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(Best) GGC, WTFC, SPSS (Worst) AKAM, DINC, SYMC from Better Trades
August 4, 2009
As the month’s trading concludes, the major indices posted their best results for July in 20 years. The surge began in early July when investors witnessed Goldman Sachs (GS) post enormous earnings. Since then, Intel (INTC), Caterpillar (CAT) and MasterCard (MA) have all posted results that have outpaced expectations.
The Dow Jones is higher by 8.4% this month, its strongest July since 1989, when it gained 9%. Meanwhile, the NASDAQ traded above the 2,000 mark during the week, its first venture above that level since October 2008. Since hitting their most recent lows in March, the NASDAQ has advanced 56%, while the S&P is up 48%.
Top 3 Stocks
GGC – Georgia Gulf Corp. ($9.00 to $17.29) +92%
As a leading North American manufacturer and international marketer of two highly integrated product lines, chlorovinyls and aromatics, Georgia Gulf Corp. (GGC) was a leader in percentage gains over the past week, adding more than $8 per share. The stock’s massive increase was due in large part to the company’s recent announcement that they reduced their debt load by more than half.
Prior to the end of the week, Georgia Gulf confirmed that the company was participating in a debt for equity exchange. In the offering, GGC accepted $736M in principle for the senior notes, in exchange for convertible preferred shares and common stock. The swap allowed the company to pay off more than $720M in principle debt.
The deal involves roughly 30 million shares of convertible preferred stock and 1.3 million shares of common stock. Of the senior notes exchanged, 7.125% of notes due in 2013 were swapped, while 9.5% in 2014 and 10.75% due in 2016 were all exchanged.
Georgia Gulf's President and CEO, Paul Carrico commented, "For several months we have been working closely with our lenders and bondholders to restructure our balance sheet and provide Georgia Gulf the financial flexibility to weather current economic conditions and to provide a solid foundation for growth. With our new capital structure, valuable asset base and skilled and dedicated employees, we are a strong business partner positioned for the long term in our chemicals and building products businesses. We look forward to continuing to work with our customers and suppliers to lead our markets as economic conditions improve."
Following the company’s swap agreement, shares of GCC surged by the end of the week, gaining more than 92% in market value. Starting the new trading week, shares continued their surge, adding an additional 38% by the close of the August 3 session, gaining $6.66 to close the day at $23.95 per share.
Over the course of a year, shares of Georgia Gulf have ranged as high as $121.00 per share, and as low as $5.50 per share.
WTFC – Wintrust Financial Corp. ($16.31 to $26.15) +60%
Included in the list of substantial gainers over the past week was Wintrust Financial Corp. (WTFC), which is a bank holding company that provides banking services, trust and investment services, commercial insurance premium financing, short-term accounts receivable financing, and certain administrative services. With July’s trading ending, shares of WTFC added 60% to their market value, in large part due to the company’s recent earnings report.
During the middle of last week, Wintrust announced 2Q results that came in ahead of market expectation, despite overall profits plunging more than 42%. For the recent period ending June 30, Wintrust recorded net income of $6.5M, or $0.06 per share, in sharp contrast to the previous year’s 2Q earnings of $11.3M, or $0.47 per share.
Revenues, meanwhile, advanced more than 26%, from $93M to $117.9M. On average, analysts within the industry were looking for the holding company to post a quarterly loss of $0.21 per share with overall revenues coming in at $101.1M.
Looking further into the report, Wintrust witnessed net interest income climbing from $59.4M to $72.5M, an increase of more than 22%. Additionally, non-interest income advanced from $33.6M to $45.5M, a more than 35% jump. However, provisions related to credit losses increased 130%, from $10.3M to $23.7M.
For the first half of the year, Wintrust managed to post net profits of $2.9M, or $0.12 per share, versus the prior year’s six-month total of $21M, or $0.87 per share.
By the end of last week’s trading, shares of WTFC gained nearly $10 per share, solely on the backs of a better-than-expected earnings report. By the start of the new trading week, beginning August 3, shares of Wintrust added more than 5%, gaining $1.50 to close the session at $27.65 per share.
Shares of Wintrust have traded as high as $39.25 per share and as low as $9.70 per share over the past 52 weeks.
SPSS – SPSS Inc. ($35.10 to $49.48) +41%
Operating as a multinational company that delivers reporting, analysis and modeling software products, and whose primary markets are marketing research, business analysis/data mining, scientific research and quality improvement analysis, SPSS Inc. (SPSS) witnessed their stock’s price surge on one major announcement… IBM is buying the company.
Announced early last week, the all-cash deal represents a 42% premium from SPSS’ closing price on July 27 of $35.09. The deal is expected to close later this year.
Ambuj Goyal, general manager of IBM's Information Management group stated, “With this acquisition, we are extending our capabilities around a new level of analytics that not only provides clients with greater insight, but true foresight."
Goyal added, "We believe actual benefits may prove greater as the deal adds to IBM's business and predictive analytics portfolio, which will be an essential part of IBM's smarter business systems and which the company has identified as a significant growth opportunity over the next few years."
SPSS is set to release their 2Q earnings report on August 4. Analysts are expecting quarterly earnings to come in at $0.42 per share on total revenues of $71.1M. SPSS posted 1Q profits of $9.4M, or $0.48 per share, as total sales tallied $72.1M.
SPSS is looking for 2Q earnings to be in a range between $0.35 and $0.48 per share on overall revenues between $68M and $74M.
As the company awaits approval for the pending acquisition, shares of SPSS traded lower following the July 31 session, falling $0.03, or 0.1%, to close at $49.45 per share. By the close of last Friday’s trading, shares of SPSS had increased more than $14 per share. During the past year, the company’s stock had traded as high as $49.58, established during the July 31 session, and as low as $21.47 per share.
Worst 3 Stocks
AKAM – Akamai Technologies Inc. ($21.13 to $16.44) -22%
On the other side of the markets, the leading percentage loser during the previous week was Akamai Technologies Inc. (AKAM), a leading global service provider for accelerating content and business processes online. During the week ending July 31, shares of AKAM plunged more than 20%, in large part due to the company’s 2Q earnings release.
In their report, Akamai announced that the company’s net income for the period advanced to $36M, or $0.19 per share, compared to the previous year’s earnings of $34M, or $0.19 per share, an increase in profits of nearly 6%. Quarterly sales inched higher as well, climbing from $194M a year ago to $205M, an increase in revenues of 5.7%.
Despite revenues and net income advancing year-over-year, results came in below market expectations of $0.41 per share and total revenues of $211M.
Looking further into the report, sales through retailers increased 18%, while revenues generated from sales outside of the U.S. surged 28%. Meanwhile, the total number of customers under recurring contracts increased 9% year-over-year to nearly 3,000.
Through the first six months of the year, Akamai has booked net earnings of $73.1M, or $0.39 per share, compared to the previous year’s net profits of $71.2M, or $0.38 per share. Revenues for the first half of the year increased nearly 9%, from $381M to $415M.
Looking ahead, "We believe we can drive profitable deals and secure growth with existing clients and also win business from accounts where we previously only had a small share of the business," stated J.D. Sherman, CFO at Akamai.
Sherman added, "The pricing pressure is disappointing, but we believe Akamai has a competitive advantage with a massive distributed network."
By the close of the July 31 session, shares of AKAM were down nearly $5 per share, as a direct result of the company’s cautious sentiment following their earnings release. Heading into August trading, shares of AKAM continued their downtick by the close, losing $0.02, or 0.1%, to finish Monday’s session at $16.42 per share.
DIN – DineEquity Inc. ($30.83 to $24.71) -19%
The owner and operator of Applebee's and IHOP restaurants, DineEquity Inc. (DIN) saw their shares slip 19% during last week’s trading. Driving the decline was news from company executives that efforts to find buyers for a large majority of the company-owned Applebee’s locals would take longer than anticipated. The company also reported quarterly earnings this past week as well.
The company had originally expected to franchise 200 of their Applebee’s locations by the close of 2009. However, with market conditions the way they are, the company does not believe that this goal will be met. The company iterated that a major stumbling block to the deals being done is the lack of financing for potential buyers.
On a positive note, the company released 2Q performance results that showed net income of $18.8M, or $1.09 per share, in sharp contrast to the previous year’s 2Q loss of $23.7M, or $1.42 per share. Last year’s results were greatly affected by the company’s $41.2M, or $2.46 per share, charges that were related to impairment and closure costs.
Revenues for the period slipped during the quarter, falling from $424.13M to $349.65M, a decrease in sales of nearly 18%. Analysts, on average, were looking for the restaurant operator to record quarterly earnings of $0.36 per share on total revenues of $354.64M.
First half results showed net income of $49.4M, or $2.87 per share, compared to the first six months of 2008 of a net loss of $15.5M, or $0.93 per share. Revenues, meanwhile, came in at $725.21M, down more than 16% from $866.92M a year ago.
Contributing to DineEquity’s downtrend last week, company representatives confirmed that sales at Applebee’s to be between -2% and -5%, while sales from IHOP stores to come in between +1% and -1%.
By the conclusion of the August 3 session, shares of DIN surged more than 3%, adding $0.81 to end the trading day at $25.52 per share. Over the past 52 weeks, the company’s stock has traded as high as $34.71 and as low as $5.24 per share.
SYMC – Symantec Corp. ($17.37 to $14.93) -14%
Rounding out the list of companies posting substantial losses for the week is Symantec Corp. (SYMC), a world leader in Internet security technology. The company provides a broad range of content security solutions to individuals and companies and is the leading provider of anti-virus protection, Internet content and e-mail filtering, and mobile code detection technologies to enterprise customers.
The company’s market value decreased 14% over the past week, as a result of the company’s 1Q earnings report, which showed a decrease in profits and revenues related to charges occurred during the quarter. Revenues, meanwhile, declined 13% year-over-year, from $1.65B to $1.43B.
On average, analysts within the industry were looking for earnings from the security software maker to post quarterly profits of $0.35 per share on total revenues of $1.49B.
Enrique Salem, CEO at Symantec stated, “What we see is shorter-term contracts. We don't expect that to change in the September quarter." The comment referred to customers now buying security products that satisfy their immediate needs and not buying services that operate over several years, taking advantage of discount offers.
Looking ahead to the company’s upcoming 2Q, Symantec is projecting quarterly earnings between $0.32 and $0.34 per share. The company is looking for sales during the period to come in between $1.4B ad $1.45B. Analysts, in the meantime, are looking for 2Q earnings from Symantec to be $0.36 per share based on overall sales of $1.5B.
Following the company’s earnings report on July 29, shares of SYMC slipped more than 7% in after-hours trading, after concluding the session up $0.04 at $17.24 per share. By the end of Friday’s trading, shares had slipped to $14.93 per share.
As August’s trading kicks off, shares of SYMC started on a positive note, adding more than 2%, or $0.32, to end the trading session at $15.25 per share. During the past year, shares of Symantec have traded as low as $10.05 per share and as high as $22.80 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
