BetterTrades
(Best) ROH, ARST, BIG (Worst) GYMB, USB, IPI from Better Trades
March 9, 2009
The first trading week in March was very difficult for many stocks on the major indices. The markets, which all lost more than 6% by the end of the week, were pushed lower throughout the week due to disappointing quarterly results from influential companies, along with a continuing barrage of dire economic reports. There were, however, a few bright spots for a small handful of companies that managed to battle through the falling markets to post significant gains by the close of Friday’s session. On the other hand, there were also companies that were battered by the selling sentiment that controlled the markets for much of the week.
Top 3 Stocks
ROH – Rohm & Haas Co. ($52.07 to $63.80) +22.5%
Leading the way as biggest percentage gainers for the week ending March 6, Rohm & Haas (ROH) benefited from the proposed merger talks between them and the Dow Chemical Co. (DOW), in which Dow offered $15.4B for the company, a 74% premium with the buyout priced at $78 per share. The offer was first submitted back in July 2009 for the purchase.
On Monday, the two companies entered the Delaware Chancery Court to postpone the hearings of Dow backing out of the merger. ROH is suing Dow for the refusal to close the deal after analysts from Dow stated that the deal might not be worth the offered price.
Rohm & Haas, a specialty chemical company, implements its broad technology into their diverse line of products, such as paints and coatings, adhesives and sealants, household products, personal computers and electronic components, and construction materials.
In addition to serving the specialty crop market, in which the company offers chemicals to the preservation of fruits and vegetables, Rohm and Haas offers a wide range of turf and ornamental products designed for use by golf course and lawn care professionals.
With the week’s trading up on news of the possible buyout, shares of ROH were trading higher strictly on the optimism of the takeover. With the company’s stock gaining nearly 23% over the last five trading session, shares jumped in Monday’s session as well, adding another 7.7%, or $4.90, to close the start of the new week at $68.70 per share.
ARST – ArcSight Inc. ($9.34 to $11.43) +22.3%
Another company posting solid gains throughout last week’s sessions was ArcSight Inc. (ARST), a leading provider of security and compliance solutions that intelligently identify and mitigate business risk and deliver a centralized view of enterprise-wide events across heterogeneous infrastructures.
Founded in 2000, the company has recently been trading publicly after their February 2008 IPO. Since that time, shares of ARST are up more than 27%. A key catalyst to the company’s surge last week came from their 3Q earnings release, which showed a jump in profits for the quarter as revenues increased year-over-year.
For the quarter, ARST booked net income of $5.1M, or $0.15 per share, versus a profit of $2.4M, or $0.09 per share from a year ago. Overall revenues advanced as well, climbing from $27.7M to $36.4M, an increase of more than 31%. Analysts were looking for the security provider to post quarterly earnings of $0.08 per share on total sales of $32.68M.
Looking ahead, the company also offered yearly projections in which ArcSight is looking to post annual earnings between $0.41 and $0.48 per share with sales totaling between $130.9M and $134.9M. On average, analysts are expecting ARST earnings to come in at $0.29 per share on $127.34M in sales for 2009.
By the close of trading on Monday, shares of ARST were still trading higher, adding 1%, or $0.11, to end the day at $11.54 per share. Over the past year, shares of ArcSight have ranged between $4.17 and $13.00 per share.
BIG – Big Lots Inc. ($15.51 to $17.51) +12.9%
One of the leading value retailers specializing in closeout merchandise and toys, Big Lots Inc. (BIG) benefited greatly during the previous week despite a soured earnings release last Wednesday. However, the company offered next year’s fiscal guidance that comes in ahead of market expectations.
In their earnings release for the 4Q, Big Lots posted a decline in profits year-over-year, from $92M, or $1.04 per share to $78.8M, or $0.96 per share, a decrease in earnings of more than 14%. Revenues during the period declined as well, falling from $1.41B to $1.37B, a decrease in sales of nearly 3%.
Analysts, in the meantime, were looking for the discount retailer to post quarterly results of $0.93 per share on overall revenues of $1.36B. Although the company posted lower results year-over-year, Big Lots managed to come in above market predictions, which boosted the company’s shares higher.
Forward looking, BIG is expecting to post yearly earnings between $1.75 and $1.90 per share, while analysts are projecting earnings to come in at $1.74 per share. For the upcoming 1Q, Big Lots is looking to post a profit in the range of $0.34 to $0.40 per share. Analysts, on average, are looking for 1Q earnings to be $0.35 per share.
At the conclusion of Monday’s trading session, shares of BIG continued on their upward trek, adding $0.20, or 1.1%, to close out at $17.71 per share. Over the past 52 weeks, shares of big Lots have ranged between $12.62 and $35.33 per share.
Worst 3 Stocks
GYMB – Gymboree Corp. ($25.72 to $15.55) -39.5%
Adversely, numerous stocks were beaten handily over the past week’s trading session, following the trend of the markets to trade down substantially. Leading the way was Gymboree Corp. (GYMB), a leading specialty retailer of high quality apparel and accessories for children ages newborn to preteen. The company also offers directed parent-child developmental play programs for children ages newborn to 4 years old.
In what should have bolstered the company’s market position after a solid earnings release this past Wednesday, shares of GYMB took a nose-dive on a much weakened outlook forecast, which pushed shares down nearly 40% for the week. For the 4Q, GYMB posted a profit of $29.5M, or $1.00 per share, in contrast to last year’s earnings of $26.8M, or $0.93 per share, an increase of 10% year-over-year.
Revenues, for the quarter, advanced as well, climbing from $278.4M to $288.7M, an increase of nearly 4%. On average, analysts were anticipating that the children’s apparel retailer would post earnings of $0.98 per share on total sales of $288M.
Notwithstanding a solid earnings release, it was the company’s upcoming 1Q outlook that did the shares in, as a weakened economy and tougher safety regulations on children’s apparel and accessories have been implemented. Heading into the 1Q, GYMB is looking to post quarterly earnings between $0.18 and $0.25 per share, while analysts are expecting the company to post earnings of $0.76 per share. Gymboree is also cautioning investors that overall sales could decrease between 20% and 25%.
With that, shares of GYMB fell 39.5% over the previous week’s trading session. However, despite, the massive losses, shares of GYMB were up during Monday’s trading, adding 5.9%, or $0.92, to end the session at $16.47 per share. During the last year, shares of GYMB have ranged between $14.02 and $47.69 per share.
USB – US Bancorp ($14.31 to $8.82) -38.3%
As a whole, the banking industry took heavy hits over the past week, as downgrades were possible for sector leaders Wells Fargo & Co. (WFC) and Bank of America (BAC) as heightened concerns over future losses increased. As fears of the stability within the banking industry continue to mount, recent cuts in dividends and massive quarterly losses, investors are worried that the government’s aid to rescue the financial system will come up short.
These events did not bode well for US Bancorp (USB), which saw their stock slip more than 38% over a five-day period. USB is a financial services holding company, which operates full-service branch offices and ATMs. The company also provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, and trust and payment service products to consumers, businesses and institutions.
Not immune to the woes of the economy, USB announced early last week that the bank was slashing their quarterly dividend by 88%, to $0.05 per share. With the company cutting their dividend, USB will relinquish their long-held title as an S&P 500 Dividend Aristocrat. In order to be a member of the elite, a company must provide increases in their dividend payout for at least 25 years.
By the end of the week, shares of USB were down 38.3% to close out Friday’s session at $8.82 per share. Monday’s session brought a glimmer of hope to the company’s shares, as the stock jumped more than 15% during trading hours, adding $1.37 to end the day at $10.19 per share. During the past year, shares of US Bancorp have ranged between $8.06 and $42.23 per share.
IPI – Intrepid Potash Inc. ($22.44 to $14.49) -35.4%
Lastly, Intrepid Potash Inc. (IPI), the largest producer of potash in the U.S., viewed the company’s shares freefall over the past week, despite the company’s better-than-expected earnings release during the week. Shares for the week dropped more than 35%, as the outlook for potash in 2009 is weaker than in recent years, which has investors selling their positions.
Dedicated to the production and marketing of potash and langbeinite, minerals containing potassium, Intrepid showed a profit in the 4Q that was nearly five-times more than the previous year’s results. For the recent 4Q, IPI posted net income of $22.69M, or $0.30 per share, much higher than last year’s 4Q profit of $4.69M, or $0.06 per share. Overall sales surged as well, up more than 41% year-over-year, from $56.32M to $79.49M. In the meantime, analysts were looking for the potash company to post earnings of $0.30 per share on total revenues of $77.71M.
Regardless of an impressive increase in quarterly earnings, it was the company’s lack of volume that provoked investors into selling their shares in Intrepid. During the 4Q, IPI sold only 94,000 short tons of potash, down more than 56% from last year’s total of 215,000 tons.
As commodity prices continue to fall and buyers remain hesitant to purchase fertilizers, Intrepid sees a tough short-term future. With uncertainty in the markets and farmers waiting to buy the needed products, the company’s downward trend has been the result of tentative purchases.
By the end of Friday’s trading session, shares of IPI were down 35.4%. One positive for the company’s stock came early Monday morning in that an analyst from Oppenheimer initiated coverage on the company’s stock, putting a “perform” status on their shares. Beginning the new week, shares of Intrepid Potash jumped more than 6% by Monday’s close, adding $0.95 to end the session at $15.44 per share.
Throughout the past year, shares of IPI have traded between $13.80 and $76.24 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
