I love coupons; who doesn't? They are, arguably, one of the most important marketing tools used by companies such as Procter & Gamble (NYSE: PG), Colgate-Palmolive (NYSE: CL), and General Mills (NYSE: GIS). I also love coupon distribution on the web, so I'm hoping a new technology reported on by BusinessWeek really takes off.
A company called Coupons, Inc. has developed a system dubbed Brandcaster. It essentially follows Google's (NASDAQ: GOOG) model of monetization. Depending on where you are on the web and what you are looking at, the Brandcaster will determine if a coupon may be applicable to you. It will then try to get you to access the coupon and print it up. Web sites who use the application will be given a cut of revenues generated from successful coupon printings. So, speaking hypothetically, if I'm on a site that's dedicated to video games, maybe this Brandcaster thing will someday tell me that I can print up a coupon allowing me to get $5 off a new software title.
If this is promoted properly, and if the value to consumer companies can be adequately communicated, then I think Coupons, Inc. has a hit on its hands. Like I say, people love coupons, and I think they are more likely to act on printing out a coupon then they are to, say, buy a product immediately online through a banner ad. I see this kind of advertising as being more effective over the long-term than other kinds of ads.
Colgate-Palmolive (NYSE: CL) reported Q1 results on Wednesday. By now, you know the drill when it comes to consumer-products companies -- weak-dollar-helped-and-commodity-costs-did-not-help. I gotta say, though, that Colgate-Palmolive showed that vigilance in terms of costs can have a positive impact, and that a business does not have to be defined by inflation.
Net sales exploded to the upside by more than 15% (again, currency effects). Net income likewise charged higher, rising 17% to 90 cents per share on an adjusted basis. I know -- superlatives such as "exploded" and "charged higher" might seem a bit hyper here, but it's always cool when a consumer-products company hits those double-digit increases. Colgate-Palmolive, like Clorox (NYSE: CLX) and Procter & Gamble (NYSE: PG), leverages its stable of brands to drive growth in cash flows (Procter & Gamble, by the way, also recently reported quarterly results). This worked like a charm, since cash flow from operations during the past three-month period increased 17%. Way to go, management. Margins, however, were pressured, as can be expected, and they will continue to be pressured in the near future.
The earnings release mentioned the flagship Colgate toothpaste product -- I am a user of the brand, and in fact, I bought a new variety earlier this week. I've said it before and I'll say it again -- the supermarket is full of investing ideas, and Colgate-Palmolive is one of them. The company had a great quarter, it beat expectations according to Briefing.com -- albeit by the usual suspect, namely the "proverbial penny" -- and it seems solid enough. A potential core holding, Colgate-Palmolive should do well over the coming year. Yesterday's 6.7% drop in the price of the shares could have been seen as a buying opportunity for patient, long-term investors, but I'll concede that the stock could languish for a little while.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
WD-40 (NASDAQ: WDFC) issued its Q2 earnings report yesterday after the close of the market trading session -- and it wasn't full of great news. The top line was essentially flat as net sales dipped 0.5% to almost $79 million. Earnings came in at $0.51 per diluted share versus $0.52 per diluted share in the year-ago time frame.
Another negative aspect to the report was the statement of cash flows. WD-40 took in a lot less in terms of net cash from operations this time around, as changes in working capital and other items affected the flow. There's also a lot less cash on the balance sheet. And, sorry to say shareholders, but WD-40 missed analyst expectations by the proverbial penny. Investors shouldn't always be concerned with Wall Street expectations, but here's something that shareholders will be concerned with: the company lowered its earnings outlook. Management says that revenue growth will probably be somewhere between 4% and 8% as opposed to the originally expected range of between 7% and 10% -- any hopes for double-digit appreciation are now history. Net income per share is now expected to fall in a range between $1.80 and $1.90 versus a previous range of $1.83 and $1.93.
Well, now, what do we make of all this? It was a disappointing report, no question. But WD-40 has some decent brands in its portfolio, including the flagship lubricant, although its brand collection isn't necessarily on par with others, such as Procter & Gamble (NYSE: PG), Colgate-Palmolive (NYSE: CL), and Clorox (NYSE: CLX). WD-40 isn't the current best play in the consumer-goods department at the moment, in my humble opinion. Some will point out that the stock's yield is attractive right now at 3%, but its dividend history isn't as good as others in terms of quarterly hikes. I'm not very bullish on WD-40; maybe I will be at a later date.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
McDonald (NYSE: MCD) has issued a press release recently concerning the use of cellphone coupon marketing. The fast-food juggernaut wants its consumers to have the ability to snag a coupon whenever they desire and by hooking up with a company called Cellfire, McDonald's is hoping it can establish a relationship with some of the hip texters out there.
Cellphone users who download the Cellfire app can then text a certain number and receive a special code good for a specific offer. According to the release, McDonald's fans can take advantage of a free iced coffee promotion through April 27 in certain locations in Utah, Wyoming, and Nevada.
McDonald's knows we're an on-the-go society, and it obviously wants to leverage the fact that mobile devices are no longer just for talking -- we text, we play games, we surf the net, and, as I recently observed, we can even shop on Amazon on our cells (I say "we," but I should point out that I do not own a cell phone, believe it or not). However, as I stated in my previous post, I'm not so certain that Amazon's text-shopping service will take off.
Procter & Gamble (NYSE: PG) is one of my favorite companies. No, I don't own it; I should, I know, but I can't own everything. Nevertheless, I love P&G for its great collection of brands that dominate supermarket shelves. And, I also love that blue-chip dividend it pays out.
Well, the company announced that shareholders are going to get a raise. The quarterly payout increased 14% to $0.40 per share. Can P&G afford to do this? How does one check? Well, you'll want to look at a company's cash flow. P&G's latest 10Q shows that, for the latest six-month period, the Dow component generated $7.4 billion in operational cash. P&G spent about $1.2 billion for capital expenditures. Dividend obligations were $2.3 billion. Adding up the dividend payments and the cap-ex requirements shows that $7.4 billion amply took care of both financial activities. Yeah, I'd say that P&G can afford the nice double-digit increase.
Here's another nifty thing. Since the new annual payment is $1.60 per share, investors can buy P&G shares all the way up to a share price of $80 and still get a 2% yield. Yeah, that might not sound like much, but an excellent, dependable, low-risk blue-chip equity with a yield 2% or higher isn't something to dismiss. So, like PepsiCo (NYSE: PEP), Johnson & Johnson (NYSE: JNJ), and Clorox (NYSE: CLX), Procter & Gamble is a safe consumer-goods stock that should be looked to as a potential core holding. This latest dividend increase offers further evidence of such thinking.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
2008 Best Values in Public Colleges Here is where to find a first-rate education without breaking the bank. For in-state residents the University of North Carolina tops the University of Florida. If you are out-of-state the top school you may never have heard of. It is SUNY Geneseo, a small liberal arts college in western New York. Top 100 Public Colleges - Kiplinger.com Rankings: Top 100 Colleges
The Coming Credit Card Crunch The subprime mortgage crisis has cost millions of homeowners their homes. Now it threatens to put the squeeze on even more consumers by spilling into the credit-card market. Here's what you should watch out for this year. The Coming Credit-Card Crunch | SmartMoney.com
If recent market turbulence has dented your investment confidence, or if you're concerned about a continued U.S. economic slowdown heading into 2008, consider purchasing Clorox's shares.
Look for The Clorox Company (NYSE: CLX) to keep rolling along. Or, put another way, when will bleach use go out-of-style?
The world's best-known bleach brand has further impressed investors with its lesser-known, but profitable operations: Specialty Group [cat liter, charcoal products, dressings and sauces, Glad brand bags/containers], along with its International Group, which sell products in Latin America and Asia that are similar to those in North America.
What's more, bleach remains a key revenue driver, but in fiscal 2007 Glad trash bags accounted for 14% of revenue, Clorox about 12%.
The risks? Analysts have their eye on rising commodity costs, but CLX's cost cutting programs and pricing power should more than compensate for that concern, in the immediate years ahead. That fact, combined with the company's demonstrated proficiency in marketing, make CLX a low-risk investment. CLX's p/e of 19 is not low, but it's reasonable given its growth prospects and the amount safety the company affords.
The First Call mean rating for CLX is: Hold. [15 firms.] Mean 2007 target: $67.40. [high: $78, low: $58.]
Stock Analysis: Clorox is a low-risk stock. Consider buying Clorox's shares if your portfolio needs a consumer defensive stock. Investors with an investment horizon longer than 1 year should be rewarded from CLX's shares. Sell / Stop Loss if you were to purchase shares of this company: $44.
Clorox Co. (NYSE: CLX) reported a Q1 profit drop this morning on the back of raw material cost increases. It also announced that it will pay just under a billion ($925 million) for Burt's Bees, a leading provider of natural health care products. Burt's Bees has moved from health food stores and organic markets to the mainstream mass market in the last few years, probably marketing itself to be sold. Apparently, it worked.
Clorox's net income dropped to $111 million ($0.76 per share) from $112 million from the year-ago period, which could be seen as a slight decline based on commodity price swings in 2007 alone. Sales for the Q1 period did rise to $1.24 billion, a 6.7% increase.
Clorox indeed said in its earnings release that corn and soybean prices were main factors in the profit decline. Those two food commodities are used in its Hidden Valley food products (namely salad dressings). Resin prices rose in the quarter as well to their highest levels ever, affecting plastic products such as Glad trash bag products and bottles used to hold its namesake bleach.
All in all, Clorox's quarter was not bad considering the commodity turmoil it has exposure to, but I have to question the valuation of Burt's Bees. How did the company come up with a valuation of nearly a billion dollars? Clorox, are you listening?
The scariest thing about this time of year isn't Halloween. It's the chance that you'll get ensnared by the alternative minimum tax -- and wind up owing thousands of additional dollars in taxes. Taxpayers are increasingly factoring in the alternative minimum tax when devising their year-end tax-planning strategies.
Which stocks gained the most over the past decade? Maybe it's no surprise that Apple Inc. is in the No. 2 spot with a gain of 3,500%. But can you guess the No. 1 stock? The top stock from the NYSE and Nasdaq was specialty clothing company Chico's FAS which has risen almost 3,800% since 1997. Other top performers include three energy companies and another clothing company American Eagle Outfitters. Winningest stocks of the past 10 years - MarketWatch
Certified Checks Not Foolproof
Counterfeiting checks is a big issue in the banking industry. You'd like to think you can trust a certified check, but you can't, at least not without taking some precautions.
Worst Products of Year: Sleeping Pills for Kids...
Consumers International presents its prizes for the most half-baked ideas of 2007. Sleeping pills for children, exploding laptops, lead toys and more make this dubious list.
Men buy trucks, women buy models from Saturn, Volkswagen & Honda. Chevy Silverado Heavy Duty is 93% male owners along with Ford F-350 andtThe Corvette is 90% male-owned. Women like the VW Beetle, Honda CRV and Hyundai Tuscon to name a few.
MOST NOTEWORTHY: The Personal Care, Household Products and Cosmetics industry, Horsehead Holdings and China Sunergy were today's noteworthy initiations:
CIBC started shares of Horsehead Holdings (NASDAQ: ZINC) with a Sector Outperformer rating and $30 target, as they believe the valuation discount to other North American zinc producers will narrow as investors become more aware of the name.
Jefferies would avoid shares of China Sunergy Co Ltd(NASDAQ: CSUN) in the near-term as the company resolves issues regarding its access to polysilicon. The firm initiated shares with a Hold rating and $8 target.
OTHER INITIATIONS:
Goldman reinstated LSI Corporation (NYSE: LSI) with a Neutral rating and $8 target.
It's a good time to be a little defensive in the stock market, to look at stocks with a history of increasing earnings as well as dividends. While these don't tend to have a catalyst that will vault them into the stratosphere the way a tech or biotech stock can, they give a lot of comfort when there's so much turmoil in the market.
The first thing to think about when you're on defense is the shape of the economy and the kinds of items consumers always buy, no matter what the economy is doing. Consumer spending makes up about 2/3 of the U.S. economy. What the consumer does matters. Right now many consumers are having trouble paying their mortgages. Housing prices are going down in many areas of the country. Large mortgage lenders such as Countrywide Financial Corp. (NYSE: CFC) and IndyMac Bancorp. (NYSE: IMB) k are having problems with their portfolios. Defensive investors won't be looking into the mortgage lending stocks for comfort.
More likely they'll be looking at companies that supply things that people must buy, things like drugs, toothpaste, gasoline, toilet paper (also known as bathroom stationery), soap, food, utilities, etc. These are the basics. They're supplied by many different companies, and many of those companies are improving, even in these difficult times. Here are just a few ideas (not recommendations for investing, but recommendations for more investigating):
Countrywide Financial (NYSE: CFC) put volume & volatility Spikes on investor hedging. CFC, the largest U.S. home mortgage lender, is recently down $1.19 to $26.03 on continued mortgage credit concerns. CFC Chairman, Angelo Mozilo, has been a consistent seller of CFC shares over the last month. CFC call option volume of 18,253 contracts compares to put volume of 60,213 contracts. CFC August straddle is priced at $7.20. CFC September option implied volatility of 113 is above a level of 75 from yesterday and its 26-month average of 41 according to Track Data, suggesting hedging for downside price risk.
Clorox (NYSE: CLX) volatility stays elevated after CLX sells off on EPS. CLX is recently down $4.52 to $57.11. Goldman Sachs says "earnings quality was very poor as operating results missed by .04 even with a lower than expected advertising to sales ratio." CLX September option implied volatility of 24 is above its 26-week average of 19 according to Track Data, suggesting larger risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
The Clorox Company (NYSE: CLX) Q3 2007 earnings showed across the board sales and volume growth in all three of the company's major business segments. Net earnings were $129 million, or $0.84 per diluted share, a $19 million increase over Q3 2006 numbers. Quarterly EPS diluted included $0.04 per share, $10 million, equally divided between restructuring costs and upgraded IT services company wide. Globally, sales were up 7% to $1.24 billion for the quarter, while volume increased 8%. Clorox CEO Don Knauss credits three factors with contributing to Clorox's success: cost savings, price increases, and lower commodity costs.
Compared to Q3 2006, Clorox's Household Group division showed sales growth of 5%, volume growth of 9%, and 8% increase in pretax earnings. These figures were driven in part by record sales of Clorox disinfecting wipes, and increased shipments of Armor All and STP auto-care products. This division primarily services the North American market.
The Specialty Products Group showed 7% sales growth, 6% volume growth, and a hefty 19% increase in pretax earnings. The winner in this product category was Fresh Step kitty litter, which has increased sales for four straight quarters. Kingsford charcoal and Glad trash bags were also category leaders.
While Clorox makes most of its revenues in the North American market, it shows its largest growth potential in its international segment, where sales growth increased 16%, volume grew 13%, and pretax earnings increased 15%. Latin America is proving to be a lucrative market for laundry and cleaning products. This is good as the Australian market showed declines in both sales and volume.
For FY 2007, Clorox anticipates sales growth of 3-5% and diluted EPS of $3.21-$3.27, including $0.09 diluted EPS for continuing restructuring costs and IT upgrades through 2008. The stock closed on Friday at $67.07, down $0.01. At PE of $21.53, Clorox compares favorably (slightly) with Proctor & Gamble Co. (NYSE: PG) at $21.73, and Colgate-Palmolive Co. (NYSE: CL) with a PE of $24.42. Potential investors will want to wait until Clorox senior management rolls out its detailed restructuring plan, scheduled to be made public on May 24. Clorox may shed low-performing, low-margin brands, and may rearrange spending to target more potential growth opportunities outside North America.
Colgate-Palmolive
Procter & Gamble
Clorox
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