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FOOL PLATE SPECIAL
An Investment Opinion
by Brian Graney
Coal in the Oil Stocking
Investors in oil and gas services and contract drilling firms have been on a share price seesaw all year long as the price of the benchmark near-month West Texas Intermediate crude oil futures contract has fluctuated between a high closing price of $17.82 a barrel on Jan. 29 and a low price of $10.72 a barrel on Dec. 10. This morning, the seesaw gyrated wildly like a empty oil barrel in rough surf on news that yesterday's U.S.-led airstrikes against Iraq did no damage to Iraq's oil production infrastructure. In response, oil prices fell, sending several oil and gas services firms and contract drillers down as the yearlong global oil supply glut persists.
Among the firms taking it on the chin this mornings were services firms such as Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %>, which slipped $2 3/8 to $44 5/16, BJ Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %>, which sank $1 to $15 1/16, and Smith International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SII)") else Response.Write("(NYSE: SII)") end if %>, which slumped $2 3/16 to $25 1/8. Among the contract drillers, Rowan Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RDC)") else Response.Write("(NYSE: RDC)") end if %> drifted down $1 5/16 to $10 1/8, R&B Falcon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FLC)") else Response.Write("(NYSE: FLC)") end if %> slid $1 1/16 to $8 13/16, and Global Marine <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLM)") else Response.Write("(NYSE: GLM)") end if %> fell $1 1/16 to $9 15/16. Yesterday, those same companies had all posted gains on expectations that some of the bombs dropped on Iraq might hinder Iraq's oil production industry, which is responsible for about 3% of the world's supply. On that speculation, oil prices on the New York Mercantile Exchange experienced their biggest one-day percentage jump since September, putting hopes into the sparkling eyes of oil traders that there may be a Santa Claus after all, and he may deliver higher oil prices along with the rest of his presents just in time for Christmas.
For investors, plunking down money in a commodity-based business such as oil always carries an additional layer of risk on top of the standard risk associated with all equities. Projecting future cash flows for any company in the oil business -- whether a huge integrated international firm, a medium-sized oilfield services and supply company, or a small seismic data technologies outfit -- requires the investor to peer into the future and form a well-educated expectation of supply and demand and how fickle oil traders will feel about the commodity years down the road. With no end in sight for the current glut, projecting a rise and subsequent equilibrium in oil prices in the future is a challenge even Kris Kringle himself may not be up to right now.
Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %>, the nation's second-largest bank, deposited a gain of $3 5/8 to $67 1/8 after it said it expects Q4 EPS to top analysts' expectations of $1.07 a share thanks to strong derivatives and currency trading and a rise in loans. The bank went so far as to say it was "possible" it will have record earnings, which would have to exceed the previous high of $1.20 a share achieved in the Q2. The company is scheduled to report earnings in the third week of January.
Desktop publishing software maker Adobe Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %> ran ahead $5 3/8 to $43 1/2 after late yesterday reporting Q4 EPS of $0.76 (excluding a $0.02 gain), up from $0.56 (not counting an $0.08 gain) a year ago. The number crushed analysts' First Call mean estimate of $0.64. The company indicated it will meet Q1 earnings expectations and expects to grow revenue by 15% a year with an operating margin of 25%.
Federal Express parent FDX Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> boxed gains of $4 to $76 after it announced fiscal Q2 EPS of $1.23, up from $1.00 last year and ahead of analysts' projections of $1.06. Revenue increased 7% to $4.2 billion. Contingency costs of $110 million to $120 million related to the threatened pilots' union strike didn't affect Q2 results, but the company expects the expenses will hurt results in the second half of the fiscal year.
Office supplies retailer Staples <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLS)") else Response.Write("(Nasdaq: SPLS)") end if %> tacked on $1 5/16 to $40 15/16 after it said it will make substantial investments in its e-commerce operations, making Staples.com its own business unit and investing $10 million to staff and equip the division during fiscal 1999. The company also announced plans to relocate and upgrade 58 of its oldest stores over the next year. Staples also said it's buying privately held Claricom Holdings, a provider of telecommunications products and services to small businesses, for $140 million in cash.
Dynamic random access memory (DRAM) chip maker Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %> jumped ahead $4 9/16 to $51 7/16 on reports that BancBoston Roberston Stephens set a three-year price target of $200 per share on the company's stock.
RightCHOICE Managed Care <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIT)") else Response.Write("(NYSE: RIT)") end if %> advanced $1 13/16 to $10 11/16 after it said Blue Cross & Blue Shield of Kansas City is interested in buying the healthcare provider for about $278.2 million as an alternative to a settlement agreement the companies reached in September. A Blue Cross official first suggested the combination -- it would pay $13.50 per share for RightCHOICE's class A shares and $15.25 per share for its Class B shares -- at a public hearing yesterday, according to RightCHOICE.
Shares of electronic design automation (EDA) tools developer Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> picked up $15/16 to $27 1/8 after a grand jury in California returned an indictment charging competitor Avant! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVNT)") else Response.Write("(Nasdaq: AVNT)") end if %> and several employees of the company with offenses stemming from allegations in its intellectual property dispute with Cadence. Avant! employees named in the indictment are Gerald C. Hsu, Chairman and CEO, Stephen Wuu, Y.Z. Liao, and Eric Cheng. The company "categorically denies each and every one of these charges."
Pharmaceutical contract research organization (CRO) Quintiles Transnational Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QTRN)") else Response.Write("(Nasdaq: QTRN)") end if %> improved $1 7/8 to $47 3/4 today after losing $10 5/16 yesterday on news of plans for a $1.7 billion purchase of Envoy <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENVY)") else Response.Write("(Nasdaq: ENVY)") end if %>, a leading provider of electronic data interchange (EDI) services to the healthcare market. Bear Stearns upgraded Quintiles to "buy" from "attractive" this morning. Envoy, a big gainer yesterday, popped up another $1 3/4 to $52 this morning.
Polymer manufacturer GenCorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GY)") else Response.Write("(NYSE: GY)") end if %> bounced up $1 3/4 to $26 15/16 after it reported Q4 operating EPS of $0.66, beating First Call's four-analyst First Call $0.59 consensus and last year's $0.52 figure. GenCorp also announced plans to spin off its Performance Chemicals and Decorative & Building Products businesses to shareholders, creating a new publicly traded company.
Laser vision correction products manufacturer and former Daily Double VISX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %> beamed up $2 1/4 to $77 1/8 after it set plans for a 2-for-1 stock split on Dec. 28.
3D graphics accelerator chipset maker S3 Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIII)") else Response.Write("(Nasdaq: SIII)") end if %> accelerated $1 19/32 to $6 5/8 after it announced a 10-year cross-licensing agreement with Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> on the patents of certain semiconductor products. Intel will also buy warrants to purchase S3 shares; further details of that transaction were not available.
E-commerce outsourcing solutions specialist Digital River <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DRIV)") else Response.Write("(Nasdaq: DRIV)") end if %> flowed ahead $3 3/16 to $28 1/16 after announcing a partnership to provide software to Wal-Mart Stores' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %> online store.
Ohio-based banking company Wood Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FFWD)") else Response.Write("(Nasdaq: FFWD)") end if %> grew $3 1/16 to $18 15/16 after it announced plans to sell itself to Sky Financial Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYF)") else Response.Write("(Nasdaq: SKYF)") end if %> in a stock deal valued at $59 million. Wood Bancorp shareholders will receive 0.7315 shares of Sky Financial Group common stock for each of their company's shares.
Internet-based automated business administrative services provider Concur Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNQR)") else Response.Write("(Nasdaq: CNQR)") end if %>, which grabbed $7 in its first day of trading yesterday, took on another $3 5/8 to $23 1/8 this morning.
Internet advertising firm DoubleClick <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCLK)") else Response.Write("(Nasdaq: DCLK)") end if %> snagged $5 7/8 to $45 3/8 after BT Alex. Brown resumed coverage of the company with a "buy" rating.
Computing products direct marketer Insight Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSIT)") else Response.Write("(Nasdaq: NSIT)") end if %> raced ahead $2 5/8 to $44 3/4 after announcing an agreement buy German company Computerprofis Computersysteme for about $8.4 million in cash and stock plus possible profit considerations.
Oral transmucosal drug delivery company Anesta Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSTA)") else Response.Write("(Nasdaq: NSTA)") end if %> inhaled $2 1/4 to $23 3/4 after it announced the pricing of a 3 million share offering at $21.25 each.
Online development services firm USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %> advanced $2 13/16 to $26 5/16 after the company announced the closing of its merger with new media marketing company CKS Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKSG)") else Response.Write("(Nasdaq: CKSG)") end if %>. The stock deal was valued at about $344.4 million when the deal was announced in September.
Less-than-truckload freight hauler and logistics company Consolidated Freightways <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFWY)") else Response.Write("(Nasdaq: CFWY)") end if %> downshifted $2 3/4 to $15 despite pre-announcing Q4 EPS of about $0.50 (excluding charges), which is well above the First Call mean estimate of $0.28. However, traders focused on the firm's announcement last night that it has ended merger talks with an unspecified third party without reaching an agreement. Morgan Stanley Dean Witter lowered its rating to "neutral" from "outperform."
Mall-based music related apparel retailer Hot Topic <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HOTT)") else Response.Write("(Nasdaq: HOTT)") end if %> was scorched $8 7/8 to $13 1/8 after reporting that its same-store sales have fallen 10.2% so far during the fourth quarter from their levels a year ago, due to lighter-than-expected mall traffic from its primarily teenaged customers.
Skiing and outdoor apparel maker The North Face <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TNFI)") else Response.Write("(Nasdaq: TNFI)") end if %> skidded $1 11/16 to $9 15/16 following a downgrade from BT Alex. Brown to "market perform" from "buy."
Business and education presentation and display products maker Hunt Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUN)") else Response.Write("(NYSE: HUN)") end if %> dropped $2 1/16 to $11 after saying its fiscal 1998 earnings will fall below the $1.10 per share the company said analysts had been expecting. The company blamed the global financial slowdown, lower sales to office superstores and other key clients, and higher start-up costs at a U.K. facility for the shortfall.
Automotive power transmission and fuel transfer systems maker Mark IV Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IV)") else Response.Write("(NYSE: IV)") end if %> stalled $1 7/16 to $12 15/16 after reporting fiscal Q3 EPS of $0.46 (before charges) versus $0.42 last year, which was ahead of the First Call mean estimate of $0.44. However, the company said general manufacturing sector weakness around the globe will result in Q4 EPS between $0.37 and $0.39 and fiscal 2000 earnings between $1.65 and $1.75. Previously, the company had guided analysts to expect EPS of $0.44 in Q4 and $1.90 in 2000.
Copper electrical wire and cable maker Encore Wire Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WIRE)") else Response.Write("(Nasdaq: WIRE)") end if %> snapped for a $11/16 loss to $9 after Schroder & Co. reduced its rating on the company to "neutral" from "buy."
Telecom and medical equipment external power conversion products maker Ault Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AULT)") else Response.Write("(Nasdaq: AULT)") end if %> dropped $5/8 to $6 1/4 after reporting fiscal Q2 EPS of $0.11, down from $0.12 last year and short of the First Call mean estimate of $0.16.
Titanium mill and fabricated products maker RTI International Metals <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RTI)") else Response.Write("(NYSE: RTI)") end if %> was rolled for a $1/2 loss to $11 3/4 after saying "reduced aerospace demand" will result in the permanent shutdown of two of the six vacuum arc furnaces in its Niles, Ohio facility. The company will take a $1 million charge in Q4 to account for the shutdown and the subsequent elimination of about 25 jobs.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |