DJIA 7873.26 -59.99 (-0.76%) S&P 500 1024.59 +0.70 (+0.07%) Nasdaq 1688.07 +7.64 (+0.45%) Value Line ndx 793.54 +2.62 (+0.33%) 30-Year Bond 105 10/32 -12/32 5.15% Yield
Lunchtime News | |
Related Items | |
|
FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
Smelly Stocks
If you thought fertilizer was just a load of %@*!, then a perhaps short review is required. It's big business, and today the largest potash producer in the world Potash Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: POT)") else Response.Write("(NYSE: POT)") end if %> -- no that ticker symbol isn't wrong -- announced that due to weakness in nitrogen markets (expected to be down $20 million year over year for the company), third quarter EPS will come in between $0.90 and $1.00, less than the IBES mean estimate of $1.29 from 11 analysts. Potash fell $1 13/16 to $51 1/8 on the news. Soil that has not undergone the rigors of aggressive planting usually contains adequate amounts of all the elements required for proper plant nutrition. However, when a particular crop is grown on the same parcel of land year after year, it may become exhausted of one or more specific nutrients. The replacement of these vital nutrients is the role of fertilizer, in addition to providing plants with the ability to grow more fully (increasing yield).
The fertilizer industry is dominated by large, North American public companies. Consolidation in the industry has contributed to greater control over production, resulting for the first time in a relatively stable supply/demand environment more characteristic of a non-cyclical industry. Weaker competitors that were responsible for "irrational" price-cutting have been acquired, allowing the large firms to implement supply management techniques that prevent inventory build up and pricing pressures. Finally, the industry is more focused than ever before on its core business of agriculture. Ten years ago many fertilizer operations were only an adjunct to larger mining or petroleum businesses.
The stage has been set for a secular and long-term growth trend for the fertilizer industry. This is largely as a result of one statistic: Roughly 50% of the world's population, in agricultural terms, is where the U.S. and Western Europe were 30 years ago. As burgeoning populations in developing countries continue to improve their economic status, the masses will begin to shift toward higher quality, higher value diets. And as abhorrent as it is to vegetarians, increasing prosperity invariably equates to a diet with more meat. More meat means more grain production, and we all know what that means.
Many industry watchers point to China and India as the two largest forces on the demand side of the fertilizer equation (indeed, volume sales to Asia thus far this year are up 7% and prices are up 11% despite "the crisis"). Together their populations comprise 1.8 billion of the world's 5 billion inhabitants. The Chinese market alone constitutes 35% of world fertilizer demand. China has 20% of the world's population with only 7% of the world's farmland -- and this discrepancy has not gone unnoticed by the fertilizer industry. All the major industry players are aggressively courting the Asian markets, with China getting the lion's share of the attention. This lack of farmland coupled with China's irrigation problems creates a steady demand situation that makes many industry analysts smile. In addition, at present it simply costs China too much to grow grain. China typically spends $150 to grow a ton of grain, while the U.S. efficiently cranks out a ton of grain for $50. With projections of relatively flat growth rates in the U.S., worldwide demand is the engine that will propel fertilizer industry growth going forward. Take a look for yourself.
Managed healthcare provider Oxford Health Plans <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OXHP)") else Response.Write("(Nasdaq: OXHP)") end if %> moved up $7/8 to $12 1/8 following a Salomon Smith Barney upgrade to "outperform" from "neutral." In recent days, Oxford has been discussing its strategy for future profitability with analysts, who have reportedly been encouraged by the company's proposed turnaround plan and CEO Norman Payson's decision last month to buy an additional two million Oxford shares.
Chip maker Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> rose $3/4 to $18 3/4 after announcing that it is shipping a microprocessor for laptop computers that operates at 300 megahertz, or the same speed as rival Intel's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> fastest laptop chip. Customers such as Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> will be able to buy the new K6-300 chips for $229 in 1,000 unit lots.
Online streaming media aggregator and broadcaster Broadcast.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BCST)") else Response.Write("(Nasdaq: BCST)") end if %> gained $5 to $49 1/4 after Morgan Stanley Dean Witter raised its rating on the firm to "outperform" from "neutral." The company said it had a "record day for simultaneous users" yesterday due to the release of President Bill Clinton's grand jury testimony. Broadcast.com is expecting 1 million unique visitors at its website today.
Internet portal company Infoseek Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> climbed another $1 1/16 to $22 3/8 after Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> selected the company as one of its "four premier search partners" for its Internet offerings such as Microsoft Network (MSN) and Internet Explorer. In connection with the deal, Infoseek will take a $7 million to $8 million charge when Microsoft launches its new search services this fall.
Shopping center real estate investment trust (REIT) Simon DeBartolo Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SPG)") else Response.Write("(NYSE: SPG)") end if %> advanced $2 to $29 1/2 after Donaldson, Lufkin & Jenrette raised its rating to "top pick" from "buy." Self-storage facility REIT Public Storage <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PSA)") else Response.Write("(NYSE: PSA)") end if %>, which received the same treatment from DLJ, added $1 7/8 to $27 1/8.
Parking lot operator Central Parking Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPC)") else Response.Write("(NYSE: CPC)") end if %> put it in gear this morning, rising $1 7/8 to $48 after agreeing to acquire privately held parking services firm Allright Holdings from Apollo Real Estate Investment Fund II, L.P. for about $585 million in Central Parking shares and assumed debt. The deal is expected to add to Central Parking's earnings in fiscal 1999.
Residential building products and specialized electrical cable manufacturer Associated Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIDE)") else Response.Write("(Nasdaq: SIDE)") end if %> tacked on $3/4 to $9 after saying that it has hired McDonald & Co. to help it sell its 50% stake in Amercord. The remaining stake in Amercord, which makes steel tire cord and tire bead, is owned by Canada's Ivaco Inc.
Automatic fire sprinkler components maker Central Sprinkler Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNSP)") else Response.Write("(Nasdaq: CNSP)") end if %> spurted $1 1/8 higher to $10 1/8 after reporting fiscal Q3 EPS of $0.45 (excluding litigation charges) versus $0.26 a year ago, beating the $0.33 expected by the sole analyst surveyed by Zacks. The company attributed the better bottom line results to lower operating costs and other efficiency improvements.
Crude oil transport, storage and trading firm EOTT Energy Partners, L.P. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EOT)") else Response.Write("(NYSE: EOT)") end if %> was pumped up $1 3/4 to $13 7/16 after agreeing to buy about 3,900 miles of crude oil pipeline and contracts for about 220,000 lease barrels of crude oil per day from affiliates of privately held Koch Industries Inc. EOTT will pay $184 million in cash and a total of 4 million EOTT partnership units for the assets, which will triple its pipeline mileage and almost double its number of lease barrels under contract.
Heating, ventilation, and air conditioning (HVAC) systems maker York International Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: YRK)") else Response.Write("(NYSE: YRK)") end if %> rose $1 3/4 to $34 1/8 after pre-announcing fiscal Q3 EPS between $0.83 and $0.88 per share, excluding a $0.27 per share one-time gain. The First Call mean estimate had called for EPS of $0.83 in the quarter. Additionally, the company said it will accelerate its share repurchases under its current 6 million share buyback plan.
Pillows and bedding products maker Pillowtex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTX)") else Response.Write("(NYSE: PTX)") end if %> was fluffed up $2 to $28 3/8 courtesy of a Prudential Securities upgrade to "strong buy" from "accumulate."
Enterprise networking company Cabletron Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %> fell $13/16 to $10 3/16 after reporting after the bell yesterday fiscal second quarter earnings of $0.09 a share compared with $0.36 in the same year-ago period. According to IBES, the analysts' mean EPS estimate was $0.08, with predictions as high as $0.14 and as low as $0.03. In a conference call, the company said it will take charges of $0.46 a share in its third quarter to pay for acquired technology.
Oil and gas pressure control equipment maker Cooper Cameron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RON)") else Response.Write("(NYSE: RON)") end if %> sank $5 1/16 to $29 3/16 after warning that it expects flat third quarter earnings of about $0.70 a share, short of analysts' expectations of $0.84, and fourth quarter EPS that will be $0.10 lower than last year's $0.83 and current estimates of $0.93. The company blamed the shortfall on a continuing lack of new equipment orders combined with weakness in Southeast Asian markets.
Oilfield services provider BJ Services Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %> dropped $1 5/8 to $17 1/16 after saying at the Dain Rauscher Wessels energy conference in Houston that it expects lower fiscal 1999 earnings and plans to eliminate 840 jobs from a total of around 9,300 due to lower demand for its services, Reuters reported. The company will take an unspecified restructuring charge in its fiscal fourth quarter.
Other oilfield services and equipment companies also lost ground following the earnings warnings by their cohorts: Smith International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SII)") else Response.Write("(NYSE: SII)") end if %> lost $1 5/8 to $24, Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> dipped $1 9/16 to $48 3/8, and Halliburton <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HAL)") else Response.Write("(NYSE: HAL)") end if %> shed $1 1/4 to $30 3/8.
Auto care centers franchisor Precision Auto Care <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PACI)") else Response.Write("(Nasdaq: PACI)") end if %> tumbled another $1 to $5 after yesterday warning that it expects a fiscal Q4 pro forma combined net loss of $0.11 per share, compared with breakeven results for the same year-earlier period. The company also forecasted pro forma combined net income of $0.32 per share for the year ended June 30, a penny below pro forma numbers for last year.
Electronic sensors and motion control devices maker BEI Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEIQ)") else Response.Write("(Nasdaq: BEIQ)") end if %> was cut $1 5/16 to $6 1/16 after saying it anticipates a possible loss from continuing operations for its fiscal fourth quarter ending Oct. 3 due to a recent downturn in sales of its most profitable core products, as well as higher-than-expected manufacturing startup costs for automotive yaw sensors. That compares with $0.17 a share in the year-earlier period and two analysts' estimates of $0.17 and $0.22, according to IBES.
Fidelity Federal Bank parent Bank Plus Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BPLS)") else Response.Write("(Nasdaq: BPLS)") end if %> tanked $1 1/8 to $6 1/8 after announcing the resignation of its president and CEO, Richard Greenwood, who is leaving to pursue "interests in the future of electronic commerce." The company named CFO Mark Mason as interim CEO.
Consumer packaging company Crown Cork & Seal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCK)") else Response.Write("(NYSE: CCK)") end if %> dropped $4 11/16 to $32 5/8 after saying it will cut 2,700 jobs, or 7% of its workforce, and announcing that it expects Q3 EPS of $0.80 to $0.82, down from $0.90 a year ago and lower than analysts' mean estimate of $1.05. The company attributed the shortfall to bad weather and currency weakness in Mexico, Brazil, and Canada.
Analog communications components maker C.P. Clare Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPCL)") else Response.Write("(Nasdaq: CPCL)") end if %> plunged $1 5/8 to $5 5/8 after saying it expects fiscal Q2 net sales of around $33.5 million, 10% lower than the $36.7 million in the previous quarter, and breakeven operating earnings before charges. The company announced a pre-tax restructuring charge of $4 million in Q2, primarily related to job cuts and the write-off of certain leasehold improvements related to the closing of its Wakefield, Mass., production facility.
Manufacturing systems maker Unova Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNA)") else Response.Write("(NYSE: UNA)") end if %> slipped $1 3/8 to $17 9/16 after warning that it expects Q3 EPS of $0.23 to $0.26, short of analysts' mean estimate of $0.30, though it predicts Q4 could top current expectations.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
Click here for continually updated Portfolio Numbers.
See something moving a stock that we didn't cover?
E-mail the Fool News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.
|
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 |