Research In Motion has seen very little slowdown in its business. Its place as an innovator and low-cost producer in the industry has served it quite well. RIMM has made it a habit of beating analyst estimates. It has averaged a 5.3% surprise over the past four quarters. This year's earnings estimates have spiked 24 cents to $3.64 in just the past week.
Full Analysis
Research In Motion (RIMM) designs, manufactures, and sells wireless solutions to the mobile communications market. Through the development and integration of hardware, software, and services, Research In Motion provides solutions for seamless access to time-sensitive information, including e-mail, phone messaging, as well as Internet and Intranet-based applications.
The company's offerings also enable third-party developers and manufacturers to enhance their products and services with proprietary wireless connection. The company's portfolio of products includes the BlackBerry line of wireless e-mail devices, embedded radio modems, and software development tools.
Research In Motion has a number of competitive advantages. First, the firm is both an innovator and a low-cost producer of handsets (at least relative to other smartphone vendors). The company has maintained solid profit margins, indicating that it can successfully maintain its average selling prices with competitive threats and diligently generate cash from operations.
Also, Research In Motion's customer base has been extremely loyal, as the BlackBerry brand is well known and devices are easy to use, facilitating upgrades to newer Blackberry handsets. The company has an established reputation for reliability and security that others have aspired to achieve.
From a market opportunity perspective, the customer base continues to expand rapidly. The company generates a majority of its revenue from hardware sales in North America, as the phone replacement rate in this region remains high and is expected to be more than 37% in 2008. Similar product churning trends are nascent in other parts of the world which bode well for future product sales.
During the third quarter of fiscal 2008, Research In Motion added approximately 1.65 million new BlackBerry subscribers, up 14% sequentially, which raised its total subscriber base to approximately 12 million. However, the addressable smartphone global market is highly under penetrated. The market size is likely to exceed 87 million in 2007 and may reach 335 million by 2010 according to industry data.
RIMM has made it a habit of beating analyst estimates. It has averaged a 5.3% surprise over the past four quarters. This year's earnings estimates have spiked 24 cents to $3.64 in just the past week. Next year's estimates jumped 31 cents. 15 out of the 23 covering analysts raised their numbers. Additionally, the most accurate estimate shows 4.1% upside for the current year.
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Wednesday, April 09, 2008
RIMM - Research In Motion - 15 out of the 23 covering analysts raised their numbers
JOYG - Joy Global - firmly in aggressive growth territory - attractively valued with a PEG ratio of 0.6
Joy Global Inc. is mining profits for itself and its shareholders. Mining equipment is sought after because end demand for commodities is so strong. This puts JOYG in an enviable business position. Current-year earnings estimates have increased 11 cents to $3.39 per share over the past 90 days. Analysts expect earnings to grow an additional 23.1% next year.
Full Analysis
Joy Global, Inc. (JOYG) manufactures surface and underground mining machinery and equipment for extraction of ores and minerals such as coal, copper, and iron. Hence, the fortunes of Joy Global are inextricably linked to commodity prices of coal and copper. The company has a worldwide presence and offers aftermarket services through facilities and equipment service centers in over 20 countries. Joy Global operates through two segments: Joy Mining Machinery and P&H Mining Equipment.
The company's profitability will benefit from the likelihood of higher mining equipment demand being spurred by strong end-market demand for commodities, capacity expansion projects, an improvement in the U.S. coal business, a lucrative oil sands market, management's continued focus on lowering overhead costs, and earnings accretion from the share buyback program.
While JOYG experienced production bottlenecks over the last few quarters, the supply constraints are a symptom of strong end-market demand rather than a management error. The capacity additions in Milwaukee, Poland, and China were needed as the growing demand for commodities (copper, iron ore, and coal) is spurring producers to invest heavily in mining-related machinery which are supplied by JOYG.
The fundamental outlook for several commodity markets remains strong. The surface mining business is benefiting from a favorable commodity price outlook. The spot price for copper, iron ore and international coal are well above production costs and should spur producers to boost production along with higher orders of new equipment. Higher demand from China more than offsets the impact of softness in the U.S. housing market and has kept copper prices at high levels.
Joy Global's business model centers on driving an increasing amount of service business from existing customers. The margins are higher than the original equipment business and provide a nice base for recurring revenue. This coupled with increased productivity, effective cost controls, and higher pricing, increased fourth quarter gross margin by 210 basis points (bps) y-o-y to 33.4% and full year FY07 gross margin by 110 bps y-o-y to 32.5%.
JOYG's operating cash flows remain strong. During FY07, cash flow from operations totaled $382 million, up 15.6% from the prior-year level of $330.4 million. Strong cash generation should enable the allocation of capital to capacity additions as well as share repurchases. In Q4FY06, the company's Board of Directors had increased the share repurchase program to $1 billion and extended the expiration date to the end of calendar year 2008 from May 2007.
Current-year earnings estimates have increased 11 cents to $3.39 per share over the past 90 days. Analysts expect earnings to grow an additional 23.1% next year. The stock is attractively valued with a PEG ratio of 0.6. It's long-term earnings growth rate of 33% places it firmly in aggressive growth territory.
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BG - Bunge - dividend has been steadily increasing over the past six years
Bunge Ltd. (BG) declared a regular quarterly dividend of 17 cents per share in late February. In addition to offering income, BG is a solid growth company. In early February, BG reported fourth-quarter results, highlighting growth in many areas, which included a 77% year-over-year increase in total segment operating profit. Wall Street estimates have been on the rise for this Growth & Income pick. Its earnings per share are expected to grow by 11% over the next 3 – 5 years, which is in line with the industry. The company’s ROE of 15% is also in line with the industry average.
Full Analysis
Bunge Ltd. is a global agribusiness and food company, producing food products for commercial customers and consumers and supplying raw materials and services to the biofuels industry. The company also supplies fertilizer to farmers in South America, and it originates, transports and processes oilseeds, grains and other agricultural commodities worldwide.
Bunge was founded in 1818 and headquartered in White Plains, New York. With over 22,000 employees in over 30 countries, it enhances lives by improving the global agribusiness and food production chain. BG’s products and services help people eat better, help businesses run more effectively, help communities thrive and help societies prosper and grow.
In late February, the company declared a regular quarterly dividend of 17 cents per share. The dividend is payable on June 2, 2008 to shareholders of record as of May 19, 2008.
Bunge’s dividend has been steadily increasing over the past six years or so. Currently, the company is yielding about 1.7%, which is higher than the industry average as many companies in the farm products industry do not pay dividends.
In addition to steady payments of dividends, this Growth & Income pick is a solid growth company. In early February, BG reported fourth-quarter results, highlighting growth in many areas such as a 77% year-over-year increase in total segment operating profit. Also, the company noted that its agribusiness benefited from improved global market conditions, posting 14% volume growth in the quarter, and that fertilizer continued to benefit from improved farm economics and high international prices.
Alberto Weisser, Bunge's Chairman and Chief Executive Officer mentioned, "In 2007, the agribusiness and fertilizer markets were characterized by improved structural conditions. Demand for Bunge's end products grew and farm economics in Brazil strengthened. Our risk management strategies performed well in a dynamic market, and we were well-positioned to serve customers during a period marked by significant supply dislocations.”
The company guided full-year 2008 results to range between $6.01 to $6.30 per share. Wall Street was in agreement, forecasting 2008 earnings of $6.18 at the time. Analysts have increased projections since then to a level of $6.59.
BG’s earnings per share are expected to grow by 11% over the next 3 – 5 years, which is in line with the industry. The company’s return on equity (ROE) of 15% is also in line with the industry average.
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MA - Mastercard - company's ROE of 27% more than doubles the industry’s average of 15%
Mastercard Incorporated (MA) is a Zacks #1 (Strong Buy) company that is trading near a 52-week high. MasterCard Incorporated is scheduled to release its first quarter 2008 financial results on Tuesday, April 29, 2008. Earnings estimates continue to rise for the credit card giant. The company's ROE of 27% more than doubles the industry’s average of 15%. MasterCard’s net profit margin of 26.7% crushes the industry’s average of 6.2%.
Full Analysis
As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes more than 18 billion transactions each year, and provides analysis as well as consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories.
MasterCard Incorporated is scheduled to release its first quarter 2008 financial results on Tuesday, April 29, 2008.
In early February, the company declared a quarterly cash dividend of 15 cents per share to holders of shares of its Class A common stock and Class B common stock. The dividend is payable on May 9, 2008 to shareholders of record of its Class A common stock and Class B common stock as of April 9, 2008. The company’s dividend yield of 0.3% is ahead of the industry average as MA operates in an industry that virtually offers no dividends.
In late January, the Zacks #1 Rank (Strong Buy) company announced fourth-quarter and full-year results. The credit card giant showed solid year-over-year improvement in both earnings and revenues for both the quarter and the full year.
"Our fourth-quarter and full-year results reflect the strength of MasterCard's global business model," said Robert W. Selander, MasterCard president and chief executive officer. "We continue to benefit from the worldwide demand for electronic payments, solid performance in high-growth regions such as South Asia/Middle East/Africa and Latin America, as well as strong growth in processed transactions and cross-border travel volumes.”
Earnings estimates continue to rise. Just last week, analyst upped full-year 2008 forecasts by penny to $7.55 per share. Three out of 19 covering analysts increased last month’s projection of $7.50 to $7.54. The most accurate earnings expectation stands even higher at $7.67 per share.
The company‘s ROE of 27% more than doubles the industry’s average of 15%. MasterCard’s net profit margin of 26.7% crushes the industry’s average of 6.2%.
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MT - ArcelorMittal - has an excellent five year average ROE of 26.9%
ArcelorMittal is parlaying its sheer size into massive profits as the steel sector stays hot. The company has been on an acquisition binge, announcing 35 transactions in 2007 alone. It has also been buying back stock to the tune of $1.8 billion in 2007 and expects to buy back $2.1 billion in 2008. ArcelorMittal trades at a price-to-earnings of only 10.69.
Full Analysis
ArcelorMittal Sa Luxembourg (MT), headquartered in Luxembourg, is the world's largest steel company, with 310,000 employees in more than 60 countries.
ArcelorMittal, a Zacks #1 Rank (Strong Buy), resulted from the 2006 merger of Arcelor and Mittal. In 2007, with a steel production of 116 million tonnes, the company manufactures approximately 10% of the world's steel output.
The company was on an acquisition tear in 2007, announcing 35 transactions and completing 14 of them for a total cost of $12.3 billion. MT's strategy is to diversify geographically into Argentina, Brazil, China, Costa Rica, Mexico and Poland and to continue product diversification into pipes and tubes, galvanizing, stainless steel and wire businesses.
On Feb 13, ArcelorMittal reported fourth-quarter and full-year earnings. For the year, net income was $10.4 billion, up 30% year-over-year. The company provided first quarter 2008 EBITDA guidance of $4.7 billion to $5.0 billion compared to $4.3 billion in the first-quarter 2007. It expects first quarter performance to be comparable to fourth-quarter 2007 levels.
"2007 has been a truly excellent year for ArcelorMittal. We are announcing today record earnings with EBITDA of $19.4 billion, some 27% higher than pro forma 2006 results, and strong cash flow from operations. This reflects the strength of the ArcelorMittal business model, which enables us to benefit from a healthy global demand for steel in both the high-quality developed and fast-growth developing economies," said Lakshmi N. Mittal, President and CEO.
The company has a policy of returning 30% of net income to shareholders. In 2007, MT returned $4.4 billion to shareholders with $1.8 billion in cash dividends and $2.6 billion spent on share buybacks. For 2008, ArcelorMittal expects to return $3.1 billion with $2.1 billion in cash dividends and $1.0 billion in share buybacks. Currently, the company pays a dividend of 1.80%.
The steel makers are taking hits from the increases in raw materials needed to make steel but have been responding by raising steel prices accordingly. ArcelorMittal sees global demand growing by 3% to 5% over the next decade even with China's economy slowing.
Brokerage analysts have been raising consensus estimates on the full year in the last 30 days. Four out of six covering analysts raised estimates by 41 cents to $7.97 from $7.56 per share.
ArcelorMittal is still cheap, despite the recent run-up in the stock. The company has a 2008 P/E of 10.69. Its price-to-book is 1.59, under the industry average of 2.16. The company's return on equity in 2007 was 18.3%. MT also has an excellent five year average ROE of 26.9%.
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ZEUS - Olympic Steel - very nice little run in the last two weeks
Olympic Steel Inc. (ZEUS) shares have been surging forward in the last two weeks as the company gets ready to report its first quarter earnings on Apr 30. In spite of a challenging environment, the company has managed to post respectable gains in both sales and income, as seen when it reported its fourth quarter and full-year results on Feb 21. Net sales for the full year increased 4.9% to a record $1.03 billion.
Full Analysis
Olympic Steel processes and distributes processed carbon, coated and stainless flat-rolled sheet, and coil and plate steel products in the united States. Olympic Steel, Inc. was founded in 1954 and is headquartered in Bedford Heights, Ohio.
Shares of Olympic Steel continue to surge forward in spite of the challenging economic environment. The company reported very respectable fourth-quarter and full-year results on Feb 21. Sales for the quarter were up 4.4% to $236.1 million. Net income was up to $4.5 million from $3.8 million in the same period last year.
This produced earnings of 42 cents, which was ahead of last year's results of 35 cents, but below expectations of the analyst community who were looking for 46 cents. The company said that it was a challenging environment for the company due to declining shipments and prices for most of the year. But in spite of those circumstances the company was able to grow its full-year revenue and income.
Net sales for the full-year increased 4.9% to a record $1.03 billion. The company also reported a 7.1% increase in tons sold to 291 thousand.
Analyst estimates continue to surge higher amid strong global demand and depleted industrial steel supplies. Within the last 30 days the current-year estimate has gained 36 cents, advancing to its current projection of $4.00 per share.
Shares of ZEUS have had a very nice little run in the last two weeks after bottoming out on Mar 20 right around $39. Since then, shares have climbed as high as $48.75, which is a very impressive 25% short-term return.
Moving forward, the key to the upside is the short-term level just above $48. Shares need to push beyond this area in order to establish themselves in higher territory. The current up trend is very strong and should provide significant amounts of support as shares push higher. Take a look at the chart below.
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DVN - Devon Energy - 52-week and all-time high for this company's stock price
Devon Energy (DVN) is riding the wave of growth that the has been running through the energy exploration Industry. The company's full-year profit was up over 25% in 2007 compared to 2006, to $3.6 billion. Estimates continue to be upgrade, with the current-year estimate tacking on an additional 10 cents in the last 30 days to advance to its current projection of $8.73 per share.
Full Analysis
Devon Energy and its subsidiaries anagoges in oil and gas exploration, production and transportation. The company owns oil and gas properties primarily in the Permian Basin in Texas and New Mexico. Devon Energy was founded in 1971 and is based in Oklahoma City, Oklahoma.
Devon energy is a significantly larger company than some of the other energy explorations that have been profiled as momentum stocks, with a market cap. of $49.5 billion. But regardless of Devon's size, its growth trajectory has been equally impressive, as seen when examining the company's fourth quarter results, reported on Feb 6.
Revenue was up 32% to $3.2 billion. Earnings totaled $1.31 billion, up from $579 million last year. Devon noted that its results were boosted by a one-time gain of $342 million from accounting adjustments and the sales of its Egyptian and West African operations. This produced earnings of $2.92 per share, well ahead of last years results and analyst expectations.
Production was up 12% in the quarter. Devon increased its total natural gas production to 226 billion of cubic feet from 209 billion cubic feet last year. Total oil equivalents grew to 58.1 million barrels of oil from 52.9 million last year.
For the full-year, Devon logged a profit of $3.6 billion, or $8 per share, compared to $2.84 billion, or $6.34 per share in 2006.
In spite of a narrow quarterly miss by two cents in the fall, this company has shown that it knows how to beat analyst estimates, having done so by an average of 17 cents, or 10.79% over the last four quarters.
On Mar 28, Devon said that it has the potential to grow its production by an average of 13% a year through 2011, based upon trends in demand and prices in both oil and natural gas.
As one might suspect, shares of DVN have been raging forward in light of the company's incredible growth in profits. Since late February, shares have caught fire and accelerated from less than $75 to their current location of over $110. This is the 52-week and all-time high for this company's stock price.
Moving forward, this stock's movement will bear a strong correlation to the price action in the crude market. As shares continue to advance, they will be moving through uncharted territory, and should have plenty of room to breath. If shares take a little breather and pull back, look for the bounce at the nice level of support just above $107. Take a look at the chart below.
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XEC - Cimarex Energy - covering analysts have been scrambling to keep up with estimates
Cimarex Energy is positioned for big profits as crude continues to trade over $100 a barrel. Despite a run-up in its share price, Cimarex is still cheap at only 11.30 times its forward P/E. The company surprised on estimates three out of four quarters in 2007 by an average of 18.08%.
Full Analysis
Cimarex Energy Company (XEC) is an oil and gas exploration and production company with a strategy of growing profits by expanding its drilling program and production rates.
XEC, a Zacks #1 Rank (Strong Buy), has its principal operations in three location: the Mid-Continent, which includes Oklahoma and Texas; the Permian Basin, which includes Texas and New Mexico; and the Gulf of Mexico.
The company diversifies its risk by drilling in the lower-risk Mid-Continent and Permian Basin properties which have proven reserves in contrast to its higher-risk Gulf Coast and Gulf of Mexico projects.
With the price of crude over $100 a barrel for most of the first quarter and the price of natural gas rising to levels last seen two years ago, covering analysts have been scrambling to keep up with estimates for the quarter and the year.
In the last 30 days, two out of four analysts have raised consensus estimates for the first quarter by 15 cents to $1.41 from $1.26. Ninety days ago, estimates called for $1.02 a share. Analysts are also projecting strong year-over-year growth for the first quarter of 83.12%.
The story is similar on estimates for the second quarter. In the last 30 days, one out of three analysts raised consensus estimates by 17 cents to $1.23 from $1.06 a share. Only 90 days ago, the consensus estimate was at 90 cents a share.
For the year, consensus estimates are rising sharply. In the last 30 days, two out of five analysts raised on average of 66 cents to $5.22 from $4.56 per share. Ninety days ago, estimates were much lower, at $3.69 a share. Analysts see year-over-year growth estimates at 27.58%.
The stock still has attractive value characteristics even after the recent run-up in the share price. It is trading at 11.30 times forward earnings. XEC's price-to-book is 1.47, under the industry average of 2.18. The company has an excellent average five year return on equity of 16.64%. Cimarex reports first-quarter earnings on May 7.
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