Knight Capital Group, Inc. (NITE) is once again distinguishing itself amongst extreme market volatility. Its share price recently broke out from its 2008 trading range and appears to be settling above a key level of resistance. Estimates for Knight continue to rise, with the current-year estimate gaining eight cents in just the last seven days and advancing to its current projection of $1.27 per share.
Full Analysis
Knight Capital Group, Inc. provides various financial services in the United States. It operates in two segments, Asset Management and Global Markets. The Asset Management segment operates as an investment manager, as well as sponsors hedge funds. This segment primarily serves banks, insurance companies, funds-of-hedge funds, corporate and public pension plan sponsors, trusts, endowments, and private clients.
Knight reported respectable first quarter results on Apr 16. Net income climbed to $32.5 million, or 35 cents per share, compared to $31.9 million, or 31 cents, in the same period last year. Analysts were projecting earnings of 30 cents per share.
Revenue did slip slightly from last year, to $224.9 million, but still eclipsed analyst expectations of $209.2 million. Revenue for the global markets segment climbed to $218.8 million from $172.6 million.
On the same day, Knight also released some key data that reflects the growth it is experiencing in its trading volumes, noting that its average daily trade volume in March jumped 87 percent to $16.55 billion. Knight's average daily trades rose to 1.8 million from 1.1 million.
Over the last two quarters Knight has done a great job of surprising and beating analyst estimates, having done so by an average of 14.5 cents, or 53%.
In spite of the nice growth trajectory in share value and the company's ability to grow its daily trading volumes, which is a key revenue driver, Knight's stock is still attractively valued. Its P/E multiple is just 14X based upon the current-year projected earnings. A nice element of value in addition to the growth profile.
Within just the last week, after Knight reported its first quarter results, its share price has been advancing aggressively, moving from just over $15 to $18.50, a very solid short-term return of more than 20%. Also, shares appear to be settling above their 2008 trading range, which is an encouraging short-term development.
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Wednesday, April 23, 2008
NITE - Knight Capital -
BUCY - Bucyrus Intl - blowout fourth quarter, a full 38.6% ahead of estimates
Bucyrus International is thriving despite a poor economic backdrop. Booming commodities markets and strong global growth are accounting for the success. Over the past four quarters, the company has posted an average surprise of 15.6%. During the past two months, this year's earnings estimates have increased 27 cents to $5.12 per share.
Full Analysis
Bucyrus International, Inc. (BUCY) engages in designing, manufacturing, and marketing draglines, electric mining shovels, and rotary blast-hole drills used for surface mining. It also provides aftermarket replacement parts and services for its machines.
The company's equipments are used for mining copper, thermal coal, metallurgical coal, oil sands, iron ore, molybdenum, phosphate, bauxite, gold, diamonds, and uranium. Bucyrus International also offers engineered replacement parts, maintenance and repair labor, technical advice, refurbishment and relocation of machines, structural and mechanical engineering, and non-destructive testing.
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BUCY reported a blowout fourth quarter in which it earned $1.22 per share, a full 38.6% ahead of estimates. Sales more than doubled to about $548 million. The overall increase in surface mining sales reflected the ongoing global demand for Bucyrus' products and services, which continues to be driven by the sustained strength in markets for commodities mined by Bucyrus machines.
It also raised guidance for 2008. Bucyrus said in its conference call with investors that it expects 2008 revenue of $2.35 billion to $2.45 billion. Analysts expected revenue of $2.25 billion for the year, on average.
Not surprisingly, analysts had great things to say about the company. Baird's Robert F. McCarthy maintained his "Outperform" rating for the stock, but raised his price target by $9 to $130. He estimates the company's EBITDA forecast implies earnings of about $4.75 to $5.50 per share for the year. Analysts, on average, expect a 2008 profit of $4.66 per share.
Seth R. Weber of Banc of America Securities backed his "Buy" rating for the South Milwaukee, Wis., company and boosted his price target by $4 to $108, saying he expects Bucyrus to benefit from strong commodity prices and growing demand for the commodities from emerging economies.
Over the past four quarters, the company has posted an average surprise of 15.6%. During the past 60 days, this year's earnings estimates have increased 27 cents to $5.12 per share. Earnings are slated to grow another 25.7% next year. The stock is cheap with a PEG ratio of 1.0.
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TSL - Trina Solar - Analysts are expecting a further 57% jump in earnings next year
Trina Solar is shining brightly amidst a solar boom. It is much more attractively valued than its peers and has similar fundamentals. The company has posted an average surprise of over 18% during the past four quarters. This year’s earnings estimates have increased 22 cents to $2.81 per share over the past 60 days. Analysts are expecting a further 57% jump in earnings next year. Additionally, the most accurate estimate shows almost 18% growth for this year.
Full Analysis
Trina Solar (TSL) through its subsidiary, Changzhou Trina Solar Energy Co., Ltd., engages in the manufacture and sale of solar-power products primarily in China. The company's solar modules provide electric power for residential, commercial, industrial, and other applications worldwide.
It produces solar modules ranging from 160 watts to 185 watts in power output. The company manufactures monocrystalline ingots, wafers, and solar cells for use in its solar module production. Trina Solar Limited provides silicon wafers to toll manufacturers and purchase solar cells from toll manufacturers.
The company recently canceled plans to build a $1 billion polysilicon plant after the market for the raw material used in solar cells loosened. There has been a scarcity of polysilicon available for the burgeoning global solar cell market, but Trina said recent developments have been "favorable" for long-term supply of the raw material. This is actually a positive for the company since it was trying to bite off more than it could chew.
In early-March, the company reported that fourth-quarter earnings surged on strong demand for solar-power systems and higher profit margins. The Chinese solar company's net income more than tripled to $15.7 million, or 62 cents per share, from $4.6 million, or 28 cents per share. Revenue climbed to $101.4 million from $38.8 million. Analysts expected 49 cents per share.
"We are extremely pleased with our results in the quarter to cap a year of many important achievements. We met or exceeded our annual 2007 targets for product shipment, revenue and net income, as the benefits of our fully integrated business model increased our bottom line," said Trina Solar's Chairman and CEO, Jifan Gao.
The company has posted an average surprise of over 18% during the past four quarters. This year’s earnings estimates have increased 22 cents to $2.81 per share over the past 60 days. Analysts are expecting a further 57% jump in earnings next year. Additionally, the most accurate estimate shows almost 18% growth for this year.
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GME - GameStop - well-positioned to take advantage of this video game cycle
GameStop is continuing to churn out robust sales and earnings. It is still in the early stages of its growth cycle. The company has posted a huge average surprise of 33.2% over the past four quarters. Just over the past month, this year's earnings estimates have jumped 16 cents to $2.36 per share.
Full Analysis
GameStop Corp. (GME) sells software, hardware, and game accessories for video game systems and personal computers. The company is also the largest reseller of used video games. It currently operates 5,264 retail stores across North America and Europe. GameStop makes its stores easily accessible to clients of all age groups by locating its stores within walking or biking distance.
The company has focused on high-traffic areas. Most of its stores are located in strip malls, with the remaining stores located in shopping malls. GameStop Corp. also offers strategy guides, action figures, as well as other computer and video game magazines to its customers.
GameStop will continue to benefit from the current video game cycle, which is still in the "early innings" of the game. The company is well-positioned to take advantage of this video game cycle that is being driven by next-generation video game consoles and the best video games ever designed.
The company believes that this cycle will be "deeper, wider, and longer" than any previous period of new console introductions. The company's stellar fourth quarter results were driven by new video games including Activision s Call of Duty 4: Modern Warfare, Rock Band from Electronic Arts, Assassin's Creed by Ubisoft, Nintendo's Super Mario Galaxy, and Activision's Guitar Hero III.
The great thing for GameStop is that it doesn't matter who the winners or losers are in terms of consoles or video game titles, as long as demand for games is strong. Instead of picking the winners, GameStop closely monitors the pulse of the video game world and lets its customers tell them which games to stock in stores.
In addition to the next generation video game cycle, GameStop's store expansion strategy continues to drive sales. GameStop is aggressively opening new stores in favored strip mall locations. These stores offer superior customer service and focus on trade-ins and used game sales. GME's size affords the company many competitive advantages and cost savings that should help drive solid sales growth and profit margin expansion in the years ahead.
GME has posted a huge average surprise of 33.2% over the past four quarters. Just over the past month, this year's earnings estimates have jumped 16 cents to $2.36 per share. Analysts expect a further gain of 24.3% next year. 13 out of 14 analysts raised their numbers.
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MON - Monsanto - ROE of 21% signals growth and surpasses the industry average of 9%
Monsanto (MON) posted record results for the fiscal second-quarter and is watching Wall Street lift estimates. The company’s earnings per share are expected to grow by 19% over the next 3 – 5 years, while the industry’s expectation stands at 11%. Monsanto’s ROE of 21% signals growth and surpasses the industry average of 9%. In addition to growth, Monsanto offers income in the form of a dividend yield of 0.5%, which is ahead of what the industry pays.
Full Analysis
Monsanto is an agricultural company that applies innovation and technology to help farmers around the world be successful, produce healthier foods, better animal feeds and more fiber, while also reducing agriculture's impact on the environment.
The company announced fiscal second-quarter results in early April. MON said it had record net sales of $3.8 billion for the second quarter, 45% higher than sales in the same period in fiscal year 2007. Key drivers for the quarter were increased revenues from the company's U.S. corn seed and traits business as well as increased revenues from its Brazilian corn seed business. Results in the quarter also reflected increased revenues from the company's Roundup agricultural herbicides globally.
Chairman, President and Chief Executive Officer Hugh Grant stated, "The performance of our seeds and traits business has us on track for another exceptional year and well positioned to support our five-year strategic growth plan. Between now and 2012, we are the only agriculture company that can point to consistent growth irrespective of commodity price swings, fluctuations in planted acres or the popularity of ethanol. Over the next five years we're poised to set the bar higher as we deliver a game changing platform every other year, real products that create real value for the farmer and for our shareowners."
Analyst earnings estimates have been on the rise since the second-quarter report with increases occurring in just the past week.
The company’s earnings per share are expected to grow by 19% over the next 3 – 5 years, while the industry’s expectation stands at 11%. Growth is also evident in its net profit margin of 17%, versus the industry’s average of 14%, and Monsanto’s return on equity (ROE) of 21% signals growth, surpassing the industry average of 9%.
In addition to growth, Monsanto offers income in the form of a dividend yield of 0.5%, which is ahead of what the industry pays.
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BMY - Bristol-Myers Squibb - net sales from continuing operations of $5.4 billion increased 33% year-over-year
Bristol-Myers Squibb (BMY) will release first-quarter results on April 24. BMY declared a quarterly dividend of 31 cents per share in early March . With a yield of 5.6%, Bristol-Myers Squibb is an industry standout as very few drug companies pay a dividend. The company sports solid growth in addition to income. In late January, Bristol-Myers reported net sales from continuing operations of $5.4 billion increased 33% year-over-year.
Full Analysis
Bristol-Myers Squibb is a global biopharmaceutical and related health care products company whose mission is to extend and enhance human life.
The company recently announced that the U.S. Food and Drug Administration (FDA) has approved ORENCIA(R) (abatacept) for reducing signs and symptoms in pediatric patients six years and older with moderately to severely active polyarticular juvenile idiopathic arthritis (JIA).
"In a JIA clinical trial, ORENCIA provided meaningful and sustained improvements in this patient population across three major sub-types of JIA through one year," said Edward H. Giannini, M.Sc., Dr.P.H., Professor of Pediatrics, Division of Rheumatology, Cincinnati Children's Hospital Medical Center, OH.
Income
BMY declared a quarterly dividend of 31 cents per share in early March. The company stated that the dividend will be payable on May 1, 2008, to stockholders of record as of close of business on April 4, 2008. Offering a dividend yield of 5.6%, Bristol-Myers Squibb is an industry standout as very few drug companies pay a dividend.
Growth
The company sports solid growth in addition to income. In late January, Bristol-Myers reported fourth-quarter and full-year results. Fourth-quarter earnings of 33 cents, which topped the previous year’s result. Quarterly net sales from continuing operations of $5.4 billion increased 33% year-over-year.
The release of first-quarter results is scheduled for April 24, 2008.
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NUS - Nu Skin Enterprises, Inc - ROE of 20% crushes the industry average of 4%
Nu Skin Enterprises, Inc. (NUS), which trading near a 52-week high, is scheduled to release first-quarter results on May 1, 2008. The company reported solid fourth-quarter results, noting that it expects to earn 23 to 25 cents per share on revenue of $281 million to $286 million for the first quarter. On Feb 19, the company raised its quarterly dividend by a half cent to 11 cents per share. NUS offers a dividend yield of 2.4%, providing solid income while it operates within an industry that on average rarely pays a dividend. Nu Skin’s ROE of 20% crushes the industry average of 4%.
Full Analysis
Nu Skin Enterprises, Inc. develops and distributes personal care products and nutritional supplements worldwide. It offers its products primarily under the Nu Skin, Pharmanex, and Big Planet brands. The company sells its products primarily through independent distributors in north Asia, the Americas, south Asia Pacific, and Europe. Nu Skin Enterprises was founded in 1984 and is headquartered in Provo, Utah.
Income
On Feb 19, the company announced that it was increasing its quarterly dividend by a half cent to 11 cents. The dividend was paid out on March 19, 2008. NUS offers a dividend yield of 2.4%, providing solid income while it operates within an industry that on average rarely pays a dividend.
Growth
Technically, the personal care and nutritional supplements company has been watching its shares trade near a 52-week high.
Nu Skin also sports fundamental growth. The company reported solid fourth-quarter results that were in line with analyst expectations in early February, noting that it expects to earn 23 to 25 cents per share on revenue of $281 million to $286 million for the first quarter.
The release of first-quarter results is scheduled for May 1, 2008.
Nu Skin announced in January that it received the go-ahead to begin direct selling activities into all districts of Beijing and Shanghai in China, which the company eventually believes could be its largest market.
President and CEO Truman Hunt said, "during the quarter, we also successfully executed phase two of our restructuring plan, including significant simplification of our operating infrastructure in China. These efforts are targeted to help us achieve our operating margin objective of 10.5 percent for 2008."
"The top-line improvements we are seeing globally, coupled with the aggressive steps we are taking to achieve our operating margin target, give us confidence that 2008 will be a great year," said Hunt. "We expect to improve earnings per share by 35 to 45 percent through increased revenue and improved operating efficiency. Overall, I am very encouraged with the direction of the business," concluded Hunt.
Nu Skin also boasts some nice comparisons against industry competition, with its ROE coming in at 20% against the industry average of just 4%. The company's profit margin stands at 3.8%, compared to the industry average of 1.2%.
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AUO - AU Optronics - expected to grow by 20% over the next 3 – 5 years
AU Optronics Corp. (AUO) recently announced March revenue results, noting that consolidated revenue grew 59% on a year-over-year basis. AU Optronics is scheduled to report first-quarter results on April 22, 2008. Wall Street earnings estimates of 48 cents per share for the first quarter are higher than last month’s 46 cents. The most accurate forecast is even more bullish at 50 cents.
Full Analysis
AU Optronics is Taiwan's largest and a worldwide top 3 manufacturer of thin film transistor liquid crystal display panels (TFT-LCD). The company is able to provide customers a full range of panel sizes and comprehensive applications, offering TFT-LCD panels in sizes ranging from 1.5 inches to greater than 65 inches.
AUO has major competitive advantages with its comprehensive product lines, allowing for maximum flexibility in producing TFT-LCD panels. After its merger with Quanta Display Inc. in October 2006, AUO is able to leverage the core competency advantages of both sides to not only increase production capacity but also better seize ever-shifting market opportunities.
Growth
The company recently announced March revenue results, noting that consolidated revenue grew 59% on a year-over-year basis.
AU Optronics is scheduled to report first-quarter results on April 22, 2008.
Wall Street earnings estimates of 48 cents per share for the first quarter are higher than last month’s 46 cents. The most accurate forecast is even more bullish at 50 cents. AUO’s earnings per share are expected to grow by 20% over the next 3 – 5 years, while the industry average forecast is a lower 15%.
The company posted fourth-quarter and full-year result in late January, sporting quarterly earnings per share of $1.30 in U.S. currency, which sky rocketed past the year-ago six cents per share and exceeded the consensus estimate by 38%.
AUO stated that its large-sized panel shipments in 2007 grew 65.9% year-over-year to 80.9 million units, and the company therefore was ranked No.1 in terms of worldwide large-area TFT-LCD shipment units. AUO added that the shipment of small- to medium- sized panel for consumer product applications posted a remarkable 80.7% year-over-year increase to 143.1 million units.
AU Optronics’ return on equity (ROE) of 27% sits high above the industry average of 7%. The company’s net profit margin of 14% also boasts a comfortable lead over the industry’s average of 3.2%.
Income
The company’s dividend yield of 0.1% is a competitive one within its industry as the computer peripherals space is not known for encompassing many dividend paying companies.
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GLF - Gulfmark Offshore - Estimates Continue To Rise
Gulfmark Offshore, Inc. (GLF) shares have been racing forward since bottoming out just above $33 on Jan 22, having since advanced beyond the $60 mark. Much of this recent price strength has been built on surging energy prices for both crude and natural gas, as exploration companies ramp up initiatives to pursue reserves in previously unprofitable offshore destinations.
Full Analysis
Gulfmark Offshore Inc. is a niche participant in the international offshore marine services industry. The company provides marine services primarily to offshore oil and natural gas exploration initiatives. Gulfmark's vessels transport drilling materials, supplies and personnel to offshore facilities, as well as move and position drilling structures. The majority of its operations are conducted in the North Sea, but also in Southeast Asia, Brazil, West Africa and India. Gulfmark was founded in 1996 and is based in Houston, Texas.
The big boom in the energy markets is making it worthwhile for exploration companies to seek out crude and natural gas in locations that were previously unprofitable. Offshore operations are becoming increasingly prevalent and relevant in the energy landscape, and this has been to the benefit to Niche players like Gulfmark that service these offshore operations.
Solid Fourth-Quarter and Full-Year Results
This dynamic is evident in both the companies fourth-quarter and full-year results, reported on Feb 25, and its consistently rising earnings estimates.
Revenue was up 33% t $91.5 million compared to the same quarter last year. Analysts were expecting revenue of $72.7 million. Income totaled $12.7 million, a sharp decline from last year due to a one-time tax law change in Norway and a new tax law in Mexico. After these adjustments, the company said it earned $1.74 per share, well ahead of analyst expectations and the $1.42 per share from the same quarter last year.
The company said higher day rates in Southeast Asia drove its revenue.
For the full-year, the company posted a profit of $99 million, or $4.29 per share, compared with $89.7 million, or $4.28 per share, in 2006. Revenue rose 22% to $306 million.
Estimates Continue To Rise
Analyst estimates continue to rise for Gulfmark, with the most recent round of revisions coming within the last 30 days, pushing the current-year estimate 12 cents higher to its current projection of $5.62.
Gulfmark also has an excellent history of surprising and beating analyst estimates, having done so for the last four quarters by an average of 26 cents, or 26.17%.
This company's stock price has been on a tear since bottoming out just above $33 per share on Jan 22. This stock has been consistently establishing new 52-week highs as it maintains its upward trajectory. With demand projected to stay strong, and earnings projections growing to reflect this dynamic, this company's stock looks well positioned to accelerate into higher territory.
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CEDC - Central European Distribution - growth in earnings supporting prices
Central European Distribution Corp. (CEDC) shares have been rallying on the heels of the company's excellent fourth-quarter and full-year results, reported in February, in which full-year earnings were up more than 38% to $77.1 million. CEDC also recently announced a financial stake in a Russian alcohol importer and distributor, in order to more effectively pursue growth opportunities within the region.
Full Analysis
Central European Distribution Corp. produces and distributes alcoholic beverages in Poland and internationally. It primarily produces and sells Vodka. CEDC produces almost 8.5 million cases of Vodka annually. It sells its products directly end-sellers such as liquor stores, bars and hotels. The company has a market cap. of $2.53 billion, was founded in 1990 and is based in Bala Cynmyd, Pennsylvania.
On Feb 27, CEDC reported very strong fourth-quarter and full-year results. Net sales for the fourth quarter increased 32% to $393.4 million. Operating income for the fourth quarter jumped 47% from the same period last year to $45.6 million.
For the full year, net sales grew 26% to $1.19 billion. Net income in 2007 was also up sharply from last year, growing to $77.1 million from $55.5 million, producing earnings of $1.91 per share.
The company noted that a couple of components contributed to the strong fourth-quarter and full-year results. CEDC experienced accelerating growth in its core brands, was also able to reduce some of its costs due to strategic initiatives, and noted that the strong underlying economic growth in the region has strengthened sales in its premium brands.
On Feb 27, CEDC announced that it was acquiring a 75% stake in Russian importer and distributor of wines and liquor Whitehall Group in an attempt to gain exposure to the what it deems as excellent expansion opportunities within Russia. Whitehall is expected to produce $200 million in revenue in 2008, up 15%-20% from last year. CEDC said it expects this acquisition to add 35 to 45 cents per share to annual earnings.
At the time of the fourth-quarter and full-year results, CEDC affirmed its original 2008 financial projections of $1.30-$1.40 billion in revenue, with earnings of $2.08-$2.18 per share. But since then, the company has raised its forecast, saying it now expects full-year revenue between $1.42 and $1.52 billion, producing earnings $2.25 to $2.40 per share.
Shares of CEDC have been in a bullish mood since bottoming out on Mar 4 at less than $49. Since then, shares have traded above the $62 mark, representing a very nice short-term gain of more than 25%. Shares are CEDC have been steady climbers for a number of years, and with the 52-week high very close at hand, and the growth in earnings supporting prices, this company's stock looks well positioned to continue its trend.
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HA - Hawaiian Holdings - developments are providing Hawaiian Airlines with an opportunity to fuel its growth and revenue
Hawaiian Holdings, Inc. (HA) After emerging from bankruptcy in June of 2005, Hawaiian Holdings has been able to buoy itself on continued revenue growth and its reputation as an "on-time" service provider. In light of recent developments in the airline industry, where a number of competitor carriers have ceased operations, Hawaiian Holdings is positioning itself to capitalize on the opportunity to service additional cities and passengers.
Hawaiian Holdings, Inc. is the parent company of Hawaiian Airlines, the sixteenth largest airline in the United States. The company has a fleet of 25 aircraft and offers nonstop service to Hawaii from more U.S. gateway cities than any other airline. Hawaiian also provides more than 100 daily jet flights among the Hawaiian Islands. Hawaiian holdings has a market cap. of $344 million, was founded in 1929 and is headquartered in Honolulu, Hawaii.
Fourth-Quarter and Full-Year Results
HA's upward trajectory was evident when the company reported its fourth-quarter and full-year results on Feb 27. Operating revenue for the quarter totaled $250.7 million, which enabled the company to swing to a profit of $3.3 million, after posting a loss of $9.6 million in the same period last year. This produced earnings of seven cents per share, well ahead of analyst estimates, who were predicting a loss of 50 cents.
For the full year 2007, the company reported net income of $7.1 million, earnings of 15 cents per share, and operating revenue of $982.6 million. This compares very favorably to its 2006 results, in which HA reported a net loss of $40.5 million, 86 cents per share, and revenue of $888 million.
Operating income for the full year 2007 was $6.8 million, compared to $0.5 million in 2006. Full-year operating revenue was $982.6 million, a 10.6% increase from the previous year.
Forward Guidance and Industry Trends
In spite of the challenging environment confronting the airline industry, the analyst community is bullish on HA's earnings prospects. Analysts are projecting a full-year loss in 2008 of 17 cents, but the next-year estimate is projecting earnings of $1.00 per share, which would mark a significant increase in profitability.
Recent developments within the airline industry are providing Hawaiian Airlines with an opportunity to fuel its growth and revenue. One of its primary competitors, Aloha Airlines sought bankruptcy protection on Mar 20 and closed operations on Mar 31. Another competitor, ATA, shut down on Apr 3. In light of these developments, HA announced plans to begin servicing Oakland, Ca. next month, a location that both Aloha and ATA had previously serviced.
"We have been waiting for a moment like this," said CEO Mark Dunkerley in an interview. "It is a generational opportunity."
And Finally, the Chart
Shares of HA have been responding to the company's trend in earnings growth and the environment created by its competitors closing shop. As recently as Mar 28, shares had were trading at $5.25, and have now advanced to over $7.25, a very nice short-term return of over 25%. Within just the last few days, shares have broken above a short-term level of resistance at $7.20. The all-time high is at $8.75. With the up trend in play and the fundamentals looking strong, this company has an opportunity to boost its bottom line and drive share value. Take a look at the chart below.
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STLD - Steel Dynamics - analyst community has been boosting their estimates over the last three months
Steel Dynamics Inc. (STLD) shares have been advancing on the heels of shortened domestic supplies and depleted imports. The company is forecasting significant increases in its production capacities in 2008 and a favorable pricing environment for most of its finished steel products. Since early February, Steel Dynamic's stock price has jumped from less than $25 to its current location of over $38 per share, a very nice short-term return of more than 50%.
Full Analysis
Steel Dynamics Inc. is the nations fifth largest producer of carbon steel products. SDI specializes in flat-rolled steel and "long products" (bars and beams). The company has a market cap. of $6.61 billion and reported 2006 revenues of $3.2 billion. Steel Dynamics employees 3,500 and is based in Fort Wayne, Indiana.
Steel Dynamics reported very strong fourth-quarter and full-year results on Jan 28. For the quarter, net sales were $1.5 billion, a 73% increase from the same quarter last year, and a 25% increase from just the previous quarter. This produced income of $98 million, or $1.00 per share, compared to $105 million, and $1.03 per share last year. The drop in earnings was a result of the Steel Dynamics acquisition of the scrap metal company Omnisource, completed in October of 2007.
Full-year results were equally impressive, with net sales jumping 35% to $4.4 billion. Consolidated shipments grew 32% to 6.2 million tons of steel. In spite of the earnings hit in the fourth quarter due to the Omnisource deal, Steel Dynamics was able to produce record earnings per share of $4.02, up from $3.77 per share in 2006.
A Bullish Projection for 2008
Steel Dynamics also provided bullish guidance for 2008, citing a number of key issues that it anticipates favorably impacting its business. The company said it is seeing increased demand for its flat-rolled steels and long products compared to 2007, due to lower inventory levels and reduced steel imports.
This projected increase in demand also happens to be accompanied with a forecast of higher selling prices. In turn, the cost of scrap metal, which is a primary source of materials needed to manufacturer the company's finished products, is also expected to rise. But with the acquisition of Omnisource, the scrap metal dealer, Steel Dynamics has positioned itself to partially benefit from this dynamic.
The analyst community has been boosting their estimates over the last three months, with the most recent bump coming within just the last 30 days. The current-year estimate has gained 11 cents to its current projection of $2.88 per share.
What About the Chart?
As previously mentioned, shares of STLD have been surging over the past two months. A very nice up trend is very much in play and continues to support current prices. Moving forward, the key level is the 52-week and all-time high just above $38, which is now only a short distance away. The stochastic is also providing a bullish signal, indicating that shares of this company are actually trading close to over-sold territory. Take a look at the chart below.
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APOG - Apogee Enterprises - company benefited from the "green" boom
Apogee is taking advantage of the "green" movement as it manufactures energy-efficient windows for skyscrapers around the world. The company beat Wall Street estimates three out of four quarters last year on average of 25%. Apogee recently reported a record fiscal year 2008. The company trades at only 10.70x 2009 earnings.
Full Analysis
Apogee Enterprises, Inc. (APOG) was founded in 1949 in Minneapolis, MN, as a single glass shop. Today, Apogee designs and develops glass for windows that enclose buildings, including some of the world's tallest skyscrapers, and for picture framing, which reduces reflectivity and fading of photographs and pictures from sunlight.
Apogee, a Zacks #1 Rank (Strong Buy), has two business segments: Architectural Products and Large-Scale Optics.
The architectural segment designs and installs the walls of glass on the outside of commercial and institutional buildings. Businesses in this segment are: Viracon, a fabricator of coated, high-performance architectural glass; Harmon, Inc., a full-service building glass installation company; Wausau Window and Wall Systems, a manufacturer of custom aluminum window systems and curtainwall; Linetec, a paint and anodizing finisher of window frames and PVC shutters; and Tubelite, a fabricator of aluminum storefront, entrance and curtainwall products.
The optical segment consists of Tru Vue which manufactures glass an acrylics for custom picture framing and commercial optics.
APOG Reports Record Fiscal 2008 Earnings
On Apr 9, Apogee reported fourth-quarter and record fiscal 2008 earnings. The company beat Wall Street estimates for the quarter by 16.67%, or seven cents, reporting 49 cents compared to analysts' estimates of 42 cents per share.
Revenues rose 18% to $243.3 million from the year-ago period. Operating margin was 9.2% compared to 6.6% in 2007.
As expected, the company's architectural segment was the growth engine. Revenues grew 21% in the segment and operating income increased 64% compared to fourth-quarter 2007. The optical segment continued to struggle, as revenues declined 9%.
Apogee had a strong fiscal 2008 with revenues increasing 13% to $881.8 million. Earnings per share were up 33% to $1.49 from $1.12 per share for 2007. The architectural segment grew revenues 15% but the optical segment was flat for the year.
The company benefited from the "green" boom, as the architectural segment performed well in markets that are using more energy-efficient products. APOG said project mix, pricing, high capacity utilization and productivity improvements contributed to the company's performance.
Apogee Raises Guidance for Fiscal 2009
Apogee is bullish going into fiscal 2009. The company raised guidance to a range of $1.82 to $1.94 per share, which would represent a 22% to 30% increase over fiscal 2008 results.
"As we enter fiscal 2009, we are positioned for continued strong growth for our architectural segment," said Russell Huffer, Chairman and Chief Executive Officer.
"We started the new year with our highest architectural backlog ever - $510.9 million. We have strong visibility for fiscal 2009 and into fiscal 2010 due to our backlog, project commitments, strong bidding activity and the construction levels and green building trends in markets we serve," he said.
The company anticipates revenue growth of 12% to 15% for the year. It's forecasting the architectural segment to increase revenues between 13% to 16% and hopes to see operating margin ranging from 8% to 8.3%.
Analysts Raise Estimates for First Quarter and Fiscal 2009
In response to the earnings surprise and company guidance for 2009, brokerage analysts raised estimates for the first quarter and fiscal year 2009.
Two out of three covering analysts raised consensus estimates in the last 30 days by five cents to 43 cents from 38 cents a share. For the year, analysts raised to be in-line with the company's guidance range. Consensus estimates rose 21 cents to $1.88 from $1.67 a share, right in the middle of Apogee's forecast range.
Apogee's 2009 P/E is only 10.70, well under the industry average of 17.15. Its price-to-book of 2.12 is also under the industry average of 2.31. Last year, the company repurchased 339,000 shares for a total of $5.4 million. APOG also pays a dividend of 1.50%.
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PCZ - Petro-Canada - one of Canada's largest oil and gas companies
Petro-Canada is taking advantage of its size as one of Canada's largest integrated oil companies to invest in the risky, but potentially lucrative, Alberta oil-sands development. The company beat Wall Street estimates three out of four quarters in 2007 on average of 7.44%. Petro-Canada has a 2008 P/E of only 7.62.
Full Analysis
Petro-Canada (PCZ) is one of Canada's largest oil and gas companies, operating in both the upstream and the downstream sectors around the world.
Petro-Canada, a Zacks #1 Rank (Strong Buy), operates with five divisions: North American Natural Gas, International Exploration & Production, Alberta Oil Sands, East Coast Oil, and Refining and Marketing.
In its natural gas division, PCZ operates in Canada and the US Rockies. Internationally the company explores in the North Sea, Libya, Syria and Trinidad & Tobago. Petro-Canada is also the second largest refiner in Canada.
PCZ owns 12% of Syncrude, the world's largest oil sands producer, which is jointly owned by Canadian Oil Sands Trust, Imperial Oil Ltd., ConocoPhillips, Nexen Inc. and others. The oil sands are important because they are the world's largest oil reserves outside of Saudi Arabia.
However, the oil is extremely labor and resource intensive to extract as experts believe most production going forward will require high-pressure steam pumped into the ground to separate the oil from the sand. The high-pressure system burns huge amounts of natural gas to produce the steam. Petro-Canada has delayed its big Fort Mckay oil-sands development while it assesses the impact of a recent royalty change.
2007 Was a Good Year
PCZ successfully increased production by 21% in 2007 compared to 2006. It also replaced 127% of proved plus probable reserves over five years. Cash flow was $3.8 billion in 2007.
The fourth quarter 2007 was more challenging for the company as it missed fourth-quarter estimates by 31 cents, reporting $1.08 compared to analysts' estimates of $1.38 per share. The miss was due to settling the Buzzard derivative contract hedges that were announced on Dec 12, 2007.
The payment to settle the contracts was $1.145 billion or $2.36 per share, which significantly decreased cash flow to $17 million compared with $991 million in the same quarter 2006. The company reported net income of $513 million compared with $486 million in the fourth-quarter 2006.
Petro-Canada Has High Hopes For 2008
The company is optimistic about 2008. Planned capital expenditures are forecast at $5.3 billion for the year.
"In 2008, we will bring on the Edmonton refinery conversion project - a significant contributor to future cash flows. We will also advance our six other growth projects, making final investment decisions on Fort Hills, the Syria Ebla gas and Montreal coker projects," said Ron Brenneman, president and chief executive officer.
Consensus Estimates Rise for the First Quarter and the Year
Analysts have shrugged off the fourth quarter earnings disappointment and have been raising estimates for the first quarter and the year.
In the last week, one out of four covering analysts raised consensus estimates for the first quarter by 25 cents to $1.69 from $1.44 per share. Estimates are up 31% over the last 60 days.
For the year, consensus estimates also continue to rise. One out of five covering analysts raised in the last week by 54 cents to $6.65 from $6.11 per share. Estimates are up sharply in the last sixty days, by $1.40 per share, as crude and natural gas prices remain elevated.
Petro-Canada is trading at only 7.62x 2008 earnings, under the industry average of 10.6. Its price-to-book is 2.33. The company also has an excellent five year average return on equity of 23.07%. PCZ is also giving back to shareholders with a 1.00% dividend yield. The company reports first-quarter earnings on Apr 29.
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SFY - Swift Energy - increased domestic production by 12%
In Swift Energy's 28 year history, it has experienced the highs and the lows of crude prices. Right now, its enjoying the highs as the company posted record earnings in 2007 and is poised to break that record again in 2008.
Swift beat Wall Street estimates in all four quarters of 2007 by an average of 8.11%. Although the stock is near a 52 week high, the company trades with a forward P/E of only 7.90.
Full Analysis
Swift Energy Company (SFY) is an independent oil and natural gas company with a focus on the onshore and inland-water areas of Texas and the Louisiana Gulf Coast. The company is headquartered in Houston.
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Swift, a Zacks #1 Rank (Strong Buy), has operations in three regions: South Louisiana, South Texas and Toledo Bend, a region along the Texas-Louisiana border. Each region has at least one key property which acts as the base for exploration in the region. For the last few years, SFY has focused on Southern Louisiana.
The company has a strategy of using acquisitions and drilling to grow oil and gas reserves, production and cash flow. Excluding its New Zealand activities, which were sold in 2007, Swift has increased its domestic proved reserves at a compounded five-year growth rate of 6% per year.
The company also has a five year compounded domestic production growth rate, through the end of 2007, of 13% per year.
Swift's policy has always been to reinvest its cash flows, rather than pay cash dividends, in order to promote long-term growth in the value of the stock.
Swift Beats Wall Street Estimates for the Fourth Straight Quarter
On Feb 14, SGY reported fourth-quarter earnings and surprised on analysts' estimates by 10.32%, or 16 cents a share. Net income increased 54% to $52.7 million, or $1.71 per share, compared to $34.3 million, or $1.13 per share in the fourth-quarter 2006. Analysts expected $1.55 per share.
The company also reported record revenues for the year of $654.1 million, an increase of 19% over 2006 revenue levels.
In 2007, Swift increased domestic production by 12% to 10.6 million barrels of oil equivalent (MMBoe) from 9.4 MMBoe in 2006. The company also increased its year-end domestic proved reserves by 13% from the previous year-end to approximately 134 million barrels of oil equivalent (MMBoe).
2008 Could Be Another Record Year
In February, the company expressed optimism for 2008.
"For continuing operations, we expect to increase production from 10% to 15% during 2008 and anticipate proved reserves growth of 5% to 9% during the year. A significant portion of our 2008 investment capital will be focused on expanding our South Louisiana potential in several areas and converting Lake Washington probable and possible reserves to proved reserves in 2008," said Terry Swift, CEO.
"Additionally, we plan to have at least two rigs operating in our new Cotulla area in South Texas for much of 2008," he added.
Approximately 75% of the $425 million to $475 million expected capital budget is targeted for activities in the South Louisiana region, with about 15% planned for activities in the South Texas region.
On Apr 9, the company gave even more bullish guidance to analysts at the Howard Weil Energy Conference. Swift now sees revenue rising to as high as $760 million compared to last year's record of $654 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) also was seen increasing to a record $530 million from $463 million.
Analysts Boost Estimates for the First Quarter and the Year
With crude continuing to hit new records and the recent bullish guidance from the company, brokerage analysts have responded by sharply raising estimates for the first quarter and the year.
In the last 30 days, four out of six covering analysts have raised consensus estimates by 41 cents to $1.53 from $1.12 a share. Similarly, for the year, analysts have aggressively raised estimates in the last 30 days by $1.33 to $6.38 from $5.05 a share.
Despite the stock trading near a 52 week high, Swift still has value characteristics. Its 2008 P/E is only 7.90 and its price-to-book is 1.88. The company has an excellent five year average return on equity (ROE) of 16.62%.
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SGY - Stone Energy - beat Wall Street estimates all four quarters in 2007 by an average of 50.33%
Stone Energy is yet another exploration company that is positioned to see gushing profits as crude and natural gas prices remain sky-high. The company beat Wall Street estimates all four quarters in 2007 by an average of 50.33%. It has a 2008 P/E of only 10.86.
Full Analysis
Stone Energy Corporation (SGY) is an independent oil and natural gas exploration and production company that operates in the Gulf of Mexico, onshore Louisiana and is in an exploratory joint venture in Bohai Bay, China. The company is headquartered in Lafayette, La.
Stone, a Zacks #1 Rank (Strong Buy), expects to grow through acquisition and continued exploration of mature and emerging oil and natural gas fields.
On Mar 20, Stone announced it had apparently submitted the "high bid" on 25 offshore blocks in the central Gulf of Mexico. Stone's share of the lease bonuses for the bids totaled approximately $43 million.
The lease acquisitions will beef up Stone's leasehold inventory by 140,511 gross acres and 79,338 net acres. The apparent high bids are still subject to a review process by the Minerals Management Service of the Department of Interior before they can be awarded.
"We are now well positioned to execute our strategy of participating in a portfolio of deep water projects which will complement our attractive shelf opportunities," said Richard L. Smith, Vice President of Exploration.
"Our plan in the deep water is to maintain a lower working interest over a larger number of prospects. We are impressed with the quality of these prospects and look forward to working with our partners."
"With deep water leases having 10-year terms, we will have a multi-year inventory of projects to evaluate. We are also pleased with our additions on the shelf as these prospects will provide us with lower risk projects with a shorter term impact," he said.
SGY Beat Wall Street Estimates by 56.96% in the Fourth Quarter
On Feb 26, Stone reported fourth-quarter earnings and surprised on analysts' estimates by 90 cents. The company reported $2.48 per share compared to consensus estimates of $1.58 per share. Revenue increased to $201.6 million from $179.2 million.
For 2007, the company experienced a 91% drilling success rate, with 20 out of 22 wells being successful. 2007 production volumes came in on the high side of SGY's original guidance despite selling its Rocky Mountain properties at mid-year.
Stone also reduced its debt by 50% after selling the Rocky Mountain properties. At the end of 2007, it had a cash position of $475 million.
SGY is benefiting from surging crude and natural gas prices. Prices realized for 2007 averaged $69.68 per barrel (Bbl) of oil and $7.30 per thousand cubic feet (Mcf) of natural gas, a 4% increase on a Mcfe basis compared to $62.40 per Bbl of oil and $7.75 per Mcf of natural gas realized during 2006.
The price increases for the fourth quarter were more dramatic. Prices averaged $84.96 per Bbl of oil and $7.55 per Mcf of natural gas, or a 23% increase on a Mcfe basis, over fourth-quarter 2006 average realized prices of $56.79 per Bbl of oil and $7.48 per Mcf of natural gas.
Analysts Raise Estimates for the First Quarter and 2008
Brokerage analysts responded to the fourth quarter earnings report and the rising crude prices by raising estimates. In the last month, consensus estimates rose for the first quarter by 30 cents to $1.63 from $1.33 per share. One analyst out of five raised in the last week alone.
It's the same story on full-year estimates. Consensus estimates skyrocketed in the last 30 days by $1.19 to $5.65 from $4.46 per share.
Stone Energy is Still a Value Pick
Despite the run-up in the stock, Stone continues to trade at attractive valuations. Its 2008 P/E is 10.8 and its price-to-book is 1.89, under the industry average of 2.21. The company has an excellent five year return on equity (ROE) of 15.65%.
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