Cart (0)
business newsSuperValu Serious About Enchancing Shareholder Value
By
Justin Sharon
Apr 14, 2011 4:50 pm
CEO Craig Herkert cited his firm having realigned business operations improved execution as key drivers of the upside surprise.
PRINT
 |
|
The last time SuperValu (SVU) saw a bull run like this it wasn’t pretty but today the grocery and general merchandise outfit will be a lot happier with the animal spirits it attracted. Shares of the retailer rose 16.85%, its biggest single-session gain since April of ’09, to top not only all S&P 500 issues but also the entire NYSE. This after the Minnesota supermarket firm founded in 1871 beat Street estimates for its fourth quarter and also issued upbeat guidance. Though profit fell 2.1% to $96 million in the period, earnings per share of $0.44 was still well ahead of consensus calling for only $0.34. Meredith Adler, a researcher at Barclays Capital, believes “The company seems to be making real, if still modest, progress.” Going forward, SuperValu now projects adjusted profit for fiscal 2012 to be in the range of $1.20 to $1.40 a share; analysts had anticipated just $1.15. The key metric of same store sales excluding gasoline are now seen slipping between 1.5% and 2.4%, no great shakes admittedly but still a marked improvement on the 6% implosion seen in fiscal 2011.
CEO Craig Herkert cited his firm having “realigned our business operations [and] improved our execution” as key drivers of the upside surprise, and now expects that “fiscal 2012 will be the bottom of the cycle, and we’ll [see] earnings growth in 2013.” SuperValu, whose operations include Acme, Albertsons, Shop ’n Save, and Star Market, continues to generate free cash flow and pay down debt. That said, it faces some serious headwinds. Even amid today’s otherwise ebullient report, annualized revenue slid 6.3% to $8.66 billion and sales have now slipped for eight straight quarters. Commodity cost inflation looms large as a bogeyman in aisle three, competitors Safeway (SWY) and Kroger (KR) have far outperformed of late, and category killer Wal-Mart (WMT) is constantly eating away at market share. An aristocratic 3.26% dividend yield sounds enticing but the shares, down more than 36% in the past year even after today’s jump, has the look of a super value trap. Ajay Jain at Hapoalim Securities USA Inc contends “I don’t really see a real catalyst to move the stock down materially in the next three to six months,” hardly a ringing endorsement.
So how best to advise Obama, who so yearns to be back in the supermarket “squeezing the fruit” as opposed to pressing the flesh? Just so long as the fruit isn’t his beloved BlackBerry -- Research in Motion (RIMM) having endured another horrific session -- he can feel free to squeeze away, but be aware that this stock may not have much more to give after today.
Please see Japanese Supermarket Shelves Stripped Bare After Disaster.
Lamar Advertising
Lamar Advertising Co. (LAMR) is almost as ubiquitous a presence as Lamar Odom and his attention seeking spouse. The Baton Rouge based outdoor advertising giant operates approximately 150,000 billboards in 44 states, Canada, and Puerto Rico. Besides assorted displays all along our open roads, it provides all manner of logos, bulletins, posters, and signs allowing clients to aim for ‘station domination’ in subways and broadcast their wares on bus shelters. (If you are so inclined, these products are also highly effective for any spurned lovers out there wishing to inflict maximum embarrassment on their ex in the middle of Times Square, but we won’t go there.)
The company went public in 1996, Alan Greenspan’s year of “irrational exuberance” but that zeitgeist is long gone; today’s 2.56% tumble has taken shares into the red by about 15% in the past year. Last week Evercore Partners became the latest research house to trim its price objective on a name it rates Underweight, taking its target down by $2 to $32. Sentiment has soured amid a heavy debt load of approximately $2.4 billion. Billboard construction is also notorious for its regulation and red tape, a legacy of the Highway Beautification Act of 1965. Nonetheless, an improving economy should boost ad outlays and increasing amounts of our time spent stuck in traffic (if you think Americans have it bad, check out this slow boat to China) provides clients with a captive audience. Moreover Lamar has contracts with 21 of the states that have privatized their logo systems, and it is ahead of competitors Clear Channel Outdoor (CCO) and CBS Corp (CBS) in both mid-size markets and the high growth digital billboard arena.
Hasbro
One of the original Monopoly sets went for a cool $146,673 at auction in February -- not bad for a product invented in the depths of the Depression. Alas Hasbro Inc. (HAS), whose Parker Brothers division produces the classic board game, didn’t fare nearly as well during the same time frame. The toymaker today reported disappointing first-quarter per share earnings of $0.12, well short of the $0.17 Wall Street was expecting, partially due to increased expenditures on its recently launched Hub TV venture. As a result the Rhode Island firm which makes Super Soaker took a serious bath, ending off 3.04%. Hasbro -- whose other iconic playthings include Cranium, G.I. Joe, My Little Pony, Nerf, Playskool, Strawberry Shortcake, and Transformers -- reported a 71% slide in net income. CEO Brian Goldner didn’t seem unduly concerned, and it should be noted Q1 is typically seasonally weak for the industry after parents have overindulged their tiny tots over the holidays. He characterized the quarter as “on track with our plan for the full year.” International was one bright spot, with revenue rising 15% to $254.3 million.Tie-ins from upcoming movies including Thor and Transformers should also perk up profit. Still, disappointments included a 12% tumble in games and puzzle revenue, to $200.4 million. Toys for both girls and preschoolers also declined. Long term concerns include age compression among an increasingly precocious generation of kids no longer entertained by the Scrabble games of old. The always fickle nature of the business, with untold numbers of once loved and now orphaned Tickle Me Elmo’s and Furby’s cluttering attics across the country, is another systemic risk.
Hasbro to Launch Direct Link to Your Kids’ Cerebral Cortex has additional insight.
Deutsche Bank
The site of the long cursed Deutsche Bank (DB) building in downtown New York is presently a green lake, having been purposefully flooded by The Port Authority. Shares of this Frankfurt financial institution today ended similarly underwater, 1.32% in the red after it and Credit Suisse (CS) were each cut to Sell from Hold at Societe Generale. (The German bank dates to 1870, which was when the Franco-Prussian War started; today’s analyst action will scarcely have improved Teutonic-French relations.) Its most recent (Q4) revenues were actually relatively strong, helped by a home market which is home to arguably the developed world’s strongest economy. Even allowing for ample write-downs, full year net income came in at a healthy 2.3 billion euros. Corporate and investment banking increased 11% annually while pre-tax profit surged some 39% on lower loss provisions. Shares have been poor performers in the past year however, down over 18%. Red flags include an ominously lofty leverage ratio of 23:1, much higher than US peers. With US peers including Goldman Sachs (GS) enduring another dire afternoon, more nasty surprises could lay ahead for Deutsche shareholders. And German banks tend not to like surprises.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
