Some reports on stocks I follow..
EchoStar Communications (NASDAQ: DISH - Quotes, News, Boards), the nation?s number two provider of satellite television, posted a loss of $0.55 per share, much wider than the expected loss of $0.49 per share. But the stock was solid as rock thanks to a revenue increase of 82% to $427 million.
By Steve Smith 11/8/1999 in individualinvestor..
The large loss was the result of a threefold increase in marketing expenses to $200 million, as EchoStar battles rival DirecTV, a unit of General Motors? Hughes Electronics (NYSE: GMH - Quotes, News, Boards) for subscribers. EchoStar lost the latest skirmish as it managed to sign up only 375,000 new customers compared to the 423,000 DirecTV added. EchoStar ended the quarter with 3 million subscribers compared to DirecTV?s 7 million.
The heavy spending also caused cash flow to turn negative to the tune of $47 million compared to a positive $9 million from the year ago period. This highlights the main problem with EchoStar: The cost to attain new subscribers is going up, which flies in the face of a business model in which the cost of new customers should diminish over time.
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On the positive side, EchoStar just penned a deal with Superstar/Netlink, a division of TV Guide (NASDAQ: TVGIA - Quotes, News, Boards) to convert 1.4 million customers to its system. And EchoStar and DirecTV have set aside their acrimonious relationship long enough to co-sign a letter urging Congress to allow them to offer local channels on their systems.
The absence of local channels been a major competitive disadvantage to satellite providers versus cable. But at Friday?s closing price of $70.06, up over 475% for the year to date, and no clear timetable of when it may turn profitable EchoStar is too rich for our blood.
We?ve been pounding the table on TMP Worldwide (NASDAQ: TMPW - Quotes, News, Boards) for a while. It recently posted a profit of $0.40 per share, a nickel above estimates and a 300% increase over the year ago period. This is fifth consecutive quarter the company has beaten estimates by an average of 48%. The stock has responded in kind by leaping some 105% for the year to date to it?s current level of $86.44.
Driving TMP?s growth is its Internet division, including its monster.com online job search site, which saw revenue grow 178% to $15 million in the latest quarter. It is far and away the leading employment site on the Web. Much like auction sites where size matters, monster.com has a huge lead over its competition.
What is especially attractive about TMP is that it is an old line company that was already profitable and now ?they get the Web.? The firm is still the nation?s largest yellow page and classified ads advertising agency ? boring but profitable. Now it?s leveraged that expertise into the Internet.
TMP is expected to earn $1.36 per share, giving it a very rich multiple of 63 times next year?s earnings.
Callaway Golf (NYSE: ELY - Quotes, News, Boards) continued its resurrection by posting a profit of $0.25 per share, two cents ahead of consensus estimates and a 212% increase over the year-ago period. The stock had been a darling of Wall Street as it rode the golf and cigar set wave and traded as high as $37 a few years back, crashed and burned last year when the fad faded and Asian economies went into a recession. Callaway posted three consecutive quarters of losses in 1998 and shares sank to $9.
Company founder and namesake Ely Callaway resumed stewardship last year and has done a magnificent job of righting the ship. He sold off non-core business and excess inventory. Then he introduced some cutting edge clubs to restore profitability.
The recovery of several Asian economies bodes well for Callaway. It recently penned a distribution deal with Sumitomo Rubber of Japan. Its Big Bertha brand remains one of the best known and best selling lines of clubs. Callaway is expected to earn $1.14 per share in 2000. Shares closed Friday at $13 or just 11.4 times forward earnings.
Oxford Health Plans (NASDAQ: OXHP - Quotes, News, Boards), a New York area health insurer, had a solid week: It reported third quarter earnings of $0.29 per share, well ahead of expectations of $0.15. The share price appreciated by more than 50% to $17 in just four days. Friday, the stock closed at $16.50.
Oxford was mentioned on this site in July as likely to return to profitability after seven quarters of losses in a row, and the company lived up to our prediction.
Now, Oxford appears to have turned the corner and is expected to make a profit for the year. The company is doing the right things, having recently raised employer premiums, left some unprofitable markets, and cut its administrative costs.
Membership declined during the quarter to 1.6 million from 1.9 million a year ago, which reflects management's decision to focus on the metropolitan New York area and withdraw from Illinois and Florida, where it can?t compete effectively.
On the critical metric of 'medical-loss ratio,' which measures the percent of each premium dollar going for medical costs, Oxford reported a ratio of 78.9%, as compared to 88.9% one year ago. The decrease means that Oxford is raising its premiums ahead of costs.
Management said that, for 2000, earnings would likely reach $1.10 per share, well ahead of the $0.80 per share analysts had been estimating. In short, a turnaround is at hand. Investors who have been waiting for a signal to buy Oxford have been sent a telegram, and should use dips from this week's advance to initiate positions.
Another plus: During September and October, fears that Congress would penalize health insurers by simplifying patient lawsuits led to discount the entire health insurer industry in a wholesale fashion.
In short, given the dark clouds over the industry and signs of a real turnaround at Oxford, now may be a good time to take a position.
Peapod Inc. (NASDAQ: PPOD - Quotes, News, Boards), the Internet grocery shopping company, posted a third quarter loss of $0.53 per share, nearly double the $0.27 per share loss that analysts were expecting.
What went wrong?
Peapod cited increased fulfillment expenses as it scales up the size of its distribution centers. Selling, general and administrative expenses tripled to $5 million.
Cost increases are to be expected for any Internet venture, but substantial revenue growth should accompany the ramped up spending.
Peapod?s sales grew just 5% to $16.5 million from the year ago period. That just won?t cut it.
Still, the stock got a nice boost to $14 on news that it formed a partnership with McLane Group L.P., a distribution technology company for the food industry. Although on Friday, the stock lost $3.38 to $11.63.
But let?s face it: Online food shopping will never replace traditional brick-and-mortar supermarkets. The online grocery market may match forecasts and grow to about $6 billion within two years, but that?s still just a fraction of the $480 billion supermarket industry.
Despite Peapod?s early lead we do not like its prospects. It will soon face stiff competition as the large supermarket chains begin offering online shopping. |
