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(Best) PRU, JPM, MW (Worst) CMTL, AVAV, NAFC from Better Trades

March 18, 2009

In a much-needed turn of events in the markets the past week, the major indices pulled together a solid rally over the trading sessions, as the markets all posted a 9% or greater gain, helping a select few increase their market shares. However, despite the upward direction, there were other stocks that could not benefit from the buyers mentality throughout the week, which pushed those shares to multi-digit losses for the week.

Top 3 Stocks

PRU – Prudential Financial Inc. ($11.38 to $18.76) +64.9%

Despite the overall performance for insurers, Prudential Financial Inc. (PRU) posted some of the biggest gains throughout the markets over the past week. As one of the largest financial service institutions in the U.S., Prudential provide a wide range of insurance, investment management and other financial products and services.

One of the biggest concerns throughout the industry is the lack of capital that Prudential, along with rivals MetLife (MET) and Principle Financial Group (PFG), face. "Recent spread-widening and economic deterioration significantly impacted our analysis, which implies that most life and health insurers are at risk of needing to raise capital as their prospects for earning their way out of the credit losses are diminishing, especially for stock-market-sensitive names," analysts at Friedman, Billings, Ramsey stated early last week.

Even with downgrades within the sector, shares of PRU jumped nearly 65% throughout the trading sessions, climbing from $11.38 per share to $18.76 per share. Of the 522 members rating Prudential, only 8.3% expect the stock to beat the market. Not a well-rated stock. Nevertheless, investors think otherwise, as the stock moved higher in Monday’s trading session as well, adding nearly 2%, or $0.34, to start the week at $19.10 per share.

JPM – JPMorgan Chase & Co. ($15.93 to $23.75) +49.1%

As a leading global financial services firm, JPMorgan Chase & Co. (JPM), is a leader in investment banking, asset management, private banking, private equity, custody and transaction services and retail and middle market financial services. Late last week, the company was labeled as the top-selling mutual fund group in the U.S. During the past year, investors placed more than $140B worth of capital into the company.

JPMorgan managed to record outflows of capital, excluding money market funds, of $1.3B, and with a dire economic environment for money managers, only a handful of groups managed to attract investors’ cash other than money markets.

Other news throughout the week, which helped propel the stock’s price, was the potential offering from Barclays Capital Group PLC (BCS), which operates in commercial and investment banking, insurance, financial and other related services in the United Kingdom, of $30M for JPM’s portfolio of NYSE market maker Bear Wagner Specialists LLC. When finalized, the deal will make Barclays the largest designated market maker on the NYSE, representing nearly 28% of the daily trading volume.

By the end of the week, shares of JPM were up nearly 50%, going from nearly $16 a share to just under $24 a share. Monday’s trading session could not continue with the previous week’s momentum, slipping $0.66, or 2.8%, to close the start of the week at $23.09 a share.

MW – Men’s Wearhouse Inc. ($9.68 to $14.08) +45.5%

Last but not least, one of the largest specialty retailers of menswear in the U.S. and Canada, Men's Wearhouse Inc. (MW), targets middle and upper middle income men by offering quality merchandise at everyday low prices. With upgrades by analysts from both Stifel Nicolaus and Wedbush Morgan, the company’s stock was also bolstered by an earnings release late last week that pushed the stock up more than 20% on Thursday.

In the company’s 4Q report, MW beat market expectations, posting earnings of $1.5M, or $0.03 per share, albeit down from the previous year’s profit of $14.5M, or $0.28 per share. Sales were down as well, as retailers continue to be battered by the lack of spending from consumers. Overall revenues dropped 11%, from $535M to $476.4M.

Analysts, in the meantime, were looking for the men’s apparel retailer to record a quarterly loss of $0.16 per share on total sales of $490.25M. Looking ahead to 2009, MW is anticipating that the first half of the year will generate earnings between $0.45 and $0.65 per share, with sales increasing between 4% and 7% during the six-month period.

With gains over the past week of 45%-plus, the start of the new week brought a different result than the prosperity from last week. Shares of MW were down more than 3% by the close of Monday’s session, falling $0.45 to close at $13.63 per share. Over the past year, MW has traded in a range of $8.33 and $27.64 per share.

Worst 3 Stocks

CMTL – Comtech Telecommunications Corp. ($36.03 to $21.61) -40%

On the other side of things, other companies did not fare as well over the past week even with the markets posting substantial gains. One of the hardest hit stocks, Comtech Telecommunications Corp. (CMTL), was beaten down due largely to the company’s 2Q earnings release earlier in the week that showed a decline in profits of nearly 50%.

CMTL, engages in the design, development, production and marketing of innovative products, systems and services for advanced communications solutions. CMTL operates through three complementary segments, telecommunications transmission, mobile data communications and RF microwave amplifiers. Comtech sells products to a diverse customer base in the global commercial and government communications markets.

In the company’s earnings report, CMTL posted net income of $12.8M, or $0.46 per share, compared to the previous year’s 2Q profit of $25.5M, or $0.91 per share, a decrease in earnings of 49.8% year-over-year. During the quarter, sales retreated as well, falling from $152M to $143.9M, a decline of 5.4%.

On average, analysts were looking for the communications equipment maker to post earnings of $0.44 per share on overall revenues of $151.2M. After the announcement of the company’s dismal earnings report, shares of CMTL plunged more than $15 per share last Tuesday. The downward trend continued throughout the remainder of the week, as shares of Comtech dropped 40% during the week. However, in Monday’s trading session, shares of CMTL gained almost 3% by the close, adding $0.61 to end the day at $22.22 per share.

AVAV – AeroVironment Inc. ($31.78 to $20.57) -35.3%

Another company devastated by a poor earnings release early last week was AeroVironment Inc. (AVAV), which designs, develops, produces, and supports an advanced portfolio of Unmanned Aircraft Systems (UAS) and efficient electric energy systems. Over the week’s trading session, shares of AVAV lost more than 35% of their market share due largely to a disappointing 3Q earnings release.

The company's small UAS are used extensively by agencies of the U.S. Department of Defense and increasingly by allied military services to provide situational awareness to tactical operating units through real-time, airborne reconnaissance, surveillance, and target acquisition.

For the 3Q, AVAV posted net earnings of $4.54M, or $0.21 per share, versus last year’s profit of $5.97M, or $0.28 per share, a decline in net income of nearly 24%. Although income was down, revenues increased during the quarter, climbing from $48.54M to $52.23M, an increase of more than 7.5%. Analysts, on average, were looking for the UAS maker to record quarterly earnings of $0.27 per share on total sales of $65.32M.

Last week’s trading saw shares of AVAV drop more than $11 a share. Having traded in a range between $18.50 and $41.22 per share, AVAV is trading just over 5% above their 52-week low set last March. By the sound of the closing bell, the company’s stock followed last week’s trend, slipping another $1.05, or 5.1%, to close at $19.52 per share.

NAFC – Nash Finch Co. ($33.72 to $27.96) -17.1%

Compared to the previous two percentage losses, Nash Finch Co. (NAFC), which is one of the largest food distribution companies in the U.S., consisting of three primary operating segments, the wholesale distribution segment, the retail segment and the military distribution segment, fared a little better.

Still posting double-digit losses, the company was hampered during last week’s trading session due mainly to a 4Q earnings release that saw net profits drop more than 27% year-over-year. For the recent period, Nash Finch recorded earnings of $6.2M, or $0.47 per share, in contrast to last year’s tally of $8.5M, or $0.62 per share. Quarterly sales advanced from last year’s total of $1.07B to $1.20B, an increase of more than 12%.

During the period, the company was negatively impacted by charges that amounted to $3.5M or $0.26 per share towards net income. Analysts, in the meantime, were projecting earnings of $0.91 per share. After the results were released, shares of NAFC gapped down more than $3 per share. By the end of the week, the stock had lost more than 17% of its market value.

Monday’s session brought a change in direction, as shares of Nash Finch closed the day up, adding $0.25, or 0.9%, to finish at $28.21 per share. During the past year, the company’s stock has traded between $24.94 and $47.63 per share.

2009 Better Trades Article

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BRIAN MULLIN