EMERALD ISLE BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EIRE)") else Response.Write("(Nasdaq: EIRE)") end if %> gained $6 3/8 to $31 7/8 after the Quincy, Massachusetts-based savings bank agreed to be acquired by $2 billion banking company Eastern Bank Corp. for $33 per share in cash. Emerald is the parent of Hibernia Savings Bank, which serves South Shore communities such as Quincy and Braintree. The addition of Eastern Bank will allow Hibernia to offer other products besides plain-vanilla mortgage lending, which dominates Hibernia's loan assets and keeps profitability down. In addition, a more comprehensive set of services will bring in more checking deposits, another way to increase net interest margins and profitability.
REMEDY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMDY)") else Response.Write("(Nasdaq: RMDY)") end if %> rose $6 11/16 to $45 7/16 on reporting Q3 revenues of $37.1 million, up 76% over last year, and EPS of $0.27, up 80% over last year and 12.5% above estimates. The "consolidated operations management" software company, whose products are based on help-desk applications for customer management, was raised to "short-term buy" from "short-term hold" by institutional brokerage SoundView Associates today.
QUICK TAKES: Video game producer THQ INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THQI)") else Response.Write("(Nasdaq: THQI)") end if %> gained $1 3/8 to $15 7/8 after reporting Q3 revenues of $16.4 million and EPS of $0.20, beating the mean estimate of $0.16 a share... BROADWAY & SEYMOUR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BSIS)") else Response.Write("(Nasdaq: BSIS)") end if %> rose $1 3/4 to $11 3/4 on announcing a contract to supply Chase Manhattan with call center software for Chase's TriState Regional Bank... SMC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SMCC)") else Response.Write("(Nasdaq: SMCC)") end if %> added $1 1/8 to $7 3/4 after the manufacturer of motor coaches reported Q3 EPS of $0.18, much better than the $0.07 a share analysts were expecting... DUSA PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DUSA)") else Response.Write("(Nasdaq: DUSA)") end if %> gained $1 27/32 to $12 31/32 on announcing positive Phase III trial results for the company's pre-cancerous actinic keratoses treatments... LOGAN'S ROADHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDHS)") else Response.Write("(Nasdaq: RDHS)") end if %> moved up $1 3/4 to $19 5/8 after reporting Q3 EPS of $0.24, missing estimates of $0.25, but topping generally beaten-down growth expectations for the restaurant sector.
Aerospace fasteners manufacturer KAYNAR TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTIC)") else Response.Write("(Nasdaq: KTIC)") end if %> picked up $2 1/2 to $32 on reporting better-than-expected Q3 EPS of $0.38... Specialty finance company LEASING SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSSI)") else Response.Write("(Nasdaq: LSSI)") end if %> advanced $1 11/16 to $21 3/16 on reporting a 48% jump in Q3 revenues and EPS of $0.42, 5% ahead of analysts' estimates... DRIL-QUIP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DRQ)") else Response.Write("(NYSE: DRQ)") end if %> gained $13 from its IPO price of $24 to close at $37 after the drilling equipment manufacturer offered 2.5 million shares and selling shareholders offered the same amount... Freight transport company PITTSTON BURLINGTON GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZX)") else Response.Write("(NYSE: PZX)") end if %> trucked $2 1/2 higher to $31 on reporting Q3 EPS of $0.79, which smeared estimates of $0.64 a share, even taking out the company's estimation that per-share earnings picked up a $0.08 contribution from the UPS strike.
Disk drive head maker READ-RITE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %> reported primary EPS of $0.62 for its fourth quarter, $0.04 shy of the Zacks mean estimate of $0.65 (primary). That EPS figure reflects a $1.9 million charge taken for prepaying some 7.53% senior notes back in August, which amounted to $0.04 per share. Without this charge, the company would have met estimates; however, the savings generated from the pre-payment (in the form of reduced interest payments) will show up in future earnings anyway. Read-Rite's stated goal of emerging from 1997 as the leading supplier of magneto resistive (MR) heads is still on track, with the company expecting all of its customers to convert by the end of 1997 (which should help margins). Trading at nine times forward earnings estimates after today's roasting -- the stock fell $3 1/4 to $20 -- the company deserves a closer look. Possible risks include a concentrated customer base in a "trickle down" industry, which must be balanced against a projected 35% increase in head unit sales for 1997 (compared with 20% for the overall disk drive industry).
Medical products manufacturer BAXTER INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAX)") else Response.Write("(NYSE: BAX)") end if %> suffered a setback today in its plans to market its oxygen-carrying human blood substitute HemAssist, and its shares suffered accordingly, falling $3 3/8 to $52 1/2. The European Medicines Evaluation Agency (EMEA), which is the European Union's equivalent of the U.S. Food & Drug Administration, wants Baxter to add an "unspecified" number of patients to its 200-patient clinical trial using HemAssist as a blood alternative for cardiac patients following cardiopulmonary bypass surgery. Baxter hoped to be generating revenues from the product in Europe in 1998, due to a supposed "streamlined" European approval process. So much for that. Baxter will have to settle for marketing its product between 1999 and 2000, which is the same time that HemAssist is expected to roll out in the U.S. (it is currently in Phase III clinical trials), forfeiting an early crack at a multi-billion dollar market.
QUICK CUTS:Specialty vehicle products maker TRANSPRO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TPR)") else Response.Write("(NYSE: TPR)") end if %> lost $2 9/16 to $8 15/16 after announcing last night that it expects fourth quarter earnings to be substantially below those of last year... ACUSON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACN)") else Response.Write("(NYSE: ACN)") end if %> fell $5 13/16 to $20 7/8 despite the healthcare products company's report of Q3 EPS of $0.15 after the bell yesterday, which beat estimates by $0.01 a share... STRATUS COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRA)") else Response.Write("(NYSE: SRA)") end if %> fell $8 13/16 to $38 after releasing 3Q EPS of $0.77. BT Alex. Brown downgraded the company to "outperform" from "buy" and Lehman cut the firm to "neutral" from "outperform"... Information and data services company FIRST DATA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDC)") else Response.Write("(NYSE: FDC)") end if %> lost $6 to $30 1/8 on reporting 3Q EPS of $0.42, which prompted Prudential to downgrade the company from "buy" to "hold" and BT Alex. Brown to cut the company from "buy" to "market perform."
CHINA EASTERN AIRLINES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CEA)") else Response.Write("(NYSE: CEA)") end if %> lost $2 1/16 to $19 3/4 over concerns with Asian market growth going forward... Mexican construction companies EMPRESAS ICA SOCIEDAD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ICA)") else Response.Write("(NYSE: ICA)") end if %> lost $1 7/8 to $15 3/16 and GRUPO TRIBASA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTR)") else Response.Write("(NYSE: GTR)") end if %> dropped $9/16 to $6 1/16 over fears that money from the government's highway rescue plan might not materialize... Bathroom and facial tissue products company FORT JAMES CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FJ)") else Response.Write("(NYSE: FJ)") end if %> said it expects to take a fourth quarter charge of $80 million, dropping shares $3 3/4 to $41 3/16... Trouble in Hong Kong hit consumer electronics company SONY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNE)") else Response.Write("(NYSE: SNE)") end if %> on the chin today as shares fell $7 3/16 to $85 7/8... CREDIT ACCEPTANCE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CACC)") else Response.Write("(Nasdaq: CACC)") end if %> slipped $3 3/4 to $6 as Salomon Brothers lowered its rating on the company to "underperform" from "hold."
Software maintenance outsourcing company PERITUS SOFTWARE SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTUS)") else Response.Write("(Nasdaq: PTUS)") end if %> lost $4 9/16 to $23 15/16 after agreeing to acquire Millenium Dynamics for $30 million in cash and up to 2.2 million Peritus shares... Liquid crystal display and telecommunications equipment maker GLENAYRE TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GEMS)") else Response.Write("(Nasdaq: GEMS)") end if %> fell $1 15/16 to $14 3/8 after it reported that it expects to take a charge of $100 million to $120 million in its fourth quarter for its acquisition of Open Development Corp... DATUM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DATM)") else Response.Write("(Nasdaq: DATM)") end if %> lost $7 3/16 to $18 7/16 after saying that it expects demand for its products in the fourth quarter to fall short of the strong demand in the two previous quarters... Enterprise-wide software company BAAN CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAANF)") else Response.Write("(Nasdaq: BAANF)") end if %> fell $4 3/4 to $70 3/8 after UBS Securities lowered its rating on the company from "strong buy" to "buy."
QUALITY SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QUAL)") else Response.Write("(Nasdaq: QUAL)") end if %> lost $4 3/8 to $8 3/4 after reporting a Q4 loss of $0.16 per share... UBS Securities lowered its rating on ARBOR SOFTWARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARSW)") else Response.Write("(Nasdaq: ARSW)") end if %> to "hold" from "strong buy," slamming the stock of the OLAP software company $ 4/38 to $8 3/4... Multinational information technology company BDM INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BDMI)") else Response.Write("(Nasdaq: BDMI)") end if %> lost $3 7/16 to $22 1/4 after reporting Q3 EPS of $0.21 versus estimates of $0.22... Smith Barney cut its rating on CONSUMER PORTFOLIO SERVICE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPSS)") else Response.Write("(Nasdaq: CPSS)") end if %> to "neutral" from "outperform," which helped shares of the retail auto installment contracts company fall $3 1/16 to $12 15/16.
FOOL ON THE HILL
An Investment Opinion by Randy Befumo
Corrections Corp Convicted
Riotous trading penalized shares of CORRECTIONS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CXC)") else Response.Write("(NYSE: CXC)") end if %> $9 9/16 to $32 today after the prison management company failed to match earnings expectations. Corrections Corp. competitors were also put on death row: WACKENHUT CORRECTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WHC)") else Response.Write("(NYSE: WHC)") end if %> got shanked in the cafeteria for $2 15/16 to $29; CORRECTIONAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCQ)") else Response.Write("(Nasdaq: CSCQ)") end if %> suffered $1 1/8 to $12 7/8; and CORNELL CORRECTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: CRN)") else Response.Write("(AMEX: CRN)") end if %> was locked down for $5/8 to $19 1/4. Even prison real estate investment trust (REIT) CCA REALTY TRUST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZN)") else Response.Write("(NYSE: PZN)") end if %> hit the showers, losing $2 1/8 to $33 in heavy trading.
The first sign of weakness in the private prison stocks since Correctional Services had problems with the Immigration & Naturalization Service detention centers two years ago, many traders were quick to execute sell orders on Corrections Corp. and its ken. The oldest and largest of the publicly traded private prison managers, Corrections Corp. is viewed as a bellwether for the industry. Corrections Corp. reported third quarter earnings of $0.16 per share, six cents better than last year but three cents below expectations. The company said the cost of hiring and training personnel was the problem, causing operating expenses to unexpectedly rise faster than revenues. While operating expenses did grow faster than sales during the quarter, this was true last quarter and does not explain the extent of the shortfall.
Estimates called for Corrections Corp. to make $0.19 per share. With 84.9 million shares outstanding, this means that the three-cent shortfall was $2.6 million. If you back out $2.6 million from the $93 million in operating expenses, the growth in operating expenses would have been only 66%, three percent below revenue growth. Given that last quarter revenues at Corrections Corp. grew by 59% versus 60% for operating expenses, it is difficult to imagine why anyone would have forecast that operating expenses suddenly would grow slower than revenue growth without some pretty optimistic guidance from the company's management. Another factor that the company is not talking about is occupancy rates -- something that has a few analysts running for cover today. Occupancies at Corrections Corp. fell to 92.7% in the quarter when most analysts were looking for a number in the 93% area.
Private prisons are viewed as a booming growth area over the next few years as more and more states stop operating their own prisons. By hiring staff who don't get the generous benefits most state employees garner, these private prisons can save quite a bit in operating costs. The number of private prison beds grew at a 24% annualized rate from 1993 to 1996. Many believe that companies with dominant market share like Corrections Corp. can grow faster than the overall market because their experience will attract skittish state bureaucrats eager to cut costs. This is borne out by the fact that Corrections Corp. grew revenues at 69% in the quarter while its biggest competitor, Wackenhut, grew revenues at 50%. However, investors should probably no longer assume that this additional growth will come without incurring disproportionately higher expenses.
Although shares of Corrections Corp. are down more than 30% from their recent highs, the valuation still stands at somewhere between 32 to 40 times the range of expected 1998 earnings. The baseline growth rate for the industry is currently 25% to 30%, with Corrections Corp. growing at 1.8 to 2.3 times this rate over the last nine months. Should Corrections Corp. slow down its growth to contain costs, this valuation might contract further. But should it continue to go full bore, it risks continuing to pile on higher-than-normal expenses and reducing its operating margins. If one of the larger players in the industry were to fall to 20 to 25 times forward estimates, this might make for an attractive valuation. With the companies in turmoil, investors who have been sitting on the sidelines might want to start revving up their research engines.
PC DOCS GROUP INTL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOCSF)") else Response.Write("(Nasdaq: DOCSF)") end if %>
(416) 695-5800 (code: 723627) -- replay
MINNESOTA MINING AND MANUFACTURING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %>
(888) 209-3817 -- replay through 10/23
INTERMET INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INMT)") else Response.Write("(Nasdaq: INMT)") end if %>
(800) 475-6701 (code: 360026) -- replay through 10/23
(320) 365-3844 (code: 360026) -- replay for international callers
READ-RITE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %>
(800) 633-8284 (reservation # 3156600) -- replay through 10/23
(303) 248-1201 (reservation # 3156600) -- replay for international callers
ICT GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICTG)") else Response.Write("(Nasdaq: ICTG)") end if %>
(800) 275-2442 -- replay through 10/24 @11:00 am EDT
COMPUTER HORIZONS CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHRZ)") else Response.Write("(Nasdaq: CHRZ)") end if %>
(800) 938-0928 -- replay through 10/24 at noon EST
MURPHY OIL CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MUR)") else Response.Write("(NYSE: MUR)") end if %>
(800) 633-8284 (code: 3190642) -- replay through 10/24 @ 1:00 pm EDT
ALLIEDSIGNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %>
(800) 633-8284 (access code: 3232046) -- replay through 10/24 @ 5:00 pm ET
MICROWARE SYSTEMS CORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWAR)") else Response.Write("(Nasdaq: MWAR)") end if %>
(800) 633-8284 (code: 3118988) -- replay through 10/24
TRIBUNE COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
(800) 633-8284 (code: 3218583) -- replay through 10/24
RTW INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RTWI)") else Response.Write("(Nasdaq: RTWI)") end if %>
(800) 475-6701 (code: 359246) -- replay through 10/24
ARBOR SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARSW)") else Response.Write("(Nasdaq: ARSW)") end if %>
(800) 633-8284 (code: 3217382) -- replay through 10/25
RAPTOR SYSTEMS, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAPT)") else Response.Write("(Nasdaq: RAPT)") end if %>
(402) 220-4216 -- replay through 10/27
FORTE SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FRTE)") else Response.Write("(Nasdaq: FRTE)") end if %>
(402) 280-9000 -- replay through 10/27
SEAGRAM COMPANY and HSN, INC.
Regarding combination of television assets
(800) 558-5253 (password: 330 9589) -- replay through 10/28
(416) 626-4151 (password: 330 9589) -- replay for international callers
AVID TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %>
(402) 220-0105 -- replay through 10/29
GENZYME <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZ)") else Response.Write("(Nasdaq: GENZ)") end if %> and GENZYME TRANSGENICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GZTC)") else Response.Write("(Nasdaq: GZTC)") end if %>
(800) 633-8284 (code: 3265950) -- replay through 10/30
(303) 248-1201 (code: 3265950) -- replay number for international callers
10/27/97 (Monday)
BJ SERVICES CO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %>
3:00 pm EST
(913) 661-0896 -- live
(402) 220-9379 -- replay through 10/30
10/27/97 (Monday)
CYBERCASH INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %>
(888) 566-0175 -- replay through 10/29
THIS WEEK'S CONFERENCE CALL SYNOPSES
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> Call
TIDEWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %> Call
IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> Call
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Randy Befumo (TMF Templr), Fool
One
Dale Wettlaufer (TMF Ralegh), Fool
Two
Alex Schay (TMF Nexus6), Fool
Three
Louis Corrigan (TMF Seymor), Fool
Four
Contributing Writers
Brian Bauer (TMF Hoops), Fool Five
Julia Wilson (TMF Delete), Fool Six
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