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VIDEOTicker Shock: Three Reasons Why Clorox Is Still a Clean Buy
Friday's top stories and stocks with potential to move.
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The Hang Seng was closed on holiday and the Nikkei closed up 1.69%. Meanwhile, the FTSE was in negative territory earlier this morning, and the CAC and the DAX were closed for a holiday. (Note to self: Ask Toddo for an Asian or European beat). And here in the US, we're currently trading lower.
Clorox (CLX):
The consumer-products company was out with its third-quarter numbers before the open. In the period, it put up $1.08 a share - markedly better than the $0.90-a-share estimate I’m seeing. But the big takeaway here was its fiscal ’09 outlook. Per the release: “Clorox now anticipates diluted EPS in the range of $3.70 to $3.80, versus its previous outlook of $3.60-$3.75.”
1. I think the bump up in the ’09 outlook is going to attract a lot of eyeballs, and the stock could move higher if I’m right.
2. Not many folks are talking about it, but I like the company’s dividend. The forward dividend yield is better than 3%.
3. It boils down to a simplistic argument: It make stuff that, even in tough times, we still need.
Note that for fiscal 2010, it indicated it was looking for $4 to $4.15 a share.
MGM Mirage (MGM):
In late March and early April, shares of MGM Mirage were trading under $3. The company seemed to have that "I've fallen and I can't get up” look. But the picture has changed a bit since then. The company was dealt some good cards earlier this week with its agreement with Dubai World. More specifically, per the Associated Press:
“MGM Mirage and Dubai World each agreed to fund their remaining payments for CityCenter with letters of credit, and the lenders agreed to immediately fund $1.8 billion to finish the project, rather than wait until each partner had fully paid its share. The company said CityCenter is now on track to be open by December 2009, with the Harmon Hotel & Spa opening in 2010.”
This is good news because Dubai World had reportedly filed a suit against it in March. It’ll be nice, assuming things go well, to see the project get done.
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Also, per Reuters: “MGM, controlled by billionaire Kirk Kerkorian, said a waiver of financial covenant requirements and leverage restrictions on its $7 billion senior credit line has been extended to June 30. The previous temporary waiver was set to expire on May 15.”
This could help reduce bankruptcy chatter. But keep in mind that all is not peaches and cream.
1. Vegas continues to be a tough market.
2. Competition is stiff.
3. I think it could take a few quarters for many to start seriously warming to this story.
How might this impact Penn Gaming (PENN), which seems to be on the prowl for facilities and hoping to pick up stuff on the cheap from other companies? (See Penn Gaming: The Hunted Becomes the Hunter?) I think it’ll be fine. I believe that casino companies may need to raise cash, and that Penn may get a good crack at buying something of value.
So would I buy MGM stock? I’m thinking perhaps a trade. But keep in mind that stock has come awfully far, awfully fast. I’m reluctant to chase it, given it could be a while before the good times start to really roll.
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