HEROES
Computer catalogue retailer MICRO WAREHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWHS)") else Response.Write("(Nasdaq: MWHS)") end if %> climbed
$5 1/2 to $22 7/8 on reporting Q2 EPS of $0.23, beating the First Call mean
estimate of $0.16, but falling 30% from Q2 1996 operating EPS. Operating
margin dropped from last year's 2.96% to 2.39%, but improved sequentially.
That was good enough for Alex. Brown to raise its rating on the company to
"buy" from "market perform." Let's assume that analysts raise 1998's EPS
estimates by 30% -- Micro Warehouse would then be selling at around 15.8
times that estimate. Compared with a multiple of 20.7 times 1998's EPS estimate
for INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> and 18.9 times the 1998 EPS estimate at which
COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> is trading, it's not as if Micro Warehouse is looking
particularly cheap right here, especially based on a foundation of very small
margins.
Diversified financial services company HUNTINGTON BANCSHARES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBAN)") else Response.Write("(Nasdaq: HBAN)") end if %> shot up $6 to $34 7/16 in advance of the company's inclusion in the
S&P 500 index tomorrow. The Columbus, Ohio-based company is a mortgage
and auto lender, trust and investment services bank, and commercial banking
services provider. With today's giant move higher, the shares moved from
the ranks of the banking companies carrying merely good valuations to the
level of the premium banks. That might not be unwarranted given the company's
attractive loan portfolio, efficiency, and profitability ratios. Truth be
told, though, it's trading way past the forward PE multiples on such venerable
growth banks such as NORWEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOB)") else Response.Write("(NYSE: NOB)") end if %>, WELLS FARGO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFC)") else Response.Write("(NYSE: WFC)") end if %>, and NATIONSBANK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NB)") else Response.Write("(NYSE: NB)") end if %>. The current valuation implies that
a bunch of money tried to squeeze into the issue today via index fund positioning
or investors suddenly believe that Huntington is going to seriously expand
its
return
on equity over the next couple years.
HUGHES ELECTRONICS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %>, a publicly traded unit of
GENERAL MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, added $3 11/16 to $63 3/4 after Donaldson,
Lufkin & Jenrette added the shares to its recommended list as the company
nears the spin-off/sale of its defense electronics business to RAYTHEON
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RTN)") else Response.Write("(NYSE: RTN)") end if %>. Hughes will also be recapitalized after transferring its
Delco Electronics unit to GM's automotive operations, at which point Hughes
will be a pure play on its satellite manufacturing and communications businesses,
of which DirectTV, PanAmSat, and Galaxy are major components.
QUICK TAKES: Defense industry supplier
and electronics manufacturer AEROFLEX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARX)") else Response.Write("(NYSE: ARX)") end if %> jumped $2 to
$8 1/2 after institutional broker Oppenheimer started coverage with a "buy"
rating... IMH COMMERCIAL HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICH)") else Response.Write("(NYSE: ICH)") end if %> moved up $2 7/16 from
its IPO price of $15 to close at $17 7/16 in the first day of trading for
the former Imperial Credit Commercial Holdings... Aerospace safety and fluid
control systems and communications products manufacturer WHITTAKER CORP.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WKR)") else Response.Write("(NYSE: WKR)") end if %> gained $1 1/4 to $12 3/4 after reiterating that it's still in
talks to sell parts of the company or the whole enchilada... CHART INDUSTRIES
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTI)") else Response.Write("(NYSE: CTI)") end if %> gained $1 13/16 to $19 13/16 after the industrial process
equipment manufacturer reported Q2 EPS of $0.32, beating the sole Zacks estimate
of $0.31... Semiconductor memory manufacturer and PC company MICRON TECHNOLOGY
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> gained $4 11/16 to $56 1/4 on positive comments from Merrill
Lynch, while TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> climbed $4 5/16 to $129...
MIRAGE RESORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MIR)") else Response.Write("(NYSE: MIR)") end if %> rose $2 3/8 to $28 3/8 on being added to
the S&P 500 index.
ENRON OIL & GAS CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EOG)") else Response.Write("(NYSE: EOG)") end if %> climbed $1 15/16 to $22 3/4 after
announcing yesterday that it believes it has submitted the high bid for the
concession on oilfields off the shore of India and that the award will take
place without undue considerations playing into the decision... Oil and gas
exploration company BARRETT RESOURCES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRR)") else Response.Write("(NYSE: BRR)") end if %> gained $2 1/16 to
$30 13/16 on reporting Q2 EPS of $0.14, beating estimates of $0.10...
PACIFIC SUNWEAR OF CALIFORNIA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSUN)") else Response.Write("(Nasdaq: PSUN)") end if %> added $2 5/8 to $32 5/8
on announcing the acquisition of 15 Good Vibrations stores, which sell teens
and juniors apparel... FRIEDE GOLDMAN INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FGII)") else Response.Write("(Nasdaq: FGII)") end if %>
jumped $6 1/4 to $32 3/4 after the newly public offshore driller reported
Q2 EPS of $0.67, wiping out the lone EPS estimate of $0.30... Information
technology services staffing company HALL KINION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HAKI)") else Response.Write("(Nasdaq: HAKI)") end if %> jumped
$4 1/8 from its IPO price of $15 to close at $19 1/8... Central European
automatic teller machine network company EURONET SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EEFT)") else Response.Write("(Nasdaq: EEFT)") end if %> added $2 7/8 to $14 1/4 on reporting a 33% sequential increase in Q2
revenues and a loss of $0.09 per share.
Mexican electronics contract manufacturer ELAMEX SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELAMF)") else Response.Write("(Nasdaq: ELAMF)") end if %>
moved up $2 3/8 to $12 1/4 after Alex. Brown raised its rating to "strong
buy" from "buy"... FIRST MICHIGAN BANK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FMBC)") else Response.Write("(Nasdaq: FMBC)") end if %> climbed
$5 7/8 to $38 1/8, tagging along with merger partner Huntington Bancshares...
FLEXTRONICS INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FLEFE)") else Response.Write("(Nasdaq: FLEFE)") end if %> gained $5 5/8 to $37 1/4
after the circuit board and electronics contract manufacturer reported Q1
EPS of $0.36, beating the mean estimate of $0.33... Data distribution company
AT HOME CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> won a $3 1/2 gain to $22 1/8 on a CS
First Boston "buy" rating... Semiconductor and medical process equipment
manufacturer APPLIED SCIENCE & TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASTX)") else Response.Write("(Nasdaq: ASTX)") end if %> rose
$3 1/8 to $21 1/4 on reporting Q4 revenues of $17.8 million and operating
EPS of $0.19, beating the mean First Call estimate of $0.14... Indicative
of action throughout the year 2000 sector for which we are at a loss to explain,
TSR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TSRI)") else Response.Write("(Nasdaq: TSRI)") end if %> leapt $4 to $30... INTERNEURON PHARMACEUTICALS
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IPIC)") else Response.Write("(Nasdaq: IPIC)") end if %> jumped $2 11/16 to $21 3/8 after its INTERCARDIA
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITRC)") else Response.Write("(Nasdaq: ITRC)") end if %> unit reported earnings... GENERAL SEMICONDUCTOR
<% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SEM)") else Response.Write("(AMEX: SEM)") end if %> added $1 3/16 to $16 1/8 after Merrill Lynch started coverage
with "accumulate" rating...Disk drive companies and their suppliers rocketed
higher today, with WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> leading the way with
a $5 3/8 gain to $45 1/2, head maker APPLIED MAGNETICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: APM)") else Response.Write("(NYSE: APM)") end if %>
climbing $2 1/2 to $34 1/2, SEAGATE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> up $3 to
$44 5/16, and head suspension assembly company HUTCHINSON TECHNOLOGY
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTCH)") else Response.Write("(Nasdaq: HTCH)") end if %> rising $1 5/8 to $32 5/8.
GOATS
U.S. Healthcare operator and insurance company AETNA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %>
lost $14 1/4 to $102 3/4 after its Aetna U.S. Healthcare unit reported operating
earnings of $152 million, up 29% over pro-forma operating earnings a year
ago. Investors were worried about a higher-than-expected medical loss ratio,
which the company chalked up to its push into new markets and higher Medicare
expenses. Aetna advised that it is tempering its growth plans somewhat, but
that it is still looking forward to double-digit growth in HMO enrollment.
With slower growth, the company may be able to get a handle on its medical
loss ratio and improve its operating margin from this quarter's levels, but
that's something that optimistic analysts had already built into their models
for the rest of the year.
Longhorn Steaks restaurant operator RARE HOSPITALITY INTERNATIONAL
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RARE)") else Response.Write("(Nasdaq: RARE)") end if %> was gored for a $2 7/8 loss to $11 1/4 after reporting
Q2 EPS of $0.17, beating estimates. The real damage came from the company's
guidance that it will not make estimates for the third quarter. In addition,
the company's CEO resigned to hook up with restaurant operator CHART HOUSE
ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHT)") else Response.Write("(NYSE: CHT)") end if %>. Elsewhere in the steakhouse sector, LONE
STAR STEAKHOUSE/SALOON <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STAR)") else Response.Write("(Nasdaq: STAR)") end if %> lost $4 to $18 as the company warned
investors to expect Q3 EPS $0.10 to $0.13 below the mean analyst estimate
of $0.47 because of a decline in revenues and increased marketing expenditures.
QUICK CUTS: BRIDGEPORT MACHINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BPTM)") else Response.Write("(Nasdaq: BPTM)") end if %> was drilled for a $2 1/8 loss to $10 after the machine tools maker reported Q1 EPS of $0.26 on revenues of $54.5 million, down 12% year-over-year... EINSTEIN/NOAH BAGEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENBX)") else Response.Write("(Nasdaq: ENBX)") end if %> lost $2 7/16 to $11 11/16 after reporting Q2 EPS of $0.15, right in line with the mean estimate... New Jersey bank COVENANT BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNSK)") else Response.Write("(Nasdaq: CNSK)") end if %> declined $3 to $18 after agreeing to be acquired by FIRST UNION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %> in a stock swap valuing Covenant at $18 7/8 per share as of last night's close... NATIONAL WESTMINSTER BANK PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NW)") else Response.Write("(NYSE: NW)") end if %> dropped $4 3/4 to $81 after the British financial services company reported second quarter results largely in line with expectations, but failed to add any new commentary on how the company plans to build shareholder value... Heavy machinery manufacturer GENCOR INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %> lost $1 to $14 1/4 on reporting Q3 revenues of $51.1 million and EPS of $0.48, basically flat over last year's results.
FOOL ON THE
HILL
An Investment Opinion by Randy
Befumo
Ready to Reassemble
Shareholders of O'SULLIVAN INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OSU)") else Response.Write("(NYSE: OSU)") end if %> have not had a very
good month. The manufacturer of "ready-to-assemble" furniture closed at $16
1/8 on July 8 and has not looked back since, falling $1 1/16 to $12 3/16
today. Although the 24% drop is disappointing, don't cry too hard for those
who have owned O'Sullivan shares for the last twelve months. Priced at a
meager $7 1/2 last August, the company's shares were up 63.3% over the past
year even counting the wicked month of July. As economic growth has sparkled,
businesses have expanded and people have begun to buy homes. As a result,
sales of particle board furniture that can be put together by the customer
have jumped, and shareholders of O'Sullivan have been catching the wave.
Year-to-date, O'Sullivan has had an absolutely stunning fiscal 1997. Although
revenues have only grown 8.7% in the first three quarters, profits have exploded
491.7%. Today the company informed investors that the fourth quarter looked
solid as well. In a
press
release, the company stated that fourth quarter revenues grew by 14%
and that earnings in the fourth quarter would exceed $0.23 per share, the
current consensus estimate. The company stated that had it not been for the
bankruptcy of a major retailer (probably Montgomery Ward), earnings would
have been four cents higher, indicating that the company absolutely blew
through consensus expectations. Shares were halted at 3:46 PM by the New
York Stock Exchange following this news and will probably reopen tomorrow.
Given the stock's performance over the past year, one might expect the valuation
to be exorbitant. However, as with many companies that are persistently perceived
as cyclical, the valuation is not actually that high. Assuming that earnings
results are $0.24 or $0.25 per share, O'Sullivan will have booked $0.95 to
$0.96 per share for the year. With the company's shares trading at $12 3/16,
O'Sullivan only trades at 14.1 times trailing earnings adjusting for the
$30.0 million in long-term debt and $10.3 million in cash currently on the
balance sheet. With $321.2 million in trailing sales, the company currently
has an enterprise value-to-sales ratio
of 0.70. Given that current operating margins of 8.1% are in line with the
company's five-year average operating margins of 7.3%, this enterprise
value-to-sales ratio is not stratospheric, but not necessarily dirt cheap
either.
With the five analysts who follow the company predicting 20% earnings growth
into next year, the only way to explain the company's current valuation is
concern that a slowdown in the economic environment will take a disproportionate
chunk out of O'Sullivan's bottom line. For many investors, the last four
quarters belay that fear, but the historical record beyond that is not
necessarily confidence inspiring. O'Sullivan earnings peaked at $0.78 per
share in 1994 before slipping all the way to $0.21 per share in fiscal 1996
on 3.8% annualized revenue growth. Given the cyclicality that O'Sullivan
has shown historically, before committing long-term funds investors should
examine what the next few years might hold for the ready-to-assemble furniture
industry of which the company is a key component.
O'Sullivan's pre-announcement states that revenues of "approximately" $80
million will be up sequentially from the $77.5 million booked last quarter,
a quarter that has been the weakest for the company the last three years
running. Although down from the first quarter and flat with the second quarter,
the uptick in fourth quarter revenues is a positive sign and is within the
historical trend. Given the economic activity going on in the background
and the fact that most economists have grudgingly conceded that the next
click down will probably not happen until mid- to late-1998, O'Sullivan has
at least two or three more quarters of good results to pump out before the
downturn clarion begins to sound.
At 10.8 times current forward EPS estimates of $1.13 compared to 14.1 times
for competitor BUSH INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSH)") else Response.Write("(NYSE: BSH)") end if %>, forecast to grow only
14% next year, investors might want to take a closer look at O'Sullivan and
also compare it with WINSLOEW FURNITURE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WLFI)") else Response.Write("(Nasdaq: WLFI)") end if %> and KIMBALL
INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KBALB)") else Response.Write("(Nasdaq: KBALB)") end if %>. Should earnings materialize as predicted,
the company has more than 20% upside even if the multiple stays at its current
14.1 times trailing. Should the company receive a Bush multiple of 17.9 times
trailing earnings, the upside increases exponentially due to the
magnification
effect.
CONFERENCE CALLS
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
(402) 222-9939 -- replay
TIDEWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %>
(800) 475-6701 (#348218) -- replay
PAPA JOHN'S PIZZA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %>
(800) 642-1687 (ask for Papa John's Int'l conference call) -- replay
CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREE)") else Response.Write("(Nasdaq: CREE)") end if %>
(800) 642-1687 (code: 523215) -- replay
(706) 645-9291 (code: 523215) -- replay for international callers
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
Re: introduction of NetShow server 2.0
(800) 677-0672 -- replay through 8/7
(402) 998-0101 -- replay for international callers
BA MERCHANT SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BPI)") else Response.Write("(NYSE: BPI)") end if %>
(800) 964-3941 -- replay through 8/7
(402) 344-6640 -- replay for international callers
AMRION INC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMRI)") else Response.Write("(Nasdaq: AMRI)") end if %> and
WHOLE FOODS MARKETS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WFMI)") else Response.Write("(Nasdaq: WFMI)") end if %>
(800) 633-8284 (code: 2979188) -- replay through 8/7
AMERICAN RADIO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFM)") else Response.Write("(NYSE: AFM)") end if %>
(800) 475-6701 (access code: 350455) -- replay through 8/8
CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
(800) 633-8284 (code: 2875731) -- replay through 8/15
08/06/97 (Wednesday)
ECSOFT GROUP PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ECSGY)") else Response.Write("(Nasdaq: ECSGY)") end if %>
11:00 a.m. EDT
(800) 263-9150 -- live
(0500) 701 087 -- UK
+44 (0)171 335 1400 -- International
08/07/97 (Thursday)
SARA LEE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLE)") else Response.Write("(NYSE: SLE)") end if %>
(402) 220-3124 -- replay through 8/14
THIS WEEK'S CONFERENCE CALL SYNOPSES
NAT'L SEMI - CYRIX (Merger)
Call
ATLAS AIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATLS)") else Response.Write("(Nasdaq: ATLS)") end if %>
Call
WE
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Ask the Headhunter
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can even order his book, praised by Tom Peters and many others. Why not earn
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Headhunter and talk to Nick!
Randy Befumo (TMF Templr), a Fool
Fool Plate Special
Dale Wettlaufer (TMF Ralegh), another
Fool
Ups & Downs
Brian Bauer (TMF Hoops), and yet
another Fool
Editing