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(Best) KIRK, DDS, GFF (Worst) ADY, UTA, CMED from Better Trades
November 23, 2009
Investors turned cautious throughout the past week, flocking to safer investments like Treasuries and the Dollar as stocks continued to trade in the red. The mood was weakened throughout the week as disappointing economic and corporate news pushed the indices off their 13-month highs established early last week.
The DOW closed the week marginally higher, adding 0.5% to close at 10,318.16. The S&P finished the week in the red, falling 0.2% ending at 1,091.38. The NASDAQ also concluded the week down, slipping 1.0% to close at 2,146.04.
Top 3 Stocks
KIRK – Kirkland’s Inc. ($12.68 to $15.72) +24.0%
In a week that saw the markets both push above yearly highs and triple-digit losses, one of the top percentage gainers was Kirkland’s Inc. (KIRK). Kirkland’s is a leading specialty retailer of home decor in the U.S. Kirkland’s offers a broad selection of distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products.
The week’s gains were attributed to the company’s recent success outlined in their 3Q earnings report. In the report, Kirkland’s announced that for the quarter, the company managed to post a profit of $5.6M, or $0.27 per share, compared to a net loss of $1.5M, or $0.07 per share from a year ago. Kirkland’s return to profitability was a direct result of fewer markdowns along with higher traffic flow.
Quarterly revenues advanced as well for Kirkland, climbing from $85.9M to $92.4M, an increase in overall sales of nearly 8%. Same store sales, a key economic indicator of the health of a retailer’s business, surged more than 11% during the period.
Analysts, within the industry, were looking for the home accessory retailer to post a quarterly profit of $0.08 per share on total revenues of $85.99M.
CEO Robert Alderson commented on the company’s results, "The execution of our merchandise and store operating plans yielded strong sales and margin improvement due to improved conversion and reduced markdown activity. We will opportunistically close any unproductive store whether (in) mall or non-mall (locations)."
Having posted a gain of more than $3 per share during last week’s trading, shares of Kirkland continued on their upward trek by the close of the November 23 session. At the closing bell, Kirkland’s stock advanced more than 3%, adding $0.50, to conclude the day at $16.22 per share.
Over the past year, the stock has slipped as low as $1.75 per share, while reaching a high of $16.45, which was achieved during the November 23 trading session.
DDS – Dillard’s Inc. ($13.19 to $15.66) +18.7%
Operating as one of the nation's largest fashion apparel and home furnishings retailers, Dillard’s Inc. (DDS) saw its stock price leap nearly 20% in market value last week. Offering a distinctive mix of name brand and private label merchandise, appealing to a broad range of customers, Dillard’s jump in price was a direct result of the company’s recent earnings release.
Announced on November 17, the company confirmed that for the 3Q, Dillard’s recorded a net profit of $8M, or $0.11 per share, in sharp contrast to last year’s 3Q net loss of $56M, or $0.76 per share. Results were affected by lower expenses and a tax benefit of $0.14 per share.
Revenues were down for the period, falling from $1.51B a year ago to $1.36B, a decrease in overall sales of nearly 10% year-over-year. In the meantime, analysts were looking for the apparel and home furnishings retailer to book a net loss of $0.51 per share on $1.38B in total revenues.
Aiding in the company’s bottom-line was Dillard’s tedious efforts to reduce costs. During the quarter, the retailer saw an 18% cut in advertising, selling, administrative and general expenses, which came in at $402.1M, down substantially from the $490.7M in costs during the prior year’s 3Q.
William Dillard II, CEO at Dillard’s commented on the company’s recent report, "We are pleased with the continued improvement in merchandise gross margin of 420 basis points during the third quarter as well as with our cost control, strong cash flow from operations and year-over-year debt reduction. We continued to benefit from our improvements in inventory management, where we have focused on more conservative purchasing combined with efforts to better match the timing of receipts with demand."
Through the first nine months of the year, Dillard’s posted a net loss of $11M, or $0.15 per share, compared to the same period a year ago, in which the company had amassed a net loss of $91.7M, or $0.47 per share. Net sales over that time came in at $4.26B, down 11% from $4.79B in the same period a year ago.
Dillard II later added, "Accordingly, even with the substantial inventory decline at the end of the quarter (22%), we believe we are well-positioned to meet anticipated fourth quarter holiday demand with a steady flow of compelling product receipts throughout the season."
With more than $2 per share increase in market value this past week, shares of Dillard’s remain in an upswing. By the sound of the closing bell on November 23, shares of DDS were up nearly 5%, or $0.76, to end the session at $16.42 per share.
Over the course of year, the company’s stock price has traded within a relatively broad range. The stock has dipped as low as $2.50 per share, while climbing as high as $16.68 per share, which was established during the November 23 trading day.
GFF – Griffon Corp. ($8.89 to $10.20) +14.7%
Rounding out the list of top percentage gainers for the week ending November 20 was Griffon Corp. (GFF), a diversified manufacturing company with operations in four business segments: Garage Doors; Installation Services; Specialty Plastic Films; and Electronic Information and Communication Systems. The company’s recent push higher came from Griffon’s recent 4Q earnings report, which showed a profit for the period.
Within Griffon’s two largest segments, its Garage Doors unit designs and manufactures garage doors for use in the residential housing and commercial building markets. The Installation Services segment sells, installs and services garage doors, garage door openers, manufactured fireplaces, floor coverings, cabinetry and a range of related building products primarily for the residential housing.
Having posted a nearly 15% jump in market price, shares of Griffon were bolstered following the company’s earnings release. For the 4Q, GFF posted a net profit of $12.4M, or $0.21 per share, a far cry from last year’s 4Q report that resulted in the company posting a net loss of $8M, or $0.24 per share.
Despite the overall profit achieved during the period, Griffon’s overall sales totals slipped year-over-year, falling from $353.7M a year ago to $328.2M, a decrease in total revenues of more than 7%.
For fiscal 2009, Griffon managed to post a net profit of $22.8M, or $0.39 per share, compared to a net loss in 2008 of $40.5M, or $1.24 per share. Income from continuing operations in 2009 was $22M, or $0.37 per share, versus income of $0.1M, or breakeven per share, from a year ago. Annual sales came in at $1.2B, down almost 8% from the previous year’s total revenues of $1.3B.
As the November 23 session concludes and the major indices traded well into the green by the close, shares of Griffon were up more than 7% on the day, gaining $0.72 to finish the session at $10.92 per share. With the day’s closing price, shares of GFF sit just under 9% off their 52-week high of $11.93 per share. The stock has also slipped to an annual low of $5.77 per share as well.
Worst 3 Stocks
ADY – American Dairy Inc. ($32.43 to $24.34) -24.9%
On the opposite side of equity markets, there were a handful of companies that saw their stock prices decline during last week’s sessions. Leading the way was American Dairy Inc. (ADY), a company that conducts its operations in the People's Republic of China through its wholly owned subsidiary Feihe Dairy. Located in Kedong County, China, Feihe Dairy is one of the leading producers and distributors of milk powder and soybean products in China and has been in operation since 2001.
At the start of trading last week, the company affirmed that its sales outlook for the 2009 fiscal year was reduced from a previously stated range, due to increasing concerns relating to a weaker-than-expected seasonal sales forecast.
CFO Jonathan Chou commented on the company’s recent revised outlook, " We believe it is prudent to adjust our full year revenue expectation today after reviewing our preliminary October results, combined with recent industry data that suggests that the seasonal strength we typically experience in the fourth quarter may be less than previously expected. Additionally, our fourth quarter comparison is particularly difficult due to the exceptional growth we exhibited last year, in the wake of the melamine crisis."
The company is now looking to post full-year sales totals between $270M and $290M, well below its previously stated revenues outlook range between $330M and $360M. The revisions were preceded by the company’s 3Q earnings report, which revealed a positive scenario.
During the recent period, American Dairy posted net income from continuing operations of $11.1M, or $0.52 per share, compared to a net loss of $22.1M, or $1.32 per share from a year ago. Revenues during the 3Q surged more than 94% to come in at $72.1M, up from last year’s tally of $37.2M. In the 3Q, analysts were looking for earnings to come in at $0.31 per share on $74.1M in sales.
Following the November 16 statement, shares of American Dairy plummeted after the announcement. The stock slipped from just over $32 per share down to the mid-$25 range, a decline of more than 21% that day. After posting losses throughout much of the week, ADY’s stock managed to close in the green to kick off the new week.
By the close of the November 23 session, shares of American Dairy were up nearly 2%, adding $0.39, to finish the first session of the week at $24.73 per share. Over the course of a year, the stock has managed to trade within a very broad range, reaching a yearly high of $44 per share, while sliding as low as $9.13 per share as well.
UTA – Universal Travel Group Inc. ($13.91 to $10.78) -22.5%
As a fast growing travel services provider in China, Universal Travel Group Inc. (UTA) is engaged in providing reservation, booking, and domestic and international travel and tourism services throughout China via the Internet and through customer representatives. The company’s stock price took a hit this past week, as investors were unimpressed by UTA’s recent earnings report.
Announcing for the 3Q, UTA confirmed that the company made a profit of $4.7M, or $0.31 per share, compared to similar results during the previous year’s 3Q in which the company booked a net profit of $4.6M, or $0.37 per share. Excluding non-cash charges, Universal Travel posted a net profit of $0.38 per share.
Quarterly sales were well above last year’s results, increasing by nearly 50% from a year ago, as overall revenues came in at $29.78M, up from $20.05M. Revenues from flight ticketing was $4.9M, up nearly 26% from a year ago in which UTA had $3.9M in sales from bookings. Additionally, the company saw an increase in online hotel reservations, which jumped more than 50% to $3.8M, and from packaged tour reservations that amounted to $21.1M in sales, up almost 55% from the previous year.
Remarking on the company’s recent performance was Ms. Jiangping Jiang, Chairwoman and CEO, "Universal Travel Group had a strong third quarter with steady growth in all three business segments. We continued our efforts in expanding our core business into western China and achieved good results from cross marketing and selling our travel related products across our business segments. Our second home base in Chongqing also started generating revenue this quarter."
For fiscal 2009, UTA is looking to post an annual profit of $1.20 per share, up from a previously stated range between $1.07 and $1.15 per share. Sales are expected to increase from $76.8M a year ago to between $88M and $96M in 2009.
Despite the upwardly revised earnings forecast, shares of UTA lost more than $3 per share last week, losing more than 22% of their market value. With the trading session finished, the company’s stock reversed course to start the new week. UTA’s stock added 1.1%, or $0.12 per share, to close at $10.90 on November 23.
During the past year, Universal Travel Group’s stock has traded as high as $17.20 per share, while falling to as little as $0.97 per share.
CMED – China Medical Technologies Inc. ($14.96 to $12.58) -15.9%
China Medical Technologies, Inc. (CMED), a China-based medical device company that develops, manufactures and markets products using HIFU for the treatment of solid cancers and benign tumors in China, witnessed its stock price lose nearly 16% of its market share during the past week, as investors were dismayed by the company’s recent earnings loss.
Announcing for the 2Q, China Medical recorded a net loss of $6.9M, or $0.26 per American Depositary Share (ADS), compared to a net profit of $17.25M, or $0.36 per ADS from a year ago. Net earnings came in at $2.59M, or $0.10 per ADS, versus a year ago in which earnings were $14.96M, or $0.57 per ADS.
Revenues, meanwhile, were down year-over-year, falling from $28.42M a year ago to $24.33M, a decrease in overall sales of more than 14%. Looking further inside the company’s sales report, revenues from Immunodiagnostic systems were $11.26M versus $17.9M in the prior year. However, revenues from Molecular diagnostic systems jumped to $13.07M from $10.51M a year earlier, a 24% increase year-over-year.
During the quarter, China Medical incurred a one-time amortization charge of $4.01M. The company also saw an increase in R&D costs, climbing from $0.93M to $1.39M this year, while sales and marketing expenses jumped from $1.65M a year ago to $2.55M, an advance in costs of more than 54% year-over-year. Overall expenses incurred by the company came to $14.57M, well above last year’s 2Q costs of $6.3M.
Xiaodong Wu, Chairman and CEO of the company remarked, "Despite recent challenges, we have seen several positive signs. In the past quarter, we received State Food and Drug Administration (SFDA) approvals for both our Fluorescent in situ Hybridization (FISH) probes in hematology and our Surface Plasmon Resonance (SPR) based analysis system, representing a major milestone. Although our ECLIA business was impacted by increased competition and our implementation of price reduction in September, we have seen signs of stabilization.”
Wu later added, “Our FISH business remained healthy despite the diversion of management's attention and we have seen growth resumed in this business recently. In addition, we have completed a trial launch on our SPR-based analysis system in a small number of top tier hospitals. With the constructive feedback from key opinion leaders after initial usage, we are well positioned for a full-scale launch on the system in the first quarter of 2010. We expect to generate revenue from the sale of HPV-DNA chips used with the system in that quarter."
Looking ahead to the 3Q, CMED is expecting to post revenues between $24.9M and $26.4M, while earnings from continuing operations should not come in below an estimated $5.6M.
As the first session in the new trading week concludes, shares of CMED reversed its trend to trade in the green. The stock gained $0.09, or 0.7%, to end the November 23 session at $12.67 per ADS. During the past year, CMED’s stock has traded as high as $26.07 per ADS, while falling to an annual low of $11.41 per ADS. With the recent closing price, shares of CMED sit 10% above their yearly low.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
