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InsiderTrader.Pilgrim America (Nasdaq: PACC) Home Insider Summaries Disclaimer Buy List Subscribe
7/16/97
Update #4
$19.25
Excellent Earnings. Time To Take Profits.
Fully diluted earnings from operations in PACC's third quarter (ended June 30) came in at $0.26 per share, beating our expectations by 2 cents. Total revenues were $320,000 more than we expected, and overpowered the fact that both operating expenses and the company's tax burden were each about $100,000 more than anticipated. With so few shares outstanding, it doesn't take a lot to affect PACC's EPS.
Reported earnings were $0.35 per share for the quarter, bolstered by a $0.09 per share one-time gain from PACC's settlement of its long-standing litigation with the FDIC (see previous updates and original recommendation for details.) This gain was on the high-end of our expectations.
The only wart on the quarterly release was the fact that, sequentially, mutual fund shares fell from $74 million in the March quarter, to $60.6 million. A large institutional buyer distorted the March number, however, and this does not indicate a secular slowdown in aggregating assets at PACC.
In fact, the company's assets under management increased 54% year-over-year to $2.2 billion, and was the main reason for PACC's good financial showing. Assuming that the company's shelf registration clears SEC scrutiny, we expect this trend to continue in the fourth quarter. Our earnings estimate for the next three months is $0.31 per share, which would bring fully diluted earnings from operations to $0.91 for the fiscal year. Reported earnings will be higher due to the numerous accounting gains from FDIC settlement and particularly from PACC's treatment of its tax-loss carryforwards.
While its true that taxes PACC is now registering on its income statement aren't actually being paid to the government at this time, prudent investors will value the company's shares on operating earnings. On this basis, PACC is now trading for 21 times our fiscal 1997 estimate, and 17.5 times our 1998 earnings estimate of $1.10 per share. Over the past two months, PACC has gone from trading at the low-end of its industry's valuation to the high end.
Even though PACC still looks strong from a long-term technical basis, we do not want to get too greedy with this winner. PACC has leapt into our 12-month price range faster than expected, and we are happy with our 91.1% gain.
Traders should continue to follow PACC, and look to buy again on any sell off. InsiderTrader would likely re-buy the stock of this solid company if it pulled back to around $16.
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