BetterTrades
(Best) TXT, PFG, LNC (Worst) ITG, R, ISCA from Better Trades
April 17, 2009
Coming off the third consecutive week in which the major indices posted gains, March proved to be the best month, with regards to percentage gains, in which the markets have seen since the 1930s. Over the past week, several companies made solid increases in their market share, while others were not as profitable during the markets push higher.
Top 3 Stocks
TXT – Textron Inc. ($7.42 to $13.56) +82.7%
As a global multi-industry company with operations in five business segments, Aircraft, Fastening Systems, Industrial Components, Industrial Products and Finance, Textron Inc. (TXT) had a very eventful week, as the company’s stock nearly doubled in price on news of a possible takeover. In a report released last Thursday, Kuwait’s Al-Watan newspaper revealed news that a group of United Arab Emirates companies and a Kuwaiti firm are in the process of structuring a deal to buy Textron.
The deal, reported to be worth $21 per share, is looking to purchase the makers of Cessna aircraft and Bell helicopters. The group of investors are interested mainly in the company’s civil operations and will most likely sell Textron’s aircraft operations to an American company, if the proposed purchase goes through. The company’s stock also was propelled higher on additional news during the week that the company could be purchased by either Lockheed Martin Corp. (LMT) or Raytheon Co. (RAY).
One major draw back to the proposed deal is the fact that Textron could find it difficult to sell the company entirely to a foreign entity in that Textron had business within the nation’s civil aviation and military defense contracts. That could lead to a breach in national security.
On Monday, Macquarie Capital downgraded their rating for Textron, from “outperform” to neutral as shares took off on news of the sale. After gaining more than $6 a share over last week’s trading session, shares of TXT slipped in the start of the new week. By the close, Textron stock dropped more than 9%, or $1.29, to end the day at $12.27 per share.
PFG – Principle Financial Group Inc. ($10.53 to $14.47) +37.4%
Another substantial gainer over last week’s shortened trading sessions was Principle Financial Group Inc. (PFG), which is a leading provider of retirement savings, investment and insurance products and services. The firm also offers a broad range of individual life and disability insurance, group life and health insurance, and residential mortgage loan origination.
The week’s surge in market price was attributable to the Treasury Department’s announced earlier in the previous week that they would extend the Troubled Asset Relief Program (TARP), which could help the insurers maintain a solid footing leading to less pessimism for the industry.
"The news report was somewhat surprising to us, given an absence of commentary from life companies regarding the TARP over the past several weeks and the apparent focus of lawmakers on other financial sectors such as banks," announced analysts at Bernstein Research.
With government aid, PFG is in desperate need for the lifeline as life and health insurers are finding it more and more difficult to raise capital in order to get themselves back into the black, amidst escalating losses and a dismal equity market.
During the past week, shares of PFG were up more than 37%, gaining nearly $4 a share during that time. The highs reached during the past trading sessions, reached prices not seen since early February. To continue with the upward trends, shares of PFG added an additional 2.6% during Monday’s session, closing up $0.37 at $14.84 per share to begin the new trading week. Over the past year, shares of PFG have ranged between $5.41 and $59.00 per share.
LNC – Lincoln National Corp. ($6.89 to $10.40) +50.9%
In the same position as aforementioned Principle Financial Group (PFG), Lincoln National Corp. (LNC) is a holding company that operates numerous insurance and investment businesses. In addition to the company possibly receiving TARP money, the company announced earlier in the week that they had made substantial payments to pay-down some of their outstanding debts.
Last Tuesday, Lincoln National confirmed that the firm repaid some $500M in debt maturities, along with planning to pay an additional $200M in commercial paper as it matures over the next several weeks. On news of the repayment, shares of LNC surged more than 9% by the conclusion of Tuesday’s trading session. The gains of the stock was most impressive as the financial sectors’ overall performance for the day saw a decline of 2.6%.
Having posted solid gains over the past four trading sessions last week, Lincoln National’s stock increased their market price by more than 50%, adding nearly $4 a share during that time. Despite a week’s long run higher in the markets, shares of LNC dropped by the end of Monday’s session, losing more than 1%, or $0.16, to conclude the day at $10.24 per share. During the past 52-weeks, LNC shares have traded between $4.76 and $59.99 per share.
Worst 3 Stocks
ITG – Investment Technology Group Inc. ($27.93 to $22.37) -19.9%
On the reverse side of the market’s five-week surge was Investment Technology Group Inc. (ITG), which was the biggest percentage loser for the previous week’s trading sessions. As one of the leading providers of technology-based equity trading services and transaction research to institutional investors and brokers, ITG lost nearly 20%, or more than $5 per share, of their market value despite recent news of the company’s increase in trading volume.
Falling to just over $22 per share by the close of the markets last Thursday, ITG shares were pushed lower by a 17% drop in March’s average commission rates, which put pressure on margins and subsequently led to a rating downgrade by BMO Capital Markets. Upon lowering their rating, BMO cut their rating from “outperform” to “market perform” based on a weakening commission trend within brokerage houses, leading to a 21.6% drop in stock price last Wednesday.
"We saw our full-service institutional clients retrench this quarter subsequent to significant declines in their assets under management, while our direct market access clients increased business with us. The ICI fund flow data indicates that substantial investor assets are on the sidelines. Once a market recovery begins and those assets return to the equity markets, we believe we are well positioned to increase trading volumes, average US commissions per share and related commission revenues, which would provide the significant operating leverage we have shown in the past," announced Howard Naphtali, CFO of Investment Technology Group.
After a weeklong decline in market price, shares of ITG managed to close Monday’s session in the green, adding $0.19, or 0.8%, to end at $22.56 per share. Over the past year, ITG stock has traded as high as $53.35 per share, and as low as $13.00 per share.
R – Ryder System Inc. ($31.49 to $25.43) -19.2%
Also losing nearly 20% of their market value over the past week, Ryder System Inc. (R), is a provider of leading-edge logistics, supply chain and transportation management solutions worldwide. The company offers a wide range of services ranging from full-service leasing, commercial rental and programmed maintenance of vehicles to integrated services such as dedicated contract carriage and carrier management.
Much of the week’s demise came from the company’s lowering of their upcoming 1Q outlook last Wednesday. In their statement, Ryder lowered their forecast from $0.40 to $0.50 per share, issued in February, to a range of $0.22 to $0.24 per share, citing lower results from various business segments and the continual economic downturn.
In December, the company made efforts to combat the economic pressures by discontinuing operations in several overseas markets and eliminating some 700 domestic jobs nationwide. Additionally, the company also temporarily laid-off some 1300 drivers and 125 salaried employees.
"For the past two-and-a-half years we have been in a freight recession… During the first quarter, we saw further material reductions in freight volumes. As a result of this more severe downturn in freight activity, we are now seeing reductions in Ryder's lease product line resulting in fewer leased units and lower usage of the vehicles currently under contract. We expect these impacts to continue throughout the year,” affirmed Greg Swienton, Chairman and CEO of Ryder System.
Following up on last week’s decline in market price, shares of Ryder continued with that trend heading into the close of Monday’s session. By the sound of the closing bell, Ryder shares were down another 5.3%, or $1.34, to start the week at $24.09 per share. During the past year, Ryder shares have ranged between $19.00 and $76.64 per share.
ISCA – International Speedway Corp. ($24.74 to $20.01) -19.1%
Lastly, International Speedway Corp. (ISCA), whose operations consist primarily of racing events at the company’s motor sports facilities, confirmed that the company’s quarterly results missed analysts’ expectations, leading the company to reduce their yearly outlook projections.
Generating revenues primarily through sales of admissions to racing events, television broadcast rights fees, sponsorship fees, hospitality rentals, royalties from licenses of trademarks and provides catering, souvenir and food concession services, ISCA made it known last Tuesday that 1Q earnings slipped year-over-year as the prices of tickets were reduced in order to increase fan attendance.
During the quarter, ISCA recorded earnings of $25.1M, or $0.52 per share, compared to last year’s tally of $36.2M, or $0.71 per share, a decrease in profits of nearly 31%. Overall sales for the period slipped as well, falling from $193.9M to $166.1M, a decline of more than 14%. On average, analysts were looking for ISCA to post quarterly earnings of $0.61 per share on revenues of $179.7M.
At the conclusion of Tuesday’s trading, shares of ISCA were down more than 23% to close at $18.68 per share. The stock’s freefall was also attributed to the company’s lowering of yearly guidance from a range of $2.35 to $2.45 down to a range of $1.80 to $2.00 per share. Revenues were also revised to a range between $745M and $765M. Analysts, on average, are looking for ISCA to post yearly earnings of $2.24 per share on total sales of $747.2M.
At the close of Monday’s session, shares of ISCA were just below breakeven, down $0.05, or 0.2%, to finish at $19.99 per share. During the past year, shares of International Speedway Corp. have traded in a range between $15.96 and $44.75 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
