DJIA 8134.58 +105.81 (+1.32%) S&P 500 1057.67 +12.92 (+1.24%) Nasdaq 1764.98 +21.39 (+1.23%) Value Line ndx 807.68 +6.20 (+0.77%) 30-Year Bond 105 17/30 -14/32 5.13% Yield
Lunchtime News | |
Related Items | |
|
FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Starbucks Krafts a Big Win
Starbucks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> warmed up $3 1/2 to $39 15/16 after the coffee powerhouse announced it is teaming up with Kraft Foods to get Starbucks coffee into grocery stores across the United States. Starbucks investors have been waiting to hear this announcement, but this is pretty much as good as it gets in terms of partnerships to put Starbucks on the shopping lists of families across the U.S. A unit of Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>, Kraft Foods is the largest packaged foods company in the country and is no stranger to the coffee scene, with its Maxwell House, General Foods International Coffees, Yuban, and Nabob coffee brands.
In an interview with the Fool earlier this month, Starbucks Chairman and CEO Howard Schultz explained the company's Coke-like mission: "We've learned that our domestic expansion not only is in the early stages, but because coffee is consumed all over the world -- most adults in the free world drink two cups of coffee a day -- we believe most of it is not very good.... Starbucks has a unique opportunity to not only build a global brand but to have a retail presence around the world, complemented by the beginning of a new growth vehicle for the company, and that's the new complementary channel of distribution of creating products and categories for the grocery stores as we develop our retail business." The company also mentioned in its latest conference call that its presence in 3,500 West Coast supermarkets has increased sales in the moribund specialty coffee market by 25%.
The swiftness with which Starbucks has moved on its strategic goals is impressive and lends much credence, along with its track record of hitting goals, to guidance of Starbucks' management. Coming into this quarter, the company was modeling 30% revenue growth for fiscal 1999 and 35% EPS growth. But getting one of the world's premier food companies involved in the company's supermarket initiative and possibly other ventures only helps expectations. Currently, the supermarket coffee business does about $3 billion a year in sales. If Starbucks can expand that market and get to 20% market share within a couple years, then the company is looking at a serious addition to its current revenue run-rate of more than $1.3 billion. If this project can also bolster the company's return on invested capital, then that's all to the good on the valuation front. While some of this has been built into the company's valuation, investors have worried lately that the company's plan to get into the restaurant business with Cafe Starbucks will hurt the company's economics. Today's announcement refocuses Starbucks investors on larger goals and the company's ability to deliver on its objectives.
Fast-food restaurant operator McDonald's Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> tacked on $2 15/16 to $60 3/16 after setting a plan to buy back up to $3.5 billion of its shares by the end of 2001. The company said it completed a $2 billion three-year repurchase plan ahead of schedule last month.
Online media streaming technologies developer RealNetworks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RNWK)") else Response.Write("(Nasdaq: RNWK)") end if %> moved up $7 1/2 to $40 7/8 after saying Internet conglomerate America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> will distribute the company's RealPlayer audio streaming technology with its AOL 4.0 CD-ROMs, which will be available in the U.S. starting today.
Vaccine developer Aviron <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVIR)") else Response.Write("(Nasdaq: AVIR)") end if %> gained $1 15/16 to $17 15/16 after data from a Phase III trial of its FluMist inhalable influenza virus vaccine indicated that the vaccine was 86% effective in protecting children against the A/Sydney strain of the virus, which emerged unexpectedly during last year's flu season.
Semiconductor and flat panel display manufacturing robots maker Brooks Automation <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRKS)") else Response.Write("(Nasdaq: BRKS)") end if %> picked up $1 3/16 to $10 11/16 after an analyst told Barron's that the company will benefit from a general business upturn in the chip industry. Women and children's shoe maker Maxwell Shoe Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MAXS)") else Response.Write("(Nasdaq: MAXS)") end if %>, which also was cast in a favorable light by the magazine, rose $1 5/8 to $13 3/4.
Toymaker Galoob Toys <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAL)") else Response.Write("(NYSE: GAL)") end if %> climbed $3 3/8 to $11 3/8 after Hasbro <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HAS)") else Response.Write("(AMEX: HAS)") end if %> agreed to acquire the company for $220 million in cash, or about $12 per share. However, Hasbro also warned that its fiscal Q3 earnings will come in $0.02 per share below last year's $0.57 per share due to a reduction in orders from toy retailer Toys R Us <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOY)") else Response.Write("(NYSE: TOY)") end if %> -- mirroring a similar warning from rival Mattel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAT)") else Response.Write("(NYSE: MAT)") end if %> last week. Hasbro slipped $9/16 to $30 7/16.
Pharmaceutical developer Agouron Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AGPH)") else Response.Write("(Nasdaq: AGPH)") end if %> was lifted $2 7/16 to $34 13/16 after scientists reported "favorable results" from a preclinical trial of the firm's AG7088 rhinovirus 3C protease enzyme inhibitor at a medical conference in San Diego. Rhinovirus is often the cause of the common cold.
Healthcare management software developer HBO & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %> gained $1 13/16 to $29 7/8 after agreeing to acquire care management programs and healthcare information services provider Access Health <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACCS)") else Response.Write("(Nasdaq: ACCS)") end if %> for up to $43.50 in HBO stock. If HBO's average share price falls below $30 per share, however, each Access share will be converted into 1.45 HBO shares. Access rose $6 3/8 to $37 5/8.
Security and utility software developer Symantec Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYMC)") else Response.Write("(Nasdaq: SYMC)") end if %> unlocked a $1 3/8 gain to $14 7/8 after agreeing to buy the anti-virus business of Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> for an unspecified sum. As part of the deal, Intel will recommend Symantec's Norton AntiVirus product as its preferred anti-virus solution to its corporate customers around the globe.
United Asset Management <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAM)") else Response.Write("(NYSE: UAM)") end if %> advanced $1 1/2 to $23 11/16 after The Wall Street Journal reported that the Boston-based investment management holding company has tentatively agreed to sell its Pilgrim Baxter & Associates mutual fund affiliate to Nationwide Financial Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NFS)") else Response.Write("(NYSE: NFS)") end if %> for about $600 million in cash. Pilgrim Baxter manages the PBHG group of mutual funds.
American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %> fell $3 1/16 to $42 5/8 on reports that its CEO Gerald Gaston made comments late last week at an ING Baring Furman Selz conference suggesting he may be looking for a way out of its proposed merger agreement with Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> following Cendant's well-publicized problems with accounting irregularities this year.
Multinational long-distance company IDT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDTC)") else Response.Write("(Nasdaq: IDTC)") end if %> slid $2 7/16 to $24 1/2 after reporting Q4 EPS of $0.20 (before one-time items), up from $0.04 a year ago and two cents ahead of the analysts' consensus estimate. Including unusual items, the company lost $0.46 a share.
Footwear maker Wolverine World Wide <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WWW)") else Response.Write("(NYSE: WWW)") end if %> was walloped for a loss of $1 7/8 to $11 5/8 after Warburg Dillon Read downgraded its rating on the company to "buy" from "strong buy." Analyst Allison Malkin cited concerns that footwear sales will be weak in October, that retailers still have not corrected inventory gluts, and that the company may be hurt by the economic turmoil overseas.
Mission-critical middleware developer BEA Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAS)") else Response.Write("(Nasdaq: BEAS)") end if %> was cut $1 1/2 to $23 1/2 after announcing it will acquire privately held Java-based Web application server company WebLogic Inc.
Long-term care provider Sun Healthcare Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHG)") else Response.Write("(NYSE: SHG)") end if %> tumbled $1 3/16 to $7 1/16 after announcing it expects Q3 EPS of $0.20 to $0.24, lower than analysts' expectations of $0.39. The company attributed the shortfall to a Health Care Financing Administration decision to convert the company's Retirement Care Associates facilities to the prospective payment system (PPS) retroactive to July 1.
Cable and telecommunications test access products designer Tollgrade Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLGD)") else Response.Write("(Nasdaq: TLGD)") end if %> was disconnected for a $8 9/16 loss to $13 5/16 after warning that it expects Q3 EPS of $0.16 to $0.18, falling short of analysts' mean estimate of $0.32. The company blamed the shortfall on labor disputes in August and September at several major regional Bell operating companies and higher-than-expected inventories at Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %>.
Electronic connectors manufacturer PCD Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCDI)") else Response.Write("(Nasdaq: PCDI)") end if %> dropped $2 9/16 to $11 9/16 after announcing it anticipates Q3 EPS of $0.17 to $0.19, below analysts' expectations of $0.25. In part due to backlog buildup, the company expects sales and earnings to improve in the fourth quarter.
Pharmaceutical company Novo Nordisk A/S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NVO)") else Response.Write("(NYSE: NVO)") end if %> sank $8 1/4 to $62 1/8 after this weekend announcing it will discontinue Phase 3 trials of levormeloxifene for the treatment and prevention of osteoporosis. Although the drug was effective on bone and lipids, its side effects outweighed any benefits.
Generic drugmaker Schein Pharmaceutical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHP)") else Response.Write("(NYSE: SHP)") end if %> shed $2 3/16 to $10 after announcing it will cut 350 jobs at its Steris Laboratories facility in Phoenix, Arizona. The company is still negotiating with the FDA, which halted manufacturing and distribution of all Steris products in September, to restart operations. The products made in the Steris facility account for 40% of Schein's sales and 50% of gross profits.
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 |