By Larry Gellar
I have identified five frequently traded stocks that reported earnings recently. While LSI Logic (LSI) is too expensive now, investors should still consider Corning (GLW), Symantec (SYMC) and ConocoPhillips (COP). Meanwhile, Hudson City Bancorp (HCBK) is a tiny bank that has a mix of attractive and unattractive elements. Let's see what's been happening with these five stocks:
Corning Inc.
Recent performance: Corning was trading for over $14.50 about a week ago, but the stock price is now bouncing between $12 and $13.
Recent headlines: Corning met Wall Street's earnings expectations, but that doesn't mean they were pretty. Net income was down 53% on a year-over-year basis. Revenue was up, though, and even managed to beat analysts' estimates. Regardless, Corning management had a variety of ominous predictions. The company plans to continue its price declines, and CFO Jim Flaws had this to say:
We are hopeful that our pricing actions, combined with our capacity decisions, will help us get back to more stable price declines in the coming quarters.
What we think: For a price to earnings ratio of 5.98, you would be hard-pressed to find a company as high quality as Corning. That's what Corning's price to earnings ratio is, though, and a dividend yield of 2.10% also sweetens the deal. The market for glass is certainly changing, but we think Corning's management is well equipped to take on the challenges. We also expect demand for LCD TVs to pick up during 2012, and TV makers around the globe rely on Corning's materials to make those products. Investors can also expect good things as Corning continues to improve its Gorilla Glass.
LSI Corporation
Recent performance: LSI was trading below $5.50 in December, but the stock price is now almost at $8.
Recent headlines: LSI just reported a beat on earnings and slight miss on revenue. The company actually lost money in the fourth quarter, but earnings per share was positive after certain exclusions. LSI also announced some pretty positive outlook, helped by the company's recent acquisition of SandForce. That subsidiary makes flash storage processors, an increasingly important technology. LSI also recently announced a partnership with ARM. By having access to ARM's technologies, LSI should be able to improve its own product line by optimizing performance and compatibility.
What we think: Prior to LSI's jump of over 10%, investors were probably overestimating how much LSI would be affected by Thailand's floods. The stock is much more expensive now, and a buy is hard to justify when Texas Instruments (TXN) is trading at only a slightly higher price to earnings ratio. Additionally, LSI has some important challenges ahead of it. For instance, the company's networking business experienced an 8% decline at a time when other companies were able to maintain their revenue, despite market difficulties. It would also be good to see the company's operating margin improve from its current level of 5.71%.
Symantec Corporation
Recent performance: Symantec almost fell to $15 in December, but the stock price is now almost up to $17.
Recent headlines: Symantec slightly beat analyst expectations for revenue and earnings on its latest earnings report. The company did, however, provide outlook that was a bit below Wall Street's previous estimates. In other news, users of Symantec's pcAnywhere could be at above-normal risk of a hacker attack. Some of the program's source code has been stolen and made public, although Symantec appears to be working on a resolution.
What we think: The pcAnywhere situation is only a minor incident, and investors are best served by viewing this stock as a whole. A price/earnings to growth ratio of 1.09 and price to sales ratio of 1.90 make this stock affordable, and the company has a variety of favorable trends going for it right now. The current product mix fits very well together, which has made it easier for Symantec to get multiple sales with each of its customers. The company's security software is at the heart of its operations, but data protection/backup software is doing well too. Current trends in the business world suggest that demand for Symantec's solutions will keep up as corporations handle more and more data.
ConocoPhillips
Recent performance: ConocoPhillips topped $74 at the beginning of the year, but the stock price is now below $70.
Recent headlines: ConocoPhillips posted earnings per share of $2.02 despite analyst expectations of only $1.77. Production was actually down a bit, but a higher price for oil helped the company enormously.
What we think: We like where ConocoPhillips is going. The split into one business with a focus on upstream, and one business with a focus on downstream will help this company run more efficiently. Peripheral asset sales are also being made to smooth the transition. Even without the split, though, ConocoPhillips continues to impress with its intelligent operations. For instance, the company was able to adjust its business to a weaker market for natural gas. Those adjustments will continue to be made, although CFO Jeff Sheets did have this to say:
We have partners on a lot of that production as well, and partners have different views about shut-ins, with most of our partners not wanting to shut in and lose the cash flow.
Meanwhile, ConocoPhillips offers investors a generous dividend yield of 3.70%. Those dividends will be coming for years, because the company's drilling at Eagle Ford and in the Permian Basin should continue to be very lucrative.
Hudson City Bancorp, Inc.
Recent performance: Hudson City Bancorp almost hit $5 in November, but the stock price is now a bit over $7.
Recent headlines: Hudsdon City Bancorp reported a loss of 73 cents per share, which was only slightly better than analyst expectations, for a loss of 74 cents per share. Here's how CEO Ronald Hermance explained the situation:
During the past year, the low interest rate environment resulted in elevated levels of liquidity as borrowers prepaid or refinanced their mortgage loans and we experienced a significant increase in the calls of our investment securities.
What we think: We're neutral on Hudson City Bancorp because the stock has both pros and cons. The stock isn't particularly cheap at a price to sales ratio of 3.38, and the current interest rate environment has proved to be problematic. For instance, net interest income fell by 17.8% on a year-over-year basis. On the other hand, the dividend yield is 4.50%, and it does appear that the bank should be able to keep those dividends coming. Now is a good time for the company to restructure its debt, so shareholders can only hope that it will be smooth sailing from here. Furthermore, we predict that the bank will continue to improve its capital ratios and lending operations.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment