BetterTrades
(Best) CMTL, HITK, GIL (Worst) MOV, KR, CIEN from Better Trades
December 14, 2009
The markets traded sideways last week, posting both positive and negative days, ultimately ending near the same level at the start of the week. Investors were influenced by several economic reports and the continued weakness of the Dollar.
The DOW closed the week higher, adding 0.8% to close at 10,471.50. The S&P also finished the week in the green, gaining 0.03% ending at 1,105.41. The NASDAQ concluded the week down, falling 0.2% to close at 2,190.31.
Top 3 Stocks
CMTL – Comtech Telecommunications Corp. ($29.59 to $33.97) +14.8%
As a company that designs, develops, produces and markets innovative products, systems and services for advanced communications solutions, Comtech Telecommunications Corp. (CMTL) announced early last week that the company’s 1Q profits slipped year-over-year, but managed to come in ahead of market expectations. Comtech conducts business through three complementary segments, telecommunications transmission, mobile data communications and RF microwave amplifiers.
For the recent period, Comtech posted a net quarterly profit of $9M, or $0.30 per share, well below the previous year’s net earnings of $21.6M, or $0.80 per share, a decrease in profits of more than 58%. Total sales for the quarter retreated as well, falling from $191.9M to $133.8M, a decline of more than 30%.
On average, analysts within the industry were looking for the communications equipment maker to post a quarterly profit of $0.22 per share on total revenues of $125.5M.
Fred Kornberg, President and CEO remarked, "We had approximately $535.6 million in backlog as of October 31, 2009, of which a substantial portion is expected to ship in fiscal 2010. Additionally, with over $500.0 million of cash and cash equivalents, we are continuing our efforts to identify and execute acquisitions to supplement our expected organic growth and to diversify our business."
Despite posted results that were down year-over-year, the company’s stock price advancement was a result of Comtech raising its 2010 fiscal year outlook. As the company continues to pursue beneficial acquisitions, Comtech is looking to post annual earnings between $2.20 and $2.30 per share, up from a previously stated range of $2.10 to $2.20 per share.
Yearly sales in 2010 are expected to come in between $842M and $860M, up from its prior view of $820M to $840M. Analysts, on average, are anticipating yearly earnings of $2.14 per share on total sales of $821.4M.
Kornberg later added, “Although we have nothing to report now on the acquisition side, we continue to simultaneously pursue a number of attractive opportunities."
By the end of last week’s trading, shares of CMTL were up nearly 15% on the company’s announcement. That trend continued into the new week. By the sound of the closing bell on December 14, Comtech’s stock was up more than 2%, adding $0.80, to conclude the session at $34.77 per share.
During the past year, Comtech’s stock has traded as high as $49.19 per share, while slipping to an annual low of $19.56 per share.
HITK – Hi-Tech Pharmacal Co. Inc. ($20.13 to $22.94) +14.0%
Another company benefiting from its recent earnings report was Hi-Tech Pharmacal Co. Inc. (HITK), which witnessed its stock surge 14% by the end of the December 11 trading session. Hi-Tech is a specialty pharmaceutical company that develops, manufactures and markets branded and generic products. Hi-Tech specializes in difficult to manufacture liquid and semi-solid dosage forms and produces a range of sterile ophthalmic, otic and inhalation products and is a leading developer and marketer of branded prescription and OTC products for the diabetes marketplace.
On December 9, Hi-Tech released their 2Q earnings results, in which the company recorded a net profit of $7.4M, or $0.60 per share, compared to the prior year’s earnings of $1.1M, or $0.09 per share, an increase in profit of more than 570% year-over-year.
Revenues also surged during the recent quarter, climbing from $25.1M to $40.9M, a jump in sales of nearly 63%. The company’s rise in revenues was also bolstered by an increase in generic drugs of 64% to $32M. Overall revenues were also influenced by ECR Pharmaceuticals, which was acquired in February 2009. The ECR acquisition contributed $4.6M to total sales.
Commenting on the company’s recent results was David Seltzer, President and CEO at Hi-Tech, “We are pleased with the continued success of Dorzolamide with Timolol ophthalmic solution and Dorzolamide ophthalmic solution along with the core generic liquid line which showed strong growth. As expected, these products strengthened the Company’s financial position and allowed us to continuously invest in the business to assure future growth. This investment includes the ECR Pharmaceuticals business which showed strong growth this quarter and our recent in-licensing of Zolpimist, which we believe will be a very successful product for ECR in the coming fiscal year.”
After adding more than $2 per share during last week’s trading, the upward trend continued into the third week of December. At the close of trading on December 14, shares of HITK posted a gain of nearly 6%, adding $1.27, to finish the day at $24.21 per share.
Over the course of a year, the company’s stock price has traded within a fairly broad range, reaching a high of $25.60 per share, while dipping as low as $4.32 per share.
GIL – Gildan Activewear Inc. ($20.21 to $21.78) +7.8%
Rounding out the list of top percentage gainers for the week ending December 11 was Gildan Activewear Inc. (GIL), a manufacturer and marketer of premium quality branded basic activewear for sale principally into the wholesale imprinted activewear segment of the North American apparel market. Gildan saw a jump in stock price of nearly 8% following the company’s recent release of 4Q earnings’ results, despite sales falling and a huge write-down.
Results for the recent quarter showed a profit of $42.4M, or $0.35 per share, in sharp contrast to last year’s profit of $21.8M, or $0.18 per share, an increase in net income of more than 94%. Results were aided by a $746K tax gain. However, the company did take an $8.9M write-down on inventory, resulting in a $0.07 per share reduction.
Revenues came in lower year-over-year, as overall sales slipped from $324.7M to $301.7M, a drop in sales of more than 7%. On average, analysts within the industry were looking for the t-shirt and clothing maker to post a quarterly profit of $0.33 per share on $301.1M in total revenues.
For fiscal 2009, Gildan reported net earnings of $95.33M, or $0.79 per share, well below 2008’s results of $146.35M, or $1.20 per share, a decrease in year-over-year earnings of nearly 35%. Annual sales came in below 2008’s results as well, falling from $1.25B to $1.04B, a drop in yearly revenues of almost 17%. Analysts had expected a yearly profit of $0.75 per share on $1.04B in overall sales.
Looking ahead to fiscal 2010, Gildan projects net sales to be around $1.2B, resulting in approximately a 17% increase over 2009’s results. Gross margins for the upcoming year are expected to be around 26%, slightly ahead of 2009’s 25.7%. Lastly, the company is predicting capital expenditures to come in at roughly $130M, nearly 3 times that of the $45M incurred in 2009.
With last week’s positive gain in the books, the start of the new trading week brought similar results. Shares of Gildan added 2.8%, or $0.60, to end the December 14 session at $22.38 per share. During the past year, the stock has managed to trade between $5.66 per share and $22.10 per share. .
Worst 3 Stocks
MOV – Movado Group Inc. ($10.60 to $9.27) -12.5%
Reporting before the opening bell on December 9, Movado Group Inc. (MOV) confirmed that the company’s earnings for the 3Q were hurt by the lack of orders and a tax charge that pushed profits into the red. Movado is a designer, manufacturer and distributor of quality watches with prominent brands sold in almost every price category comprising the watch industry.
Offering products under such names as Movado, Ebel, Concord, ESQ, Coach, Hugo Boss, Juicy Couture, Tommy Hilfiger, and Lacoste brand names, Movado recorded a net loss of $20.9M, or $0.85 per share. That is a far cry from the previous year’s net profit of $15.7M, or $0.62 per share.
The latest results were greatly affected by a one-time tax charge of $22.95M, unlike last year, when the company benefited from a tax gain of $3.74M. However, Movado did manage to benefit from sales of discontinued inventory that amounted to $8.4M.
Excluding the one-time charge, Movado would have posted a net profit of $3M, or $0.12 per share, down substantially from the prior year’s net income of $13.43M, or $0.53 per share, a decrease in earnings of nearly 78%.
Quarterly sales fell year-over-year, slipping from $135.8M to $129M, a decrease in overall revenues of 5%. Sales have been hurt across the board for luxury makers, as consumers continue to curtail their spending habits. Retailers also played into Movado’s lack of sales, as stores have been keeping a keen eye on their inventories.
On average, analysts within the industry were looking for the luxury watch and jewelry maker to post a quarterly profit of $0.66 per share based on total sales of $141.2M.
Commenting on the results was Efraim Grinberg, CEO at Movado, "We are very disappointed in our third quarter and year-to-date results. We experienced higher levels of destocking in the marketplace than originally anticipated as retailers continued to focus on very tight inventory control. Further, the unprecedented level of U.S. jewelry retailers closing their operations and liquidating inventory has had a significant impact on our business."
Because Movado operates in an industry that has been devastated by the economic recession, the company is now looking to post a full-year loss between $1.40 and $1.50 per share, compared to a previously expected profit of $0.50 per share made during the 1Q. The expected loss will include a $0.94 reduction in earnings for tax charges, a $0.08 loss related to the sale of discontinued products and a $0.03 charge related to restructuring costs.
Excluding one-time items, Movado is expecting to record an annual loss between $0.35 and $0.45 per share. Analysts, on average, are projecting a yearly profit of $0.55 per share. Analysts typically exclude one-time items from their forecasts.
By the conclusion of trading on December 14, shares of Movado reversed course, adding 4.1%, or $0.38, to finish at $9.65 per share. Over the course of a year, shares of MOV have traded as high as $15.56 per share, while slipping as low as $4.65 per share.
KR – Kroger Co. ($22.50 to $20.03) -11.0%
Operating as one of the larger grocery retailers in the U.S., Kroger Co. (KR) made it known that the company recorded a net loss for the 3Q, as a massive write-down destroyed the bottom-line. During the quarter, Kroger reported a net loss of $875M, or $1.35 per share, versus a net profit of $237.7M, or $0.36 per share a year ago.
Kroger took a $1.05B charge related to the company’s Ralph’s grocery units, stating that California’s double-digit unemployment rate and housing slump exacerbated the situation. Excluding the writedown, Kroger would have posted a profit of $176.7M, or $0.27 per share.
Overall sales advanced marginally year-over-year, climbing from $17.6B to $17.7B. Same store sales, a key economic indicator, increased 1.3% during the quarter. Analysts, on average, were looking for the grocer to post a quarterly profit of $0.37 per share based on total sales of $17.69B.
David Dillon, Chairman and CEO of Kroger, remarked, "The operating environment we saw during the third quarter was more challenging than we anticipated, obscuring some otherwise strong fundamentals in our performance such as exceptional tonnage growth, market share gains, increases in loyal household count, and good cost control. These fundamentals are important to our long-term success."
Kroger, for the second straight quarter, downwardly revised its full-year earnings outlook and is now expecting an annual profit between $1.60 and $1.70 per share. That is down from a previously stated range of $1.90 to $2.00 per share. Analysts are looking for a yearly profit of $1.94 per share.
Following the announcement, shares of Kroger plunged nearly 12% to close at $20.13 per share. At the start of the new trading week, the company’s stock continued to fall, losing $0.11, or 0.5%, to finish at $19.92 per share. Throughout the past year, the company’s stock has been able to reach a high of $27.59 per share, while dipping as low $19.39 per share.
CIEN – Ciena Corp. ($12.58 to $11.50) -8.6%
Included in the list of top percentage losers for the past week was Ciena Corp. (CIEN), a company that prides themselves as being a network specialist, which is focused on expanding the possibilities for its customers' networks while reducing their cost of ownership. Ciena’s systems, software and services target and cure specific network troubles so that telecom companies, cable operators, governments and enterprises can better utilize new applications that are driving their businesses forward.
Prior to the conclusion of last week’s trading, Ciena revealed that the company recorded a larger-than-anticipated net loss during the 4Q, as mounting costs offset an increase in overall revenues. For the recent quarter, Ciena booked a net loss of $26.7M, or $0.29 per share, compared to a net loss of $25.4M, or $0.28 per share from a year ago.
Gary Smith, Ciena's CEO and President commented, "While cautious customer spending seems likely to continue as we enter 2010, our fourth quarter order flow gives us confidence in our ability to deliver sequential revenue growth in our fiscal first quarter 2010. We currently expect a sequential increase in our fiscal first quarter revenue of up to 5%."
Quarterly sales slipped year-over-year as well, retreating from $179.7M a year ago to $176.3M, a drop in total revenues of almost 2%. The company noted that excluding certain one-time items that the loss would have come in at only $0.12 per share. Nevertheless, analysts within the industry were looking for the communications networking equipment, software and services provider to post a quarterly loss of only $0.07 per share on total revenues of $167.7M.
Smith later added, "Our fiscal fourth quarter revenue growth was driven by our CN 4200 family, continued strong performance from our carrier Ethernet service delivery portfolio and sequential growth from core switching platforms. Industry sentiment has improved somewhat over the first half of the calendar year as a result of what seems to be a stabilizing macro environment combined with continued pressure on service providers to increase network capacity and deliver more services."
For the year, Ciena recorded a net loss of $581.2M, or $6.37 per share on $652.6M in gross sales. That is compared to the prior year’s net earnings of $38.9M, or $0.42 per share based on $902.4M in total revenues.
Before the markets opened to start the December 14 session, Ciena received news that the S&P 500 index was delisting the stock and replacing them with Visa Inc. (V). By the close of trading, shares of CIEN were down more than 4%, losing $0.51, to end the session at $10.99 per share.
In the past 52 weeks, the stock has traded as low as $4.98 per share, while climbing as high as $16.64 per share. .
2009 Better Trades Article
brought to you by
BRIAN MULLIN
