Stick with Manitowoc
Manitowoc ($9; NYSE: MTW) earned $0.80 per share excluding special charges in the September quarter, up 21% but $0.01 shy of the consensus estimate. Sales rose 20% to $1.11 billion. At the end of September, the crane backlog was $3.3 billion, up 26% from year-earlier levels but down slightly from June levels. As customers find it more difficult to finance purchases, demand has slowed in some regions. However, demand remains strong in most emerging markets, as infrastructure build-out continues.
In 2008, Manitowoc expects per-share profits of $3.15 to $3.25, effectively projecting December-quarter results 22% to 34% below the consensus. While lowered guidance is never good news, the projection sets a fairly low bar for Manitowoc. Reducing the 2009 consensus by 34% brings the estimate to $2.43 per share. Manitowoc, trading at about four times that lowered estimate, remains a Focus List Buy and a Long-Term Buy.
Cooper Industries ($25; NYSE: CBE) posted profits of $0.97 per share excluding special items, up 17% and $0.02 above consensus estimates. Revenue rose 15% to $1.73 billion. Cooper plans to cut costs and rely on strong free cash flow — up 27% in the nine months ended September — to get through the next six months, a period during which the company expects customers to trim inventories. Cooper is a Buy and a Long-Term Buy . . . Energen’s ($30; NYSE: EGN) profits surged 26% to $1.01 per share, topping consensus estimates by $0.17. Energen’s energy subsidiary grew net income 15%, while the natural-gas utility lost $5.8 million during the seasonally weak quarter, better than the $10.5 million loss in the year-earlier period. To reflect sagging commodity prices, the company lowered its 2009 per-share-profit guidance to $3.70 to $4.10, below the $4.80 consensus. Energen, trading at just eight times the low end of its 2009 guidance range, remains a Long-Term Buy . . . Laboratory Corp. of America ($60; NYSE: LH) earned $1.10 per share excluding special charges, up 3% and $0.02 below the consensus. Revenue rose 11%. In 2009, LabCorp. projects per-share profits between $5.00 and $5.25, up 9% to 15%, though stock repurchases could render those numbers conservative. LabCorp is a Buy and a Long-Term Buy . . . NII Holdings ($19; NASDAQ: NIHD) earned $0.54 per share, up 17% but $0.13 short of consensus estimates. Operating revenue increased 38% to $1.19 billion, strengthened by the addition of 394,500 subscribers. At the end of September, NII had more than 5.8 million subscribers, up 33% from a year earlier. The company exceeded expectations for operating income and revenue, but net earnings were hurt by unfavorable currency translation. NII is a Focus List Buy . . . Despite a decline in sales, Aflac ($42; NYSE: AFL) earned $1.02 per share excluding investment losses, up 20%. Revenue fell 4% to $3.69 billion, but earnings benefited from an aggressive share-repurchase program, improved profit margins, and a 12% increase in earned premiums. In 2009, Aflac expects per-share profits to rise at least 13%, more than the consensus at the time of the announcement. In other news, Aflac declared its December dividend and raised the quarterly dividend payable in March by 17% to $0.28 per share. Aflac is a Long-Term Buy . . . Airgas’ ($33; NYSE: ARG) profits excluding special items surged 28% to $0.86 per share. Sales rose 15% to $1.16 billion, with same-store sales up 8%. Airgas reiterated its profit target for fiscal 2009 ending March, projecting at least $3.30 per share, marking growth of 23% or more. In other news, Airgas increased its quarterly dividend 33% to $0.16 per share, payable Dec. 15. Airgas is a Focus List Buy . . . Microsoft ($23; NASDAQ: MSFT) earned $0.48 per share, up 7%. Buoyed by a gain of more than 20% in sales of software under multiyear contracts, revenue rose 9% to $15.06 billion. In preparing for the challenging market ahead, Microsoft cut its forecast for per-share earnings in fiscal 2009 ending June to $2.00 to $2.10, below its previous range of $2.12 to $2.18. Trading at 11 times the fiscal 2009 consensus, Microsoft is a Buy and a Long-Term Buy.
General Motors ($6; NYSE: GM) and Chrysler have asked the U.S. government for $10 billion to help complete their merger. The deal would include a $3 billion stake for the government in the form of preferred stock. The combined company would control about one-third of the American auto market.
The request underscores GM’s desperate quest for liquidity. Estimates vary, but GM may run out of cash as early as mid-2009 without assistance. Now, with its credit rating well below investment grade, GM has struggled to find funding for the merger. To conserve cash, GM plans to close two plants for a week in November. GM is an Underperform.
OPEC announced plans to cut oil production by 1.5 billion barrels a day starting in November, in hopes of stopping the decline in oil prices. The cutback represents about 2% of global oil production. In the days following the news, crude oil fell to about $62 per barrel, its lowest level since May 2007, before bouncing to $68. OPEC members, who pump 40% of the world’s oil, say they want to keep oil prices between $70 and $90. But OPEC’s actions appear insufficient to hold prices within that target range, and the consortium may need to make additional reductions when it meets in December.
OPEC actions aside, most analysts expect oil prices to average more than $70 per barrel next year. At that level, most energy producers should keep drilling, which represents good news for the Forecasts’ oilfield-services stocks, including Transocean ($67; NYSE: RIG), Oceaneering ($25; NYSE: OII), and National Oilwell Varco ($25; NYSE: NOV). Transocean and Oceaneering are Focus List Buys. Transocean is also a Long-Term Buy. National Oilwell is a Buy and a Long-Term Buy.
Boeing ($49; NYSE: BA) and the International Association of Machinists and Aerospace Workers agreed to a tentative deal that could end an eight-week strike that cost the plane maker an estimated $100 million a day in deferred revenue. Workers were expected to vote on the deal by Saturday, Nov. 1. Boeing is rated Neutral.
Having already drawn down $90 billion in federal loans, American International Group ($2; NYSE: AIG) has enough cash to survive only eight more weeks, by one estimate. While the estimate may prove too pessimistic, any cash crunch could intensify pressure on AIG to sell assets to repay the loans. AIG is rated Neutral.
Wal-Mart Stores ($55; NYSE: WMT) plans to slow expansion in the fiscal year ending January by opening 212 U.S. stores, 31 fewer than last year. Openings are expected to drop by at least another 35 stores in fiscal 2010. Wal-Mart Stores is a Long-Term Buy.
Questar ($29; NYSE: STR) increased its quarterly dividend 2% to $0.125 per share, payable Dec. 15. Questar is a Long-Term Buy.
Altria Group ($20; NYSE: MO) raised the prices of cigarettes to counter a 4.8% decline in U.S. consumption. Altria Group is rated Neutral.