Hershey Announces Sweet Capital Investment

Asian stocks rose overnight, but not by much. The Hang Seng and the Nikkei ended up 0.05% and 0.08%, respectively. European stocks were in positive territory, too, in early trading. And here in the US, we’re currently trading lower.

Here’s what I'm seeing this morning:

Hershey (HSY):
The company that needs no introduction was out with a release after the bell last night.

It announced plans to make a $250 to $300 million capital investment to help modernize its legendary Pennsylvania facility. In the release it also offered up an outlook of $2.47 to $2.52 a share (adjusted) for 2010.

My thoughts:

1. I think the capital investment makes sense long-haul because of the potential cost savings. The 2010 outlook was decent as it’s in line with the $2.51 estimate that I'm seeing.

2. The data indicates it’s been pummeling estimates over the trailing four quarters, which is something I look for.

3. I believe management is playing it conservative with its 2010 outlook.

4. This is a stock that’s held up well despite the shakiness of the market, which could attract some institutional players looking to jettison losing positions and ride winners. I think it can continue to grow at a single-digit pace over the next several years, despite the economy.

Callaway Golf (ELY):
The company disseminated a release last night after the closing bell in which it offered up guidance for the second quarter. Per the PRNewswire-FirstCall release:
 

Callaway Golf Company today provided guidance for the second quarter of 2010, announcing that estimated net sales would be in the range of $295-$305 million and fully diluted earnings per share would be in the range of $0.10-$0.15, including charges of approximately $0.01 per share related to the Company's global operations strategy.

My thoughts:

1. Analysts had been expecting $0.33 a share, so the stock could be under a little pressure in today's session. I’d also speculate that over the next day or two, we could see sell-side analysts taking down their numbers.

2. However, this is a company I intend to keep an eye on because its quality products are well-known and respected among the golfing community, and because once the economic recovery kicks into higher gear, demand for its products will get a boost.

3. I’d like to see insiders become active in the stock in the open market in the near future as it would send a nice sign to the investment community. The data shows that executives have been quiet as of late.

4. It’s well above right now, but it’s important that this stock stays north of $5 in order to remain on the radar screens of some sell-side analysts and others in the investment community.

See also, Upgrades and Downgrades: Callaway Golf Hits the Rough.

CVS Caremark (CVS):
The company announced in a release that its board approved a buyback program for up to $2 billion of its stock. This naturally caught my eye because it sends a positive message.

Data shows that back in January/February, an insider bought more than 190,000 shares (a combination of both direct and indirect) above $30. Also, late last year there was some insider activity in the upper $20s. While insider activity is no guarantee that good things will happen, it makes me think that the low $30s could be a decent entry point.

Finish Line (FINL):
Justin Sharon points out in his article that the Indiana-based shoe retailer was upgraded by Citi to Buy.

It's a decent value at 14.2 times this year's estimate. But I'd like to see a major catalyst before getting too excited. Alternatively, I'd like to see the stock come down to the $12 or $13 level. Dick's Sporting Goods (DKS), which sells footwear and many other sports-related items at good prices, excites me a bit more in the $28 range. I think that stock could trade into the mid-$30s within the next six months or so.

Have a great day!