BetterTrades
(Best) CSL, LVS, LTM (Worst) MRTN, MCO, BK from Better Trades
July 27, 2009
The markets rallied throughout much of the week, as investors responded well to an influx in corporate earnings that came in well-above market expectations. The resurgence in market gains, builds on the rally that lasted from early March through mid-June, pushing the indices to yearly highs.
The latest surge in the markets has pushed the Dow Jones high enough to erase all losses incurred thus far this year and sent the index above the 9,000 level, a range not seen since early January. The S&P 500, which is testing the 1,000 mark, has not traded or closed above that level since early November.
Top 3 Stocks
CSL – Carlisle Companies Inc. ($24.05 to $30.80) +28.1%
A leading percentage gaining throughout the previous week, Carlisle Companies Inc. (CSL), is engaged in the manufacturing and distribution of a wide variety of products across a broad range of industries, including roofing, construction, trucking, automotive, foodservice, industrial equipment, lawn and garden and aircraft manufacturing. The stock surged nearly 30% during the week, based solely on the strength of the company’s 2Q earnings, which came in above market expectations.
For the recent period, Carlisle recorded a quarterly profit of $55.5M, or $0.90 per share, in contrast to the prior year’s income of $54.3M, or $0.88 per share, an increase in earnings of just over 2%.
Although earnings increased year-over-year, sales did not, falling from $863M to $618.5M, a drop in revenues of more than 28%. Analysts, on average, were looking for the construction material manufacturer to record quarterly earnings of $0.45 per share on total sales of $659.5M.
CarVlisle noted that sales were down across the board, along with the foreign exchange rate cutting into sales by 1%. However, the company did prosper from a gain of $24.5M related to insurance recoveries connected to a fire at a tire and wheel facility in Georgia.
In the first half of the year, Carlisle posted net earnings of $62.1M, or $1.01 per share, compared to last year’s six-month tally of a loss of $8.3M, or $0.14 per share. Sales for the period retreated from $1.5B to $1.1B, a drop of nearly 27%. For the remainder of the year, the company is anticipating a 25% decline in sales due to the dire housing industry.
Counteracting their weekly surge, shares of CSL declined in the July 27 trading session, losing $0.07, or 0.2%, to close out at $30.73 per share. Over the past year, Carlisle shares have ranged from $16.60 per share to $37.19 per share.
LVS – Las Vegas Sands Corp. ($8.59 to $10.88) +26.7%
Included in the list of top percentage gainers is Las Vegas Sands Corp. (LVS), a hotel, gaming, and retail mall company headquartered in Las Vegas, Nevada. The company owns The Venetian Resort Hotel Casino, the Sands Expo and Convention Center, and the Venetian Interactive, an internet based venture.
The company’s most recent undertaking, Venetian Macau Limited, is a development of multiple casino hotel resort properties in The People's Republic of China's Special Administrative Region of Macau.
Early last week, LVS confirmed that the company has considered applying in Hong Kong for an initial public offering (IPO), presenting shares of the Macau casino to investors. The company is seeking cash to restart construction on its hotel and casino complex in Macau’s Cotai Strip. Construction on the 20,000-room unit, with an estimated $12B in costs, was halted last year when the global financial crunch worsened.
Adding to the stock’s weekly performance, a BMO Capital Markets analyst upgraded shares of LVS from “Market Perform” to “Outperform,” while raising the target price on the stock from $11 to $15 per share. On average, analysts are expecting Las Vegas Sands to post a profit of $0.03 per share in 2009 and $0.19 per share in 2010.
After gaining nearly 27% in market value last week, shares of LVS continued their uptrend starting the new trading week. By the sound of the closing bell in the July 27 session, shares added nearly 4%, or $0.40, to end the day at $11.28 per share.
LVS shares, in the past year, have traded as high as $59.17 and as low as $1.38 per share.
LTM – Life Time Fitness Inc. ($22.30 to $27.15) +21.7%
Operating very distinctive and expansive sports, athletic, fitness and family recreation centers throughout the country, Life Time Fitness Inc. (LTM) saw their stock’s price surge by the end of the week on better-than-expected quarterly results. Despite the decline in profits, the company managed to increase sales year-over-year, beating market expectations.
For the 2Q, LTM posted net income of $18.3M, or $0.46 per share, versus the previous year’s 2Q profit of $19.8M, or $0.50 per share, a decrease in earnings of nearly 8%. In the meantime, quarterly revenues advanced, climbing from $192.4M to $212.5M, an increase of more than 10%.
Analysts within the industry were looking for the fitness club operator to record quarterly earnings of $0.41 per share with overall revenues coming in at $211.6M.
"To this end, we continue to advance several connectivity and value enhancement initiatives for members, including dedicated monthly events across a wide range of interest areas at every center and a significantly enhanced myLT.com Web portal," stated CEO Bahram Akradi regarding the company’s focus on membership growth and current member retention.
In response to a solid earnings release, Life Time upwardly adjusted expected earnings for the upcoming year. The company now anticipates earnings in 2010 to range between $67M and $71M, up from a previously stated range of $62M to $68M. Earnings per share are now projected to come in between $1.65 and $1.75, up from $1.55 to $1.70 per share. Revenues were also raised and are now expected to come in between $830M to $860M
With a more than 20% jump in the stock’s price of the past week, shares of LTM furthered their advance higher. At the closing bell on July 27, shares of Life Time Fitness added $0.42, or 1.5%, to end the day at $27.57 per share.
Over the course of a year, shares have traded as low as $7.07 and as high as $41.50 per share.
Worst 3 Stocks
MRTN – Marten Transport Ltd. ($20.10 to $17.42) -13.3%
Despite the overall markets posting solid gains last week, there was a substantial amount of companies that did not fare as well. Included in that list is Marten Transport Ltd. (MRTN), which is a long-haul truckload carrier providing protective service and time- sensitive transportation. Protective service transportation relates to temperature controlled or insulated carriages of temperature-sensitive materials and general commodities.
Kicking off the start of last week’s trading, Marten announced quarterly earnings that came in mixed, compared to market expectations. For the recent 2Q, Marten booked net income of $4.5M, or $0.20 per share, versus the prior year’s 2Q profit of $3.5M, or $0.16 per share, an increase in earnings of nearly 29%.
Nevertheless, operating revenues declined during the quarter, falling from $160M a year ago to $125.8M, a drop in sales of more than 21%. On average, analysts within the industry were looking for the transport operator to book net income of $0.20 per share on total sales of $130.2M.
For the fist six months of the year, Marten recorded net income of $8.5M, or $0.39 per share, in contrast to last year’s six-month tally of $6.1M, or $0.28 per share, an increase in earnings of more than 39%. However, overall operating revenues slipped from $303.4M to $247.8M, a decrease in sales of more than 18%.
Even with a solid earnings report, investors did not respond positively to the release. During the past week, shares of MRTN fell more than 13% in market value. Despite the drop in the stock’s price, the start of the new trading week brought prosperity to the company’s stock, as shares jumped 1%, or $0.18, to end the July 27 trading session at $17.60 per share.
Marten Transport has witnessed their stock trade as high as $22.59 per share over the past year, and as low as $14.71 per share.
MCO – Moody’s Corp. ($29.03 to $25.93) -10.7%
Losing more than 10% of their market value in a week, Moody’s Corp. (MCO) witnessed their shares tumble late in the week, after Warren Buffett's Berkshire Hathaway Inc. (BRK.A) (BRK.B) reduced their stake in Moody’s.
Moody’s, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, has been the topic of blame for the country’s current financial crisis based on speculation that the company assigned top rating on risky mortgages that turned out to collapse a short while later.
National Indemnity, an insurer owned by Warren Buffett's Berkshire Hathaway, reportedly sold nearly 8 million shares in the credit rating agency during the past week, propelling the stock downwards. Buffet, long known for his “buy and hold” strategies, triggered other investors to take note of the sale.
John Neff, an analyst with William Blair and Co. stated, "Until Mr. Buffett clarifies his outlook for Moody's through either word or deed, there will be that much more pressure on the incremental Moody's buyer to stay on the sidelines and that much more encouragement for the incremental short seller who can understandably speculate that Berkshire's remaining 40 million shares now constitute an overhang."
The 8 million shares sold reduced Berkshire’s stake in Moody’s from 48 million, or 20.4%, down to its current 40 million, or 17%. Since first investing in Moody’s back in 2000, Berkshire has neither bought nor sold and shares of the company.
Bill Bergman, an analyst at Morningstar Inc. (MORN) and a former Federal Reserve economist commented, "Credit rating agencies are creatures of confidence, and investor sentiment means a lot. There is a great deal of intellectual talent at Moody's, but Moody's faces more competition, regulatory risks and costs. Fifty percent margins are a thing of the past."
By the end of the week, concluding July 24, shares of Moody’s had lost well over $3 per share. With the start of the new trading week, the stock rebounded marginally, adding $0.82, or 3.2%, to end the July 27 session at $26.75 per share.
During the past year, MCO shares have ranged between $15.41 and $43.07 per share.
BK – The Bank of New York Mellon Corp. ($29.39 to $26.74) -9.0%
Rounding out the list of biggest percentage losers for the past week is The Bank of New York Mellon Corp. (BK). The company operates as a bank holding company and one of the world's larger financial institutions, providing comprehensive financial services to individuals, small and mid-sized businesses, multinational corporations, financial institutions, governments and public agencies worldwide.
Shares of BK declined 9% over the course of a week, due in large part to the bank’s 2Q earnings report, which showed a year-over-year decline in profits related to one-time charges for payment of TARP funds.
During the recent period, New York Mellon posted net earnings of $176M, or $0.15 per share, in sharp contrast to the previous year’s 2Q profits of $309M, or $0.28 per share, a decline in income of more than 43%. Furthermore, the bank’s overall revenues generated during the quarter fell from $3.38B to $2.96B, a decrease in sales of more than 12%.
New York Mellon recorded a one-time charge of $196.5M for the period, relating to the bank’s repayment of the $3B in government aid in which they received last year. The bank also paid out nearly $40M in preferred dividends in the TARP funds before the repayment of funds last month.
The aforementioned charges, together with a fee levied on banks to help replenish the FDIC's insurance fund, reduced New York Mellon’s net earnings by $0.23 per share.
"Overall, revenue has stabilized, we continue to gain market share, remain profitable, and have among the best capital levels in our industry. However, investment losses remain stubbornly high primarily due to continued deterioration in the residential housing market. We will continue to focus on maintaining exceptional client service levels and reducing risk and expenses," commented Robert Kelly, Chairman and CEO at the Bank of New York Mellon.
Analysts, in the meantime, were anticipating quarterly earnings from the bank of $0.52 per share on total revenues of $3.28B.
Following a nearly $3 per share decrease in market price last week, trading within the July 27 session recouped a small percentage of those losses. By the sound of the closing bell, BK shares were up $0.26, or 1%, to close out the day at $27.00 per share.
Shares have traded as high as $40.65 per share and as low as $15.44 over the past year.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
