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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
The Secret's Out
Lingerie and beauty products maker Intimate Brands <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBI)") else Response.Write("(NYSE: IBI)") end if %>, operator of the Victoria's Secret and Bath & Body Works chains, beat most retailers by a day and announced December sales this morning. The stock is up $1 1/2 to $31 1/2 at midday. Apparently Santa's elves were actively purchasing from these shops, as same-store sales increased 6% for the five weeks ended January 2. Due to these strong results, the company projected that this quarter's earnings per share (EPS) will be $0.02 higher than expected, indicating that Q1 EPS will be at least $0.95. Once again, the company will achieve annual earnings growth in excess of 20%.
The results for this year's holiday season are more impressive because they are being racked up on top of last year's strong 11% comparable-store sales. Substantially boosting sales from a record platform is a sign of an extremely successful retailer. On top of that, all of this is occurring in the important Q4 period when the company earns about 60% of its annual profits. If trends from Q3 continued in the current quarter, sales are being supported by new product introductions and national advertising at Victoria's Secret. Bath and Body Works was cleaning up across all product categories. You can, of course, also order Victoria's Secret products over the Web (Bath and Body Works isn't yet online).
A small sliver of Intimate Brands was spun out of Limited Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTD)") else Response.Write("(NYSE: LTD)") end if %> in 1995, but the parent still owns roughly 84% of the stock. The typical way to invest in Intimate Brands is simply buy its stock. That is the pure play way to buy this fine company. Another way to do it, however, is to buy the Limited. When you purchase a share of the Limited, you are effectively buying about 0.91 shares of Intimate Brands along with brands such as Limited, Express, Lane Bryant, and Structure. Based on the current prices, you are only paying about $1.50 for all the other brands within the Limited stable in addition to the market price for the Intimate Brands stake.
There's no telling if or when the value of these other chains will be unlocked from the Limited. The company does, however, have a history of spinning off successful units. In 1996, the Limited sold a stake of superstar retailer Abercrombie & Fitch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANF)") else Response.Write("(NYSE: ANF)") end if %> in an initial public offering (IPO). Last year, it followed up by shedding its remaining majority stake in that company via an exchange offer. If you are patient, the Limited will likely seek to take action to realize the value of all its units. While waiting, the sexy results from Intimate Brands will prop up both its own and the Limited's stock.
Electronic design automation products developer Mentor Graphics Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MENT)") else Response.Write("(Nasdaq: MENT)") end if %> picked up $2 1/4 to $10 5/16 after saying its Q4 earnings will top the First Call mean estimate of $0.17 per share due to record revenues, product orders, and gross margins. Elsewhere, rival Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> climbed $13/16 to $30 1/2 after Lehman Brothers started coverage of the stock with a "buy" rating and a 12-month price target of $39 per share.
Internet service provider MindSpring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> hopped up $5 11/16 to $72 1/4 after agreeing to acquire the U.S. dial-up, dedicated, and Web-hosting accounts of ICG Communications' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICGX)") else Response.Write("(Nasdaq: ICGX)") end if %> Netcom subsidiary for $215 million in cash and $30 million in stock. The deal will put MindSpring over the 1 million dial-up subscriber mark, according to the company. ICG, which will hang on to Netcom's nationwide network backbone, lost $13/16 to $22 5/16 on the news.
Online stamp and collectibles auctioneer Greg Manning Auctions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GMAI)") else Response.Write("(Nasdaq: GMAI)") end if %> was bid up $3 1/4 to $12 after announcing that it will report "record" profit and sales figures for fiscal Q2. The company added that a full 40% of its sales during the quarter came from Internet auctions.
Several steel producers rose this morning on various upgrades throughout the sector by Merrill Lynch. Among those benefiting the most, Cleveland-based LTV Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTV)") else Response.Write("(NYSE: LTV)") end if %> gained $1 3/8 to $7 13/16, Bethlehem Steel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BS)") else Response.Write("(NYSE: BS)") end if %> moved up $7/8 to $10 1/8, minimill originator Nucor Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NUE)") else Response.Write("(NYSE: NUE)") end if %> added $13/16 to $45 5/8, and USX-U.S. Steel Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: X)") else Response.Write("(NYSE: X)") end if %> forged a $1 9/16 gain to $26 1/16.
Web portal Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> was boosted $5 1/4 to $57 5/8 after Credit Suisse First Boston started coverage with a "buy" rating, saying the company could attract investment interest from a big media player looking for an Internet presence. Other portals also gained ground. Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> shouted its way $15 3/8 higher to $273 1/4, Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> tacked on $4 3/8 to $46 7/16, and Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> found gains of $4 1/8 to $51.
Following the lead from SoundView Technology's call on the sector yesterday, BT Alex. Brown fueled the rally in semiconductor capital equipment stocks today with some upgrades of its own. Among those "feeling the love," wafer fabrication systems maker Applied Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> added $4 1/4 to $54, yield management firm KLA-Tencor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> picked up $2 1/8 to $54 3/4, chip metrology tools supplier Veeco Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VECO)") else Response.Write("(Nasdaq: VECO)") end if %> gained $3 3/4 to $60 1/4, thin film deposition systems designer Novellus Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVLS)") else Response.Write("(Nasdaq: NVLS)") end if %> advanced $5 15/16 to $64 1/2, chemical mechanical planarization equipment company LAM Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %> rose $1 7/16 to $26 11/16, and metrology and process controls firm Zygo Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ZIGO)") else Response.Write("(Nasdaq: ZIGO)") end if %> moved up $2 15/16 to $12 15/16.
Paging company SkyTel Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYT)") else Response.Write("(Nasdaq: SKYT)") end if %> rose $1 3/8 to $22 3/8 as software giant Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> reported a 5.7%, or 3.4 million common share, stake in the company in a federal filing.
Online and TV-based specialty retailer Shop At Home <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SATH)") else Response.Write("(Nasdaq: SATH)") end if %> gained $11/16 to $8 11/16 after saying its shipments in December, excluding returns, were up 58% from last year's levels thanks in part to a 134% year-on-year increase in Internet sales.
Discount retailer Dollar Tree Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLTR)") else Response.Write("(Nasdaq: DLTR)") end if %> grew $4 9/16 to $47 3/4 after reporting a 5.2% rise in Q4 same-store sales, following last year's 5.5% advance during the same period. Net sales rose 24.3% in the quarter to $340 million, while net sales for 1998 increased by 27% year-on-year to $919 million.
Paper, paperboard container, and building products maker Georgia-Pacific Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GP)") else Response.Write("(NYSE: GP)") end if %> produced a $3 9/16 gain to $66 1/16 this morning on numerous reports that the company recently raised prices for uncoated office and printing paper anywhere from $40 to $60 per ton.
Enterprise retail software developer JDA Software Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JDAS)") else Response.Write("(Nasdaq: JDAS)") end if %> slipped $2 15/32 to $7 1/16 after it said it expects a Q4 loss of $0.08 to $0.11 a share, compared with expectations of a $0.16 profit. While the company said it's in the process of figuring out where the shortfall in license revenues came from, it cited broad softness across its domestic and international markets as a suspect. The company also restated Q2 earnings because of a new accounting practice.
Internet-based telecommunications services provider Tel-Save.com Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TALK)") else Response.Write("(Nasdaq: TALK)") end if %>, which yesterday announced a two-year extension of its marketing agreement with America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, lost $1 13/16 to $17 13/16 this morning. Accompanying the AOL news was the resignation of CEO Daniel Borislow. He will be replaced by former Network Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSOL)") else Response.Write("(Nasdaq: NSOL)") end if %> CEO Gabriel Battista, who also becomes chairman and president.
Aspect Telecommunications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASPT)") else Response.Write("(Nasdaq: ASPT)") end if %>, which makes call center management software, tumbled $4 3/4 to $12 5/16 after it said it expects Q4 EPS of between $0.10 and $0.14 per share, short of the First Call analysts' mean estimate of $0.21. Aspect said North American business fell short of estimates.
Aerospace and defense company Northrop Grumman <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NOC)") else Response.Write("(NYSE: NOC)") end if %> dove $5 3/8 to $67 7/8 following the news that it will take pre-tax charges totaling about $125 million in the fourth quarter, reducing earnings for the year by roughly $1.18 a share. These charges are in addition to previously announced consolidation expenses to be charged in the fourth quarter. Costs in connection with the production of fuselages for Boeing's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> 747 airplanes were blamed for the news.
Auto parts and packaging company Tenneco Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TEN)") else Response.Write("(NYSE: TEN)") end if %> rusted $5/16 to $35 5/8 after it said it anticipates its Q4 earnings will be "substantially below" the market's $0.50 per share estimate due to weak performance in its automotive aftermarket business. In addition, the company's 42% tax rate for the quarter, combined with finance and data center costs, is expected to pull EPS $0.12 to $0.14 below last year's $0.46 figure.
Bicycle maker Cannondale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %> skidded $1 1/4 to $7 3/8 following last night's announcement of projected fiscal Q2 EPS of $0.20, missing First Call's three-analyst estimate of a $0.36 profit. Suppliers relied upon for the components needed for higher-margin performance bicycles didn't come through during the quarter, the company said.
Enterprise resource planning software developer Platinum Software Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSQL)") else Response.Write("(Nasdaq: PSQL)") end if %> dulled $1 1/16 to $12 1/16 after the company said it will take an unspecified restructuring charge in Q2 in connection with its recently completed acquisition of manufacturing software company DataWorks.
Shares in video transport and network access system maker Tellabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> lost $3 11/16 to $75 1/8 today after it told news services yesterday it had no explanation for its $13 1/16 rise. CFO Peter Guglielmi returned to the company Monday after a five-month leave of absence.
Analytic application software developer Hyperion Solutions Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HYSL)") else Response.Write("(Nasdaq: HYSL)") end if %> lost $5/8 to $16 3/4 after it said it expects fiscal Q2 EPS of $0.25 to $0.30, missing analysts' expectations of $0.31. The company said Q3 EPS will also likely fall short of estimates. "For the first time we saw customers shifting spending to concentrate on Y2K issues, which affected some of our larger transactions," said CEO John Dillon, who also noted a sales decline in connection with the retraining of its sales force after merging with Arbor Software Corp.
Disposable specialty medical products maker Maxxim Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAM)") else Response.Write("(NYSE: MAM)") end if %> dropped $1/2 to $26 3/4 after it completed its $15 per share tender offer for the common stock of minimally invasive endoscopy surgical instruments designer Circon <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CCON)") else Response.Write("(Nasdaq: CCON)") end if %> in connection with the planned merger of the companies.
Network security products maker Network Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETA)") else Response.Write("(Nasdaq: NETA)") end if %> leaked $3 5/16 to $56 5/8 despite saying Q4 EPS was expected to come in at $0.47, a penny above the Street's consensus estimate.
Movie theater operator AMC Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AEN)") else Response.Write("(AMEX: AEN)") end if %> blurred $15/16 to $17 7/8 after BT Alex. Brown downgraded the stock to "market perform" from "buy."
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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 |