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business newsMeadWestvaco Successfully Shaking the Money Tree
By
Justin Sharon
Mar 18, 2011 4:50 pm
The company's shares finished about 3.45% higher after getting boosted by Goldman Sachs.
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Please see Play Rock, Paper, Scissor Against a Computer!, Throwback Products We Love: Paper Notebooks, and Why the Kindle Can’t Kill the Paper Industry.
General Mills (GIS) may be better known for its Green Giant, but in celebration of St. Patrick’s Day the packaged food behemoth unleashed a little leprechaun on the stock exchange 24 hours ago. The firm founded at the end of the Roaring Twenties, whose other brands include Lucky Charms, Betty Crocker, Cheerios, Häagen-Dazs, Hamburger Helper, Total, and Wheaties, was fortunate enough to see some green screens today. Shares ended up on an announcement that Mills is in talks to acquire a majority 51% steak in French food firm Yoplait, the world’s second-largest yogurt brand. (Danone, also from France, is number one globally, although its Activia was recently fined for highly irregular advertising claims that even Jamie Lee Curtis likely found tough to stomach.) The controlling interest comes with a price tag of 810 million euros -- $1.13 billion -- and assuming Yoplait earns an Ebitda of roughly $190 to $200 million, this transaction reflects a multiple in a range of 11 to 12 times. Should a deal in fact materialize, the transaction likely wouldn’t close before Q1 of 2012 pending regulatory approvals -- indeed authorities in Paris are already planning to be “particularly attentive” to the proposed combination lest large numbers of Gallic jobs be lost. Assuming it goes through, the proposal should be neutral to slightly accretive for per share earnings at General Mills from the first year. Mills is the world’s ninth-largest packaged-food producer, and it says five million cups of Yoplait are eaten each day. Certainly, yogurt sales remained relatively strong even in the recession; this is clearly one thing Greeks still do well. Shares have basically been dead money over the past year however amid rising food inflation. We may get further clarity as to the cereal giant’s intentions when it releases quarterly earnings next week.
Also check out Behind General Mills’ Tasty Results, Greek Yogurt Brings New Life to Dairy Aisle, and Quick Hits: Honey, I Shrunk the Cereal Box.
St. Patrick had to share some headlines with St. Jude Medical Inc. (STJ) yesterday. He’s the patron saint of hopeless cases, something which seemed especially apt when the medical device company’s CEO was arrested in India with a gun, or at least live ammunition, in his pocket. He has since been released and shares, up 2.27%, don’t seem to have suffered much at the Minnesota-based maker of implantable defibrillators used to treat treating cardiac rhythm disorders. Although also heavily involved in neurological markets, St. Jude Medical is best known for a strong cardiovascular franchise including pacemakers and coronary imaging. Shares are up a solid 19.75% in the past 12 months and just hit a fresh 52-week peak. (The fact that heart attacks typically spike on the Monday after Daylight Savings Time may not have hurt performance.) It posted strong results for the most recent quarter, with operating margin of 24.7% for all of 2010 representing a 90 basis point improvement over the previous year. Analysts have high hopes for a new catheter-based device currently in development to treat atrial fibrillation, which affects more than 2 million Americans. Red flags include periodic product recalls and formidable competition from Medtronic (MDT).
Medical Device Makers Brace for Change, How CEOs Talk to You and Economic Snapshot: Prison Advice for the Average White-Collar Criminal have related research.
Tough day for Phil Knight. Whatever the Nike (NKE) chairman and founder ate after waking up it was likely less the Breakfast of Champions than humble pie. The Oregon outfit was this morning's headline downgrade from Goldman Sachs, one white shoe firm which understandably didn’t think much of last night’s earnings from the sneaker and athletic apparel outfit. Besides cutting the stock to Neutral from Buy, Goldman also pulled Nike off its list of Conviction Buys. As a result, shares nosedived 9.13%, the biggest drop in two years, following its first profit shortfall since 2006. On an otherwise up day in equities that easily made it the S&P 500′s worst performer. Although Q3 results themselves were largely as expected, investors are understandably unnerved with management’s expectation of an extra 300 basis points of gross margin pressure for the fourth quarter. Looking further forward, with the anniversary of South Africa's soccer World Cup fast approaching, comparisons are about to get progressively more challenging. Also of concern was an 18% increase in inventory levels at the end of the quarter. The biggest issue though appears to be ever rising input costs -- notwithstanding those $1.25-a-day sweatshops. Analyst Eric Tracy at FBR Capital said, “We were surprised by…the extension of gross margin pressure related to input costs into fiscal 2012,” adding that “A delay in [increasing prices] will pressure results for the next several quarters.” Nike, named after the Greek goddess of victory, has a lot of lost ground to make up. They are currently all over March Madness but the market clearly thinks you’d be crazy to invest in it at the moment.
For more, turn to Nike’s Earnings Run Into Problems, Nike Patents Sneakers From "Back to the Future II", and The Bad Boys of Business: Nike.
Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
No positions in stocks mentioned.
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