BREAKFAST WITH THE FOOL
Tuesday, December 7, 1999
"I don't think you can spend yourself rich."
-- George Humphrey
Ketchup King Heinz Pours on Earnings By
Richard McCaffery (TMF Gibson)
Condiment, sauce, and convenience foods maker H.J. Heinz <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HNZ)") else Response.Write("(NYSE: HNZ)") end if %> delivered fiscal second quarter diluted earnings per share (excluding restructuring and implementation charges) of $0.65 this morning, up 8.3% from $0.60 per share last year. The results were in line with analyst estimates of $0.65 per share.
The maker of StarKist tuna and Kibbles n' Bits said its move to offer consumers ready-to-eat meals and convenience foods -- all the rage now in the food industry -- is central to its plan to drive earnings and sales.
For example, the launch of its Boston Market homestyle frozen meals is expected to be a growth driver. So-called "meal solutions" such as these offer better margins and sales growth in the 5% to 10% range. Heinz is pushing for earnings per share from 6% to 7% this year, and President and Chief Executive William Johnson said the company is on track to meet those goals.
The company's progress in terms of sales this quarter was perhaps a little less encouraging for investors hoping for brisk long-term growth. Sales grew $21 million to $2.3 billion for the quarter, up just 0.9% from last year. However, excluding divestitures and a 0.5% foreign exchange rate, which seems fair, sales grew 4.9%. Johnson said he's pleased with the growth, which is in line with his plans to grow sales 4% to 5% on average.
Still, as pointed out in a recent Heinz story in the Drip Portfolio, this kind of stable but unspectacular growth makes you wonder what analysts are thinking when they put a long-term growth rate of 10.3% on the stock, the current clip expected by analysts polled by IBES International. While the company's focus on fast-growing, high-end products like frozen meals bodes well for sales growth, the company hasn't yet proven it can move the ship that fast.
Along with today's announcement, Johnson said he's stepping up the company's reorganization plan, called project Excel, in order to recognize all restructuring charges by the end of fiscal 2001. Savings from the project, now estimated at $215 million by 2002, will be higher than expected as well.
News to Go
International media giant News Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> is buying a 10.8% stake in Internet healthcare company Healtheon/WebMD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HLTH)") else Response.Write("(Nasdaq: HLTH)") end if %> to create a global partnership aimed at becoming the dominant brand in the trillion-dollar healthcare industry. News Corp.'s investment includes $962.5 million worth of branding services, stock, cash, and a licensing agreement.
Travel, real estate, and other consumer services company Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> is nearing an agreement to pay up to $3 billion to settle a shareholder lawsuit stemming from its widely publicized accounting nightmare in 1998, The Wall Street Journal reported.
Telecommunications heavyweights Bell Atlantic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BEL)") else Response.Write("(NYSE: BEL)") end if %> and Vodafone AirTouch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VOD)") else Response.Write("(NYSE: VOD)") end if %> moved a step closer toward combining their U.S. wireless assets yesterday after the U.S. Justice Department gave its approval for the alliance providing they divest overlapping assets in 22 cities. According to the companies, the combination will create the country's largest wireless carrier with more than 21 million phone customers and 3.5 million pager customers.
Website content company About.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOUT)") else Response.Write("(Nasdaq: BOUT)") end if %> purchased privately held North Sky Inc., which offers website development tools and hosting services, for about $21 million in stock.
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