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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
Twinlab Deenergized... Again
Nutritional product maker Twinlab Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TWLB)") else Response.Write("(Nasdaq: TWLB)") end if %> burnt off 30% of its value this morning, falling $2 7/8 to $6 5/8 after announcing earnings below expectations for 1998, a restatement of earnings for the prior three quarters, and projections that the first quarter of 1999 would fall "significantly" short of last year's (restated lower) first quarter. Talk about an unhealthy way to wake up in the morning. The restatement of the prior quarters results related "irrevocable, unconditional, bona fide sales orders that were received within a quarter but not completely shipped before the end of the quarter." The company is adjusting its shipping and accounting practices to avoid such problems in the future.
Prior to this morning, the First Call consensus earnings estimate for 1998 and 1999 were $1.16 and $1.38, respectively. As it turns out, 1998 earnings per share came in at $1.10 and, according to Ross Blechman, company CEO, "it now appears that earnings for [1999] will not reach 1998 levels." Those estimates for future years will start tumbling quickly.
Investors have been shying away from nutritional supplement makers for several months. Last year, Twinlab competitors General Nutrition Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNCI)") else Response.Write("(Nasdaq: GNCI)") end if %> and Rexall Sundown <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RXSD)") else Response.Write("(Nasdaq: RXSD)") end if %> had earnings problems as inventories rose and competition intensified. Competitive pressures have obviously traversed the industry. Since its high of $47 7/8 last July, Twinlab has fallen over 80%.
For long-term investors, substantial value no doubt exists in some of these companies. Our nation's aging population and the increasing popularity of nutritional supplements are powerful secular trends. All of the industry players (over)predicted this growth, however, and supply increased much faster than demand, resulting in the current industry woes.
While I'm a proponent of buying into great companies when they're down, investors may want to wait for some good financial news to emerge from these companies before throwing down money. You won't get into a stock at its bottom using this strategy, but you could avoid a substantial further decline. Just ask the people who bought Twinlab last October at $25 after a one week decline of 30%.
Online designer apparel retailer Bluefly <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BFLY)") else Response.Write("(Nasdaq: BFLY)") end if %> rose $3 11/16 to $13 15/16 after signing a deal making it a featured member in the Apparel & Jewelry area of the GO Network portal, which is operated by Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> and Walt Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %>. For its part, Infoseek picked up $4 1/8 to $75 3/8 following bullish comments about the future of the Internet from Disney Chairman Michael Eisner at Disney's annual shareholders' meeting yesterday.
Fiber-optic network operator Qwest Communications International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> ventured $2 15/16 higher to $61 7/8 after saying it has completed the roll-out of end-to-end local business telecom networks in ten major U.S. cities and plans to expand into 9 other local metropolitan markets by the end of this year. The company added that it is "comfortable" with analysts' current expectations for revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) growth in 1999 and 2000.
Air carrier Delta Air Lines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> ascended $3 5/8 to $61 9/16 after Merrill Lynch named the stock a "focus 1 selection" and boosted its fiscal 1999 earnings estimate to $6.70 per share from $6.50 per share.
Telecommunications dense wavelength division multiplexing (DWDM) systems designer Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> was lifted $1 7/8 to $26 1/2 after BancBoston Robertson Stephens raised its rating on the company to "buy" from "long-term attractive."
Enterprise middleware solutions provider BEA Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAS)") else Response.Write("(Nasdaq: BEAS)") end if %> moved up $1 13/16 to $17 3/4 after reporting pro forma Q4 EPS of $0.05 (excluding charges), flat with last year's results but a penny ahead of the Zacks mean estimate. The stock also benefited from upgrades from at least three brokerage firms this morning.
Christian music products producer Integrity Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITGR)") else Response.Write("(Nasdaq: ITGR)") end if %> gained $1 1/2 to $5 3/8 after forming online direct selling relationships with Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> and Didax's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMEN)") else Response.Write("(Nasdaq: AMEN)") end if %> Crosswalk.com site. Integrity also posted Q4 EPS of $0.13 this morning, more than doubling last year's results of $0.06.
Women's fashion footwear designer Nine West Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NIN)") else Response.Write("(NYSE: NIN)") end if %> strode ahead $1 3/16 to $20 3/4 following a NationsBanc Montgomery Securities upgrade to "buy" from "hold."
Lansing, Michigan-based bank holding company CFSB Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CFSB)") else Response.Write("(Nasdaq: CFSB)") end if %> gained $6 1/16 to $27 1/16 after agreeing to be acquired by financial services provider Old Kent Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OK)") else Response.Write("(NYSE: OK)") end if %> for about $242 million in stock, or $28 per CFSB share.
3D graphics chipset maker NVIDIA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NVDA)") else Response.Write("(Nasdaq: NVDA)") end if %> tacked on $1 3/4 to $23 3/4 after posting fiscal Q4 (ended Jan. 31) EPS of $0.27, crushing last year's $0.06 figure. Revenues jumped 178%, compared to the same period a year ago, to $65.5 million.
Paging company SkyTel Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SKYT)") else Response.Write("(Nasdaq: SKYT)") end if %> picked up $3/4 to $19 3/8 following an upgrade to "strong buy" from "hold" courtesy of Prudential Securities.
FedEx and RPS parent FDX Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> delivered a $5 1/16 gain to $94 15/16 following a Schroder & Co. upgrade to "outperform significantly" from "perform in line." The brokerage also bumped up the company's fiscal 1999 earnings estimate to $3.91 per share from $3.43 per share.
Financial and mortgage guaranty reinsurer Capital Re Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KRE)") else Response.Write("(NYSE: KRE)") end if %> climbed $3 to $17 13/16 after a subsidiary of specialty liability insurer ACE Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ACL)") else Response.Write("(NYSE: ACL)") end if %> agreed to make a $75 million equity investment in the company, acquiring roughly an 11% stake.
Greeting cards maker American Greetings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AM)") else Response.Write("(NYSE: AM)") end if %> saddened $11 11/16 to $23 3/8 after it announced a new "productivity initiative" expected to cut fiscal 2000 EPS to between $2.00 and $2.10 per share, well off the $2.97 estimate four analysts gave First Call. The company also authorized a buyback of up to 5 million shares of company stock, about 7% of the total outstanding.
Pickles and frozen foods maker Vlasic Foods International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VL)") else Response.Write("(NYSE: VL)") end if %> was crunched for a $2 3/8 loss to $14 15/16 after it turned in fiscal Q2 EPS of $0.24, ahead of Wall Street's $0.20 estimate but $0.02 behind last year's mark. CEO Robert Bernstock said the company will not pursue previously planned asset sales in its Swift-Armour business and added that a new minimum tax law imposed by the Argentine government in December will affect the future operations of Swift-Armour's future operations. "We remain comfortable with the range of Wall Street operating earnings estimates for fiscal 1999, adjusted for Argentina,'' said Bernstock.
Aircraft maker Boeing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %> moved back $9/16 to $36 13/16 following reports in The Wall Street Journal showing that a quarter of the $13 billion that the aerospace giant is investing in its product lines will produce no meaningful returns. Among the problems plaguing Boeing is the fact that nine of 40 lines of business are expected to produce negative or breakeven returns under current plans. The company intends to undergo a financial overhaul that will include setting precise growth and profit targets for every product line by the end of the second quarter.
PC maker and direct seller Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> lost $1 1/8 to $81 3/8 this morning in advance of a media conference call today at which the company is expected to announce "precedent-setting initiatives" for its online business. For more on this development, ask the cook for some more of today's Breakfast With the Fool.
Immunex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMNX)") else Response.Write("(Nasdaq: IMNX)") end if %>, which announced a 2-for-1 stock split last night, lost $8 1/16 to $150 1/2 this morning. The company's shares ran ahead $21 5/8 yesterday, grabbing about $10 in the last 15 minutes of the session.
Pet supply superstore PETsMART <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PETM)") else Response.Write("(Nasdaq: PETM)") end if %> dropped $27/32 to $8 5/32 after BT Alex. Brown cut its rating on the stock to "buy" from "strong buy." Last night, the company reported Q4 EPS of $0.15, up from $0.02 last year but flat with market estimates.
Telecommunications and data communications products maker Teltrend Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLTN)") else Response.Write("(Nasdaq: TLTN)") end if %> fell $4 7/8 to $19 1/4 despite reporting fiscal Q2 EPS of $0.18, up from $0.13 last year and $0.02 better than the five-analyst estimate provided by First Call. Stephens Inc. reportedly downgraded the stock to "outperform" from "buy" this morning.
Computer reseller MicroAge <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MICA)") else Response.Write("(Nasdaq: MICA)") end if %> grayed $2 13/16 to $9 1/2 after CEO Jeffrey McKeever said the company expects fiscal Q2 EPS to come in between breakeven and $0.10, disappointing the $0.22 consensus estimate five analysts gave First Call. Fiscal Q1 EPS was $0.10, ahead of last year's $0.31 loss but a nickel below estimates. McKeever said MicroAge continues to consider options for its Pinacor division but said a spin-off would leave the unit "inadequately capitalized."
Enterprise software maker Brio Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BRYO)") else Response.Write("(Nasdaq: BRYO)") end if %> lost $3 7/8 to $19 7/8 after Credit Suisse First Boston cut its rating on the stock to "buy" from "strong buy," spurred by Brio's acquisition of privately held SQRIBE Technologies, an enterprise reporting and enterprise information portal software company.
Website developer and operator Telescan Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TSCN)") else Response.Write("(Nasdaq: TSCN)") end if %> fell $2 3/16 to $14 11/16 after it cancelled plans to spin off its non-financial services operations because of "consistent improvement in their operations and strategic value in the high-growth Internet industry." Q4 losses were $0.31 per share including a pre-tax write-down of the non-financial operations of $1.53 million and $537,000 in other charges.
Timeshare operator Silverleaf Resorts <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SVR)") else Response.Write("(NYSE: SVR)") end if %> dulled $2 1/16 to $8 after it said it will delay its Q4 and full-year 1998 earnings report for a week; it was expected today. Dallas-based Silverleaf currently runs over 20 resorts in various stages of development.
Car-rental company Budget Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BD)") else Response.Write("(NYSE: BD)") end if %> skidded down $1 1/2 to $12 3/16 after reporting a Q4 loss of $1.28 per share before one-time items, compared to a $0.09 loss last year and Wall Street's estimated $0.90 loss. "Fourth quarter earnings were disappointing," said CEO Sandy Miller. "We are focused on cutting costs and raising revenues to reverse the fourth quarter's negative trends."
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |