July 23, 2008

Fed Speak - What does it say?

Since the time of Alan Greenspan, the guessing game of what the Federal Reserve will do at any of its Federal Open Market meetings has been turned into a parlor game.

The next meeting is August 5th.

My take? They are staying pat on the Fed Funds Rate at 2 percent.

I decode the Fed Speak in my latest post for Medill Money Mavens.

Posted by bmiraski at 6:04 PM | Comments (0)

July 17, 2008

The pen is mightier

With the economy in the dumps, luxury sales are slowing.

Just look at the auto sales numbers for June. There is no good information there.

Even with the high gas prices, car sales normally will stay firm, especially at the high end. However, consumers are more likely to be moving to smaller luxury items these days.

Learn more about pen sales and why they might be soaring in my latest article for the Medill News Service.

Posted by bmiraski at 4:05 PM | Comments (0)

Cool Economic Word Cloud

I can't take credit for this. However, this is one of the best uses I have seen of the word cloud concept yet.

A user named Econymous took Ben Bernanke's speech before Congress and turned it into a word cloud.

Anyone think that the FED isn't looking at Oil Price, Inflation, and the Financial Credit markets after seeing this?

Click through for a larger version.

Posted by bmiraski at 9:52 AM | Comments (0)

July 16, 2008

Is it time for GM to hit the road?

Oh, GM, I believe the time has come for you to get out of town.

And by town, I mean the Dow.

If you want a rant, you get one at Medill Money Mavens.

Posted by bmiraski at 3:30 PM | Comments (0)

July 13, 2008

Money Money Money Money

NEWS ALERT
from The Wall Street Journal
July 13, 2008
Anheuser-Busch and InBev have completed a deal at $70 per share, which will create a new company to be named Anheuser-Busch InBev. Anheuser will get two seats on the combined board.

Yes, yes, yes!

I am glad the family finally came around to see how good a deal this was.

And congrats to Sam Adams, now the leader in domestically-owned beer.

Posted by bmiraski at 8:16 PM | Comments (0)

June 26, 2008

Inflation Emergency!!!

I am doing research for my beat this quarter, covering the economy and the markets. As part of that, I am working on a story that I think might be an interesting look at how inflation is calculated and the information brought to the public.

However, to do that, I have to get in touch with one of the speakers from my class last quarter. I knew right where to get his name, but I needed to get it.

When I did, I happened to scroll to the bottom of the release and found this:

CPI HOTLINE SERVICE PROVIDES LATEST INDEXES 24 HOURS A DAY

The all items CPI-U and CPI-W for the U.S. City Average, the Midwest region, and the Chicago area are available to the public 24 hours a day, 7 days a week through the Bureau's CPI Hotline service. This recorded message also provides percent changes from the prior period and from a year earlier, as well as the scheduled release date for the next CPI issuance. The Hotline number in Chicago is (312) 353-1880, menu option 2.

Just what you need for the late night emergencies when you need to know what the inflation rate might be.

Posted by bmiraski at 3:33 PM | Comments (0)

June 24, 2008

Be Like Lithuania

An interesting little side quiz just took place on CNBC.

What nation relies on nuclear energy the most?

My guess was France. That was wrong.

The correct answer is the former-Soviet republic of Lithuania.

Yes, little Lithuania relies on old Soviet engineering, the same kind that gave us the Chernobyl disaster, to power its microwave ovens and televisions showing re-runs of "Stalin loves Lenin" and "How Gorby Met Your Mother."

So, here's a question: Why can't the U.S. be more like Lithuania.

I know there is the argument that most people don't want a nuclear reactor in their backyard.

But is a nuclear reactor in your backyard better or worse than a coal power plant?

Business Week took "clean coal" to task in its latest issue. The obvious oxymoron of clean coal energy is broadcast all over the airwaves as the technology that will save the U.S. and end our dependence on oil.

Yeah, at the risk of giving us all lung cancer from the emissions. Oh, and there is that pesky global warming caused by the CO2 emissions that we still have no way to control.

I know there is a fear of a terrorist attack on a nuclear plant. I understand the concern. However, I also understand that we can't live our lives in fear of the worst. Modern nuclear plants are safe and have back-up control systems. To live in fear of a coordinated attack on a nuclear power plant is also ludicrous because it fits into what Bruce Schneier calls a "movie scenario."

It seems like a likely target, but the true risk of an attack would need something on the scale of a full suspension of disbelief that everything would work perfectly to pull it off.

Maybe its time we stepped back and looked indiscriminately at nuclear power as a real option.

After all, if little Lithuania can do it with decades-old Soviet technology, why can't we?

Posted by bmiraski at 9:41 AM | Comments (0)

June 17, 2008

Warren Buffett could be my hero

Image details: Warren Buffett Testifies Before Senate Finance Committee served by picapp.com
Forbes is reporting that Warren Buffett is backing the InBev takeover of Anheuser-Busch that had me so excited last week.

Buffett is a fellow shareholder in the maker of Budweiser and obviously wants the best thing for his shares, which have been performing all of flat since he and I bought the stock.

And based on the Forbes article, it looks as if Buffett is going to take his concerns right to the top:

According to Belgian newspaper De Standaard, Buffett not only supports Inbev's offer, he is schedule to meet Anheuser's chief executive August Busch IV about it.

I can't say enough how much I want this deal to happen.

Posted by bmiraski at 10:09 AM | Comments (0)

June 16, 2008

Coffee catching on

Apparently stories on coffee and premium craft roasters are catching on. Not too long ago, I published this story on Chicago's Metropolis Coffee Co. located in Chicago's Edgewater neighborhood.

Another Chicago craft roaster, Intelligentsia, is expanding out in California. boingboing was on hand to get a tour of the facility and the coffee roasting process.

Posted by bmiraski at 12:24 PM | Comments (0)

June 12, 2008

Raise a glass to cheer the BUD deal

Overnight, InBev, one of Belgium's biggest brewers with brands like Beck's and Bass, offered to buy Anheuser-Busch, the makers of Budweiser for an estimated $46.4 billion.

That equates to about $65 a share for Bud's stock owners, a $15 premium over where the stock was trading just about two weeks ago.

The stock has already jumped to over $62 on the news this morning.

Two thoughts on this:

1. I own BUD. I bought it about five years ago...at $50, meaning there has been no price appreciation on my stock during that time. I have had other investments up over 100%, including one very established company *cough*Nike*cough*, yet BUD has remained flat.

I don't have confidence in the ownership to get the stock to $65 on their own. The only way I am going to get that type of premium on my purchase anytime soon is to approve this deal if or when it comes to a vote.

I am all on the side of "Yes" on this one.

2. If the deal goes through, the largest domestically-owned beer brewer will be Sam Adams. The Boston Beer Co., a craft brewer!

Something about that makes me feel good.

In 2007, the craft brew industry grew 12 percent and there is no doubt that the companies in that sector are turning out better product than the big boys, who would now all be owned by foreigners.

It would be a return to the roots of brewing in the U.S., if only in name since we all know that Bud, Miller and Coors will continue to be thought of as American beers.

So with that, I raise a glass to this deal going through, a glass I can pay for with my profits.

Posted by bmiraski at 9:01 AM | Comments (0)

June 11, 2008

Gimme, gimme, gimme

There is no item more speculated about than the inner workings of a baseball team.

What do they make? How much do they really bring in? What makes most of their owners richer than Exxon Mobil (ok, maybe not that rich)?

A few lucky people are getting to look at the Chicago Cubs' books because they are on the approved list to buy the team.

I love how Major League Baseball gets to approve who gets to be a member of its little elite club, but that is a topic for another time, probably after the team is sold.

Right now, I just want to get my hands on those books.

If any of the nine prospective owners wants to call me and give me a little inside information, please do.

Posted by bmiraski at 3:52 PM | Comments (0)

Euro 2008 - a winner for sponsors

I have spent a number of hours on my break watching the opening rounds of Euro 2008, the soccer tournament pitting 16 of the best national teams in Europe.

Ringed around the pitch (that's the field for those Americans unwilling to understand proper football terminology) are ads for addidas, Coca-Cola, McDonald's, Mastercard and others.

According to a Forbes article published about a week ago, those ads are likely to be big winners for the companies who place them.

They are going to need to pay off because the amount they have paid is overwhelming.

So far UEFA, the European soccer's governing body, has seen huge revenues from the games. Sponsors and broadcasters are providing sales of $2.0 billion, 35.0% more than the previous 2004 tournament in Portugal.

What does that number mean? The Superbowl is the U.S. longtime standard for advertising sales, where 30-second spots go for near $3 million.

Yet, in 2007, according to the TNS Media Intelligence numbers, the Superbowl only brought in $151.5 million in ad revenue. Sure, it is a one time, 3-plus-hour event versus an almost month-long contest with multiple matches, but it is the event in the U.S. (2008 numbers weren't available)

Or is it.

Based on the same numbers, the final three games of the NCAA basketball tournament in 2007 produced more ad revenue ($168.4 million). Yes, it is three games compared to one, but it was three games where the final result was almost a guarantee given the strength of the Florida team that season.

In terms of just rights and sponsorship, a previous Forbes article rated the Superbowl as the most valuable sporting event, at $379 million. That might be a more equal comparison for the $2.0 billion number.

However, the $2.0 billion taken in by UEFA is still a staggering $105 million per day of the tournament, nothing to sneeze at when some of the largest countries in the world don't take part, and one of those, the U.S., normally couldn't care less about soccer.

Congrats go out to UEFA.

Posted by bmiraski at 2:54 PM | Comments (0)

June 9, 2008

Social Networking

Over the weekend, I finally got to a Business Week issue from two weeks ago, about the future of tech beyond blogs. The story revisits a cover story from three years ago, before there was anything called Facebook, YouTube, or Twitter.

The newest version keys in on two phenomenon: Twitter and Social Networking.

I must admit I don't understand the appeal of Twitter. It reminds my of my Facebook profile status, which I don't think hs changed more than three times since I have had my page. It just doesn't seem to have a practical purpose to me, despite this little snippet from the article:

"The new résumé is 140 characters," tweets 23-year-old Amanda Mooney, who just landed a job in PR.

If that is the case, then I am wasting more than my money at journalism school.

However, I will concede that there seems to be great benefit derived from social networking. If there was one thing that confounded my while in consulting, it was the constant "networking" needs that seemed to follow me everywhere, and the ability to keep up with those networks while totally engulfed in other things.

With an application, web-enabled, and updated by all the participants in the network, voila, all my struggles could be saved. With a short read out, I can stay up to date with what everyone is doing and who they are connecting with.

Facebook has done that for social lives, so why shouldn't business do the same.

Take this example from Best Buy, also from the article:

In 2006 two marketing managers at the company worked weekends to create an in-house social network, Blue Shirt Nation. Now it has grown to more than 20,000 participants, 85% of them sales associates. In a company with a 60% annual turnover rate, this group churns at only 8.5%, blogs Gary Koelling, one of the founders. And Blue Shirt Nation gets results. A promotional drive on the site helped persuade 40,000 employees to sign up for 401(k) retirement accounts.

I know my consulting firm was implementing a similar social network at the company as I left, something I am sure will pay off.

My only doubt: How many of these networks can someone update?

My MySpace page hasn't been updated in months, maybe over a year at this point, while my Facebook page does get attention. If I had to keep up both a social and a consulting social network page, would that really happen as we are all stressed for time as it is?

At least one company is betting yes. Ning, which got its own little profile in the same issue of the magazine, allows you and I to create a social network for anything we might think is appropriate.

It seems that most of those who have done so have done it for charitible causes, but the site boasts that it could be used to talk about wedding events, getting guests connected prior to the big day, or maybe to get together with those that share the same hobbies.

Again, I go back to how many of these sites can one person keep up to date. If I already have Facebook, why not start a group for the same purpose. Groups there can share most of the same items that would be present on a Ning site.

I do see the applicability to business. I am looking to see when the first big business contracts with Ning to build their internal site.

The entire montage is a look at how far tech has come in changing the way that not only people interact, but also businesses internally and externally. Social networking is the next big thing right now, and probably has a long lifespan ahead of it, given the reliance on networks in this free agent society of ours.

What else will come soon is anyone's guess. My thought is that it will be some offshoot of the social network push that expands it even further, probably using instant connection via some mobile device.

For now, I am just betting on my general web "index fund" and letting it take whatever turn it may.

Posted by bmiraski at 4:28 PM | Comments (0)

April 30, 2008

Kraft's revenue soars but earnings suffer from higher costs

Originally published by the Medill News Service, Apr. 30, 2008

Kraft Foods Inc. posted earnings lower than the year-prior quarter because of higher input costs and despite stronger net revenues. However, the company beat analysts’ expectations by three cents sending the stock 2.8 percent higher in Wednesday trading.

For the quarter ended March 31, the Northfield-based food processor, with brands such as Jell-O, Oreo and Maxwell House, reported net income of $608 million, or 40 cents per diluted share. Earnings were 13.4 percent lower than earnings in the year-prior quarter of $702 million, or 43 cents per diluted share.

Excluding items, the company earned $681 million or 44 cents per diluted share. This was 4.9 percent lower than the same quarter of the previous year, when the company earned $716 million, excluding items, or 44 cents per diluted share.

Wall Street estimated diluted per-share earnings excluding items at 41 cents per share, as compiled by Zacks Investment Research Inc.

The company’s equity base was reduced from the same period a year ago because of an ongoing share repurchase program. Average diluted shares outstanding were reduced by 102 million shares from the same quarter last year. The year-ago period also benefited from a one-time interest benefit of 3 cents per share related to Kraft’s separation from Altria Group Inc.

Net revenues in the first quarter were $10.4 billion, up 20.8 percent from the same period in the year prior when net revenues were $8.6 billion.

Kraft continues to deal with higher input costs related to commodities across the board. However, the company said it is combating those costs by raising prices on products as it continues to reinvest in its brands. On Wednesday's conference call, CEO Irene Rosenfeld said she is optimistic about the impact of the moves that Kraft is making.

“Our ability to increase prices and increase market share is proof positive that our investment is paying off,” she said.

Matt Arnold, an analyst who covers the company for Edward D. Jones and Co. LP, agrees that the pricing strategies are important.

“It is a key piece of it, absolutely,” Arnold said. “The pricing they are taking alone isn’t enough to offset the inflation they are seeing in input costs.”

Despite what Rosenfeld termed “aggressive” pricing strategies, Kraft’s margins were lower in the quarter. The company’s gross margin declined by 1.9 percent to 33.6 percent and operating margin was down 1.9 percent to 11.2 percent.

Margin erosion was strongly felt in the U.S. snacks and cereal business, an area where the company had historically strong performance according to David Driscoll, an analyst who covers the stock for Citigroup Inc.

Operating margin in the segment was 11.7 percent in the first quarter, down from 16.8 percent in the year-prior period. Operating income in the segment fell 28.2 percent from $234 million to $168 million.

“Clearly we are not pleased with the Q1 performance of our snacks and cereals business,” Rosenfeld said. She added that the issues with margin were due to a major run-up in the cost of wheat, which surpassed what the company was expecting.

“This is a tough one to swallow here,” Driscoll said to conclude his comments on the earnings call.

According to the company’s management, the full impact of pricing changes will start to be seen in the second quarter, and will be complete in the second half of the year. This is based on the price increases lagging behind the rise in costs, and some price points being protected for large events that occurred in the first quarter, such as the Super Bowl and Easter.

Rosenfeld continued her positive spin looking ahead as consumers move away from eating out at restaurants and eat more of their meals at home.

“We feel comfortable that as consumers eat home more often, they will come home to Kraft,” she said.

“The single biggest key to success, and where we see opportunity, is to improve profitability in the U.S. business,” Arnold explained. He added that the company continues to make investments in their iconic brands and that there is a lot of opportunity to improve domestic profitability.

Kraft projected that its full-year earnings per diluted share will be $1.56, down from the full-year earnings of $1.62 per diluted share in 2007. Excluding items, the company is estimating $1.90 per diluted share. Analysts’ consensus excluding items is $1.89 per share as compiled by Zacks.

The forecast includes the impact of the acquisition of Group Danone SA’s international biscuit operations, but does not include the impact of the pending sale of the Post cereals business to Ralcorp Holdings Inc. When asked for guidance on the impact of the Post sale, Timothy McLevish, chief financial officer of Kraft, said the company would wait to comment until the transaction is completed.

Kraft Foods stock closed Wednesday at $31.63, up 86 cents from the previous day’s closing price of $30.77

Posted by bmiraski at 4:07 PM | Comments (0)

April 29, 2008

Sanfilippo back on track to consistent profit

Originally published by the Medill News Service, Apr. 29, 2008

With its raw-material costs declining and its big moving expenses and redundant costs soon to be out of the way, nut processor John B. Sanfilippo and Son Inc. appears to be on track to turning a profit year-round instead of only in the fall quarter.

“Commodity costs have come back down,” Adam Strauss said. “We expect their gross margins to normalize.” Strauss is the portfolio manager for the Appleseed Fund, a mutual fund offered by Pekin, Singer, Strauss Asset Management Inc. The company is the largest shareholder of Sanfilippo.

The Elk Grove Village-based company has recently struggled on the bottom line outside of its fiscal second quarter, which ends in December, the largest in terms of sales. Holiday-related sales generally are 33 percent higher than summer business, helping the company to reach profitability for the year.

However, in its past two fiscal years the company has lost $30.4 million, and its stock has tumbled from $22 to about $11 recently.

Nevertheless, CEO Jeffrey Sanfilippo recently told investors that he sees the company’s fortunes on the rise.

“Although we still have a lot of work to do, it is evident that the initiatives the company executed over the last year are beginning to demonstrate positive results,” Sanfilippo stated.

Strauss agrees. He said the company has two major reasons for its recent struggles. First, commodity prices in the nut industry were at their highest point in the last 10 years. During a five-year stretch from 2001 to 2006, the average grower price of almonds went from 91 cents per pound to $2.81.

Sanfilippo management specifically highlighted the company’s issues with almond prices in its latest earnings report. Because the prices of almonds dropped soon after the company purchased its almond crop in 2005, the company sustained losses over the next year as it sold through its high-priced supplies.

According to Strauss, the trend of rising prices was exacerbated by fad diets, which pushed nuts as a healthy snack food and stimulated extra demand while supply was down because of crop problems caused by insect issues.

However, this trend is reversing in the nut industry, despite rising food prices elsewhere.

According to Marieke de Rijke, assistant vice president in food and agriculture research at Rabobank Group, this price drop might be seen in almonds this year. “What you see with the almond crop is that the bloom this spring has been good, and the growing conditions have been ideal,” she said.

While she would not comment on prices, de Rijke said that if the crop is big again, there is a possibility of the price declining.

The rising nut costs have been an issue across the industry. Diamond Foods Inc., which markets its nuts under the Emerald Nuts label, was able to pass on the higher prices to customers and weather the pricing issues.

“Over the last three to five years, there has been a big increase in walnut tree plantations. Over the next several years, those will start to come online,” said Michael Lippold, an analyst who covers Diamond Foods Inc. for Craig-Hallum Capital Group LLC. He expects costs to drop and margins to increase for nut companies that have raised their consumer prices to keep pace with their growing costs.

However, de Rijke pointed out that prices may remain firm with the increased demand, especially in Asia, as exports of almonds, walnuts and recently, pecans, are increasing.

“Prices for nuts are really a matter of supply and demand,” she said. “With all nuts, the harvest is still several months away so it is hard to say something about production levels.”

Sanfilippo's other costly problem, now also diminishing, was the consolidation of its manufacturing and processing facilities in Elgin. The company is in the process of moving production lines from three Chicago facilities which has led to charges in excess of $10 million related to the consolidation in the past two quarters.

Redundant operating expenses were estimated at $2.4 million by management as the company continued to produce the same products in two locations during the move.

Although this cost has been hanging over the company, the operations streamlining has almost reached completion and the most difficult move – relocating a peanut butter production line from Elk Grove Village to Georgia – is complete and in operation at its new location.

Recent efforts to accelerate the move have added some incremental costs but CEO Sanfilippo sees the company completing its move of all Chicago operations to Elgin by the end of June.

Despite consolidation, the new facility is only about 50 percent utilized. When investors asked company’s management when the facility would be fully utilized, they were quick to point out that the company did not want to repeat failures in the past.

“The one thing we don’t want to do… we don’t want to go out and capture unprofitable sales, and end up where we were last year,” said CFO Michael Valentine in a recent earnings call.

CEO Sanfilippo reiterated that sentiment: “We are focused on value added customers. We’ve targeted specific retail accounts, food manufacturers, food service companies to grow their business, to grow our business. It could be a five-year horizon by the time we fully get utilized out of this facility.”

While the company still needs to deal with the 800-pound. gorilla in the industry, Planters, owned by Northfield-based Kraft Foods Inc., and upstart Diamond Foods Inc., it is innovating with products like Fisher Snack Naturals, which is aimed at the health-conscious consumer.

“Demand is increasing because of the health benefits of nuts,” de Rijke said.

Sanfilippo points to a qualified health claim on its Web site: “Scientific evidence suggests but does not prove that eating 1.5 ounces per day of most nuts, such as peanuts, almonds, hazelnuts, pecans, pistachio nuts and/or walnuts, as part of a diet low in saturated fat and cholesterol may reduce the risk of heart disease.” The site also lists the nutritional benefits of eating nuts.

Sanfilippo said the company is seeing an uptick in interest from its private label customers, helping to capture back some business which was lacking during the company’s recent struggles.

“We are working with many of our private label accounts to develop new items for their programs,” Sanfilippo said.

As costs and demand improve, so does the outlook for the stock. After Sanfilippo in February reported earnings of 33 cents per diluted share, the shares jumped $2.40 to $9.35, their highest point since October.

Strauss noted that the stock had a market value of only $100 million while its shareholder equity on the balance sheet was near $163 million. With that valuation, he sees room for the investment that his firm has made to grow, especially given the changing nature of the two costly factors that have kept earnings down.

“We saw the two reasons as temporary in nature,” said Strauss.

He noted that, with the economy slowing, many companies are going to see lower earnings.

However, he quickly added, “this is a staple product.”

Posted by bmiraski at 3:57 PM | Comments (0)

April 24, 2008

Housing slump drags down Fortune Brands in first quarter

Originally published by the Medill News Service, Apr. 24, 2008

Fortune Brands Inc. reported flat earnings due to a slowdown in the housing market affecting its home products business. The results underperformed analysts’ estimates, but the stock fell 2.8 percent Thursday.

For the quarter ended March 31, 2008, the Deerfield-based holding company with subsidiaries in the spirits, golf and home and hardware businesses, earned $120.5 million, or 77 cents per diluted share. The result was essentially flat compared with results the previous year when the company earned $120.2 million, or 77 cents per diluted share.

Wall Street estimated diluted per share earnings of 79 cents per diluted share, as compiled by Zacks Investment Research Inc.

The company recorded net sales of $1.81 billion in the first quarter, a drop of 5.4 percent from the previous year when the company had net sales of $1.91 billion.

The biggest contribution to the reduction in sales and the flat earnings was the slowdown in the U.S. housing market. Sales in the home and hardware segment of the business were $894.4 million, down 12.5 percent from the prior year's first quarter. Chief Financial Officer Craig Omtvedt said in the earnings conference call Thursday that the replace-and-remodel sector of that business continues to be stronger than the new construction market. He projected that operating income in the segment would be down from high single digits to low teens for the year.

The poor results in the home and hardware segment were not a surprise to Robin Diedrich, an analyst who covers the company for St. Louis-based Edward D. Jones and Co. LP. “We were expecting that segment to be the weakest. We had a decline baked in for the quarter. It was a little more than we expected,” Diedrich said.

While a company might raise prices to offset the slow sales, Fortune Brands is looking at other ways to decrease its costs and maintain margins.

“We are doing some material substitution,” CEO Bruce Carbonari said. “Pricing is getting more and more difficult unless we have a sudden rise. With the environment being what it is, it is difficult to do a price increase.”

In the spirits business, the company used the earnings conference call to emphasize its focus on building brands. Carbonari said the company is making investments in its current brands to grow organically, rather than aggressively seeking a purchase.

Fortune Brands recently lost the bidding for the purchase of the Absolut Vodka brand to rival Pernod Ricard SA. The company was praised for its unwillingness to overpay. Fortune Brands took a one-time charge in the first quarter of 3 cents per diluted share from its participation in the bidding for the brand. The company still has an agreement to distribute Absolut in the U.S. until 2012.

Jonathan Feeney, an analyst for Wachovia Capital Markets LLC, reiterated praise for the company’s fiscal responsibility on the earnings conference call. “It certainly shows some discipline on your part that you allowed someone else to pay that price for the assets,” Feeney said. Pernod paid $8.3 billion for the rights to Absolut.

The organic growth is a model that Diedrich likes for the company, even if it is hard to quantify the results.

“It is not as easy to put your finger on as ‘We are going to go out and buy X brand.’,” Diedrich said.

“I would rather see them build the brand long-term than do an acquisition. A bad acquisition can destroy returns for decades. I think it is the prudent move.”

The company saw sales gains of 8.0 percent in its golf business, helped by strong sales in the Asian markets, specifically Korea and Japan.

Despite the flat quarter, Omtvedt said the company will continue to invest in itself. He is projecting capital expenditures to be in the range of $200 million to $225 million.

“We are maintaining strategic spend for new products in the businesses. That is what we did in 2000 through 2001 and that served us well when things turned around,” Omtveldt said. “What we are not going to do is take out $1 now to protect diluted earnings per share and find out it takes $2 to put it back in later.”

Diedrich, who has a buy rating on the stock, continues to see a good outlook for the company.

“This is a long-term investment," she said.

The company forecasts its second quarter results to be lower than last year's second quarter, based on the weakness in the housing market and a late start to the golf season. Fortune Brands earned $1.48 per diluted share in that quarter and expects results to be down at a rate between the high single digits and the mid-teens. The company also narrowed its forecast for the full year.

“We’re now targeting diluted EPS before charges/gains to be in the range of flat to down at a high-single-digit rate,” Carbonari wrote in the earnings press release.

Fortune Brands stock closed Thursday, down $2.02 at $68.86, a decline of 2.8 percent from the previous day's closing price of $70.88.

Posted by bmiraski at 3:20 PM | Comments (0)

Tootsie Roll takes its licks in the first quarter

Originally published by the Medill News Service, Apr. 24, 2008

Tootsie Roll Industries Inc. reported sharply lower first-quarter earnings due to higher costs for raw materials and fuel, missing analyst expectations.

Late Wednesday, the Chicago-based maker of confectionary products reported net income of $6.45 million, or 12 cents per share, for the quarter ended March 29. That’s a decrease of 34 percent from the same period in 2007 when the company earned $9.81 million, or 17 cents per share.

The company missed analyst expectations of 16 cents per share. Only a single analyst issues an estimate for the company.

“The company’s per share earnings for first quarter 2008 did benefit from common stock purchases in the open market resulting in fewer shares outstanding,” Chairman Melvin Gordon stated in the press release. The average shares outstanding for the company decreased by 1.36 million shares since the first quarter of last year.

The company’s earnings were hurt due to less favorable exchanges rates affecting margins on products manufactured in Canada.

Tootsie Roll reported net product sales of $90.3 million, a decrease of 2.8 percent from the same period last year, when the company had net product sales of $92.9 million.

The decrease in sales was due to the struggling economy, Gordon explained in the press release. The company is battling higher costs in addition to lower sales and has implemented price increases to counteract the difficult environment.

“The company does do a certain amount of buying of currencies and a certain amount of hedging,” a spokeswoman added.

Despite the controls, the company has not been able to recover all of the higher raw material costs during the first quarter, according to Gordon.

Tootsie Roll’s stock closed down 34 cents at $24.07 Thursday, a decrease of 1.4 percent.

Posted by bmiraski at 3:12 PM | Comments (0)