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Stocks in the News – October 22, 2008:

It’s been a busy week reading up on quarterly earnings and acquisitions in my two portfolios. Here’s an update for interested readers.

Saputo (SAP) announced today that they have reached an agreement to purchase the Neilson Dairy operations from George Weston (WN) for $465M. Saputo, Canada’s largest cheese producer and a large North American operator, will add two Ontario plants of a combined 390 employees and annual sales of over $600M. I took the opportunity to add to my position this morning at $25.

Exelon (EXC) made an offer to acquire all of NRG Energy (NRG) for $6.2B in common stock that is aimed at adding to Exelon’s unregulated power operations. In a letter sent to David Crane (CEO of NRG) John Rowe (CEO of EXC) highlighted a number of synergies that Exelon was focusing on as motivation for this deal. I discussed Exelon in May of this year with Taking Stock in EXC and will be looking to add to my position on further weakness in the share price. The company benefits from a number of strategic moves on the part of management and is well positioned to make acquisitions in this current market.

Caterpillar (CAT) announced third quarter results for 2008 with a profit of $868M ($1.39 per share) as revenue rose and material costs soared that missed consensus earnings of $1.41 per share. The company had previously guided lower and announced full EPS expectations of $6.00. Caterpillar shares are down almost 50% YTD despite their ability to easily achieve a price to earnings ratio of 10x for 2008. I will be looking to add to my position shortly. This is a good example of my recent comments on how an investor should look to internal guidance rather than from analysts with an outside view of the company. Caterpillar is a long-term hold in my portfolio that will continue to do manage its resources well despite evidence of an emerging global recession.

Kimberly-Clark (KMB) reported third quarter results for 2008 with a profit of $0.99 per share in line with company guidance of $0.98-1.03 per share. On a year over year basis sales in North America rose 7%, 2% in Europe and 20% in developing/emerging markets.

Canadian National Railway (CNR) reported strong third quarter results despite increased fuel costs in the quarter with a profit of $1.16 per share. Their operating ratio for the quarter rose to 62.6% and impressive increases in operating results on a per car basis.

Husky Energy (HSE) reported third quarter EPS of $1.50 despite significant falls in both crude oil and natural gas prices and declines in production that were within management guidance for the quarter.

Dupont (DD) reported their third quarter EPS of $0.40 including hurricane related charges and guided 6% lower on full year earnings of $3.25-3.30 from its previous $3.45-3.55 target. Revenues rose over 9% as prices were increased broadly across their product portfolio.

(Disclosure: I hold common shares in SAP, EXC, CAT, KMB, CNR, HSE & DD)

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