Tuesday, February 23, 2010

Tuesday Morning (HD,SHLD,BRCD,INTC,ODP, SAFM,HSII, SAH)





US futures are signalling a lower open for stocks, to the tune about a third of a percent.


Home Depot (HD) beat earnings by 7cents, with revenues coming in ahead of expectations also.  The company also increased forward earnings and revenue guidance slightly, taking 2010 eps target to 1.79 versus the 1.73 expected.  The company is increasing their dividend for the first time since 2006, with a longer term target payout ratio (% of net income) of 40%.


Sears Holdings (SHLD) reported q42009 earnings of 3.69, 15cents ahead of estimates.  They closed 27stores in the fourth quarter and 62during full year 2009.  They also bought back 7.1million shares in 2009 at an average price of $59.81, significant;y below the current $95.66.  Full year EBITDA of $1.8billion gives the company a rather full valuation with a $11billion market value.  


Brocade (BRCD) shares are down 18% in premarket trading.  As results disappointed in their fiscal q1 quarter, management did a surprisingly poor job executing the company's sales strategy.  Along with weak 2010 guidance, investors are unimpressed.  I'd commented on October 5th that the rumors of the company selling itself were premature, and that they should wait and sell higher.  Unfortunately that was 30% ago...


Intel (INTC) is planning a $2billion investment fund with venture capital firms, to invest in US companies.


Poultry producer Sanderson Farms (SAFM) reported earnings of 75cents per share that beat estimates by about 11cents.  Restaurant traffic remained weak, but grocery store demand held up better.  Management commented  “Demand for chicken at the retail grocery level has remained good and current supply levels are balanced with consumer demand in that market. Our food service business remains soft, reflecting the prolonged slowdown in restaurant traffic caused by current economic conditions. We expect these demand trends to continue until we see a meaningful improvement in the national job market and consumers resume spending and dining out again."


Office Depot (ODP) beat earnings (well, their loss was less than expected) estimates by 16cents, with revenue coming in better than expected also.  The company shuttered about 115 stores in 2009 and continues to take big charges to earnings to reflect that.  2009 free cash flow of $166million is about a 16% Free Cash Flow Yield on the company's net-of-cash market value.


Executive search firm Heidrick & Struggles (HSII) beat revenue and earnings expectations, but more importantly gave a positive 2010 outlook.  The firm sees full year 2010 revenue of about $460million, versus street expectations of $439million.


Car dealership owner Sonic Automotive (SAH) beat revenue and earnings expectations.  Management noted "Our new vehicle retail revenue was up approximately 11% compared to the fourth quarter last year as our dealerships continue to gain share in their local markets. In addition, our new vehicle retail margin for the quarter at 7.3% was up 60 basis points compared to the same period last year. Overall used vehicle unit volume was up 18% and total used vehicle revenue was up almost 23% for the fourth quarter of 2009 compared to the same quarter last year." 




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