Archive for April, 2010

  • Bed Bath & Beyond Earns 86 Cents a Share
    , April 7th, 2010 at 7:41 pm

    Holey Moley! Bed Bath & Beyond (BBBY) creamed even my high expectations. For their Q4, they earned 86 cents per share. In January, BBBY gave a range of 67 cents to 71 cents a share. Kinda low, no?
    For the entire year (this was FY 2010 that just ended in February), BBBY earned $2.30 a share. For FY 2011, the company said it expects earnings growth of 10% to 15%. In other words, forward earnings of $2.53 to $2.64 a share. That’s much better than I was expecting. For Q1, BBBY sees earnings ranging between 44 and 48 cents per share. I have no idea what to expect now.
    I had said that I was concerned that BBBY was becoming fully priced. Not anymore. This is still an excellent buy. (The earnings table is updated below.)
    As with the broader economy, BBBY’s resurgence is a margin story. They’ve held the line on costs and no longer have to undercut anyone (RIP: Linens N Things). Here’s a look at BBBY’s trailing four-quarter operating and net margin.
    image924.png
    That upspike is key. Retailing is a margins game. When you increase your margins, you’re King of the World, or at least the King of the Mall. Think of it this way: A margin increase of 6% to 8% turns a 10% sales increase into a 47% increase in profits. When the opposite happens, well, that’s not good.
    Where BBBY is different than the broader economy is that their sales are growing. Nominal GDP growth has been pretty flat but BBBY increased its sales by 16.7% over last year.
    Here’s the earnings call transcript from Seeking Alpha. Unfortunately, they never take any questions.

  • Looking Ahead to Bed Bath & Beyond’s Earnings
    , April 7th, 2010 at 12:28 pm

    Bed Bath & Beyond (BBBY) is due to report its earnings today, probably after the close. This will be an interesting report because the last earnings report was WAY above expectations. The Street was expecting 43 cents a share and BBBY earned 58 cents a share. The stock has been in a happy mood ever since (new 52-week high on Monday, thank you very much).
    With the last earnings report, BBBY said that this earnings report should range between 67 cents and 71 cents per share. That was above the Street’s estimate of 63 cents. Wall Street seems to think the company is low-balling and I agree. The Street’s consensus is for 73 cents a share. This is for the company’s fourth-quarter (December, January and February) making BBBY one of the last companies to report their results for the holiday season.
    I’m expecting another beat, say 75 cents a share, but I’m not sure if the stock will respond so well this time. What I’d like to see is strong guidance going forward. I’d also like to see a full-year earnings forecast. The stock is getting pricey but a forecast of $2.50 a share for FY 2011 would help out a lot.
    Here are the earnings results going back a few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-99 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-00 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-01 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-02 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-03 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-04 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-05 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-06 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-07 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86

  • Is This the News?
    , April 7th, 2010 at 11:26 am

    Here’s NICK’s press release released a few minutes ago:

    CLEARWATER, Fla., April 7, 2010 (GLOBE NEWSWIRE) — Nicholas Financial, Inc. (Nasdaq:NICK – News) today announced the opening of two (2) new branch offices located in Nashville, Tennessee and Grand Rapids, Michigan. The new offices expand Nicholas Financial’s branch network to fifty-two (52) locations. The company expects to open its 5th branch in the greater Atlanta, Georgia metro area during the current quarter, bringing the total number of Nicholas Financial branch offices to 53 in 12 states. The Company will continue to evaluate potential branch locations in both new and existing markets and intends to add 3 to 5 new branches during its 2011 fiscal year which began April 1, 2010.

    Yeah…big deal. We already knew NICK is opening offices. It’s odd how a stock can be a screaming buy and yet no one will pay attention. Then suddenly, everyone has to own it.

  • Nicholas Financial Breaks Out
    , April 7th, 2010 at 10:44 am

    Shares of Nicholas Financial (NICK) seem to be breaking out today. It’s still early but the trading looks very good. As I write this, NICK is at $7.98. The stock hasn’t been over $8 since 2007.
    Today’s volume is over 23,000 which is very high. This is unusual for not being near earnings. NICK usually trades around 2,000 to 5,000 shares. The spread has narrowed to just four cents.
    I guess someone is buying!

  • Johnson & Johnson’s Dividend Streak
    , April 6th, 2010 at 3:41 pm

    Sometime later this month Johnson & Johnson (JNJ) will announce its 48th consecutive annual dividend increase. This dividend hike probably won’t make much news but I urge all serious investors to take notice. Half a century of rising dividends is a remarkable achievement.
    JNJ’s current quarterly dividend is 49 cents a share which works out to a yield of about 3%. Last year’s increase was fairly small, just 7.7%. Alan Brochstein speculates that this year’s increase will be 10%, which brings the dividend to 54 cents a share. That sounds about right to me. If that’s the case, then JNJ currently yield about 3.3%.
    If you want to see how important dividends are for long-term investing, consider that a person who bought JNJ 25 years ago may soon be getting close 100% a year just in dividends.

  • CEO Pay
    , April 6th, 2010 at 8:49 am

    The NYT has a neat graphic detailing CEO pay at many top firms. On a side note, it turns out that many CEOs are middle-aged white guys.

  • I Smell Pulitzer
    , April 6th, 2010 at 8:27 am

    The WSJ bravely uncovers the story of Americans who have plunged from the Upper-Middle-Upper Class all the way down to the Middle-Upper-Middle Class.

    Indeed, the bank of Mom and Dad is closing at a time when young people are having trouble borrowing from traditional lenders. Some 22% of young people between the ages of 18 and 34 said they’ve been turned down for a mortgage, loan or credit card in the past year, according to a February survey from FindLaw.com, a legal marketing and information site. That’s double the percentage of any other age group in its survey.
    As a result, many young people are now moving home to save on rent. About 21% of young adults say they’ve either moved in with a friend or relative, or had a friend or relative move in with them because of the economy, according to a study from the Pew Research Center.

    First Haiti, now this! Why God? WHY??

  • Growth Has Been Leading Value
    , April 5th, 2010 at 3:16 pm

    Since the summer of 2006, growth has been leading value. Much of the reason is that financial stocks have crowded the value side. Right now, I’m not sure if either side has a big advantage. Simply due to the wide yield curve, I’d still lean towards growth.
    Here’s a look at the Vanguard Growth Fund (VIGRX) divided by the Vanguard Value Fund (VIVAX):
    image923.png

  • Mauboussin and Surowiecki
    , April 5th, 2010 at 12:49 pm


    (Via: Kedrosky)

  • Uncle Sam Made 8.5% on Bailouts
    , April 5th, 2010 at 12:14 pm

    From Reuters:

    U.S. taxpayers earned an annualized 8.5 percent return from the government’s bailout of 49 financial firms, underscoring efforts by the industry to speed up repayments and warrant repurchases, according to a report by SNL Financial.
    Firms such as Citigroup (C.N), which still has common shares held by the U.S. Treasury Department, and rivals that have made partial redemptions were excluded from the analysis, SNL Financial said in a statement on Monday.
    Proceeds from Troubled Asset Relief Program (TARP) warrant repurchases and auctions led to a surge in returns through March 30, SNL said. So far, since the start of the program in late 2008, 64 institutions have fully repaid government aid.
    For months, taxpayers balked at government efforts to help banks, which they saw as the main culprit behind the worst U.S. recession since the 1930s, as the collapse of investment bank Lehman Brothers shook global financial markets in late 2008.
    The biggest banks, such as Goldman Sachs Group Inc (GS.N), repaid the money they owed the Treasury last year and earlier this year. Still, more than 600 smaller banks are left in the program, and owe roughly $130 billion to taxpayers.
    Goldman alone produced a return of 20 percent to taxpayers at the time of repayment in July last year, according to SNL.
    Overall, firms that have exited the programs, plus those 18 that have fully redeemed their TARP preferred stock but still have their warrants held by the Treasury, returned 7.6 percent in the period, SNL Financial noted.

    I wasn’t too worried about the money going to the top banks. As for AIG and the car companies, well, that’s another story.