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VIDEOTicker Shock: Four Reasons Why B&N's Stock Could Be a Bestseller
Thursday's top stories and stocks with potential to move.
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Asian stocks ended lower. The Hang Seng closed lower 1.58% and the Nikkei was down 0.86%. European stocks were in negative territory earlier this morning as well. And here in the US, we're currently trading lower.
Here's what I’m focused on this morning:
Barnes & Noble (BKS):
Read on… The well-known book retailer published (I’m trying here) its first-quarter earnings.
According to the release:
“The first quarter net loss from continuing operations was $2.1 million or $0.04 per share, compared to guidance of a loss per share of $0.10 to $0.20. The company was able to exceed its guidance due to better-than-expected revenues, gross margins and a continuous focus on expense management.”
My interest is a tad piqued, as the Street was looking for a steep, $0.15-a-share loss.
The other big highlight: “Based on the company’s better-than-expected performance during the first quarter, the company is raising its full-year earnings per share guidance range to $1.10 to $1.40, from $0.95 to $1.25.” My feelings:
1. That’s a pretty big bump up in guidance, and I think analysts are going to be cranking up their estimates as a result. Note that the estimate I’m seeing is for $1.07.
2. That dividend is a good read. The forward yield, by my calculation, was better than 4%, based on last night’s close.
3. I’d be reluctant to chase the stock in today’s session, because the overall market tide may pull down the boat.
4. With all that in mind, we could see this stock north of $30 within a year’s time.
Limited Brands (LTD):
Looks like Victoria finally revealed her secret: an earnings beat. Check out the company's first-quarter release. It earned a penny a share, which was a big thumping from the (adjusted) $0.11 it earned in the comparable period last year. However, it was north of expectations; the Street was actually prepared for it to lose $0.03.
This tidbit in the release also caught my eye: “For 2009, the company expects earnings per share of $0.67 to $0.87.”
A quick gander back at its fourth-quarter release reveals that it had previously offered up an ’09 outlook of $0.60 to $0.85. (If you're so inclined, maybe a little research of the site wouldn’t be a bad idea.)
My thoughts: 1. The investment community will probably see this as a positive, and the shares have a solid shot of getting a goose in today’s session.
2. The PE based upon the high end of the company’s ’09 outlook (I’ll use $0.87) is 13.4. Not unreasonable, but not terribly cheap, either.
3. For what it's worth, the Street is at $0.74, so there’s a chance we could see the sell side raise their estimates in the days ahead.
4. I think it's important to realize that things aren’t all that swell. Note that comps were down 7% in the period.
I’m lukewarm on the story right now. In my heart, I think there are better opportunities out there. Sorry, Limited bulls.
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