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business newsITT Corporation Is This Afternoon's "It" Stock
By
Justin Sharon
Jan 12, 2011 3:50 pm
Shares are easily today's top S&P 500 performer, up more than 14% as investors warm to the news of its plans to split into three publicly traded entities.
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The restructuring, expected to be complete by the end of this year, will leave intact the existing aerospace and industrial powerhouse, while also siphoning off water-related and defense equipment firms. Peter Skibitski, researcher at brokers Robinson Humphrey, believes “the timing is good” amid the “beginning of a recovery in the commercial and industrial end markets.” Secular growth trends in fluid technology, water infrastructure, and treatment were already seen as better than half full even before the recent discovery of "Erin Brockovich" carcinogens in our drinking supply, so this may be much more than merely a pump-and-dump scheme. On the battlefield, ITT’s night vision equipment division has a 24-month order backlog and its JCREW device is critical in jamming detonation on roadside bombs in both Iraq and Afghanistan.
The record of such spin-offs in unlocking shareholder value isn’t always ironclad, and S&P has already put the parent firm on notice for a possible downgrade of its credit ratings. Potential cuts to the defense budget will also always loom large. Still, for now investors believe ITT, which once even owned Wonder Bread, stands to make plenty of dough by being a much less unwieldy outfit going forward.
Please see Do Corporate Spin-Offs Help or Hurt Shareholders? and Are Water Stocks More Valuable than Gold?
For those who prefer having heavy metals on their wrist, rather than in their water, there’s always Signet Jewelers Limited (SIG). Its shares are up sharply today on the back of both strong holiday sales and upbeat industry sentiment.
The world’s largest such specialty shop sells brands including Kay, Jared The Galleria, and H.Samuel out of about 1,400 US stores and an additional 550 or so in the UK. While high rollers like LiLo are more likely to be found shopping for bracelets, ankle and otherwise, at upscale Tiffany & Co. (TIF), Signet and Zale Corporation (ZLC) -- today’s top NYSE performer -- serve more of a middle market. Strong North American November and December same-store sales comps of 11.7% beat Street estimates at this 61-year-old Bermuda-based firm founded by Mr. Leslie Ratner. (Gerald Ratner took over the family business from his father in 1985, only to rather stupidly stick his necklace on the line six years later by calling his own company’s products “total crap.” In 1993 the retailer wisely changed its name to Signet.)
They also recently gave good earnings per share guidance for fiscal 2011, the projected range of between $2.54 and $2.66 excluding a one-time charge also coming in ahead of consensus expectations. Domestic average selling prices gained an impressive 11.3% and new labels like Charmed Memories and the Tolkowski bridal diamond are expected to be popular Valentine’s Day purchases.
One wild card to which Signet will always remain vulnerable is any pullback in the pound sterling, but for now its investors are ringing in the new year by ringing up profits.
Also check out Wisconsin Jeweler Offers 50% Off Between Now and Whenever the Second Coming Occurs.
Goldman Sachs may or may not be partial to Trojan horses, but it's evidently a big proponent of Trojan condoms-maker Church & Dwight (CHD), boosting its shares to a bullish Buy from Neutral. Stock in the New Jersey household products and personal care giant founded in 1846 is clearly experiencing good vibrations as a result, currently trading some 2% higher.
This consumer goods company also makes several other iconic products including First Response home pregnancy test kits, Arm & Hammer baking soda, and laundry additive OxiClean, once famously peddled by a pitchman whose ability to sell sand to Saudis and ice to Eskimos remained undiminished even in death. In also increasing its 12-month price target by a steep $10 to $81, Goldman made mention of an anticipated acceleration in gross profit growth, which in turn could deliver a 12% to 13% per share earnings increase for 2011.
Private label competition and sluggish organic sales growth -- only 2.8% in the most recent quarter -- remain concerns.
Turn to Most Embarrassing Products: Trojan Condoms and The Ten Best CEO Pitchmen for more.
Two years to the week after its Hudson Miracle, a slight Sullying of reputations over at US Airways Group Inc (LCC) today. The 30-year-old carrier, which operates out of Tempe, Arizona, is down in an up sector after getting downgraded to Hold from Buy at Soleil Securities on that old industry hoodoo, a precipitous increase in fuel costs.
Analysts wrote in a note, “The combination of US Airways’ shares approaching our target price, coupled with a recent sharp rise in market fuel prices suggest an above-average 2011 earnings headwind.” Accordingly it reduced 2011 per share earnings estimates to $2.15 a share from $2.50 at the carrier, which operates about 3,000 daily departures to almost 200 different destinations. Soleil’s price objective is intact at $12 and US Airways does command an impressive market share in the lucrative New York-Washington shuttle corridor, acquired from the failed rump of Trump‘s organization several years ago. But with fuel prices some 20% higher than year-ago levels, and the stock still up more than 100% in the same time, some loss of altitude was long overdue.
US Air Sued for Million-Dollar Xbox and US Air Says Drinks Are on Us has related content.
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No positions in stocks mentioned.
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