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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Suiza Rebound Continues
<% ' AvantGo:FoolPlate %>Suiza Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SZA)") else Response.Write("(NYSE: SZA)") end if %> picked up $2 5/16 to $40 9/16 this morning after gaining $4 5/16 on Friday following the company's third quarter earnings release. EPS of $0.76 was in-line with the revised estimate of third quarter results that the company released in mid-September. At that time, the company explained that its operations are usually neutral in terms of butterfat prices, with increased prices from selling butterfat offsetting increased production costs and lower volumes in products containing butterfat. Just as a bank's net interest margins roll with changes in the yield curve, as long as the yield curve shifts at a manageable rate, Suiza Foods' neutrality to changes in butterfat prices was affected by the swiftness of pricing changes. In the third quarter alone, butterfat prices rose 50%, according to the company.
For the third quarter, net sales per diluted share increased 39% over last year, to $21.43 per share. On a gross basis, net sales increased 94%, to nearly $1 billion for the third quarter. Suiza is an acquisition-happy company and has successfully rolled a number of different dairy and packaging operations into itself, including the purchase last year of Morningstar, a dairy and specialty food products firm with over a half billion in sales in 1996. This year, the largest growth was seen in the packaging segment, which experienced eight-fold growth in the third quarter, albeit from a small base last year.
For the coming year, the company is planning on "significant manufacturing distribution rationalization," kicking in the second phase of an acquisition-based strategy. That's in addition to the company's plans to keep participating in the consolidation of the dairy industry. On the national level, the brand competition is fierce in juices, frozen confections, ice cream, and specialty dairy products. Milk is really an industry of regional brands, which have come out of dairy producers' cooperatives, but the real margins are in the specialty products. One very interesting partnership the company has going is its agreement with a unit of Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>, to produce Lactaid, a milk for lactose-intolerant people. Even with depressed results for the fourth quarter, return on equity reached an annualized 17.8%, which isn't too bad of a number considering the non-cyclical character of such a company. Getting to the next level -- one of a large national company rather than a smaller, entrepreneurial company growing by leaps and bounds -- may take a different skillset for management. But so far, Suiza's hitting its objectives very well and should be interesting to watch as it tackles bigger things.<% ' AvantGo:End %>
<% ' AvantGo:Ups %>Internet companies continued rising following Friday's news that Softbank Holdings has invested an additional $40 million, representing a 9.9% stake, in online computer retailer Buycomp.com. In August, the Internet investment company paid $20 million for a 10.25% interest. The investments essentially value Buycomp.com at $400 million, one of the highest pre-IPO valuations ever. Investors bid shares of Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> up $5 3/16 to $158 3/4. Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> soared $3 3/8 to $43 3/8, Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> leapt $2 5/8 to $51 3/4, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> rose $2 3/8 to $36 3/8, while Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> netted a $2 3/16 gain to $27 9/16. America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> picked up $3 3/16 to $143 3/16, Mindspring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> surged $3 5/8 to $49 1/4, NetGravity <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETG)") else Response.Write("(Nasdaq: NETG)") end if %> added $1 7/8 to $17 7/8, K-tel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTEL)") else Response.Write("(Nasdaq: KTEL)") end if %> jumped $7/8 to $11 3/16, Earthlink <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ELNK)") else Response.Write("(Nasdaq: ELNK)") end if %> was up $3 3/8 to $53 1/4, and Spyglass <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPYG)") else Response.Write("(Nasdaq: SPYG)") end if %> gained $2 3/4 to $17 9/16.
Alcan Aluminum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AL)") else Response.Write("(NYSE: AL)") end if %> added $13/16 to $28 1/8 after the world's largest automaker, General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, announced a 10-year multibillion dollar deal to buy aluminum from the company in an all-out effort to make lighter cars. The pact is unusually long but sets prices according to production costs rather than volatile commodity markets.
Biopharmaceutical company Centocor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNTO)") else Response.Write("(Nasdaq: CNTO)") end if %> jumped $3 to $50 1/4 after saying that a combination of its antiplatelet monoclonal antibody drug ReoPro with the use of stents "significantly" reduced patients' risk of death by 57% compared with patients given stents alone. Centocor co-markets ReoPro with Eli Lilly & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %>, which slipped $1 7/16 to $85 15/16.
Drug wholesaler Bergen Brunswig <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBC)") else Response.Write("(NYSE: BBC)") end if %> gained $7/8 to $56 3/16 after announcing it will acquire Stadtlander Drug Co., a specialist in disease-specific pharmaceutical care delivery for transplant, HIV, infertility, and serious mental illness patients. Stadtlander parent, Toronto-based Counsel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CXSNF)") else Response.Write("(Nasdaq: CXSNF)") end if %>, fell $1/4 to $8 1/4. Bergen also signed a deal to have exclusive rights to market SIMS Communications' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SIMS)") else Response.Write("(Nasdaq: SIMS)") end if %> One Medical Service System.
Computing giant IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> climbed $1 7/8 to $151 13/16 after Merrill Lynch raised its 12-month target price on the stock to $180 from $165, reflecting a share price multiple 23 times its 1999 earnings estimate of $7.65.
Integrated voice and data applications maker General Magic <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GMGC)") else Response.Write("(Nasdaq: GMGC)") end if %> surged $1, or 15.7%, to $7 3/8 after announcing an exclusive deal in which Intuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> will use the company's magicTalk voice platform, giving Quicken.com users voice-command access to financial information. The service is expected to be available early next year.
Enterprise software developer SEEC Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEC)") else Response.Write("(Nasdaq: SEEC)") end if %> rocketed up $2 7/8 to $8 3/4 after winning a master software deal with the New York State Office of General Services, allowing state and local government agencies in New York to directly purchase SEEC's enterprise reengineering and year 2000 solutions.
Telecommunications technology company Premisys Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PRMS)") else Response.Write("(Nasdaq: PRMS)") end if %> bumped up $1 5/16 to $14 9/16 after announcing a joint partnership agreement with distributor Tein Telecom to service Belgium, the Netherlands, and Luxembourg, or the Benelux region.
Computer networking chip maker Broadcom Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRCM)") else Response.Write("(Nasdaq: BRCM)") end if %> advanced $10 1/8 to $96 5/8 after unveiling a single computer chip that can mix Web pages and TV images on TV screens and will allow for seamless integration of scenes from TV, websites, videos, and digital-video-disk (DVD) movies.
QVC and E! Entertainment cable network operator and telecommunications company Comcast <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %> climbed $1 3/8 to $46 1/8 after reporting a 12.5% increase in third quarter revenues and a loss of $0.01 a share (excluding gains), compared with a loss of $0.18 in the year-earlier period. Analysts had projected a loss of $0.25 per share.
Harley-Davidson aftermarket parts and accessories supplier Global Motorsport Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSTM)") else Response.Write("(Nasdaq: CSTM)") end if %>, formerly Custom Chrome Inc., powered up $2 to $18 7/8 after announcing it will be acquired by Stonington Partners for $19.50 per share in cash -- a 15.6% premium to its closing price Friday.<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Investment bank J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> slid $3 5/16 to $100 7/16 following reports in The Wall Street Journal that it will cut 740 positions, or about 5% of its staff, by the end of the year as the bank tries to cut costs following losses associated with the recent turmoil in international financial markets.
X-ray systems marketer Hologic Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HOLX)") else Response.Write("(Nasdaq: HOLX)") end if %> was zapped $3 5/8, or 22.9%, to $12 3/16 after it reported fiscal Q4 EPS of $0.10, well shy of last year's $0.29 mark and $0.20 below Wall Street's projection. Hologic blamed a seasonal sales slowdown, as well as the move to its new Sahara clinical bone sonometer, for the disappointing Q4.
Assisted living services provider ARV Assisted Living <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SRS)") else Response.Write("(AMEX: SRS)") end if %> coughed $11/16 to $6 1/16 after it announced that CFO Victor Streuffert will resign due to "personal reasons." Streuffert had served as the company's CFO for only two weeks.
Biotechnology firm Geron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GERN)") else Response.Write("(Nasdaq: GERN)") end if %> burned off $3 7/16 to $13 3/4 this morning, having blasted ahead 74% Friday after research funded and licensed by the company successfully derived human embryonic stem cells, which may be used to supply human cells of virtually any tissue type and lead to new transplantation techniques.
Pharmacy services provider PharMerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DOSE)") else Response.Write("(Nasdaq: DOSE)") end if %> toppled $17/32 to $4 9/16 after it said it has hired Donaldson, Lufkin & Jenrette Securities to advise it while it considers strategic alternatives. The announcement came as PharMerica reported a Q3 pro forma net income of $0.09, $0.03 below analysts' consensus and $0.02 lower than last year's mark. Stephens Inc. upgraded the company to "outperform" from "neutral."
Telecommunications equipment maker Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> bleeped slightly, falling $11/16 to $53 13/16 on reports that it lost its contract to supply network switches, base stations, and controllers for wireless communications services provider AirTouch Communications' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATI)") else Response.Write("(NYSE: ATI)") end if %> network expansion in Southern California. For a closer look, dial up this morning's Breakfast With the Fool.
LeCroy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCRY)") else Response.Write("(Nasdaq: LCRY)") end if %>, a maker of digital oscilloscopes, spiraled down $2 1/8 to $17 5/8 after Prudential Securities downgraded it to "hold" from "accumulate." LeCroy adopted a shareholder rights plan, a common takeover defense, last week.
Hotel real estate investment trust (REIT) Patriot American Hospitality <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAH)") else Response.Write("(NYSE: PAH)") end if %> shed $1 11/16 to $9 1/4 after it reported Q3 funds from operations of $0.36, down from $0.44 last year. Wall Street's consensus was $0.39, while Patriot hoped to turn in a $0.40 mark. CEO Paul Nussbaum blamed "income recognition issues related to certain management agreements" for the shortfall.
Property and casualty insurer Vesta Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VTA)") else Response.Write("(NYSE: VTA)") end if %> shuddered $3 1/4 to $6 1/4 after it said it expects a Q3 loss of about $30 million and that it will be in default of its loan covenants as a result. Wall Street expected a $0.29 per share loss. Meanwhile, insurer and asset manager Torchmark Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TMK)") else Response.Write("(NYSE: TMK)") end if %> lost $5 1/16 to $38 13/16 after it said it has agreed to sell approximately 1.9 million shares of Vesta to Alfa Insurance Group for $7.42 per share. The sale price represents a discount of nearly 22% on Vesta's $9.50 per share close last week. Alfa has agreed to buy up to 36% of Vesta's shares to shore up its finances.
Auto insurance holding company Mercury General <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCY)") else Response.Write("(NYSE: MCY)") end if %> braked $2 1/4 to $43 3/8 following its announcement that Q3 EPS was $0.74, $0.03 above last year's mark but significantly below the market's $0.82 consensus estimate. Mercury said an advertising campaign launched in April "has not met expectations" but will be continued.
Jaco Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JACO)") else Response.Write("(Nasdaq: JACO)") end if %>, which makes passive and active electronic components for original equipment manufacturers (OEMs), lost $7/8 to $6 after it said fiscal Q1 losses were $0.06 per share, compared with EPS of $0.10 last year and the market's $0.02 per share profit estimate. CEO Joel Girsky said industry-wide pricing pressure and sagging demand was responsible for the slide.
America West Holdings Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AWA)") else Response.Write("(NYSE: AWA)") end if %>, the parent of air carrier America West Airlines, dove $1 13/16 to $14 1/2 after Goldman Sachs downgraded the company to "market perform" from "market outperform." Meanwhile, American Airlines operator AMR Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> fell $2 7/8 to $63 7/8 following Goldman's cut to "market perform" from "trading buy."<% ' AvantGo:End %>
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