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(Best) SNS, FUN, WGO (Worst) FDS, BBY, TRA from Better Trades
December 21, 2009
The markets fluctuated back and forth throughout much of last week, as investors pulled back their enthusiasm despite positive economic news, along with the Federal Reserve’s pledge to hold key interest rates at record lows.
The DOW closed the week lower, falling 1.4% to close at 10,328.89. The S&P also finished the week in the red, slipping 0.04% ending at 1,102.47. The NASDAQ concluded the week higher, adding 1.0% to close at 2,211.69.
Top 3 Stocks
SNS – Steak n Shake Co. ($11.79 to $14.55) +23.4%
Steak n Shake Co. (SNS), is an operator of a full service, casual dining restaurants serving a core menu of its famous Steakburger sandwiches, thin 'n crispy French fries, old fashioned hand-dipped milk shakes, chili, and a variety of desserts and breakfast foods. The company’s saw its stock jump more than 23% following an announcement early last week that profits for the 4Q surged on improved sales.
For the recent period, Steak n Shake posted a net profit of $3.4M, or $0.12 per share, compared to last year’s 4Q in which the company recorded a net loss of $9.2M, or $0.32 per share. Quarterly sales jumped from $138.9M to $160M, an increase in revenues of more than 15% year-over-year. Same store sales grew at a 10% clip during the quarter, excluding an extra week of sales.
The company saw its total costs and expenses jump from $149.9M to $154.7M, an increase of just over 3%, while restaurant operating costs came in 8% higher, from $75.4M to $81.5M.
For fiscal 2009, Steak n Shake booked a net profit of $6M, or $0.21 per share, versus net income of $23M, or $0.81 per share from a year ago. Annual revenues came in at $627M, up 2.8% from the previous year’s sales of $610.1M, while year-over-year same store sales increased 4.1%.
Effective December 18, the company announced a reverse stock split of 1-for-20. With that, the stock’s price was misleading by the close of the December 21 session, as the stock gained 1913.8%, or $278.45, to conclude at $293.00 per share.
Prior to the reverse stock split, shares of SNS had traded within a relatively narrow range, with an annual high of $14.68 per share, and a yearly low of $4.92 per share. On an adjusted basis, the trading range during the past year is $98.40 to $301.73 per share.
FUN – Cedar Fair LP ($9.07 to $11.16) +23.0%
With the stock posting a gain of more than $2 per share, Cedar Fair LP (FUN) saw its stock price jump on news of a definitive buyout deal from Apollo Global Management worth an estimated $2.4B in an all cash deal. Cedar Fair owns and operates 11 amusement parks, six outdoor water parks, one indoor water park and five hotels, as well the Cedar Point Marina, one of the largest full-service marinas on the Great Lakes.
Announced on December 17, Cedar Fair will receive $11.50 in cash per outstanding share, which represents a 43% premium over the stock’s 30-day average, and a 28% premium over the December 15 closing price of $9.01 per share.
Cedar Fair Chairman and CEO Dick Kinzel commented on the company’s recent news, "We have considered a wide range of strategic alternatives over the past several years. After considering these strategic alternatives, we have concluded that the transaction with Apollo is in the best interest of our unit holders."
Cedar’s lead director, Michael Kwiatkowski, remarked, ”This transaction allows Cedar Fair unit holders to realize significant value from their investment in our company over recent trading levels. Apollo has a strong track record of growing businesses, and its desire to add Cedar Fair to its portfolio serves as a testament to our solid business model and the talent of our people.”
The transaction is scheduled to be completed by the 2Q of 2010, wherein Cedar Fair will then become a private company.
In the company’s most recent earnings reports, released on November 3, Cedar Fair posted a net profit of $107.61M, or $1.92 per share, in contrast to the previous year’s 3Q earnings of $91.54M, or $1.65 per share, an increase in net income of nearly 18%. Revenues for the period came in at $519.9M, down 3.8% from $540.3M in the prior year’s 3Q.
Continuing on its upward trend, shares of FUN were up by the end of trading on December 21, adding $0.08, or 0.7%, to finish the session at $11.24 per share. During the past year, the company’s stock has traded as high as $14.10 per share, while slipping as low as $5.75 per share.
WGO – Winnebago Industries Inc. ($10.75 to $12.74) +18.5%
Rounding out the list of top percentage gainers for the week ending December 18 was Winnebago Industries Inc. (WGO), a leading U.S. manufacturer of motor homes and self-contained recreation vehicles used primarily in leisure travel and outdoor recreation activities. During the past week, the stock jumped nearly 19% in market value due in large part to the company’s recent quarterly earnings report.
Reporting for the 1Q, Winnebago saw a smaller quarterly loss than in the prior year as the RV market began to show signs of improvement. For the quarter, WGO posted a net loss of $1.3M, or $0.05 per share, compared to last year’s net loss of $9.6M, or $0.33 per share, an 86% improvement year-over-year.
Sales for the period improved by nearly 17%, climbing from $69.4M to $81.02M. The company also confirmed that backlog sales, those yet to be delivered, totaled more than 1,500 units, up 350% from the same period a year ago.
On average, analysts within the industry were looking for the maker of recreation vehicles to post a quarterly loss of $0.07 per share based on overall revenues of $108.2M.
CEO Bob Olson remarked on the company’s recent announcement, "While the economic environment, the availability of credit and the level of retail demand remain tenuous, we believe that dealer inventory has finally bottomed out. As difficult as this recession has been for Winnebago Industries and the entire RV industry, we believe the worst may be over."
Following the company’s earnings release on December 17, shares of WGO jumped nearly 22%. Although those gains were not sustained by the end of Friday’s trading, the stock did manage to gain nearly $2 per share by the end of the week.
At the start of a new trading week, Winnebago’s stock could not maintain its upward trend, slipping $0.22, or 1.7%, to conclude the December 21 session at $12.52 per share. Over the course of a year, WBO’s stock has traded as high as $16.44 per share, while dipping as low as $3.14 per share.
Worst 3 Stocks
FDS – FactSet Research Systems Inc. ($75.95 to $65.54) -13.7%
Prior to the opening bell on December 15, FactSet Research Systems Inc. (FDS) revealed that the company’s net earnings during the 1Q advanced year-over-year, as higher operating margins offset a marginal decrease in overall sales. FactSet supplies global economic and financial data to analysts, investment bankers and other financial professionals.
For the quarter, FactSet posted net income of $36.14M, or $0.74 per share, compared to last year’s tally of $35.59M, or $0.73 per share. Revenues for the period came in at $155.24M, down slightly from $155.63M a year ago.
Sales from U.S. markets were down 1% at $105M, while non-U.S. sales came in up 1% at $50M. Analysts within the industry were looking for FactSet to record a quarterly profit of $0.74 per share on $155.85M in total revenues.
Looking forward to the 2Q, FactSet expects earnings to come in between $0.73 and $0.75 per share, with total sales in the range of $154M to $158M. Analysts are anticipating 2Q earnings of $0.75 per share on $158.31M in overall revenues.
Although the company posted a solid earnings report and a positive outlook, shares of FDS did not respond. By the end of the week, FactSet’s stock plunged more than 13%, losing $10.41 to conclude at $65.54 per share.
At the start of the holiday shortened trading week, FactSet’s stock managed to post a positive day, adding $0.38, or 0.6%, to close the December 21 session at $65.92 per share. Over the course of a year, the stock has traded between $34.24 and $76.76 per share.
BBY – Best Buy Co. Inc. ($44.34 to $39.50) -10.9%
Announcing early last week, Best Buy Co. (BBY) confirmed that the company’s earnings for the 3Q skyrocketed, but predicted a narrower 4Q profit as shoppers continue to check their spending. Best Buy is widely recognized for selling personal computers and other home office products, consumer electronics, entertainment software, major appliances and related accessories principally through its retail stores.
For the recent period, the nation’s largest electronics retailer posted a net profit of $227M, or $0.53 per share, versus a profit of $52M, or $0.13 per share from a year ago. Quarterly revenues also advanced year-over-year, climbing from $11.5B to $12.02B, an increase in sales of 4.5%.
Domestic sales increased 9% to $8.9B, while international sales slipped 6% to $3.1B. Analysts, on average, were looking for Best Buy to post a quarterly profit of $0.43 per share on total sales of $11.98B.
For fiscal 2010, Best Buy is now looking to post a profit between $2.94 and $3.09 per share, up from a previously stated range of $2.70 to $3.00 per share. Revenues are now expected to come in between $49B and $49.5B, higher than the prior range of $48B to $49B that was first anticipated. Analysts are looking for a yearly profit of $2.96 per share based on total sales of $48.59B.
Despite the raised outlook, shares of BBY slipped nearly 11% by the end of last week, giving up $4.84 to finish the week at $39.50 per share. At the close of the December 21 session, shares of Best Buy were up more than 1%, gaining $0.57, to conclude the day at $40.07 per share.
During the past year, the company’s stock has traded between $22.92 and $45.55 per share
TRA – Terra Industries Inc. ($35.30 to $31.90) -9.6%
Included in the list of top percentage losers for the past week was Terra Industries Inc. (TRA), which is in the middle of an ongoing hostile takeover bid from rival CF Industries Inc. (CF).
Terra is an industry leader in the production and marketing of both nitrogen products and methanol and is one of the largest producers of anhydrous ammonia and nitrogen solutions in the United States and Canada and of ammonium nitrate in the United Kingdom.
Since the beginning of the year, Terra has repeatedly refused CF’s buyout bid, citing that they "continue to substantially undervalue Terra." CF originally offered to buyout Terra for $32 per share in an all-cash deal, but was rejected. The latest bid called for CF offering $36.75 in cash, including a special dividend of $7.50 per share declared by Terra in September, plus 0.1034 of a CF common share for each Terra share.
Terra responded to the latest development by stating, "The board believes the market consensus is shifting to reflect the brighter near- and long-term prospects for the entire sector, and that the latest improvement to CF's bid does not fully reflect these brighter prospects."
The combined bid, including the special dividend, currently stands at $45.91 per share.
CF is also the target of a takeover by agricultural nutrients maker Agrium Inc. (AGU), which has proposed a buyout of CF for $45 per share in cash plus a one-for-one share exchange.
With shareholders and investors uncertain about the near future of Terra Industries, shares of TRA plunged nearly 10% last week. However, as the new week in trading begins, Terra’s stock jumped more than 3% by the close of the December 21 session, gaining $1.05 to end the day at $32.95 per share.
During the past year, the stock has traded between $14.17 and $43.14 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
