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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer

Penske Yellow-Flagged

Penske Motorsports <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPWY)") else Response.Write("(Nasdaq: SPWY)") end if %> lost $7/8 to $19 this morning after confirming fears that earnings for the quarter would be below expectations. The operator of Michigan Speedway, Nazareth Speedway, California Speedway, and North Carolina Speedway, said that lower-than-expected attendance at its U.S. 500 CART event and NASCAR Tripleheader weekend at California Speedway were a drag on quarterly results, even as the company's Pepsi 200 and Pepsi 400 NASCAR events at Michigan in August recorded record attendance. Third quarter EPS of $0.24 to $0.26 is expected, below the range of $0.29 to $0.37 reported by Zacks and well below the $0.63 reported in the third quarter of last year.

The company didn't issue any guidance on future quarters in its press release, though that's been the major dynamic going into the pricing of the company over the last week. On September 3, its 45%-owned Miami-Dade Homestead Motorsports Complex received a 1999 Winston Cup event, which NationsBanc Montgomery Securities believes can add $0.10 to $0.12 to Penske's EPS, depending on broadcast rights fees. However, the company asked that analysts withhold an increase in earnings estimates. This was not because of the award of the race, but because of other trends in the business affecting profitability.

NationsBanc Montgomery Securities believes that incremental fixed costs associated with the buildout of the California facilities and the acquisition of North Carolina Speedway have hampered profitability. Weak results at the NASCAR event in California didn't help that cause. With sharply rising television broadcast rights fees and ratings, the company should generate leverage over these fixed costs and improve the company's profitability. Right now, though, the company's invested capital turnover is the second lowest and net margin is the lowest among its peer group of NASCAR facilities operators:

Company                    DVD   ISCA   SPWY    TRK 
 Invest. Capital Turnover  1.93   0.67   0.44   0.38 
 Net Margin (%)           15.55  19.99  13.64  18.97

You can learn more about Penske and other Nascar-related companies in The Fool's new Industry Snapshot on Nascar companies.

UPS

Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> gained $1 19/32 to $83 1/2 after Prudential Securities raised its rating on the Pentium chip maker to "strong buy" from "accumulate." Today Intel also introduced a new mobile Pentium II processor 300 MHz, which is designed to boost performance without draining the battery.

Enterprise hardware and software company Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SUNW)") else Response.Write("(NYSE: SUNW)") end if %> added $13/16 to $46 3/16 after announcing it is extending Microsoft Windows NT compatibility across its family of Sun StorEdge systems. The company also said it is developing technology that will allow it to integrate seamlessly into Windows NT networks. Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> rose $1 1/32 to $103.

Computer communications and networking products direct marketer Black Box Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BBOX)") else Response.Write("(Nasdaq: BBOX)") end if %> jumped $2 1/4 to $25 13/16 after announcing it has acquired for an undisclosed sum Wakefield Electronics Inc., which operates under the name South Hills Datacomm. Black Box expects the merger will add $0.08 to $0.10 in earnings per share over the next year.

Seattle-based supercomputer company Tera Computer Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TERA)") else Response.Write("(Nasdaq: TERA)") end if %> picked up $13/16 to $9 3/4 after saying it has installed its Unix-based operating system, MTX, at the San Diego Supercomputer Center (SDSC). The company also announced it is testing a four-processor network system.

Ikon Office Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IKN)") else Response.Write("(NYSE: IKN)") end if %> soared $1 11/16 to $9 after Prudential Securities upgraded the office-equipment supplier to "accumulate" from "hold" with a 12-month price target of $12. Prudential also said Ikon is an interesting takeover candidate.

America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> picked up $2 3/4 to $98 after the online services company announced a two-year advertising pact with Scudder Funds, which will become AOL's main mutual funds advertiser.

Sportswear and swimwear designer Quiksilver Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZQK)") else Response.Write("(NYSE: ZQK)") end if %> charged up $2 3/16 to $19 1/2 after reporting Q3 EPS of $0.28, up from $0.21 and $0.02 ahead of analysts' mean estimate. Looking forward, the company said bookings for the upcoming holiday season have increased more than 40%.

High-end accessories designer Gucci Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> strutted up $3 7/8 to $39 1/8 after reporting a 5.9% increase in fiscal Q2 revenues of $236.9 million. July was the first month in the company's history in which revenues topped $100 million.

Telecommunications systems designer and manufacturer Reltec Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RLT)") else Response.Write("(NYSE: RLT)") end if %> regained $1 3/8 to $14 after yesterday's sell-off as the company warned of lower-than-expected Q3 earnings and announced the purchase of 292,600 shares of Positron Fiber Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PFSCF)") else Response.Write("(Nasdaq: PFSCF)") end if %>, which leapt $1 3/16 to $13 7/16. Meanwhile, Lehman Brothers lowered its price target for the company's shares to $45 from $55 a share, its 1998 EPS estimate to $0.58 from $0.85, and its 1999 estimate to $1.20 from $1.36.

High-power rechargeable batteries maker Bolder Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOLD)") else Response.Write("(Nasdaq: BOLD)") end if %> was jump started for a $1 3/8 gain to $10 1/4 after announcing it has completed the initial qualification process for its first commercial battery product and will begin accepting orders.

Drug-related products developer The West Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WST)") else Response.Write("(NYSE: WST)") end if %> gained $2 13/16 to $28 11/16 after announcing the start of a self-tender for up to 2 million, or roughly 11%, of its common shares for between $27 and $31 a share. The tender, which ends October 7, involves shareholders specifying a price at which they are willing to sell their shares. The company will then determine one price that will allow it to buy up to 2 million shares from those willing to sell at or below that price. Separately, the company also announced a Q3 charge of $0.15 a share.

Training and development services company Provant Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: POVT)") else Response.Write("(Nasdaq: POVT)") end if %> surged $2 1/2, or 20.8%, to $14 1/2 after announcing it has signed a letter of intent to acquire Des Moines, Iowa-based American Media Inc., which makes corporate training products and had revenues of $17.1 million for the fiscal year ended June 30.

Real estate investment trust Asset Investors Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIC)") else Response.Write("(NYSE: AIC)") end if %> climbed $1/2 to $14 3/8 after announcing it will buy back up to 800,000 shares.

DOWNS

Investment bank and brokerage firm Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> slid $5 1/8 to $60 7/8 after pre-announcing estimated net earnings of $102 million in July and August, which included $135 million in after-tax losses in "emerging market activities." The company added that the problems in emerging markets create an "uncertain operating environment over the near term" for some of its businesses.

Cincinnati-based consumer products giant Procter & Gamble Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PG)") else Response.Write("(NYSE: PG)") end if %> dropped $5 to $74 5/8 as the company said current president and COO Durk Jager will replace John Pepper as CEO at the start of next year. The company, which is in the initial phase of a large-scale restructuring, said it expects a "mid-single digit" increase in fiscal Q1 EPS, adding that it is comfortable with the Street's fiscal 1999 EPS estimate of $2.84.

Houston-based freight forwarder Eagle USA Airfreight <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EUSA)") else Response.Write("(Nasdaq: EUSA)") end if %> was rocked for a $9 3/16 loss to $13 1/8 after saying its fiscal Q4 EPS will come in between $0.27 and $0.31, missing the First Call mean estimate of $0.34. Revenues are expected to be between $118 million and $123 million.

Merrill Lynch reduced its near-term ratings on several retailers, sending their shares lower this morning. Gap <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %> slipped $2 7/8 to $58 1/16 after being downgraded to "accumulate" from "buy," while Federated Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FD)") else Response.Write("(NYSE: FD)") end if %> slumped $2 3/16 to $47 3/4 following a downgrade to "neutral" from "accumulate." Sears, Roebuck <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> slid $3 1/16 to $47 7/16 and jeweler Zale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZLC)") else Response.Write("(NYSE: ZLC)") end if %> sank $1 3/4 to $25 7/8 after both companies were cut to "accumulate" from "buy."

Royal Dutch Petroleum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> fell $2 1/4 to $47 11/16 as the partner in the Royal Dutch/Shell Group oil exploration and production company resumed oil exports from Nigeria's Forcados field, which accounts for about 20% of the country's reserves. The threat of more oil in an already glutted market helped send crude oil prices lower this morning, even though the production resumption by Royal Dutch had been expected by analysts.

Online book and music retailer Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> was sent down the river with a $2 3/4 loss to $89 1/2 after The Wall Street Journal's "Heard on the Street" column today raised questions about the firm's future profitability, based on the low margins of the book selling business in general.

Enterprise application software firm PeopleSoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSFT)") else Response.Write("(Nasdaq: PSFT)") end if %> lost $1 to $32 3/8 after ending a marketing and distribution agreement with healthcare information systems provider Shared Medical Systems Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMS)") else Response.Write("(NYSE: SMS)") end if %>, under which SMS marketed PeopleSoft's applications as part of its Novius management system.

Internet marketing firm Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNK)") else Response.Write("(Nasdaq: THNK)") end if %> was stumped $2 3/8 to $8 3/4 after Prudential Securities lowered its rating to "hold" from "accumulate."

Construction, coal mining, and waste water transmission products company Walter Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WLT)") else Response.Write("(NYSE: WLT)") end if %> slipped $2 7/16 to $12 1/4 after saying that lower-than-expected earnings at its coal operations will result in fiscal Q1 EPS between $0.17 and $0.18, which is short of the First Call mean estimate of $0.26.

Mortgage originator and servicer FirstCity Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FCFC)") else Response.Write("(Nasdaq: FCFC)") end if %> dropped $2 1/4 to $14 after announcing that it expects a higher-than-expected $10 million to $14 million provision in fiscal Q3 to account for increased loan prepayments due to falling interest rates. The company also said that it has decided to nix plans for an offering of cumulative preferred shares and will seek other funding sources.

Equipment lease financing company First Sierra Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FSFH)") else Response.Write("(Nasdaq: FSFH)") end if %> fell $1 1/2 to $7 3/8 after agreeing to end its merger agreement with privately held Oliver-Carr Corp. because of "current stock market conditions." First Sierra's share price has dropped 64% since the all-stock merger was announced on June 10.

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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool Editing Brian Bauer (TMF Hoops), another Fool Bob Bobala (TMF Bobala), a Fool's Fool Jennifer Silber (TMF Amused), Fool at last