S&P 500 1282.75 -11.51 (-0.89%) Nasdaq 2373.75 -38.28 (-1.59%) Russell 2000 431.79 -5.67 (-1.30%) 30-Year Bond 90 11/32 -7/32 5.94 Yield
FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
Hardly Good News From CKE
Shareholders of CKE Restaurants <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKR)") else Response.Write("(NYSE: CKR)") end if %> got another dose of bad news today when the company warned that earnings would fall short of analysts estimates. Instead of the $0.45 earnings per share (EPS) projected by the consensus First Call estimate, CKE expects results to fall in the $0.35-$0.37 range for the first quarter ending May 17th. The shortfall was caused by poor results at the company's Hardee's and Carl's Jr. chains, where same-store sales fell 4.8% and 4.7%, respectively. Taco Bueno, by far the company's smallest chain, posted excellent comparable store sales of 10.7%. The stock flamed out $4 13/16 to $13 1/4 in morning trading.
Having turned around the Carl's Jr. chain several years ago, CKE purchased the Hardee's chain in July 1997 with the anticipation of working its magic once again. Although investor optimism about the company's prospects has waxed and waned several times, the stock is now at a level lower than it ever reached in the year of the acquisition.
Carl's efforts to revitalize Hardee's began in earnest last year when they began rolling out the "Star Hardee's" format. Under this program, the restaurant maintains its popular breakfast menu but enhances its regular meals by switching to charbroiling and adding several menu items including Carl's Famous Star burger. A little over 10% of the chain has been converted, resulting in same-store gains of 8%-10% for those units. Unfortunately, the non-converted portion of the chain is still seeing sales hemorrhage.
Even worse news for investors is the fact that the sequential same-store sales actually worsened in the most recent quarter after improving for over a year. Considering the poor performance of the chain in recent years, many people had thought that unit sales at Hardee's didn't have much more room to fall. The nadir does not yet appear to have been hit.
After year's of performing well, Carl's Jr. is now showing signs of neglect. Even though the chain had strong results last year, the 4.7% decline in comparable sales cannot be ignored. Perhaps management is spending too much time trying to work on Hardee's. Then again, it could be that competition from McDonald's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> and other fast food companies is proving a little too stiff for the CKE team. With the Hardee's system needing a capital influx for renovation and the Carl's Jr. chain faltering, now is probably a good time to stay away from CKE.
Offshore drilling services company Friede Goldman International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FGI)") else Response.Write("(NYSE: FGI)") end if %> moved up $1 to $17 3/8 after the company agreed to buy Halter Marine Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HLX)") else Response.Write("(AMEX: HLX)") end if %> in a stock swap valuing Halter at $7.55 per share, about a 3% premium to yesterday's closing price. "By joining forces," said Friede Goldman Chairman and CEO J.L. Holloway, "we can optimize our merged production capacity while reducing costs to truly compete on a global scale."
The Limited Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTD)") else Response.Write("(NYSE: LTD)") end if %> bagged a slight gain of $1/8 to $49 1/16. The company said last night that May same-store sales rose 10%, though same-store sales for the seventeen weeks ended May 29 rose 12%. The parent of Victoria's Secret, Express, Limited, Lerner New York, and other specialty store brands said it has extended through midnight tomorrow its 15 million share tender offer to acquire shares for between $50 and $55 each.
Polish pay television services company @Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATEN)") else Response.Write("(Nasdaq: ATEN)") end if %> jumped up $5 5/8 to $18 1/8 after United Pan-Europe Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UPCOY)") else Response.Write("(Nasdaq: UPCOY)") end if %> agreed to buy the company for $19 per share in cash. The buyout price represents a 52% premium to yesterday's close.
Computer network directory and messaging products company Banyan Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BNYN)") else Response.Write("(Nasdaq: BNYN)") end if %> grew $2 to $12 9/16 after CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> announced the purchase of a 35% stake in Banyan's Switchboard Inc. in exchange for $135 million in promotion over the next seven years and branding over the 10 years. The site will be renamed CBS Switchboard.
Burlington, Vermont-based bank holding company Banknorth Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BKNG)") else Response.Write("(Nasdaq: BKNG)") end if %> added $3 to $29 3/4 after Peoples Heritage Financial Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PHBK)") else Response.Write("(Nasdaq: PHBK)") end if %> agreed to buy the company in a $781 million stock swap valuing Banknorth at $32.85 per share based on yesterday's closing prices. That's a 23% premium to yesterday's close.
Semiconductor capital equipment plasma and power sources supplier Applied Science & Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASTX)") else Response.Write("(Nasdaq: ASTX)") end if %> grabbed $1 to $16 after announcing a three-year deal to supply Applied Materials Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> with semiconductor sub-systems. The deal could be worth as much as $142 million over its term.
Wireless broadband telecommunications network firm WinStar Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCII)") else Response.Write("(Nasdaq: WCII)") end if %> shone $1 5/8 to $53 on news that it will expand its Web hosting business. Today the company opens a new, 14,000 square foot data center in Tysons Corner, Virginia, a Washington, D.C. suburb, that will host WinStar's Office.com business site as well as the winstar.com site.
Flash data storage technology company M-Systems Flash Disk Pioneers Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FLSH)") else Response.Write("(Nasdaq: FLSH)") end if %> brightened $5/8 to $5 15/16 after Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> subsidiary WebTV Networks chose M-Systems' DiskOnChip as the local storage device for the next generation of WebTV set-top boxes.
Thin-gauge industrial and consumer films company O'Sullivan Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: OSL)") else Response.Write("(AMEX: OSL)") end if %> got $2 11/16 to $12 1/16 after Geon Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GON)") else Response.Write("(NYSE: GON)") end if %> agreed to buy the company for $12.25 per share in cash, about a 31% premium to yesterday's closing price. Shares of Geon took on $1 9/16 to $33 1/4 this morning.
Internet advertising services company AdForce <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADFC)") else Response.Write("(Nasdaq: ADFC)") end if %> was shoved $7 7/16 lower to $21 1/2 after announcing after the bell yesterday that client GeoCities' ad serving business will be brought in-house this month by Yahoo <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, which has acquired the online community. The GeoCities relationship accounted for 17% of AdForce's May revenues and 20% of its March-quarter revenues. AdForce said it is "obviously surprised and disappointed with Yahoo!'s decision."
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> dropped $5 1/8 to $108 this morning after sliding 5% yesterday. The only news out of the firm is yesterday's announcement that it will acquire two of the Internet's "leading music brands" for $400 million in stock. The first, Spinner Networks, is a multi-format Internet music broadcaster, and the second is Nullsoft, Inc., developer of WinAmp, the Internet's leading MP3 music audio player.
Merrill Lynch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MER)") else Response.Write("(NYSE: MER)") end if %> shed $4 11/16 to $70 9/16 as analysts and investors mull over the company's announcement of "a new model for personal financial services in the Digital Age [capitalization theirs]" based on a fee structure of a "blended rate of one percent of equity and mutual fund assets and 30 basis points of cash/fixed-income assets; minimum annual fee: $1,500." Other full-service brokers also lost ground, as Paine Webber <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> dropped $3 5/8 to $41 1/8, Donaldson, Lufkin & Jenrette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DLJ)") else Response.Write("(NYSE: DLJ)") end if %> lost $3 7/8 to $57 7/8, Morgan Stanley Dean Witter <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWD)") else Response.Write("(NYSE: MWD)") end if %> slid $5 3/8 to $86 3/8, and Salomon Smith Barney parent Citigroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> fell $2 3/16 to $40 3/4.
Internet-based software management firm Marimba <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRBA)") else Response.Write("(Nasdaq: MRBA)") end if %> was knocked down $11 1/2 to $45 7/8 after Morgan Stanley Dean Witter, an underwriter of the firm's initial public offering last month, started coverage of the company with a less-than-enthusiastic "neutral" rating.
Cookies and crackers maker Keebler Foods Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KBL)") else Response.Write("(NYSE: KBL)") end if %> crumbled $1 13/16 to $31 13/16 after Merrill Lynch lowered its long-term rating on the company to "accumulate" from "buy."
Aerospace equipment manufacturer Esterline Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ESL)") else Response.Write("(NYSE: ESL)") end if %> skidded $1 3/4 to $13 1/16 after posting fiscal Q2 EPS of $0.40, down from last year's $0.45 and $0.03 short of the Zacks mean estimate. Additionally, the company said its full-year sales figures will be flat with last year's results due to weakness in many of its product markets.
Telecommunications software firm Catapult Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATT)") else Response.Write("(Nasdaq: CATT)") end if %> misfired for a $2 3/16 loss to $20 3/16 after CFO Joan Varrone said she is resigning to "accept another position."
Department store operator Dayton Hudson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DH)") else Response.Write("(NYSE: DH)") end if %> was marked down $1 3/8 to $62 5/8 after Credit Suisse First Boston cut its rating on the firm to "hold" from "buy," reportedly on worries that margins have peaked.
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |