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business newsNuclear Stock Shaw Group in Meltdown Mode
By
Justin Sharon
Mar 14, 2011 4:50 pm
Shaw, although sharply recovered from its 28% morning plunge, still tumbled roughly 10.73% on concerns it will be negatively impacted by the tragic events unfolding in Asia.
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Indeed, Shaw is currently constructing the first two US nuclear power plants built in a generation, for Scana Corp (SCG) and Southern Company (SO.) Clearly, it is fair to assume that regulators will now understandably want to review all safety features. And with the 25th anniversary of the Chernobyl disaster only a month away, expect some scary news stories on the industry’s prospects. It already seems Germany may shut down its plants for a cooling system upgrade, and Switzerland has now suspended the approval process for three stations. Our own country hasn’t built any new nuke plants of note since the Three Mile Island mishap caused some serious second thoughts in 1979, although interestingly enough our pacifist French cousins have no such qualms, and derive most of their energy from the atom. For all the present alarm a few pertinent facts are worth pointing out however. Shaw’s AP1000 model is more advanced than the General Electric (GE) Boiling Water Reactor used in Japan, and features stricter safety measures. Shaw also derives less than 10% of its overall revenues from nuclear, an amount that is admittedly expected to ramp up considerably going forward. The Chinese, Russian, and Vietnamese governments have all said after the earthquake that their nuclear power usage plans are unaffected. And a likely upcoming mandate that coal-fired utility power plants must have scrubbing facilities to control pollution, which only about 50% presently do, is actually an opportunity for Shaw Group here at home. This time last week, with oil over $100, nuclear was a key alternative energy source. Today, no one wants to touch it with a 10-foot rod. As ever, the eventual outcome may well end up being somewhere in the middle.
Please see Critical Decisions Looming for Japan’s Nuclear Industry, Reveille for the American Nuclear Industry, and Will Catastrophe in Japan Stop New Nuclear Plants in US?
So did you know that the roundest knight at the round table was Sir Cumference? Apparently he became so big by eating too much pi. Okay, that’s more punny than funny but today, 3.14, is Pie Day after all. Camelot or not, let’s hope King Arthur sticks to round rather than OpenTable‘s (OPEN) today. Shares in our headline downgrade finished off about 3.34% after analysts at Merriman Capital cut their rating to Neutral from Buy on the online provider of restaurant reservations. A nosebleed multiple was cited and OpenTable, based in the foodie heaven of San Francisco, is indeed a love-to-hate stock for the valuation crowd. Shares remain up an astonishing 140% in the past year even after today’s tumble. Barron’s served it up some serious humble pie in September, believing the stock too rich for its tastes back when it could be had for all of $65.19, so one shudders to think what they think of it at $88 and change. There is undoubtedly much to admire in its core business model. Last month revenue and non-GAAP earnings per share of $30.8 million and $0.33 comfortably beat Street estimates which were by no means conservative. Organic growth accelerated to 45% on an annual basis, a rate many companies would kill for. And fast-growing mobile devices, where it currently derives 10% of reservations, represents a big future piece of the profit pie. But its fourth quarter also revealed an unsettling increase in operating expenses, even as average subscription revenue per restaurant disappointed and some deceleration in seats-filled growth for the current quarter was apparent. OpenTable, founded in 1998, is a decade ahead of any North American rival but success always attracts imitators and its growing competition includes current cult company Groupon with its daily deals. After such a stratospheric upward run shares are presently priced for perfection. The firm’s service may be free, but lunches never are and this stock certainly isn’t.
For further reservations on a table-pounding bye, turn to Why It’s Time to Sell OpenTable.
What was meant to be a big day for email, what with Wikileaks and all, has instead turned into something of a damp squib. Granted, Bank of America (BAC) is down under but it’s less due to Australian Julian Assange than the market’s overall malaise. And IncrediMail (MAIL), already underwater over the past 12 months, is again sliding substantially. The Israeli-based Internet and digital media outfit was founded in 1999 by a couple of cousins and IPO-ed on Nasdaq in January 2006. It builds downloadable applications and high-end desktop software, including an integrated suite of email and instant messaging, plus screen savers and digital photos. The company’s core email product, distributed to roughly 100 countries, has a devoted fan base and allows users to design and create their own individual electronic "look." However, while contrarians will quibble, electronic mail itself is seen as increasingly unhip among the young and has been for a surprisingly long time. In an "always-on" era of information overload, where Facebook and Twitter increasingly rule, it’s perceived as an increasingly clunky form of communication and even the recent precipitous plunge in spam, while welcome, looks short-lived. IncrediMail actually derives the bulk of its revenues from search, and inked a lucrative contract with Google (GOOG) in July of ’08. But competitive threats abound and changes to its formerly hefty dividend payout policy removes an attractive reason for ownership.
Is Email Killing Your Bathroom Experience?, You Checked Your Work Email Yesterday, Didn’t You?, and What Does Your Email Address Say About You? provide a Reply to All your questions.
We’ll end on an up note. On a day shares touched six-week troughs, Cintas Corporation (CTAS) stock actually ended up about 0.85%. The 43-year-old Ohio provider of corporate uniforms was upgraded to Outperform from Neutral by brokers Robert W. Baird this morning. Baird also boosted its price objective to $34 from $32. It cited an attractive valuation and improving fundamentals, especially with the US jobless rate for February having again dipped below 9%. Cintas will report fiscal third-quarter results on Tuesday, March 22 and it should show an improvement on the second quarter when annual operating margin fell by 34 basis points to 12.1% excluding one-time charges in a still sluggish economy. Its core uniform rental division grew 2.2%, solid rather than spectacular to be sure, but easier comparisons should propel it to a stronger performance next week. With about 30% of all uniform rentals, it is the clear market leader, although outsourcing looms as a long-term headwind. Incidentally, it's also the official outfitter for both NASCAR and the NFL’s Cincinnati Bengals and Cleveland Browns. With the first football strike for 24 years now apparently inevitable, one's mind goes back to the last gridiron work stoppage. The first Monday Night Football game after it ended was on October 19. Otherwise known as Black Monday.
Turn to Worst Work Uniforms: Foot Locker, The Undercover Boss Effect: Does the Reality Show Influence Its Featured Company’s Share Price?, and A Good Company Versus a Good Stock for more.
Lasting through the end of March, 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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