st, 2010 and May 31st, 2011, at an agreed multiple of future earnings. Wholesome Sweeteners’ sales performance has been impressive, generating a compound annual growth rate in excess of 30% for the last three years, and rising to the $43M level in 2007. The company’s leadership position in the industry and continual product innovations should enable it to capture rising product sales in the expanding organic and natural sweetener channels providing enhanced margins relative to our traditional refined sugar processing and marketing business. According to the Organic Trade Association, organic food is one of the fastest growing product groups within the food industry with sales growing 15% to 20% annually. This growth reflects an increasing trend among consumers to adopt organic and natural items into their daily food and beverage diets. By the end of the day’s trading session, shares of Imperial Sugar were higher by the close, up $0.19, or $1.2%, to conclude at $15.68 per share.
Imperial Sugar Company, incorporated in 1924, is engaged in processing and marketing of refined sugar in the United States. The company’s products include granulated, powdered, and liquid and brown sugars marketed in a range of packaging options under various brands (Dixie Crystals, Holly and Imperial) or private labels. The company also produces selected specialty sugar products and sugars used in confections and icings. During the fiscal year of 2007, refined sugar accounted for approximately 97% of the total sales, while specialty sugar accounted for 3% of the total sales. The company has a 45% equity interest in Wholesome Sweeteners, Inc. In November of 2007, the company was engaged in a joint venture with Ingenios Santos, S.A. de C.V., for marketing sugar products in Mexico and the U.S. under the name Comerialiazadora Santos Imperial S. de R.L. de C.V. The company produces refined sugar from raw cane sugar and markets the sugar products to retailers, foodservice distributors and industrial food manufacturers directly through their sales force and through independent brokers. It also produces and sells granulated white, brown and powdered sugar to retailers and distributors in packages ranging from six-oz. shakers to 50-pound bags. Retail packages are marketed under the trade names: Dixie Crystal, Holly and Imperial. Retail packages are also sold under retailers’ private labels. In fiscal 2007, sales of refined sugar products to retail customers accounted for approximately 34% of the refined sugar sales revenue. Imperial Sugar Company also produces and sells refined sugar, molasses and other ingredients to industrial customers, food manufacturers, in bulk, packaged or liquid form. Food manufacturers purchase sugar for use in the preparation of confections, baked products, frozen desserts, cereal, canned goods and various other food products. In fiscal 2007, sales of refined sugar products to industrial customers accounted for approximately 54% of the refined sugar sales revenue. The company also produces specialty sugar products and sells them to industrial customers. Specialty sugar products accounted for 6% of industrial sales in fiscal 2007, or approximately 3% of total sales. Specialty sugar products include: Savannah Gold, co-crystallized products, edible molasses, syrups and specialty sugars used in confections, fondants and icings. Imperial Sugar Company sells a range of sugar products, including granulated, powdered and brown sugar in package sizes ranging from one-pound packages to 100-pound bags to foodservice distributors who in turn sell those products to restaurants and institutional foodservice establishments. In fiscal 2007, sales of refined sugar products to foodservice distributors accounted for approximately 12% of the refined sugar sales revenue.
Imperial Sugar's stock price has been on a recent upswing lately, gaining almost 24% to $15.70, up from last month's all-time low of $12.66, achieved on June 12th. IPSU's relative strength has been off the chart when compared to the Dow Jones which retreated approximately 9% within the same period. The main catalyst to the increase in Imperial’s price move is the spike in sugar prices which have jumped nearly 28% from $0.11/lb. to $0.14/lb. The increased strength in the pricing of sugar could be directly related to Brazil's delayed crop start and a shift in acreage to more profitable crops by India and Pakistan as well as the overall effects of the commodity boom. The business of refining sugar appears on the surface to be simple, but many factors come into play that makes this business much more complex than meets the eye. IPSU tries to capitalize on the spread between raw sugar and refined sugar. They have to buy either sugar cane or sugar beets for processing. They then process the raw material through a conversion process which is energy intensive. IPSU utilized 2.7 million Btu’s of natural gas and 1.8 million Btu’s of coal in their 2007 refining efforts.
This company has a clean balance sheet with no debt and approximately $7.29 per share in cash, and it's selling at less than its current book value of $14.34. The shares appear to have support near the $15 area and resistance at the $24 mark, and over the past several weeks, the stock has had an impressive upward trend. This could be a significant sign to investors that it might be time to ride the momentum upward as the shares could run up another 25%, nearing $20, before eventual selling pressures surface. Viewed as both a positive and a negative, the stock currently only has one analyst covering the research for the company. The analyst is forecasting a 3Q loss of $0.59 on revenues of $104M. The problem is, the analyst’s estimates are based on worst case scenarios and are not modeled with the possibility of a rally in sugar prices. The shares deserve a second look at these very depressed levels as there is evidence that more reward than risk exists at this juncture. IPSU is destined to hit the groove once again. However, it will take time as the healing process needs to run its course.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Imperial Sugar Company, incorporated in 1924, is engaged in processing and marketing of refined sugar in the United States. The company’s products include granulated, powdered, and liquid and brown sugars marketed in a range of packaging options under various brands (Dixie Crystals, Holly and Imperial) or private labels. The company also produces selected specialty sugar products and sugars used in confections and icings. During the fiscal year of 2007, refined sugar accounted for approximately 97% of the total sales, while specialty sugar accounted for 3% of the total sales. The company has a 45% equity interest in Wholesome Sweeteners, Inc. In November of 2007, the company was engaged in a joint venture with Ingenios Santos, S.A. de C.V., for marketing sugar products in Mexico and the U.S. under the name Comerialiazadora Santos Imperial S. de R.L. de C.V. The company produces refined sugar from raw cane sugar and markets the sugar products to retailers, foodservice distributors and industrial food manufacturers directly through their sales force and through independent brokers. It also produces and sells granulated white, brown and powdered sugar to retailers and distributors in packages ranging from six-oz. shakers to 50-pound bags. Retail packages are marketed under the trade names: Dixie Crystal, Holly and Imperial. Retail packages are also sold under retailers’ private labels. In fiscal 2007, sales of refined sugar products to retail customers accounted for approximately 34% of the refined sugar sales revenue. Imperial Sugar Company also produces and sells refined sugar, molasses and other ingredients to industrial customers, food manufacturers, in bulk, packaged or liquid form. Food manufacturers purchase sugar for use in the preparation of confections, baked products, frozen desserts, cereal, canned goods and various other food products. In fiscal 2007, sales of refined sugar products to industrial customers accounted for approximately 54% of the refined sugar sales revenue. The company also produces specialty sugar products and sells them to industrial customers. Specialty sugar products accounted for 6% of industrial sales in fiscal 2007, or approximately 3% of total sales. Specialty sugar products include: Savannah Gold, co-crystallized products, edible molasses, syrups and specialty sugars used in confections, fondants and icings. Imperial Sugar Company sells a range of sugar products, including granulated, powdered and brown sugar in package sizes ranging from one-pound packages to 100-pound bags to foodservice distributors who in turn sell those products to restaurants and institutional foodservice establishments. In fiscal 2007, sales of refined sugar products to foodservice distributors accounted for approximately 12% of the refined sugar sales revenue.
Imperial Sugar's stock price has been on a recent upswing lately, gaining almost 24% to $15.70, up from last month's all-time low of $12.66, achieved on June 12th. IPSU's relative strength has been off the chart when compared to the Dow Jones which retreated approximately 9% within the same period. The main catalyst to the increase in Imperial’s price move is the spike in sugar prices which have jumped nearly 28% from $0.11/lb. to $0.14/lb. The increased strength in the pricing of sugar could be directly related to Brazil's delayed crop start and a shift in acreage to more profitable crops by India and Pakistan as well as the overall effects of the commodity boom. The business of refining sugar appears on the surface to be simple, but many factors come into play that makes this business much more complex than meets the eye. IPSU tries to capitalize on the spread between raw sugar and refined sugar. They have to buy either sugar cane or sugar beets for processing. They then process the raw material through a conversion process which is energy intensive. IPSU utilized 2.7 million Btu’s of natural gas and 1.8 million Btu’s of coal in their 2007 refining efforts.
This company has a clean balance sheet with no debt and approximately $7.29 per share in cash, and it's selling at less than its current book value of $14.34. The shares appear to have support near the $15 area and resistance at the $24 mark, and over the past several weeks, the stock has had an impressive upward trend. This could be a significant sign to investors that it might be time to ride the momentum upward as the shares could run up another 25%, nearing $20, before eventual selling pressures surface. Viewed as both a positive and a negative, the stock currently only has one analyst covering the research for the company. The analyst is forecasting a 3Q loss of $0.59 on revenues of $104M. The problem is, the analyst’s estimates are based on worst case scenarios and are not modeled with the possibility of a rally in sugar prices. The shares deserve a second look at these very depressed levels as there is evidence that more reward than risk exists at this juncture. IPSU is destined to hit the groove once again. However, it will take time as the healing process needs to run its course.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, July 14, 2008
BetterTrades looks at Allegheny Technologies Inc. - July 14, 2008
Allegheny Technologies Inc. (ATI) made it known on Monday that the company is now predicting that their 2Q profits will be higher than previously forecasted, aided by a one-time tax gain. The specialty metals producer now expects earnings of $1.65 per share to $1.67 per share, including the $0.11 per share tax benefit. ATI stated that they previously estimated that its quarterly profit would be somewhat higher than the $1.40 per share it reported in the 1Q. Analysts had predicted that the company would earn $1.53 per share, on average. ATI is scheduled to report their 2Q results July 23rd. Recently, ATI has benefited from the ongoing transformation within the company, and that their product, market, and geographic diversification have been changing as well. In addition, the company’s enterprise risk management program is reducing the impact of volatile input costs on their earnings results. The firm’s transformation and diversification strategies are designed to position ATI for growth and improve earnings, as well as providing stability of earnings and cash flows through market cycles. Just a few weeks ago, the company also unveiled a new steel armor designed to protect military vehicles, ships and aircraft from armor-piercing rounds and explosions. The company stated that the plate steel, distinguished by its flatness, consistent hardness and other properties, is the first of its kind to be developed in the U.S. since the Vietnam War. The introduction of the ATI 500-MIL armor steel comes in the midst of strong demand from the defense industry, and it has been designed for a range of applications, including the protection of medium- and heavyweight tactical vehicles, armored patrol cars, above-deck structures on ships and aircraft, the company also added. Allegheny Technologies, which reported $5.5B in 2007 revenues, supplies military-grade titanium, alloys, zirconium, tungsten and other specialty metals. Shares of Allegheny Technologies surged nearly 10% today, adding $4.86 to close at $55.21 in late trading Monday.
Allegheny Technologies Incorporated manufactures and sells specialty metals worldwide. The company operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products. The High Performance Metals segment produces, converts, and distributes a range of high performance alloys, including nickel- and cobalt-based alloys and super-alloys; titanium and titanium-based alloys; exotic metals, such as zirconium, hafnium, niobium, nickel-titanium, and their related alloys; and other specialty alloys in various forms comprising ingot, billet, bar, rod, wire, and seamless tube. It sells products directly to end-use customers in the aerospace and defense, chemical process, oil and gas, medical, and electrical energy sectors. The Flat-Rolled Products segment offers stainless steel, nickel-based alloys, and titanium and titanium-based alloys in various product forms, such as plate, sheet, engineered strip, and precision rolled strip products, as well as grain-oriented electrical steel to independent service centers and end-use customers. It serves chemical process, oil and gas, electrical energy, automotive, food equipment and appliances, machine and cutting tools, construction and mining, aerospace and defense, electronics, communication equipment, and computers industries. The Engineered Products segment includes the production of tungsten powder, tungsten heavy alloys, tungsten carbide materials, and tungsten carbide cutting tools. It also manufactures carbon alloy steel impression die forgings, and grey and ductile iron castings, as well as provides precision metals processing services, such as grinding, polishing, blasting, cutting, flattening, and ultrasonic testing. This segment serves various industrial markets, including automotive, chemical process, oil and gas, machine and cutting tools, aerospace, construction and mining, and other markets. Allegheny Technologies Incorporated was founded in 1960, currently employs nearly 10,000 workers and is based in Pittsburgh, Pennsylvania.
As a cyclical stock in the steel/ iron industry, this enormous player in the U.S. stainless steel market has taken a hit after recently reporting lower profits in the company’s most recent earnings report. Released back in late-April, Allegheny’s 1Q’s profit declined 28%, which was due in large part by higher raw material costs. For the quarter, ending March 31st, the company earned $142M, or $1.40 per share, down from $197.8M, or $1.92 per share, in the same period a year earlier. Revenues, meanwhile for the company, declined only 2% to $1.34B from $1.37B. Analysts, on average, had expected profits of $1.48 per share on sales of $1.3B. The company also confirmed that, as expected, certain raw material costs were higher than the raw material indices and surcharges included in its selling prices hurt their overall results for the quarter. However, there is a positive swing for the company, that being of the recent surge in steel prices can in no way be seen to have peaked, in that there is increasing tightness in the scrap and raw material markets. This would in turn result in more advances in the commodities pricing throughout the remainder of the year and into much of next year, garnering more gains for the companies within this industry.
Most of the commentary of late from analysts has been generally cautious in tone. The predominant rating on Allegheny on the Street is Neutral or Hold, while in early June, a JPMorgan analyst downgraded Allegheny to Neutral from Outperform as it was believed that estimates were too high on the Street and that sentiment was overly positive. Additionally, other analysts have recently reduced their 2008 outlook for Allegheny to reflect some additional weakening of spot titanium pricing, as well as delays in achieving base price increases in commodity stainless steel products. Since the downgrade, shares of Allegheny have slipped nearly 20% to its closing price as of today. Trading as low as $50, this stock price has bounced slightly over the past trading sessions. However, ATI is still experiencing a record year in profits, due to high demand in specialty metals, even if it hasn't met the target expectations set by market analysts. In fact, titanium metal is in such high demand that Allegheny has a production backlog worth over $1B. Even if this growth rate is lower than a year ago, the absolute measurement of orders is through the roof for the company. If investors are willing to hang onto this stock, there is a strong possibility that they will see this stock come back in price, and possibly then some. But with any cyclical stock, investors need to be aware of the risk of trading this stock, but if things line up as well as they could, we could see ATI reach the $100 range within a year, the stock’s trading range of a year ago.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Allegheny Technologies Incorporated manufactures and sells specialty metals worldwide. The company operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products. The High Performance Metals segment produces, converts, and distributes a range of high performance alloys, including nickel- and cobalt-based alloys and super-alloys; titanium and titanium-based alloys; exotic metals, such as zirconium, hafnium, niobium, nickel-titanium, and their related alloys; and other specialty alloys in various forms comprising ingot, billet, bar, rod, wire, and seamless tube. It sells products directly to end-use customers in the aerospace and defense, chemical process, oil and gas, medical, and electrical energy sectors. The Flat-Rolled Products segment offers stainless steel, nickel-based alloys, and titanium and titanium-based alloys in various product forms, such as plate, sheet, engineered strip, and precision rolled strip products, as well as grain-oriented electrical steel to independent service centers and end-use customers. It serves chemical process, oil and gas, electrical energy, automotive, food equipment and appliances, machine and cutting tools, construction and mining, aerospace and defense, electronics, communication equipment, and computers industries. The Engineered Products segment includes the production of tungsten powder, tungsten heavy alloys, tungsten carbide materials, and tungsten carbide cutting tools. It also manufactures carbon alloy steel impression die forgings, and grey and ductile iron castings, as well as provides precision metals processing services, such as grinding, polishing, blasting, cutting, flattening, and ultrasonic testing. This segment serves various industrial markets, including automotive, chemical process, oil and gas, machine and cutting tools, aerospace, construction and mining, and other markets. Allegheny Technologies Incorporated was founded in 1960, currently employs nearly 10,000 workers and is based in Pittsburgh, Pennsylvania.
As a cyclical stock in the steel/ iron industry, this enormous player in the U.S. stainless steel market has taken a hit after recently reporting lower profits in the company’s most recent earnings report. Released back in late-April, Allegheny’s 1Q’s profit declined 28%, which was due in large part by higher raw material costs. For the quarter, ending March 31st, the company earned $142M, or $1.40 per share, down from $197.8M, or $1.92 per share, in the same period a year earlier. Revenues, meanwhile for the company, declined only 2% to $1.34B from $1.37B. Analysts, on average, had expected profits of $1.48 per share on sales of $1.3B. The company also confirmed that, as expected, certain raw material costs were higher than the raw material indices and surcharges included in its selling prices hurt their overall results for the quarter. However, there is a positive swing for the company, that being of the recent surge in steel prices can in no way be seen to have peaked, in that there is increasing tightness in the scrap and raw material markets. This would in turn result in more advances in the commodities pricing throughout the remainder of the year and into much of next year, garnering more gains for the companies within this industry.
Most of the commentary of late from analysts has been generally cautious in tone. The predominant rating on Allegheny on the Street is Neutral or Hold, while in early June, a JPMorgan analyst downgraded Allegheny to Neutral from Outperform as it was believed that estimates were too high on the Street and that sentiment was overly positive. Additionally, other analysts have recently reduced their 2008 outlook for Allegheny to reflect some additional weakening of spot titanium pricing, as well as delays in achieving base price increases in commodity stainless steel products. Since the downgrade, shares of Allegheny have slipped nearly 20% to its closing price as of today. Trading as low as $50, this stock price has bounced slightly over the past trading sessions. However, ATI is still experiencing a record year in profits, due to high demand in specialty metals, even if it hasn't met the target expectations set by market analysts. In fact, titanium metal is in such high demand that Allegheny has a production backlog worth over $1B. Even if this growth rate is lower than a year ago, the absolute measurement of orders is through the roof for the company. If investors are willing to hang onto this stock, there is a strong possibility that they will see this stock come back in price, and possibly then some. But with any cyclical stock, investors need to be aware of the risk of trading this stock, but if things line up as well as they could, we could see ATI reach the $100 range within a year, the stock’s trading range of a year ago.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, July 11, 2008
BetterTrades looks at Infosys Technologies Ltd. - July 11, 2008
Information technology provider Infosys Technologies (INFY) announced early Friday that the company’s fiscal 1Q profits increased 16% as its customer base grew. Net income for the quarter jumped to $306M, or $0.54 per share, from $263M, or $0.46 per share, during the corresponding quarter last year. Revenues for Infosys increased 24% to $1.16B during the quarter, from $928M during the year-ago period, while analysts, on average, expected profits of $0.51 per share on revenues of $1.15B. Some of the revenue growth was offset by narrowing margins, in that the company’s margins tightened because of increases in salary and visa costs. Infosys Technologies also stated Friday that the firm expects fiscal 2Q earnings to range between $0.55 and $0.56 per share despite a slowdown in the global economy. Analysts, on average, forecast earnings of $0.56 per share for the quarter ending Sept. 30th. Infosys expects those earnings based on projected revenues ranging between $1.22B and $1.23B, with analysts anticipating Infosys will generate $1.21B in revenues during its 2Q. Infosys projects it will earn between $2.32 and $2.36 per share for the fiscal year ending March 31st 2009, along with forecasting their revenues which should range between $4.97B and $5.05B for the year. For the full year, analysts expect Infosys to earn $2.31 per share on revenues of $5.03B. By the end of today’s trading, American Depositary shares of Infosys plunged $5.85, or 13.3%, to $38.14, from their close in Thursday's regular session at $43.99.
Infosys Technologies Limited, incorporated in July of 1981, is a global technology services firm which defines and designs and delivers information technology (IT)-enabled business solutions to its clients. The company provides end-to-end business solutions that leverage technology for its clients, including technical consulting, design, development, product engineering, maintenance, systems integration, package-enabled consulting, and implementation and infrastructure management services. Infosys also provides software products to the banking industry. Infosys BPO is a majority owned subsidiary. Through Infosys BPO, it provides business process management services, such as offsite customer relationship management, finance and accounting, and administration and sales order processing. Infosys Australia, Infosys China and Infosys Consulting are the company’s wholly owned subsidiaries. In October of 2007, Infosys BPO acquired 100% interest in P-Financial Services Holding B.V. The company complements its service offerings with specialist support for clients. It also uses its software engineering group and technology lab to create customized solutions for its clients. In addition, it continually evaluates and trains its professionals in new technologies and methodologies.
Back in early June, Infosys was granted two patents by the US Patents and Trademark Office. Surprisingly none of them has anything to do with the traditional business of Infosys. One of the patents discussed making a mobile network appear seamlessly connected, even when the underlying technology and its characteristics keep on changing. The vision here is of omnipresent mobile connectivity and the impenetrable concept of invisibility for the technology to end user. In effect, Infosys has built a wall around their business to protect itself from the downturns of the economy, especially in times like these. In addition, the development of significant high-tech Intellectual Property [IP] should help protect the business from any economic downturns. It's clear that Infosys doesn't want just to maintain the world's software projects. It wants to actively develop, brainstorm and tweak them, keeping the core engine as its own IP.
While investor enthusiasm for Infosys Technologies may have been dampened as a result of the weakness in the U.S. financial industry, an objective evaluation of the macro environment suggests that the risks appear to be overstated. The company continues to talk about the advantage of its global delivery model, consulting and solution capabilities, and a strong platform for customers. Infosys earned nearly 63% of its business from North American clients during the quarter, and had a 35% exposure to the troubled insurance, banking and financial sector. With those worries in the ongoing sub-prime mortgage crisis, its impact on the global financial markets could crimp its clients' information technology budgets, which would in turn, cut deeply into Infosys’ bottom-line. For the year, Infosys is expecting a 19% to 21% growth in revenues to reach a total of $4.97B to $5.05B, and a 16.7% to 18.7% growth in earnings, which should reach $2.31 to $2.35 per share for the year. The markets, and analysts as a whole, were expecting higher revenues of $5.23B with earnings per share of $2.36. Although the global economic environment continues to remain uncertain and could impact IT spending in the short term, Infosys appears to have several opportunities for growth as customers relentlessly focus on improving efficiency.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Infosys Technologies Limited, incorporated in July of 1981, is a global technology services firm which defines and designs and delivers information technology (IT)-enabled business solutions to its clients. The company provides end-to-end business solutions that leverage technology for its clients, including technical consulting, design, development, product engineering, maintenance, systems integration, package-enabled consulting, and implementation and infrastructure management services. Infosys also provides software products to the banking industry. Infosys BPO is a majority owned subsidiary. Through Infosys BPO, it provides business process management services, such as offsite customer relationship management, finance and accounting, and administration and sales order processing. Infosys Australia, Infosys China and Infosys Consulting are the company’s wholly owned subsidiaries. In October of 2007, Infosys BPO acquired 100% interest in P-Financial Services Holding B.V. The company complements its service offerings with specialist support for clients. It also uses its software engineering group and technology lab to create customized solutions for its clients. In addition, it continually evaluates and trains its professionals in new technologies and methodologies.
Back in early June, Infosys was granted two patents by the US Patents and Trademark Office. Surprisingly none of them has anything to do with the traditional business of Infosys. One of the patents discussed making a mobile network appear seamlessly connected, even when the underlying technology and its characteristics keep on changing. The vision here is of omnipresent mobile connectivity and the impenetrable concept of invisibility for the technology to end user. In effect, Infosys has built a wall around their business to protect itself from the downturns of the economy, especially in times like these. In addition, the development of significant high-tech Intellectual Property [IP] should help protect the business from any economic downturns. It's clear that Infosys doesn't want just to maintain the world's software projects. It wants to actively develop, brainstorm and tweak them, keeping the core engine as its own IP.
While investor enthusiasm for Infosys Technologies may have been dampened as a result of the weakness in the U.S. financial industry, an objective evaluation of the macro environment suggests that the risks appear to be overstated. The company continues to talk about the advantage of its global delivery model, consulting and solution capabilities, and a strong platform for customers. Infosys earned nearly 63% of its business from North American clients during the quarter, and had a 35% exposure to the troubled insurance, banking and financial sector. With those worries in the ongoing sub-prime mortgage crisis, its impact on the global financial markets could crimp its clients' information technology budgets, which would in turn, cut deeply into Infosys’ bottom-line. For the year, Infosys is expecting a 19% to 21% growth in revenues to reach a total of $4.97B to $5.05B, and a 16.7% to 18.7% growth in earnings, which should reach $2.31 to $2.35 per share for the year. The markets, and analysts as a whole, were expecting higher revenues of $5.23B with earnings per share of $2.36. Although the global economic environment continues to remain uncertain and could impact IT spending in the short term, Infosys appears to have several opportunities for growth as customers relentlessly focus on improving efficiency.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, July 10, 2008
BetterTrades looks at Alcoa Inc. - July 10, 2008
In an announcement made after the close Tuesday, Alcoa Inc.'s (AA) 2Q earnings dropped almost 24% as higher prices failed to offset the costs of raw materials, energy and plant disruptions. The company confirmed that they earned $546M, or $0.66 per share, for the quarter, compared with $715M, or $0.81 per share, during the same period a year earlier. Quarterly revenues slipped nearly 6% to $7.6B. Current results did beat analysts’ estimates as experts, on average, expected profits of $0.64 per share on revenues of $7.36B. During the quarter, facility disruptions weighed heavily on results by a total of $39M, including a natural gas pipeline explosion in Western Australia that curtailed profitability by $17M. Also during the quarter, Alcoa continued a share repurchase program, bringing the number of shares bought back for the year to date to 18.3 million, or 10% of shares outstanding. In direct correlation to the company’s bottom-line, the price of raw materials like alumna, used to make aluminum, and caustic soda increased during the quarter, along with natural gas and electricity. Yet, the spot price for aluminum on the New York Mercantile Exchange has risen almost 7% this year, while its price settled on Wednesday at $1.42 per pound after hitting s 52-week high of $1.47 per pound late last week. Looking ahead, growth in China will more than likely remain strong with consumption in the region projected to increase nearly 20% by year’s end. The company has also forecasted growth of 6% annually in the global industry over the next decade, fueled by gains in Asia. At the conclusion of Thursday’s trade, shares of Alcoa were higher by the close, up $3.06, or 9.7%, at $34.60 a share.
Alcoa Inc. is engaged in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its active and growing participation in all aspects of the industry, including technology, mining, refining, smelting, fabricating, and recycling. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, consumer products, building and construction, and industrial applications. Alcoa is a global company operating in 44 countries. In addition, Alcoa has investments and activities in Australia, Brazil, China, Iceland, Jamaica, Guinea, and Russia. Alcoa’s operations consist of six worldwide segments: Alumina; Primary Metals; Flat-Rolled Products; Extruded and End Products; Engineered Solutions, and Packaging and Consumer. The Alumina segment primarily consists of a series of affiliated operating entities referred to as Alcoa World Alumina and Chemicals (AWAC). Alcoa owns 60% and Alumina Limited owns 40% of these individual entities. The company produces aluminum from alumina by an electrolytic process requiring large amounts of electric power. Electric power accounts for approximately 30% of the company’s primary aluminum costs. Alcoa generates approximately 24% of the power used at its smelters worldwide and generally purchases the remainder under long-term arrangements. The company’s wholly owned subsidiary, Alcoa Power Generating Inc. (APGI), generates approximately 25% of the power requirements for Alcoa’s North American smelters. Alcoa purchases the remainder under long-term contracts. APGI owns and operates two hydroelectric projects: Tapoco and Yadkin, consisting of eight dams under Federal Energy Regulatory Commission (FERC) licenses. APGI hydroelectric facilities provide electric power for the aluminum smelters at Alcoa, Tennessee and Badin, North Carolina. The Tennessee smelter also purchases power from the Tennessee Valley Authority under a contract that extends to 2010.
Alcoa has been the beneficiary of the rising price of aluminum, which enabled the company to not be quite so concerned about input costs. Aluminum prices have continued to show strength and those higher prices are supported by a host of factors, being that global supply and demand is essentially balanced, even though North America and Europe are experiencing significant weakness in specific markets, but global consumption remains robust. It is foreseen that aluminum consumption will increase by approximately 8% over the upcoming year given the supply interruptions in China, South Africa and the United States. Throughout the U.S. and Europe, supply will outbid demand as the automotive industry along with commercial building and construction activity have already shown signs of weakness which are at or already below 2007 levels. The one true bright spot for the industry is that consumption for aluminum in China is expected to increase approximately 20% for the year. Estimates are that the aluminum market will remain in surplus through the second half of 2008. But analysts believe that China will become a net importer over the next 12-to-24 months, which could drive significant increases in prices, especially if there are continuing global power shortages.
Like much of the broader economy, Alcoa has been hampered by high energy prices as well as increased raw material costs. To make matters worse, the price of aluminum, Alcoa’s core product, which had enjoyed a nice run-up in the commodity boom, is showing signs of cooling off. In the company’s recent earnings report, higher raw materials and energy costs reduced Alcoa’s profits by $107M. But aluminum prices are up about 20% year-to-date and could hit $2 by early 2009 amid tightening supply of bauxite, the key raw material in aluminum production, and higher energy costs. That's good news for Alcoa in that the company’s earnings per share could easily jump from an estimated $3.80 to $4.79. Alcoa should benefit from higher volumes, in alumina and aluminum, and better pricing in its upstream business in the medium-to-long term, and from better volumes and improved mix and productivity in its midstream and downstream operations. With that, analysts have maintained their “buy” recommendations on the stock, posting target prices of $44 to $46 per share.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Alcoa Inc. is engaged in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its active and growing participation in all aspects of the industry, including technology, mining, refining, smelting, fabricating, and recycling. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, consumer products, building and construction, and industrial applications. Alcoa is a global company operating in 44 countries. In addition, Alcoa has investments and activities in Australia, Brazil, China, Iceland, Jamaica, Guinea, and Russia. Alcoa’s operations consist of six worldwide segments: Alumina; Primary Metals; Flat-Rolled Products; Extruded and End Products; Engineered Solutions, and Packaging and Consumer. The Alumina segment primarily consists of a series of affiliated operating entities referred to as Alcoa World Alumina and Chemicals (AWAC). Alcoa owns 60% and Alumina Limited owns 40% of these individual entities. The company produces aluminum from alumina by an electrolytic process requiring large amounts of electric power. Electric power accounts for approximately 30% of the company’s primary aluminum costs. Alcoa generates approximately 24% of the power used at its smelters worldwide and generally purchases the remainder under long-term arrangements. The company’s wholly owned subsidiary, Alcoa Power Generating Inc. (APGI), generates approximately 25% of the power requirements for Alcoa’s North American smelters. Alcoa purchases the remainder under long-term contracts. APGI owns and operates two hydroelectric projects: Tapoco and Yadkin, consisting of eight dams under Federal Energy Regulatory Commission (FERC) licenses. APGI hydroelectric facilities provide electric power for the aluminum smelters at Alcoa, Tennessee and Badin, North Carolina. The Tennessee smelter also purchases power from the Tennessee Valley Authority under a contract that extends to 2010.
Alcoa has been the beneficiary of the rising price of aluminum, which enabled the company to not be quite so concerned about input costs. Aluminum prices have continued to show strength and those higher prices are supported by a host of factors, being that global supply and demand is essentially balanced, even though North America and Europe are experiencing significant weakness in specific markets, but global consumption remains robust. It is foreseen that aluminum consumption will increase by approximately 8% over the upcoming year given the supply interruptions in China, South Africa and the United States. Throughout the U.S. and Europe, supply will outbid demand as the automotive industry along with commercial building and construction activity have already shown signs of weakness which are at or already below 2007 levels. The one true bright spot for the industry is that consumption for aluminum in China is expected to increase approximately 20% for the year. Estimates are that the aluminum market will remain in surplus through the second half of 2008. But analysts believe that China will become a net importer over the next 12-to-24 months, which could drive significant increases in prices, especially if there are continuing global power shortages.
Like much of the broader economy, Alcoa has been hampered by high energy prices as well as increased raw material costs. To make matters worse, the price of aluminum, Alcoa’s core product, which had enjoyed a nice run-up in the commodity boom, is showing signs of cooling off. In the company’s recent earnings report, higher raw materials and energy costs reduced Alcoa’s profits by $107M. But aluminum prices are up about 20% year-to-date and could hit $2 by early 2009 amid tightening supply of bauxite, the key raw material in aluminum production, and higher energy costs. That's good news for Alcoa in that the company’s earnings per share could easily jump from an estimated $3.80 to $4.79. Alcoa should benefit from higher volumes, in alumina and aluminum, and better pricing in its upstream business in the medium-to-long term, and from better volumes and improved mix and productivity in its midstream and downstream operations. With that, analysts have maintained their “buy” recommendations on the stock, posting target prices of $44 to $46 per share.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, July 09, 2008
BetterTrades looks at The Buckle Inc. - July 9, 2008
The Buckle, Inc. (BKE) announced today that comparable-store, net sales, for stores open at least one year, for the five-week period ending July 5th, increased 28.9% from comparable store net sales for the five-week period ending July 7th, 2007. Net sales for the five-week fiscal month surged 38.6% to $61.9M from net sales of $44.7M for the prior year five-week fiscal month ending July 7th, 2007. Comparable store net sales year-to-date for the 22-week period increased 28% from comparable store net sales for the same time frame in 2007. Net sales for the 22-week period increased 35.8% to $273.1M from net sales of $201.1M for the prior year’s 22-week period back in 2007. Additionally, just a few weeks ago, an analyst from JPMorgan started coverage on the company at “Overweight” stating that the secret to The Bucket’s success was an assortment of limited distribution and third-party brands. Furthermore, half of Buckle's stores are located in smaller, commodity-rich markets, such as Texas, which have limited competition. About 11% of the company's stores are located in Texas, a commodity-rich state. Texas has been a strong market for the company, which has been helped by the rising price of oil. The analyst also went ahead and forecasted the company to post 30% earnings per share growth for the retailer this year, despite a sagging economy that has hurt many of its peers. At the sound of the closing bell today, shares of The Buckle were lower on the day, down $0.24, or 0.5%, to close the session at $46.67 per share.
The Buckle, incorporated in 1948, is a retailer of medium to better-priced casual apparel, footwear and accessories for fashion conscious young men and women. As of February, 2008, the company operated 368 retail stores in 38 states throughout the continental United States, excluding the northeast, under the names Buckle and The Buckle. The company markets a selection of mostly brand name casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Buckle provides customer services, such as free hemming, free gift-wrapping, easy layaways, the Buckle private label credit card and a frequent shopper program. Most stores are located in regional shopping malls and lifestyle centers. Brand name merchandise accounted for approximately 70% of the company's sales during the fiscal year ending in February of 2008. The remaining balance comprises of private label merchandise that is manufactured to the company's specifications. The Company offers brands, such as Lucky Brand Dungarees, Big Star, Silver, Hurley, Affliction, Fossil, MEK, Billabong, Guess, Quiksilver/Roxy, 7 Diamonds, OBEY and Manchester. As of April, 2008, the company operated 371 stores in 38 states, including three stores opened during fiscal 2008. The existing stores are in four downtown locations, nine strip centers, 27 lifestyle centers and 331 shopping malls. The company competes with Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Hollister, Hot Topic (HOTT), Gap (GPS), Pacific Sunwear (PSUN), Dillards (DDS), Federated Stores, Parisian, Saks (SKS), Bon-Ton Stores (BONT), Express, Aeropostale (ARO), Maurices, Wet Seal (WTSLA), Forever 21 and Vanity.
Even though many people haven’t heard of The Buckle, the company has been able to post double-digit top-line growth despite a weaker economy, along with growing earnings at a much greater pace than the overall market, paying out a substantially higher yield than competitors (2.2%) and giving back 24% on Return on Equity (ROE). During the 1Q, ending in early May, teen retailers posted an average 5.2% decline in store sales, while BKE stood out as the company posted a 20.9% increase in sales, more than double than the expert’s estimates. Unlike competitors The Gap and Abercrombie, the company relies heavily on brand-name clothing, which accounts for about two-thirds of sales and alleviating the risks of not knowing precisely what their fickle customers want. BKE is moving into high traffic shopping malls as well as moving more to the side of appealing to the younger set, children ages 8 to 15, with apparel that can only be purchased online. The company also has plans to open about 20 new stores this year, suggesting that The Buckle could have as many as 500 units operating by 2012. With an increase in disposable income and spending power within Generation Y, niche specialty stores, such as The Buckle, are able to take a larger percentage from this consumer group.
Despite the numerous advantages that the company possesses, there are, of course, pitfalls that the company may encounter within their industry and business model. Most importantly is that the company has no economic support system to fall back onto if or when their concept begins to fade. Moreover, the company’s unit expansion growth in the past has shown that it is well behind the company’s revenue growth, which may, in turn, give investors caution before investing in their company. Favorably, instead of costly marketing programs, The Buckle keeps its advertising expense budget to about 1% of total sales, compared to 3% to 4% for some other national retailers, and allows its reputation for quality brand-name merchandise to drive traffic. When a company can still generate sales growth in the low 30% range with minimal marketing costs, it has a profound effect on the bottom line. Furthermore, the unassuming approach to advertising frees up capital to be used on other important matters, such as inventory management and distribution. For a high-growth, well-managed company and an under the radar stock, which currently trades at just under 16x the consensus fiscal 2009 estimate of $3.07, along with continued earnings out performing, a somewhat resilient customer base, and increasing investor awareness, this stock could wind up in the upper $50-to-low $60 range sometime in the near future.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
The Buckle, incorporated in 1948, is a retailer of medium to better-priced casual apparel, footwear and accessories for fashion conscious young men and women. As of February, 2008, the company operated 368 retail stores in 38 states throughout the continental United States, excluding the northeast, under the names Buckle and The Buckle. The company markets a selection of mostly brand name casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Buckle provides customer services, such as free hemming, free gift-wrapping, easy layaways, the Buckle private label credit card and a frequent shopper program. Most stores are located in regional shopping malls and lifestyle centers. Brand name merchandise accounted for approximately 70% of the company's sales during the fiscal year ending in February of 2008. The remaining balance comprises of private label merchandise that is manufactured to the company's specifications. The Company offers brands, such as Lucky Brand Dungarees, Big Star, Silver, Hurley, Affliction, Fossil, MEK, Billabong, Guess, Quiksilver/Roxy, 7 Diamonds, OBEY and Manchester. As of April, 2008, the company operated 371 stores in 38 states, including three stores opened during fiscal 2008. The existing stores are in four downtown locations, nine strip centers, 27 lifestyle centers and 331 shopping malls. The company competes with Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Hollister, Hot Topic (HOTT), Gap (GPS), Pacific Sunwear (PSUN), Dillards (DDS), Federated Stores, Parisian, Saks (SKS), Bon-Ton Stores (BONT), Express, Aeropostale (ARO), Maurices, Wet Seal (WTSLA), Forever 21 and Vanity.
Even though many people haven’t heard of The Buckle, the company has been able to post double-digit top-line growth despite a weaker economy, along with growing earnings at a much greater pace than the overall market, paying out a substantially higher yield than competitors (2.2%) and giving back 24% on Return on Equity (ROE). During the 1Q, ending in early May, teen retailers posted an average 5.2% decline in store sales, while BKE stood out as the company posted a 20.9% increase in sales, more than double than the expert’s estimates. Unlike competitors The Gap and Abercrombie, the company relies heavily on brand-name clothing, which accounts for about two-thirds of sales and alleviating the risks of not knowing precisely what their fickle customers want. BKE is moving into high traffic shopping malls as well as moving more to the side of appealing to the younger set, children ages 8 to 15, with apparel that can only be purchased online. The company also has plans to open about 20 new stores this year, suggesting that The Buckle could have as many as 500 units operating by 2012. With an increase in disposable income and spending power within Generation Y, niche specialty stores, such as The Buckle, are able to take a larger percentage from this consumer group.
Despite the numerous advantages that the company possesses, there are, of course, pitfalls that the company may encounter within their industry and business model. Most importantly is that the company has no economic support system to fall back onto if or when their concept begins to fade. Moreover, the company’s unit expansion growth in the past has shown that it is well behind the company’s revenue growth, which may, in turn, give investors caution before investing in their company. Favorably, instead of costly marketing programs, The Buckle keeps its advertising expense budget to about 1% of total sales, compared to 3% to 4% for some other national retailers, and allows its reputation for quality brand-name merchandise to drive traffic. When a company can still generate sales growth in the low 30% range with minimal marketing costs, it has a profound effect on the bottom line. Furthermore, the unassuming approach to advertising frees up capital to be used on other important matters, such as inventory management and distribution. For a high-growth, well-managed company and an under the radar stock, which currently trades at just under 16x the consensus fiscal 2009 estimate of $3.07, along with continued earnings out performing, a somewhat resilient customer base, and increasing investor awareness, this stock could wind up in the upper $50-to-low $60 range sometime in the near future.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, July 08, 2008
BetterTrades looks at ConocoPhillips - July 8, 2008
In a statement released earlier this morning, ConocoPhillips (COP) confirmed that the company’s daily petroleum production for the 2Q declined by 60,000 barrels of oil equivalency from the 1Q’s production of 1.79 million barrels. The reduction to the overall production levels were due to the fact that the company had scheduled a planned maintenance at certain refineries. Nonetheless, overall refinery utilization increased across the board for the company, which contributed to the company posting better margins for their gasoline production and other core products. The company's average U.S. crude-refining capacity utilization rate for the 2Q is anticipated to be in the mid-90% range, reflecting improved performance at ConocoPhillips' Gulf Coast refineries. Its international crude-refining capacity utilization rate for the 2Q is expected to be in the upper-80% range, primarily due to maintenance activities and the continued impact of low hydro-skimming margins. During the June quarter, the average price of a barrel of West Texas Intermediate crude advanced to $123.98 from $97.94 in the first three months of 2008, summing up market prices for the precious commodity during a time of record levels in crude futures. Even with oil prices on the rise, ConocoPhillips stated that their worldwide refining margins widened from the previous quarter, as prices for its refined products continued to increase as well. The company's global marketing margins for the 2Q are expected to be thinner than the 1Q, primarily due to market prices lagging increases in product costs. The company reports 2Q earnings results on July 29th. By the close of today’s markets, shares of ConocoPhillips were down more than 1%, or $1.21, to conclude the session at $89.15 per share.
ConocoPhillips operates as an integrated energy company worldwide. It operates in six segments: Exploration and Production (E&P), Midstream, Refining and Marketing (R&M), LUKOIL Investment, Chemicals, and Emerging Businesses. E&P segment explores for, produces, and markets crude oil, natural gas, and natural gas liquids. It also mines deposits of oil sands in Canada to extract the bitumen and upgrade it into a synthetic crude oil. Midstream segment gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad. R&M segment purchases, refines, markets, and transports crude oil and petroleum products, including gasoline, distillates, and aviation fuels primarily in the U.S., Europe, and Asia Pacific. LUKOIL Investment segment consists of 20% interest in OAO LUKOIL, an international integrated oil and gas company. Chemicals segment manufactures and markets petrochemicals and plastics. It offers olefins and polyolefins, including ethylene, propylene, and other olefin products; aromatics products, such as benzene, styrene, paraxylene, cyclohexane, polystyrene, and styrene-butadiene copolymers; and various specialty chemical products comprising organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals, and engineering plastics and compounds. Emerging Businesses segment develops new technologies and businesses. It focuses on the power generation; development of carbon-to-liquids technology through coal and petroleum coke; and alternative energy and programs, such as advanced hydrocarbon processes, energy conversion technologies, new petroleum-based products, and renewable fuels. It also offers E-Gas, a gasification technology that produces high-value synthetic gas. By the end of December, 2007, the company had 8.72 billion barrels of oil equivalent of proved reserves. ConocoPhillips was founded in 1917, currently employs more than 32,000 people and is based in Houston, Texas.
The Emerging Business segment of ConocoPhillips is an overlooked and undervalued aspect of this behemoth energy company as this segment is responsible for developing new technologies and businesses. It focuses on the power generation; development of carbon-to-liquids technology through coal and petroleum coking and alternative energy and programs, such as advanced hydrocarbon processes, energy conversion technologies, new petroleum-based products, and renewable fuels. It also offers E-Gas, a gasification technology that produces high-value synthetic gas. The biggest negative for the giant oil company is that with crude oil’s unyielding march towards the near term target price of $150, it has come to fruition that the price of crude is now threatening to send the global economy into a recession. As the American economy has expanded over the decades, the gap between demand and domestic production started widening and in order to secure access to foreign sources, the price of oil became a corner stone of our foreign policy. Worldwide more than 80% of oil resources are nationalized as oil continues to shape the economic, foreign and military policy all over the world. Only the truly ingenuous will pretend that oil trades in a free-market and that governments have no role to play in it.
The beauty of this company is that is able to boast an operating cash flow, trailing twelve months (ttm), which is approaching $25B along with their levered free cash flow of almost $17B. Their total cash, from their most recent quarter, was up around $1.42B, and with every passing quarter, the company should anticipate that number to grow greatly, especially with the trek of record oil prices of late. This is a company with a book value per share of over $58 and a new 52-week high share price of $95.96, set back on June 16th. COP is still selling at less than 2 times their book value, and even at $90-a-share the forward P/E Ratio is an inexpensive 6.5 times earnings. The current price-per-share underestimates the earning power and operating margins of ConocoPhillips. With oil reaching new all-time highs and natural gas likely to be higher by next winter, this company's bottom-line numbers are very likely to surprise to the upside for a number of future quarters. Recently as well, analysts’ have raised the target price of ConocoPhillips to $110 from $96 and have also increased 2008 earnings forecast to $14.63 per share from $10.69 per share. Previous expectations from analysts have the company’s profit pegged at $11.93 per share for the year. The new estimates are due in large part to a delayed reaction of worldwide supply-and-demand elasticity to higher prices, and the jump in exploration and developmental costs for producing the fossil fuel.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
ConocoPhillips operates as an integrated energy company worldwide. It operates in six segments: Exploration and Production (E&P), Midstream, Refining and Marketing (R&M), LUKOIL Investment, Chemicals, and Emerging Businesses. E&P segment explores for, produces, and markets crude oil, natural gas, and natural gas liquids. It also mines deposits of oil sands in Canada to extract the bitumen and upgrade it into a synthetic crude oil. Midstream segment gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad. R&M segment purchases, refines, markets, and transports crude oil and petroleum products, including gasoline, distillates, and aviation fuels primarily in the U.S., Europe, and Asia Pacific. LUKOIL Investment segment consists of 20% interest in OAO LUKOIL, an international integrated oil and gas company. Chemicals segment manufactures and markets petrochemicals and plastics. It offers olefins and polyolefins, including ethylene, propylene, and other olefin products; aromatics products, such as benzene, styrene, paraxylene, cyclohexane, polystyrene, and styrene-butadiene copolymers; and various specialty chemical products comprising organosulfur chemicals, solvents, catalysts, drilling chemicals, mining chemicals, and engineering plastics and compounds. Emerging Businesses segment develops new technologies and businesses. It focuses on the power generation; development of carbon-to-liquids technology through coal and petroleum coke; and alternative energy and programs, such as advanced hydrocarbon processes, energy conversion technologies, new petroleum-based products, and renewable fuels. It also offers E-Gas, a gasification technology that produces high-value synthetic gas. By the end of December, 2007, the company had 8.72 billion barrels of oil equivalent of proved reserves. ConocoPhillips was founded in 1917, currently employs more than 32,000 people and is based in Houston, Texas.
The Emerging Business segment of ConocoPhillips is an overlooked and undervalued aspect of this behemoth energy company as this segment is responsible for developing new technologies and businesses. It focuses on the power generation; development of carbon-to-liquids technology through coal and petroleum coking and alternative energy and programs, such as advanced hydrocarbon processes, energy conversion technologies, new petroleum-based products, and renewable fuels. It also offers E-Gas, a gasification technology that produces high-value synthetic gas. The biggest negative for the giant oil company is that with crude oil’s unyielding march towards the near term target price of $150, it has come to fruition that the price of crude is now threatening to send the global economy into a recession. As the American economy has expanded over the decades, the gap between demand and domestic production started widening and in order to secure access to foreign sources, the price of oil became a corner stone of our foreign policy. Worldwide more than 80% of oil resources are nationalized as oil continues to shape the economic, foreign and military policy all over the world. Only the truly ingenuous will pretend that oil trades in a free-market and that governments have no role to play in it.
The beauty of this company is that is able to boast an operating cash flow, trailing twelve months (ttm), which is approaching $25B along with their levered free cash flow of almost $17B. Their total cash, from their most recent quarter, was up around $1.42B, and with every passing quarter, the company should anticipate that number to grow greatly, especially with the trek of record oil prices of late. This is a company with a book value per share of over $58 and a new 52-week high share price of $95.96, set back on June 16th. COP is still selling at less than 2 times their book value, and even at $90-a-share the forward P/E Ratio is an inexpensive 6.5 times earnings. The current price-per-share underestimates the earning power and operating margins of ConocoPhillips. With oil reaching new all-time highs and natural gas likely to be higher by next winter, this company's bottom-line numbers are very likely to surprise to the upside for a number of future quarters. Recently as well, analysts’ have raised the target price of ConocoPhillips to $110 from $96 and have also increased 2008 earnings forecast to $14.63 per share from $10.69 per share. Previous expectations from analysts have the company’s profit pegged at $11.93 per share for the year. The new estimates are due in large part to a delayed reaction of worldwide supply-and-demand elasticity to higher prices, and the jump in exploration and developmental costs for producing the fossil fuel.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, July 07, 2008
BetterTrades looks at Canadian Solar Inc. - July 7, 2008
Canadian Solar Inc. (CSIQ) confirmed earlier this morning that the company has signed five new sales agreements in Italy and the Czech Republic in the past three weeks. The customers covered under these agreements are WSW in the Czech Republic, and Arco Energy, AC Service, Ravano Green Power and Albatec of Italy. The total volume of shipments for 2008 for the aforementioned agreements totals 14.9 MW and reflects sales of CSIQ's regular module products. The sales will be realized in the second half of 2008 and are in addition to existing shipments to customers in Germany, Spain, U.S., Korea and China. Based on current customer orders, market forecasts and supply contracts, CSIQ's preliminary estimates for the second half of 2008 consists of a geographic sales mix of approximately 60% to Germany, 15% to Spain and 7% to the U.S. In addition, approximately 10% of sales for the upcoming period are expected to come from newly emerging markets in the rest of Europe. The remaining balance of approximately 8% sales is earmarked for South Korea and China. CSIQ management released a statement remarking that ''CSIQ has maintained a healthy balance of market segments and an impressive portfolio of strong long-term customers. These additional sales agreements reflect the increasing demand for CSIQ products in new markets. This not only increases our future revenue and market share, but also allows CSIQ to diversify its geographic sales footprint. We are also pleased to see stable and continuous demands from our traditional markets including Germany and Spain. Along with our recently announced e-Module sales contracts, CSIQ now actively delivers Photovoltaic (PV) products in seven countries and strategically positions itself for continued market growth in 2009.'' By the close of today’s trading session, shares of Canadian Solar surged on the day, gaining $1.52, or nearly 5%, to close at $33.50 a share.
Canadian Solar Inc. incorporated in October 2001, designs, develops, manufactures and sells solar cell and module products that convert sunlight into electricity for a variety of uses, while the company conducts all of its manufacturing operations in China. The company’s products include a range of standard solar modules built to general specifications for use in a range of residential, commercial and industrial solar power generation systems. It also designs and produces specialty solar modules and products based on its customers’ requirements. Specialty solar modules and products consist of customized modules that its customers incorporate into their own products, such as solar-powered bus stop lighting, and complete specialty products, such as solar-powered car battery chargers. It sells its products under its CSIQ brand name and to original equipment manufacturing (OEM) customers under their brand names. It also implements solar power development projects, primarily in conjunction with government organizations to provide solar power generation in rural areas of China. Canadian Solar sells its products to customers located in various markets worldwide, including Germany, Spain, Canada, Korea and China. It sells its standard solar modules to distributors and system integrators, along with selling their specialty solar modules and products directly to various manufacturers who integrate the specialty solar modules into their own products and sell and market the specialty solar products as part of their product portfolio. In January 2007, the company entered into a supply agreement with Deutsche Solar for a supply of multi-crystalline silicon wafers. Canadian Solar also implements solar power development projects, primarily in conjunction with government organizations, to provide solar power generation in rural areas of China. In conjunction with the Canadian International Development Agency (CIDA), CSIQ implemented a Solar Electrification for Western China project between 2002 and 2005. As part of this project, the company installed many demonstration projects and conducted three solar power forums in Beijing, Xining and Suzhou. During 2007, it successfully completed its first Building Integrated Photovoltaics (BIPV) solar project, a solar glass roof system, in collaboration with Luoyang Poly. Canadian Solar currently competes with BP Solar, Sharp Solar and SolarWorld and companies located in China such as Suntech Power Holdings Co., Ltd. (STP), Yingli Green Energy Holding Company Limited (YGE), Solarfun Power Holdings Co. (SOLF), Ltd. and Trina Solar Limited (TSL).
CSIQ's operating strategy is to pursue a balanced and diversified supply channel mix by entering into long-term supply contracts and exercise manufacturing arrangements in addition to in-house solar cell, wafer and ingot manufacturing. In the current market environment, a couple of factors are causing high prices for solar modules, such as an industry-wide shortage of silicon, a primary constituent of solar cells, and higher demand caused by the expansion of the solar power and semiconductor industries. The alternative energy sector of the market has been very hot for quite some time now, as consumer and investors alike attempt to shield themselves from the sky-rocketing costs of fossil fuels. In regards to the increase in demand, Canadian Solar has recently increased their 2009 production capacity to 800 megawatts worth of solar modules vs. earlier estimates of 500 to 550 megawatts, including capacity for "upgraded metallurgical grade" silicon-based products. The company also is expanding its manufacturing capacity for the earlier stages of solar module production, such as the basic silicon wafers that become solar cells. Estimates for theses upgrades will cost roughly $100M, but CSIQ states that it's better for solar companies to make more of their own components internally than to buy them on the open market.
In the company’s most recent earnings report, released on May 13th, Canadian Solar posted a dramatic turn-around in net income, which advanced to $18.99M from a loss of $3.85M in the same period last year, along with revenue increasing to $171.2M, a 34% increase from the same period last year. This, in turn, produced earnings of $0.61, way ahead of analysts’ estimates of $0.29. Canadian Solar has been making a habit of surpassing analysts’ expectations, having surprised estimates over the last three quarters by an average of $0.13. Based on the better-than-expected earnings report, CSIQ revised their guidance for 2008. Canadian Solar, which falls somewhere in the middle of the fast-growing solar power industry in terms of revenues, expects 2008 sales of $750M to $870M, up from its previous forecast of $650M to $750M, while the average estimate of analysts is anticipated at $836M. With the increased revenue guidance in hand, the company's valuations have become more attractive to those looking to invest in Canadian Solar. CSIQ has a total debt of about $90M, $71M in short-term debt, up from $40M at year end 2007, and $32M in cash, taking into consideration the conversion of the company's previous $75M of convertible notes, which added about 4 million shares to the company's share count in late-May. The company currently carries a forward P/E multiple of 10X, which isn’t at all pricey compared to the overall market, but when compared to other solar stocks, it actually looks like a great bargain.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Canadian Solar Inc. incorporated in October 2001, designs, develops, manufactures and sells solar cell and module products that convert sunlight into electricity for a variety of uses, while the company conducts all of its manufacturing operations in China. The company’s products include a range of standard solar modules built to general specifications for use in a range of residential, commercial and industrial solar power generation systems. It also designs and produces specialty solar modules and products based on its customers’ requirements. Specialty solar modules and products consist of customized modules that its customers incorporate into their own products, such as solar-powered bus stop lighting, and complete specialty products, such as solar-powered car battery chargers. It sells its products under its CSIQ brand name and to original equipment manufacturing (OEM) customers under their brand names. It also implements solar power development projects, primarily in conjunction with government organizations to provide solar power generation in rural areas of China. Canadian Solar sells its products to customers located in various markets worldwide, including Germany, Spain, Canada, Korea and China. It sells its standard solar modules to distributors and system integrators, along with selling their specialty solar modules and products directly to various manufacturers who integrate the specialty solar modules into their own products and sell and market the specialty solar products as part of their product portfolio. In January 2007, the company entered into a supply agreement with Deutsche Solar for a supply of multi-crystalline silicon wafers. Canadian Solar also implements solar power development projects, primarily in conjunction with government organizations, to provide solar power generation in rural areas of China. In conjunction with the Canadian International Development Agency (CIDA), CSIQ implemented a Solar Electrification for Western China project between 2002 and 2005. As part of this project, the company installed many demonstration projects and conducted three solar power forums in Beijing, Xining and Suzhou. During 2007, it successfully completed its first Building Integrated Photovoltaics (BIPV) solar project, a solar glass roof system, in collaboration with Luoyang Poly. Canadian Solar currently competes with BP Solar, Sharp Solar and SolarWorld and companies located in China such as Suntech Power Holdings Co., Ltd. (STP), Yingli Green Energy Holding Company Limited (YGE), Solarfun Power Holdings Co. (SOLF), Ltd. and Trina Solar Limited (TSL).
CSIQ's operating strategy is to pursue a balanced and diversified supply channel mix by entering into long-term supply contracts and exercise manufacturing arrangements in addition to in-house solar cell, wafer and ingot manufacturing. In the current market environment, a couple of factors are causing high prices for solar modules, such as an industry-wide shortage of silicon, a primary constituent of solar cells, and higher demand caused by the expansion of the solar power and semiconductor industries. The alternative energy sector of the market has been very hot for quite some time now, as consumer and investors alike attempt to shield themselves from the sky-rocketing costs of fossil fuels. In regards to the increase in demand, Canadian Solar has recently increased their 2009 production capacity to 800 megawatts worth of solar modules vs. earlier estimates of 500 to 550 megawatts, including capacity for "upgraded metallurgical grade" silicon-based products. The company also is expanding its manufacturing capacity for the earlier stages of solar module production, such as the basic silicon wafers that become solar cells. Estimates for theses upgrades will cost roughly $100M, but CSIQ states that it's better for solar companies to make more of their own components internally than to buy them on the open market.
In the company’s most recent earnings report, released on May 13th, Canadian Solar posted a dramatic turn-around in net income, which advanced to $18.99M from a loss of $3.85M in the same period last year, along with revenue increasing to $171.2M, a 34% increase from the same period last year. This, in turn, produced earnings of $0.61, way ahead of analysts’ estimates of $0.29. Canadian Solar has been making a habit of surpassing analysts’ expectations, having surprised estimates over the last three quarters by an average of $0.13. Based on the better-than-expected earnings report, CSIQ revised their guidance for 2008. Canadian Solar, which falls somewhere in the middle of the fast-growing solar power industry in terms of revenues, expects 2008 sales of $750M to $870M, up from its previous forecast of $650M to $750M, while the average estimate of analysts is anticipated at $836M. With the increased revenue guidance in hand, the company's valuations have become more attractive to those looking to invest in Canadian Solar. CSIQ has a total debt of about $90M, $71M in short-term debt, up from $40M at year end 2007, and $32M in cash, taking into consideration the conversion of the company's previous $75M of convertible notes, which added about 4 million shares to the company's share count in late-May. The company currently carries a forward P/E multiple of 10X, which isn’t at all pricey compared to the overall market, but when compared to other solar stocks, it actually looks like a great bargain.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, July 03, 2008
BetterTrades looks at Peabody Energy Corp. - July 3, 2008
An analyst upgraded Peabody Energy Corp. (BTU) Thursday morning, citing a better outlook for the coal sector in general. An analyst from Citi’s Investment Research boosted his rating on the companies to "Buy" from "Hold." The convergence of mine disruptions, strength across the energy complex, and robust BRIC-country (Brazil, Russia, India and China) demand has driven coal prices to 10-year highs. A recent sell-off in the equities due to a downtick in European spot prices was excessive. Shares of Peabody have fallen more than 10% since Monday. This big sell-off in the top performing coal names indicates that money managers and other institutional investors were most likely holding onto these names for ascetic purposes through the end of the quarter, only to take profits in them at the first chance they had. This seems to be profit-taking in the midst of a deteriorating economy, and the end of the beginning, not the beginning of the end. On Peabody, the new $105 price target, up from $69, implies that investors expect the shares to surge more than 35% above Wednesday's $77.90 close. Wednesday’s trading saw the stock drop nearly 9%, while Thursday’s trading brought more of the sell-off that the previous day saw. By the close on Thursday, shares of Peabody were down $0.28, or 0.4%, to close at $77.62.
Peabody Energy Corporation is a coal company and during 2007, the company sold 237.8 million tons of coal. It sells coal to over 340 electricity generating and industrial plants in 19 countries. At the end of last year, the company had 9.3 billion tons of proven and probable coal reserves. Peabody owns majority interests in 31 coal operations located throughout all the United States coal producing regions and in Australia. In addition, Peabody owns a minority interest in one Venezuelan mine, through a joint venture arrangement. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois and Indiana. Peabody owns and operates six mines in Queensland, Australia, and five mines in New South Wales, Australia. Its Australian production includes both low-sulfur thermal coal and metallurgical coal. During 2007, the company generated 89% of its production from non-union mines. In October of 2007, the company spun-off portions of its Eastern United States Mining operations business segment to form Patriot Coal Corporation (PCX). Peabody competes with Arch Coal, Inc.(ACI), Rio Tinto Energy America (RTP), CONSOL Energy Inc (CNX), Foundation Coal Corporation (FCL), Massey Energy Company (MEE),, Anglo-American PLC, BHP Billiton (BHP), Shenhua Group, China Coal and Xstrata PLC.
Coal's recent rally appears to have far exceeded analysts’ expectations. Peabody in particular should benefit from the commodity boom as it has the largest international presence throughout the industry. The company acquired assets in Australia in 2006 and has since more than double production. As prices for coal from Australia to the Pacific Rim have increased five fold over 2007 levels, BTU should see significant increases in operating margins and cash flow. This is a trend that should be expected from Peabody in the next several years. Coal provides about half the electricity in the United States, though not in California, where natural gas, another fossil fuel, claims a larger share. Nuclear power contributes 20% of the U.S. power total. Hydroelectric has a small role, while solar and wind thus far account for less than 1% of the total. Currently most coal mining stocks are priced so high that their prices are being justified on the basis that coal price will continue to climb, and will stay high for the foreseeable future. Global coal demand continues to set new records as coal fuels the largest and strongest developing economies. Global coal inventories remain low, U.S. exports are accelerating and new coal-fueled generation is being built at a fast pace around the globe. As a result, Peabody has begun signing agreements that will significantly increase the company’s earnings and cash flows this year and establish a solid foundation for future years.
Speaking of continued earnings, in the company’s previous report, released in lat April, Peabody announced that they had posted 1Q earnings of $273.5M, an increase of 16% over the comparable prior-year period, on record quarterly revenues of $1.28B, an increase of 15%, and sales of 61.2 million tons. Peabody's strategy to expand their global platform and target high-growth, high-demand markets is delivering significantly improved performance based on very strong coal markets and recent international price settlements. During the 1Q, Peabody was named number one in Fortune's Most Admired Companies ranking for the mining and crude oil sector, ranking first in each of the eight categories used in the evaluation. Based on their past earnings results, Peabody raised the company’s full-year 2008 targets, on the basis of recent and expected pricing settlements for metallurgical and thermal contracts. Full-year 2008 earnings are now targeted to be between $1.5B and $1.8B, a $500M increase over original targets, with income from continuing operations of $2.20 to $3.00 per share. Production targets remain between 220 to 240 million tons, with expected sales of 240 to 260 million tons, including 22 to 24 million tons out of Australia. For 2Q of 2008, in which results will be made known on July 23rd, Peabody is targeting earnings of $300M to $400M and earnings of $0.35 to $0.60 per share, as the company benefits from greater contributions from Australian operations related to new coal prices in Australia. As the company’s focus continues to be on improving productivity and costs, expanding access to high-growth, high-margin markets, and improving capital efficiency, the outlook remains stellar for a best-of-breed company in a market that appears to have no top.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Peabody Energy Corporation is a coal company and during 2007, the company sold 237.8 million tons of coal. It sells coal to over 340 electricity generating and industrial plants in 19 countries. At the end of last year, the company had 9.3 billion tons of proven and probable coal reserves. Peabody owns majority interests in 31 coal operations located throughout all the United States coal producing regions and in Australia. In addition, Peabody owns a minority interest in one Venezuelan mine, through a joint venture arrangement. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois and Indiana. Peabody owns and operates six mines in Queensland, Australia, and five mines in New South Wales, Australia. Its Australian production includes both low-sulfur thermal coal and metallurgical coal. During 2007, the company generated 89% of its production from non-union mines. In October of 2007, the company spun-off portions of its Eastern United States Mining operations business segment to form Patriot Coal Corporation (PCX). Peabody competes with Arch Coal, Inc.(ACI), Rio Tinto Energy America (RTP), CONSOL Energy Inc (CNX), Foundation Coal Corporation (FCL), Massey Energy Company (MEE),, Anglo-American PLC, BHP Billiton (BHP), Shenhua Group, China Coal and Xstrata PLC.
Coal's recent rally appears to have far exceeded analysts’ expectations. Peabody in particular should benefit from the commodity boom as it has the largest international presence throughout the industry. The company acquired assets in Australia in 2006 and has since more than double production. As prices for coal from Australia to the Pacific Rim have increased five fold over 2007 levels, BTU should see significant increases in operating margins and cash flow. This is a trend that should be expected from Peabody in the next several years. Coal provides about half the electricity in the United States, though not in California, where natural gas, another fossil fuel, claims a larger share. Nuclear power contributes 20% of the U.S. power total. Hydroelectric has a small role, while solar and wind thus far account for less than 1% of the total. Currently most coal mining stocks are priced so high that their prices are being justified on the basis that coal price will continue to climb, and will stay high for the foreseeable future. Global coal demand continues to set new records as coal fuels the largest and strongest developing economies. Global coal inventories remain low, U.S. exports are accelerating and new coal-fueled generation is being built at a fast pace around the globe. As a result, Peabody has begun signing agreements that will significantly increase the company’s earnings and cash flows this year and establish a solid foundation for future years.
Speaking of continued earnings, in the company’s previous report, released in lat April, Peabody announced that they had posted 1Q earnings of $273.5M, an increase of 16% over the comparable prior-year period, on record quarterly revenues of $1.28B, an increase of 15%, and sales of 61.2 million tons. Peabody's strategy to expand their global platform and target high-growth, high-demand markets is delivering significantly improved performance based on very strong coal markets and recent international price settlements. During the 1Q, Peabody was named number one in Fortune's Most Admired Companies ranking for the mining and crude oil sector, ranking first in each of the eight categories used in the evaluation. Based on their past earnings results, Peabody raised the company’s full-year 2008 targets, on the basis of recent and expected pricing settlements for metallurgical and thermal contracts. Full-year 2008 earnings are now targeted to be between $1.5B and $1.8B, a $500M increase over original targets, with income from continuing operations of $2.20 to $3.00 per share. Production targets remain between 220 to 240 million tons, with expected sales of 240 to 260 million tons, including 22 to 24 million tons out of Australia. For 2Q of 2008, in which results will be made known on July 23rd, Peabody is targeting earnings of $300M to $400M and earnings of $0.35 to $0.60 per share, as the company benefits from greater contributions from Australian operations related to new coal prices in Australia. As the company’s focus continues to be on improving productivity and costs, expanding access to high-growth, high-margin markets, and improving capital efficiency, the outlook remains stellar for a best-of-breed company in a market that appears to have no top.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, July 02, 2008
BetterTrades looks at Family Dollar Stores Inc. - July 2, 2008
Discount-store operator Family Dollar Stores Inc. (FDO) confirmed Wednesday that the company’s fiscal 3Q profits jumped 7%, topping both internal and analysts’ expectations, as more consumers flocked to its stores looking for bargains on food and other items. Profit for the quarter increased to $64.7M, or $0.46 per share, from $60.4M, or $0.40 per share a year ago, while total revenues gained 2.9% to $1.7B from $1.65B, with sales in stores open at least one year rising 0.1%. Analysts, meanwhile, had predicted a profit of $0.40 per share on revenues of $1.7B. This past April, the company announced that they expected 3Q earnings between $0.39 and $0.44 per share. Also on Wednesday, Family Dollar raised fiscal 4Q profit guidance by $0.01 per share, following the strong earnings report. FDO now expects quarterly earnings between $0.30 and $0.35 per share, up from prior guidance issued in April of $0.29 to $0.34 per share. Analysts, on average, predict a profit of $0.29 per share. For the year, the company now predicts earnings per share between $1.58 and $1.63 per share, up from previous guidance of $1.50 to $1.60 per share, while analysts expect a profit of $1.51 per share. The company stated that they expect food sales to drive revenues higher by 6% in June and 4% to 6% higher in the 4Q. By the close of the trading session today, shares of FDO were up just over 8%, higher by $1.66, to close at $21.95 per share.
Family Dollar Stores, Inc. operates a chain of neighborhood retail discount stores in the United States. It offers general merchandise in four categories: consumables, home products, apparel and accessories, and seasonal and electronics. The consumables category consists of household chemicals, paper products, candy, snacks and other food, health and beauty aids, hardware and automotive supplies, and pet food and supplies. The home products category includes domestics, such as blankets, sheets, and towels; house wares; giftware; and home decor. The apparel and accessories category comprises men's clothing, women's clothing, boys' and girls' clothing, and infants’ clothing, shoes, and fashion accessories. The seasonal and electronics category includes toys, and stationery and school supplies; seasonal goods; and personal electronics, including pre-paid cellular phones and services. As of March 1, 2008, Family Dollar Stores operated a chain of approximately 6,500 general merchandise retail discount stores in 44 states. The company was founded in 1959, currently employs just over 25,000 people and is headquartered in Charlotte, North Carolina.
As a member of the S&P 500, Family Dollar has been considered a dividend mogul. Over the past 10 years this dividend growth stock has delivered an annual average total return of 4.5% to its shareholders. At the same time the company has managed to deliver an impressive 12.66% average annual increase in its EPS over the past nine years. Annual dividend payments have increased over the past 10 years by an average of 11.2% annually, which matches the growth in EPS. A 12% growth in dividends translates into the dividend payment doubling almost every six years, and if you are able to look at the company’s historical data, going as far back as 1990, FDO has indeed managed to double its dividend payments every six years. The dividend payout has remained below 35% over the past 10 years, which in turn is a plus, in that it leaves room for consistent dividend growth which minimizes the impact of short-term fluctuations in earnings. Additionally, Return on Equity (ROE) has been quite consistent, and over the past 10 years, the average is at 17% and the 5 year average is at 17.95%. This is very appealing as FDO does not have a large amount of debt. In fact, total debt only makes up 16.4% of the company’s total capital.
Like other low-end retailers, Family Dollar has struggled in the middle of the credit crunch, higher gasoline prices and housing-market woes. In April, the company stated that they expected the economic stimulus package to help results. But it is too early to tell whether or not those checks have helped the bottom-line at all. As more Americans are looking for value and convenience in today's tough economic environment, cash-poor customers have trended towards discount retailers like Wal-Mart and Family Dollar in order to maximize the value of their dollars. In general, Family Dollar stores are very close to home and offer the cheapest products available anywhere, which is very appealing in today's environment. One positive for the company is that since the stock dipped below the $16 mark, back in January, the stock has been able to rebound nicely since then. In fact, since falling below that level, shares of Family Dollar have increased some 36%, an incredible feat to achieve, especially through the high volatility of the markets since the beginning of the year. During the trading session today, shares advanced to hit the $23.10 level. Since late morning trading, the stock has receded slightly, trading with a gain of roughly 8%, or $1.65, near the $21.95 marker. From an historical perspective, the stock has weakened about 38% since hitting an annual high of $35.41 in July of 2007. However, today's jump higher has pushed the security through resistance at its 10-month moving average, hovering around the $21 level. All in all, these results highlight a trend that is only likely to continue as long as the U.S. economy remains in shambles.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Family Dollar Stores, Inc. operates a chain of neighborhood retail discount stores in the United States. It offers general merchandise in four categories: consumables, home products, apparel and accessories, and seasonal and electronics. The consumables category consists of household chemicals, paper products, candy, snacks and other food, health and beauty aids, hardware and automotive supplies, and pet food and supplies. The home products category includes domestics, such as blankets, sheets, and towels; house wares; giftware; and home decor. The apparel and accessories category comprises men's clothing, women's clothing, boys' and girls' clothing, and infants’ clothing, shoes, and fashion accessories. The seasonal and electronics category includes toys, and stationery and school supplies; seasonal goods; and personal electronics, including pre-paid cellular phones and services. As of March 1, 2008, Family Dollar Stores operated a chain of approximately 6,500 general merchandise retail discount stores in 44 states. The company was founded in 1959, currently employs just over 25,000 people and is headquartered in Charlotte, North Carolina.
As a member of the S&P 500, Family Dollar has been considered a dividend mogul. Over the past 10 years this dividend growth stock has delivered an annual average total return of 4.5% to its shareholders. At the same time the company has managed to deliver an impressive 12.66% average annual increase in its EPS over the past nine years. Annual dividend payments have increased over the past 10 years by an average of 11.2% annually, which matches the growth in EPS. A 12% growth in dividends translates into the dividend payment doubling almost every six years, and if you are able to look at the company’s historical data, going as far back as 1990, FDO has indeed managed to double its dividend payments every six years. The dividend payout has remained below 35% over the past 10 years, which in turn is a plus, in that it leaves room for consistent dividend growth which minimizes the impact of short-term fluctuations in earnings. Additionally, Return on Equity (ROE) has been quite consistent, and over the past 10 years, the average is at 17% and the 5 year average is at 17.95%. This is very appealing as FDO does not have a large amount of debt. In fact, total debt only makes up 16.4% of the company’s total capital.
Like other low-end retailers, Family Dollar has struggled in the middle of the credit crunch, higher gasoline prices and housing-market woes. In April, the company stated that they expected the economic stimulus package to help results. But it is too early to tell whether or not those checks have helped the bottom-line at all. As more Americans are looking for value and convenience in today's tough economic environment, cash-poor customers have trended towards discount retailers like Wal-Mart and Family Dollar in order to maximize the value of their dollars. In general, Family Dollar stores are very close to home and offer the cheapest products available anywhere, which is very appealing in today's environment. One positive for the company is that since the stock dipped below the $16 mark, back in January, the stock has been able to rebound nicely since then. In fact, since falling below that level, shares of Family Dollar have increased some 36%, an incredible feat to achieve, especially through the high volatility of the markets since the beginning of the year. During the trading session today, shares advanced to hit the $23.10 level. Since late morning trading, the stock has receded slightly, trading with a gain of roughly 8%, or $1.65, near the $21.95 marker. From an historical perspective, the stock has weakened about 38% since hitting an annual high of $35.41 in July of 2007. However, today's jump higher has pushed the security through resistance at its 10-month moving average, hovering around the $21 level. All in all, these results highlight a trend that is only likely to continue as long as the U.S. economy remains in shambles.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, July 01, 2008
BetterTrades looks at FLIR Systems Inc. - July 1, 2008
A division of FLIR Systems Inc. (FLIR), which makes thermal imaging and stabilized camera systems, received a $49.8M contract from the Navy for a short-range surveillance system that will be installed on military ground vehicles, the Pentagon confirmed late Monday. Additionally, early last week, FLIR announced a $6.7M order from the Colombian government for multi-sensor surveillance systems for use on airplanes engaged in counter-narcotic and counter-terrorism missions. Also, FLIR Systems announced last month that the firm has been awarded a $23.1M delivery order from the U.S. Coast Guard for the Electro-Optical Sensor System (ESS) program. The units delivered under this order, variants of FLIR's TALON stabilized multi-sensor system, will be installed on HH-60 and HH-65 helicopters to enhance the Coast Guard's performance of its airborne use of force, interdiction, and search and rescue missions. Work will be performed in FLIR's North Billerica, MA facility. This order was made pursuant to a previously awarded indefinite delivery, indefinite quantity contract. Initial units were fielded in 2007, providing enhanced detection capabilities to the Coast Guard in the war on drugs and homeland defense. This contract builds on FLIR's excellent relationship with the U.S. Coast Guard and demonstrates the unique capabilities and extreme ruggedness of their systems. By the conclusion of Tuesday’s trading session, shares of FLIR were up more than 6%, higher by $2.51 to close at $43.08 per share.
FLIR Systems, Inc. designs, manufactures, and markets thermal imaging and infrared camera systems in the United States and internationally. It operates in three divisions: Thermography, Commercial Vision Systems, and Government Systems. The Thermography division designs and manufactures hand-held thermal imaging systems that detect and measure minute temperature differences, which are used in various industrial and commercial applications, including high-end predictive and preventative maintenance, research and development, test and measurement, leak detection, scientific analysis, manufacturing process control, building inspection, and thermography applications. This division serves research and development facilities, universities, industrial companies, utility companies, building inspectors, electrical contractors, thermography consultants, damage restoration contractors, and various commercial enterprises. The Commercial Vision Systems division provides infrared detectors, camera cores, readout integrated circuits, and other sub-components to original equipment manufacturers in automotive night vision, recreational marine, firefighting, airborne law enforcement, and commercial security markets. It serves customers, including original equipment manufacturers, automotive suppliers, aircraft manufacturers and dealers, marine electronics dealers, integrators of security systems, and news gathering agencies. The Government Systems division offers hand-held and fixed mounted products for force protection, counter terrorism, search and rescue, perimeter security, navigation safety, law enforcement, narcotics detection, maritime and border patrol, and anti-piracy applications. It serves domestic and foreign government agencies, including military, paramilitary, and police forces. FLIR Systems offers its products through direct sales personnel, and a network of distributors and representatives. The company was founded in 1978, currently employs fewer than 2,000 people and is headquartered in Wilsonville, Oregon.
As a pure-play leader in infrared technology, FLIR sells a wide gamut of night-vision devices, sensors and camera systems. Prices range in the millions for a complex camera system to as little as $3,000 for an off-the-shelf thermal imaging tool that a building inspector can use. The biggest block of orders comes from the government, especially the Defense Department. In late May, FLIR announced its largest contract ever, a $358.4M add-on sensor system for the U.S. Army and Missile Defense Command. Government-related revenues for the company’s 1Q jumped 40% from the same period last year to $113.7M. Those revenues made up 48% of overall revenues for FLIR. Thermography products, imaging systems that detect and measure minute temperature differences, accounted for 34% of the total revenues, along with this business division growing 47% in the 1Q from last year to $79.5M. Commercial vision systems, meanwhile, made up 18% of the total revenues, while sales there jumped 66.8% from a year ago to $43.7M. Also this past May, FLIR announced that they would launch a 12-ounce handheld infrared thermal imaging camera priced at 30% to 40% below its lowest-cost model. FLIR's backlog, as of April, was already strong. Firm orders for delivery within the next 12 months stood at $471M, which was $78M more than in the earlier year. The government orders made up $371M of that backlog.
Recently, the company reaffirmed its 2008 outlook on revenues of $1B to $1.05B, which would be up about 35% from 2007, and full-year earnings of $1.13 to $1.20 a share, an increase of 27% to 35% and they also see 20% earnings growth in 2009 and 11% in 2010. Analysts, who track FLIR, expect 2008 earnings of $1.19 a share, the higher end of the company’s guidance. Not only are the current earnings superb, but these estimates have been raised of late and the chance for further increases in estimates is still a strong possibility. This EPS growth has given this stock an EPS growth rate of 28% along with a P/E Ratio of 45 which is near the highs of its range. However, with a Return on Equity (ROE) of nearly 27%, along with long-term debt of 31%, this should ensure that the long term is very good for this company, at the current progression of operations. Current assets are over 3 times current liabilities, and the current stock price hit its all time high of $44.46 after it had 2 stock splits in the last 4 years, each 2 for 1 with the most recent one occurring this past December. Due to the high P/E, this stock could be a little risky to get into at this time, but with increased earnings potential and a strong foothold on the international distribution channels, FLIR is in a unique position to take full advantage of increasing demand.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
FLIR Systems, Inc. designs, manufactures, and markets thermal imaging and infrared camera systems in the United States and internationally. It operates in three divisions: Thermography, Commercial Vision Systems, and Government Systems. The Thermography division designs and manufactures hand-held thermal imaging systems that detect and measure minute temperature differences, which are used in various industrial and commercial applications, including high-end predictive and preventative maintenance, research and development, test and measurement, leak detection, scientific analysis, manufacturing process control, building inspection, and thermography applications. This division serves research and development facilities, universities, industrial companies, utility companies, building inspectors, electrical contractors, thermography consultants, damage restoration contractors, and various commercial enterprises. The Commercial Vision Systems division provides infrared detectors, camera cores, readout integrated circuits, and other sub-components to original equipment manufacturers in automotive night vision, recreational marine, firefighting, airborne law enforcement, and commercial security markets. It serves customers, including original equipment manufacturers, automotive suppliers, aircraft manufacturers and dealers, marine electronics dealers, integrators of security systems, and news gathering agencies. The Government Systems division offers hand-held and fixed mounted products for force protection, counter terrorism, search and rescue, perimeter security, navigation safety, law enforcement, narcotics detection, maritime and border patrol, and anti-piracy applications. It serves domestic and foreign government agencies, including military, paramilitary, and police forces. FLIR Systems offers its products through direct sales personnel, and a network of distributors and representatives. The company was founded in 1978, currently employs fewer than 2,000 people and is headquartered in Wilsonville, Oregon.
As a pure-play leader in infrared technology, FLIR sells a wide gamut of night-vision devices, sensors and camera systems. Prices range in the millions for a complex camera system to as little as $3,000 for an off-the-shelf thermal imaging tool that a building inspector can use. The biggest block of orders comes from the government, especially the Defense Department. In late May, FLIR announced its largest contract ever, a $358.4M add-on sensor system for the U.S. Army and Missile Defense Command. Government-related revenues for the company’s 1Q jumped 40% from the same period last year to $113.7M. Those revenues made up 48% of overall revenues for FLIR. Thermography products, imaging systems that detect and measure minute temperature differences, accounted for 34% of the total revenues, along with this business division growing 47% in the 1Q from last year to $79.5M. Commercial vision systems, meanwhile, made up 18% of the total revenues, while sales there jumped 66.8% from a year ago to $43.7M. Also this past May, FLIR announced that they would launch a 12-ounce handheld infrared thermal imaging camera priced at 30% to 40% below its lowest-cost model. FLIR's backlog, as of April, was already strong. Firm orders for delivery within the next 12 months stood at $471M, which was $78M more than in the earlier year. The government orders made up $371M of that backlog.
Recently, the company reaffirmed its 2008 outlook on revenues of $1B to $1.05B, which would be up about 35% from 2007, and full-year earnings of $1.13 to $1.20 a share, an increase of 27% to 35% and they also see 20% earnings growth in 2009 and 11% in 2010. Analysts, who track FLIR, expect 2008 earnings of $1.19 a share, the higher end of the company’s guidance. Not only are the current earnings superb, but these estimates have been raised of late and the chance for further increases in estimates is still a strong possibility. This EPS growth has given this stock an EPS growth rate of 28% along with a P/E Ratio of 45 which is near the highs of its range. However, with a Return on Equity (ROE) of nearly 27%, along with long-term debt of 31%, this should ensure that the long term is very good for this company, at the current progression of operations. Current assets are over 3 times current liabilities, and the current stock price hit its all time high of $44.46 after it had 2 stock splits in the last 4 years, each 2 for 1 with the most recent one occurring this past December. Due to the high P/E, this stock could be a little risky to get into at this time, but with increased earnings potential and a strong foothold on the international distribution channels, FLIR is in a unique position to take full advantage of increasing demand.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
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