FOOL PLATE
SPECIAL
An Investment Opinion by Randy
Befumo
Coke Takes a Small Spill
Beverage titan COCA-COLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> jostled investors a little this
morning when it reported that earnings growth in the third quarter would
not be as high as previously anticipated. The company stated that third quarter
earnings would be "slightly higher" than those reported a year ago, including
a one-time gain from the sale of its stakes in two bottlers. Coca-Cola
anticipates booking a $0.04 to $0.06 per share gain from the sale of its
49% interest in Coca-Cola Bottling Co of New York, Inc. and its 48% interest
in Coke Canada to COCA-COLA ENTERPRISES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCE)") else Response.Write("(NYSE: CCE)") end if %>, one of the Atlanta,
Georgia concern's largest bottlers.
Current expectations call for Coca-Cola to make $0.44 per share versus $0.39
in the year-ago period, meaning that net of the gain, earnings growth from
operations will be flat. So why is Coca-Cola only down $1 11/16 to $64 7/8?
The company has consistently argued that because it is constantly buying
and selling stakes in Coca-Cola bottlers, this sort of income is actually
regular recurring income and should be valued in the same way as the income
the company receives from its core beverage operations. Apparently the market
agrees, as the company is down less than 3% as of this writing.
For its part, separately traded Coca-Cola Enterprises said the acquisition
would dilute the third quarter by $0.02 per share, the fourth quarter by
$0.03 per share, and fiscal 1998 results by $0.05 per share. Additionally,
the company's non-cash compensation expenses will be $0.05 per share higher
than expected next quarter, but the company will receive a $0.15 per share
one-time benefit from a change in British tax law. For all of this one-time
charging and dilution, Coca-Cola Enterprises was down $7/8 to $29 3/8.
Although the markets are shrugging off the news for both Coca-Cola and Coca-Cola
Enterprises, the issue of how individual investors should view one-time charges
and benefits is still quite important. Both AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> and INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFMX)") else Response.Write("(Nasdaq: IFMX)") end if %> have either announced or taken relatively
substantial one-time charges today to restate prior income. In America Online's
case, the adjustments only affected $7 million of the company's multi-billion
dollar revenues over the past year, making for a negligible adjustment. In
Informix's case, the company may have to adjust prior sales by as much as
$100 million, making its plight a bit more serious. Taken together, this
illustrates how when it comes to "one-time" events, the significance is in
the eyes of shareholders and no absolute rule really applies. For example,
although Coca-Cola's gains are booked as one-time asset sales, the company's
claims that these gains are actually regularly recurring income similar to
a loan company securitizing baskets of loans or a franchisor selling franchises
are not completely irrational. What can be good for the goose (the loan company
or franchisor) is sometimes not always immediately considered good for the
gander (in this case, Coca-Cola).
UPS
Oil and gas exploration and production company COSTILLA ENERGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COSE)") else Response.Write("(Nasdaq: COSE)") end if %> gained another $1 1/4 to $10 1/4 after yesterday reporting a 56% increase
in production and a nearly 3-to-1 ratio of reserves additions to
production.
AMERICAN MEDSERVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMCI)") else Response.Write("(Nasdaq: AMCI)") end if %> jumped $2 to $17 1/2 after
the pharmacy services company agreed to be acquired by OMNICARE INC.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OCR)") else Response.Write("(NYSE: OCR)") end if %> for $18 per share in cash.
Security services company O'GARA CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OGAR)") else Response.Write("(Nasdaq: OGAR)") end if %> added $2 5/8 to
$15 after announcing an agreement to merge with Kroll Associates, a risk
management and "corporate intelligence" company.
BEST BUY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %> popped up $1 3/16 to $14 3/16 after Goldman Sachs
put out a "trading buy" recommendation on the consumer products retailer.
Marine engine manufacturer OUTBOARD MARINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OM)") else Response.Write("(NYSE: OM)") end if %> rose $1 3/8
to $17 11/16 on the first day of an $18 per share cash tender offer from
investment group Greenway Partners, which is apparently trumping the $16
per share bid from DETROIT DIESEL CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DDC)") else Response.Write("(NYSE: DDC)") end if %>.
JOHN ALDEN FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JA)") else Response.Write("(NYSE: JA)") end if %> ticked up $1 1/4 to $23 1/2 after
the healthcare insurer reported Q2 EPS of $0.68, up 21% year-over-year and
well above the Zacks mean estimate of $0.32.
DOWNS
Data monster ELECTRONIC DATA SYSTEMS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EDS)") else Response.Write("(NYSE: EDS)") end if %> disappointed
investors again and was pulled down $6 3/16 to $37. The company missed the
Q2 mean EPS estimate of $0.45 in reporting operating earnings of $0.40 per
share. EDS guided 1997 EPS expectations lower to $1.90 to $2.00, below the
mean estimate of $2.24, forcing just about every major brokerage firm to
reduce their ratings on the company.
PETSMART INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PETM)") else Response.Write("(Nasdaq: PETM)") end if %> was sent to the doghouse this morning,
falling $3 1/8 to $8 5/8 after the pet supply superstore pre-announced Q2
operating EPS of $0.02 to $0.04, below estimates of $0.09. The company will
also take a large restructuring charge to close underperforming stores and
write off inventory.
Marketing products company NORWOOD PROMOTIONAL PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NPPI)") else Response.Write("(Nasdaq: NPPI)") end if %>
fell $1 11/16 to $13 1/16 upon announcing the resignation of its president
and chief operating officer as well as the termination of talks to acquire
Rou Bill Group.
TITAN HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TH)") else Response.Write("(NYSE: TH)") end if %> lost $1 3/8 to $21 1/2 after the specialty
property and casualty insurer agreed to be acquired by USF&G CORP.
<% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FG)") else Response.Write("(NYSE: FG)") end if %> for $11.60 per share in cash and 0.46516 shares of USF&G,
valuing Titan at $22.47 per share as of last night's close.
Workstation memory board manufacturer DATARAM CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: DTM)") else Response.Write("(AMEX: DTM)") end if %> fell
$1 1/2 to $8 3/4 after reporting solid Q1 earnings but warned that a legal
fight with SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> may have a material effect
on earnings going forward.
Computer training company LEARNING TREE INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LTRE)") else Response.Write("(Nasdaq: LTRE)") end if %> was chopped down $6 1/2 to $28 1/4 after reporting Q3 EPS of $0.14, missing the mean estimate of $0.15.
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 %> and
APPLE COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %>
Regarding product and technology development agreement
(800) 456-5304 (code: 8797) -- replay through 8/8 @ 5:00 pm EDT
(402) 344-6835 -- replay number for international callers
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
I-STAT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STAT)") else Response.Write("(Nasdaq: STAT)") end if %>
(800) 475-6701 (ID# 345839) -- replay through 8/8
SARA LEE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLE)") else Response.Write("(NYSE: SLE)") end if %>
(402) 220-3124 -- replay through 8/14
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
08/08/97 (Friday)
PETSMART INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PETM)") else Response.Write("(Nasdaq: PETM)") end if %>
5:00 pm EDT
(800) 696-1558 (code 224543) -- live
THIS WEEK'S CONFERENCE CALL SYNOPSES
RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
Call
AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>
Call
APPLE and MICROSOFT
Call
CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %>
Call
OXFORD HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OXHP)") else Response.Write("(Nasdaq: OXHP)") end if %>
Call
FOOL PORTFOLIO BORING PORTFOLIO ATCT down $3/32 at $5 1/8 ATLS dn $1 1/4 at $26 1/8 AOL down $1 7/16 at $70 1/16 BGP down $1/4 at $23 7/8 CHV down $1/2 at $77 1/2 CSL down $1/4 at $41 7/16 COMS up $9/16 at $56 1/8 CSCO down $1 at $77 13/16 DJT up $1/8 at $9 7/8 GNT dn $1 13/16 at $43 3/4 GM down $15/16 at $63 ORCL up $1/32 at $56 29/32 INVX down $1 1/8 at $34 1/4 OXHP up $3/8 at $74 3/8 IOM up $7/16 at $24 PMSI up $1/8 at $11 3/8 KLAC down $1 3/4 at $63 7/16 TDW dn $1 9/16 at $52 3/16 LU down $1 11/16 at $86 3/8 MMM down $15/16 at $95 T unch. at $40 1/8WE DELIVER - Get The Lunchtime News delivered
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Randy Befumo (TMF Templr), a Fool
Fool Plate SpecialDale Wettlaufer (TMF Ralegh), another Fool
Ups & DownsBrian Bauer (TMF Hoops), and yet another Fool
Editing