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(Best) PER, AM, NKTR (Worst) RIMM, IPSU, CPRT from Better Trades
September 30, 2009
During the past week, investors began to question the heights the indices have reached in this current rally. After coming off their 12-year lows in early March, the markets have started to show signs of uncertainty. This was much more evident in last week’s trading, as the indexes alternated between positive and negative ground, regardless of economic news.
Traders pushed the Dow to within 62 points of the psychologically important 10,000 mark last week, a level that the Dow has not been at since October. However, that bullish sentiment was quickly relinquished by the close of trading, and the markets concluded in the red for the remainder of the week.
The DOW closed the week lower, falling 1.6%, to close at 9,665.19. The S&P also finished the week in the red, slipping 2.2%, ending at 1,044.38. The NASDAQ concluded the week lower, declining 2.0%, to close at 2,090.92.
Top 3 Stocks
PER – Perot Systems Corp. ($17.91 to $29.69) +65.8%
One of the leading percentage gainers for the week ending September 25 was Perot Systems Corp. (PER).Perot is a worldwide provider of information technology services and e-business solutions to a broad range of clients.
The company’s stock surged during the week solely on the news that Dell Inc. (DELL) would purchase the company for an estimated $3.9B. Dell is looking to expand their business beyond the PC business, while competing more feverously with market leader Hewlett-Packard Co. (HPQ).
Specializing in the development and integration of information systems, operating and improving technology and business processes, and helping clients transform their businesses, Perot was offered $30 per share by Dell on September 21, signaling a 68% premium over the company’s closing price of $17.91 per share on September 18.
Michael Dell, Chairman and CEO at Dell remarked on the proposed deal, "We consider Perot Systems to be a premium asset with great people that enhances our opportunities for immediate and long-term growth. This significantly expands Dell's enterprise-solutions capabilities and makes Perot Systems' strengths available to even more customers around the world. There will be efficiencies from combining the companies, but the acquisition makes such great sense because of the obvious ways our businesses complement each other."
The company, founded by former Presidential candidate H. Ross Perot, would bring Dell more than 1,000 customers, including contracts from the U.S. Military and the Department of Homeland Security. In addition, Perot Systems’ generates nearly 48% of their business from the healthcare industry, and a quarter of their business from the government. In 2008, PER amassed $117M in net income from $2.8B in annual sales.
With the deal expected to be completed by the end of January 2010, shares of PER surged more than 65% following the announcement of the deal. The stock jumped nearly $12 a share by the close of the week.
As the new trading week begins shares of Perot Systems advanced marginally, adding $0.10, or 0.3%, to close the September 28 session at $29.79 per share. Over the past year, the company’s stock price has traded as low as $10.58, while the high of the year was reached this past Friday at $29.94 per share.
AM – American Greetings Corp. ($14.94 to $18.98) +27.0%
Doing business as the world's largest publicly held creator, manufacturer and distributor of greeting cards and social expression products, American Greetings Corp. (AM) witnessed their stock’s price advance handily over the past week as the company released their 2Q earnings report, showing a substantial increase in profits year-over-year, despite a decrease in sales.
Prior to the close of the trading week, American Greetings announced that the company’s earnings during the 2Q rocketed from $2.3M, or $0.05 per share a year ago to $23.1M, or $0.59 per share this year, a more than 10-fold increase in profits.
Results were greatly affected by a pretax benefit from an insurance program, which amounted to $7.9M, or $0.19 per share. Although the company saw quarterly revenues dip nearly 8%, from $385.8M to $356.4M, American Greetings did manage to decrease their inventory by 20%, to $208.1M.
Zev Weiss, CEO at American Greetings commented on the company’s quarterly results, "We have expanded our use of technology for both traditional greeting cards as well as on-line applications including Facebook and the iPhone. These examples of leadership in innovation are all in addition to the recent enhancements we have made to our portfolio, specifically the acquisitions of Recycled Paper Greetings and Papyrus, which complement our innovation with leadership in both humor and elegant design."
Looking ahead, AM raised their expectations for cash flows from operations in 2010 to $160M, up from the previously stated estimate of $105M to $115M. The company’s fiscal year ends in February 2010.
By the end of the week, shares of AM jumped more than $4 per share, a 27% gain from its closing price of $14.94 on September 18. With a new week commencing, the company’s stock continued its upward trend, adding nearly 15%, or $2.82, to end the September 28 session at $21.80 per share.
NKTR – Nektar Therapeutics ($8.46 to $9.96) + 17.7%
Rounding out the top three percentage gainers from the past week, Nektar Therapeutics (NKTR) witnessed a significant move in their stock price, as the company received news concerning their recent drug candidate for the treatment of ovarian cancer, while also entering into a new partnership with AstraZeneca PLC (AZN).
Nektar’s new drug, known as the test number NKTR-102, received positive results from its test patients in preclinical trials for the treatment of ovarian cancer. The tests involve patients that have yet to begin chemotherapy in battling the cancer. Nektar has also started enrolling additional test patients into another study involving two separate doses of NKTR-102.
Chief Medical Officer at Nektar, Lorianne Masuoka, remarked, "We are also pleased with the rapid enrollment of the first stage of our Phase 2 clinical study in platinum-resistant ovarian cancer. Although many patients are not yet evaluable for response, we have already achieved a sufficient number of confirmed responses to open the second stage for both regimens in the study earlier than anticipated."
As for the proposed partnership, Nektar and AstraZeneca would collaborate on possible solutions for the treatment of pain and constipation from the use of opium-based pain medications. If the collaboration between the two companies becomes successful, analysts value the deal at $1.5B, plus royalties on sales.
A report from IMS Health stated nearly 230 million prescriptions for opioid drugs were written in 2007 throughout the U.S. From those figures, between 40% and 90% of the patients using these drugs develop constipation.
By the end of the trading week, shares of NKTR were up $1.50, gaining nearly 18% in market value. With the start of trading on September 28, the company’s stock resumed its upward march, adding $0.16, or 1.6%, to conclude the session at $10.12 per share.
During the past year, Nektar’s stock has traded within a wide range, reaching a low of $2.45 per share, and a high of $10.64 per share, which was reached September 22, the day the drug trial results were released.
Worst 3 Stocks
RIMM – Research In Motion Ltd. ($83.62 to $68.91) -17.6%
Leading the way as one of the top percentage losers for the past week was Research In Motion Ltd. (RIMM), a world leader in the mobile communications market with a history of developing breakthrough wireless solutions. These technologies are used primarily in the BlackBerry wireless platform, the RIM Wireless Handheld product line, software development tools and radio-modems.
RIMM’s nearly 18% decline in market value was attributed to the company’s disappointing 2Q earnings report, which showed a decrease in profits of 4% year-over-year. The company posted a quarterly profit of $475.6M, or $0.83 per share, compared to the previous year’s earnings of $495.5M, or $0.86 per share. Results were also affected by the company’s $112.8M charge relating to a payment of all outstanding patent suits with Visto Corp.
Excluding the company’s one-time charge, quarterly profits would have come in at $588.4M, or $1.03 per share. Positively, quarterly sales surged during the period, advancing from $2.58B to $3.53B, an increase of 37% year-over-year.
On average, analysts within the industry were looking for the Blackberry maker to record a profit of $1.00 per share for the quarter, based on total sales of $3.62B.
Commenting on the results was Jim Balsillie, Co-CEO at Research In Motion, "We are pleased to report a strong second quarter with excellent financial performance, successful product launches and accelerating growth in international markets and new market segments."
Looking ahead to the upcoming 3Q, the company expects to post revenues between $3.6B and $3.85B, with profits ranging from $1.00 to $1.08 per share. Analysts are currently projecting 3Q results of $1.05 per share on $3.92B in revenues.
Continuing with their downward trek, shares of RIMM slipped nearly 4% by the close of the September 28 session, falling $2.53 to close the day at $66.38 per share. During the past 52 week, the company’s stock price has slipped to a low of $35.05 per share, while reaching a high of $88.08 per share.
IPSU – Imperial Sugar Co. ($15.68 to $13.35) -14.9%
Operating as one of the largest processors and marketers of refined sugar in the United States and a major sugar distributor to the foodservice market, shares of Imperial Sugar Co. (IPSU) sank on news that a federal investigation at one of the company’s plants revealed that an explosion that killed 14 could have been prevented.
The explosion, which occurred on September 24, killed 14 and wounded another 36 workers. The plant, which is located in Savannah, Georgia, is the second largest sugar refinery in the nation. In a report from the U.S. Chemical Safety Board (CSB), a government agency that investigates industrial accidents, revealed that Imperial Sugar had previously written warnings to company officials stating that explosive dust hazards were common within the plants and that routine cleanings should be practiced.
The primary explosion occurred inside a sugar conveyor that was located beneath two sugar storage silos. According to the CSB report, the silos were inadequately designed. The two silos had collected a massive concentration of sugar dust, which in turn, triggered several secondary dust explosions. Although the damage was too severe to determine exactly what caused the first explosion, investigators believe that an overheated bearing on the steel conveyor most likely ignited the dust.
OSHA, the Occupational Safety and Health Administration cited IPSU for more than 200 workplace safety violations in 2008 alone at their Georgia and Gramercy, La. plants. OSHA levied nearly $9M in fines against the company, the third highest amount in the agency’s history, which Imperial is now contesting.
CEO and President of Imperial Sugar, John Sheptor, responded to the investigative report, “Imperial Sugar and the CSB have collaborated throughout their investigation. We appreciate their professionalism and we value their contributions to our combustible dust and safety program. We have worked very hard to make our facilities the safest possible, and will continue to share what we have learned and will learn with the CSB and industry.”
Following the news about the plant explosion, shares of IPSU plunged nearly 15% by the close of the week, losing more than $2 per share. Nevertheless, with a new week in trading beginning, shares of Imperial Sugar advanced more than 3% by the end of the September 28 session, adding $0.48 to conclude the day at $13.83 per share.
Over the past year, the company’s stock has traded as high as $16.74 per share, and as low as $5.10 per share.
CPRT – Copart Inc. ($37.44 to $32.86) -12.2%
Rounding out the list of top percentage losers for the past week was Copart Inc. (CPRT), which provides vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through auctions, principally to licensed dismantlers, rebuilders and used vehicle dealers. Losing more than 12% of their market share, Copart’s share price demise was a direct result of the company’s dismal 4Q earnings report.
For the company’s most recent quarter, Copart announced that profits during the period retreated from $40.8M, or $0.47 per share a year ago to net income of $34.6M, or $0.41 per share, a decrease in year-over-year profits of more than 15%.
Results were greatly affected by a drop in overall revenues, Copart witnessed a drop in sales of more than 10%, falling from $206.3M to $184.3M. Analysts, in the meantime, were looking for the junk car auctioneer to record a quarterly profit of $0.43 per share on total revenues of $184.9M.
Adding to the company dismal report was an increase in operating expenses, which advanced to $22.4M, up more than 19% from last year’s $18.8M in costs. Also affecting the bottom-line was the recent exchange rate between the U.S. Dollar and the British pound. During the quarter, the exchange rate, which was valued at $1.60 to every Sterling, was much lower than last year’s rate of $1.97 to every pound. This difference equated to a loss of nearly $9M in revenues.
For fiscal 2009, Copart booked net income of $141.1M, or $1.66 per share, well below last year’s profit of $156.9M, or $1.75 per share, a decrease in earnings of more than 10% year-over-year. Total revenues came in at $743.1M, down more than 5% from 2008 sales of $783.2M.
With the company’s stock losing nearly $5 per share by the end of the week, shares of Copart rebounded at the start of the new trading week, gaining $0.13, or 0.4%, to finish the day at $32.99 per share. During the past year, shares of CPRT have traded within a wide margin, reaching highs of $40.66 per share, and lows of $22.54 per share.
2009 Better Trades Article
brought to you by
BRIAN MULLIN
