"Halftime report"--Multex/MarketGuide:>>>Surprises at the top
by Isabelle Sender
June 28, 2000
Who are the five top performers in the most recent quarter and what did analysts say was going to happen to them in the quarter?
Looking back, five companies experienced better than 88 percent growth in the last 13 weeks. The stocks of these companies share a common "surprise" factor ? analysts could not have predicted the events that precipitated these companies' aggressive upward moves. Analysts did, however, identify these companies' potential. Events such as operational turnarounds and merger-and-acquisition possibilities characterized the top five for the quarter and, subsequently, drove the stocks' through the roof. Companies enjoying the best price percentage change between March 31 and June 23, with at least six analysts following the stock in the current quarter are: Total Renal Care Holdings (TRL), EEX Corp. (EEX), Central Newspapers (ECP), Nabisco Holdings (NA), and AmeriSource Health Corp. (AAS).
Ticker
Name
% Price Change
Industry
Market Cap. (in millions)
TRL
Total Renal Care Holdings
112.17
Healthcare Facilities
442.952
EEX
EEX Corporation
97.84
Oil & Gas Operations
244.391
ECP
Central Newspapers, Inc.
95.91
Printing & Publishing
5,271.215
NA
Nabisco Holdings Corp.
91.2
Food Processing
13,664.621
AAS
AmeriSource Health Corp.
88.79
Biotechnology & Drugs
1,628.843
Total Renal Care Holdings
TRL's first quarter was better than projected. In a May 11 report by U.S. Bancorp Piper Jaffray, analyst William B. Bonello maintained his "neutral" rating on TRL, conceding that the company has been successful at reducing its debt by showing progress in cash flows and collections. Although not sustainable, this progress will add $20 million to $30 million to TRL's bottom line by its fiscal year end, Bonello believes.
Currently, the analyst consensus rating on TRL is a "hold." The company is expected to show a second-quarter profit of 3 cents per share ? a turnaround from its year-ago loss of 26 cents per share.
EEX Corporation
Companies mentioned in this article
Total Renal Care Holdings (TRL)
EEX Corp. (EEX)
Central Newspapers (ECP)
Nabisco Holdings (NA)
AmeriSource Health Corp. (AAS)
Philip Morris (MO)
Unilever (UL)
Bestfoods (BFO)
In a March 27 report, Dain Rauscher Wessels analyst John J. Myers maintained his "neutral, aggressive" rating of the independent oil and natural gas producer. Myers increased his estimated year-end loss for the company to 67 cents from 57 cents per share, but decreased his loss per share estimate to 4 cents from 5 cents for the company's first quarter, citing his long-term concerns about production growth and the company's balance sheet.
By May 11, the company positively surprised analysts on Wall Street. Myers changed his rating on EEX to "neutral," as the company's first-quarter results returned the company to profitability. EEX reported earnings of 2 cents per share for the first quarter, instead of the projected 4-cent loss. And Morgan Stanley Dean Witter's Philip J. Kehl and Tuam Q. Pham set a year-end target price of $6 for the stock, giving it an "outperform" rating. On June 23, the stock closed at $ 5.687.
As of last week, analysts covering the stock considered it a "buy/hold," and they expect the company to narrow its losses by year's end.
Central Newspapers
ECP continues to surprise analysts by winning many little short-term battles despite a gloomy long-term outlook. It started the second quarter of the calendar year at $33.437 and as of Friday, June 23, closed at $ 59.875. The seven analysts covering the stock currently rate ECP a "buy, " according to a June 25 Ace Consensus Estimate. The report, however, also notes that analysts are "not optimistic about the earnings picture at ECP over the next two years."
Reports mentioned
Report on Total Renal Care 5/11/00 U.S. Bancorp Piper Jaffray ($10)
Report on Total Renal Care 6/25/00 Multex-ACE Consensus Estimates (free)
Report on EEX Corporation 6/25/00 Multex-ACE Consensus Estimates (free)
Report on EEX 6/1/00 Morgan Stanley Dean Witter (sponsored)
Report on EEX 3/27/00 Dain Rauscher Wessels ($10)
Report on EEX 5/11/00 Dain Rauscher Wessels ($10)
Report on Central Newspapers 6/25/00 Multex-ACE Consensus Estimates (free)
Report on ECP 4/19/00 First Union Securities, Inc.--Equity Research ($10)
Update on newspaper stocks 3/14/00 First Union Securities, Inc.--Equity Research ($10)
Report on ECP 6/8/00 First Union Securities, Inc.--Equity Research ($10)
Report on Nabisco Holdings Corp 6/25/00 Multex-ACE Consensus Estimates (free)
Report on BFO 6/7/00 Prudential Securities-Equity ($10)
Report on AmeriSource Health Corp 6/25/00 Multex-ACE Consensus Estimates (free)
E-Commerce Appointments 3/31/00 The Buckingham Research Group ($10)
Report on AAS 6/2/00 The Buckingham Research Group ($10)
Long-term problems didn't appear to impact the stock last quarter either. In March, First Union Securities ranked the stock a "buy" in its newspaper stocks update. Analyst Asa W. Graves noted that although a recent merger of the company's recruitment and hiring management assets with another company had recently helped its stock price, the long-term concerns surrounding ECP's sluggish advertising revenues and circulation growth would likely continue to be "interesting for value-oriented investors with long-time horizons." A month later, Graves maintained a "buy" rating and a $40 price target on the news of ECP's on-target earnings report for its first quarter and its board's approval of a stock repurchase plan.
The big pop in ECP's price came earlier this month, however, when it decided to sell or merge its properties. On June 8, the day the news was announced, Graves reiterated a "buy" rating. The stock closed at $52, more than $20 above its previous day closing price of $31.50.
Nabisco Holdings Corp.
Nabisco is another merger and acquisition target lately as Philip Morris (MO) plans to combine its Kraft Foods unit with Nabisco. The stock has climbed steadily since earlier in the month when investors joined in the hype of Unilever (UL) planned acquisition of Bestfoods (BFO). In a June 7 report, Prudential Securities' John M. McMillin lowered his rating on BFO to a "hold" and rated the food-industry "accumulate," warning investors not to "get caught up in the euphoria."
Wall Street agrees with McMillin, in spite of the stock's exceptional performance over the past 13 weeks. Nabisco's shares are currently considered a "hold" by the 15 Wall Street professionals tracking the stock, according to the most recent ACE consensus estimate.
AmeriSource Health Corp.
Analysts currently rate AAS a "buy/hold." In the June 25 Ace Consensus Estimates they note, "In both 2000 and 2001, AmeriSource will post higher earnings." Wall Street says that now.
On February 28, however, Buckingham Research Group rated the shares of AmeriSource Health a "buy." As a supplier to electronic retailers (e-tailers), AAS has found itself a profitable niche. In a March 31 report, Buckingham Research Group revised its March third-quarter earnings estimates upward for AAS and reiterated its "buy." The stock began its steady climb from that day's $15 closing price.
Buckingham remains bullish on the stock. In a June 2 report, Buckingham became more aggressive and raised its fiscal year-end price target for the stock to $32 from $27. This new estimate did not appear to impact the stock, which has been trading in the $27 to $28 range lately.
If you had invested in these five stocks 13 weeks ago, on March 31, your money would have doubled by now. But, even those analysts who looked favorably upon these stocks couldn't have predicted their tremendous leaps. And now, the question remains whether these companies can continue to perform. Or, do the ambivalent attitudes of analysts covering these companies foreshadow an impending slow-down? Only time will tell. One thing is for sure, however. In a 13-week period during which much of the bubble burst, these five companies were riding high.<<<
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