UBS upgraded Pacific Sunwear (NASDAQ: PSUN) to Neutral from Sell and said liquidity is no longer a near-term concern. The firm lowered Pacific Sunwear's target to $1.50 from $3. Citigroup upgraded shares to Hold from Sell on valuation following the recent weakness and believes Pacific Sunwear has sufficient liquidity to remain a going concern.
Calyon believes Reliant Energy (NYSE: RRI) will be successful in unwinding the Merrill Lynch Retail credit sleeve and obtaining alternative collateral. The firm upgraded shares to Buy from Add.
JP Morgan said Cogent's (NASDAQ: COGT) position in homeland security and the defense markets make it less sensitive to an economic downturn, making valuation attractive. JP Morgan upgraded shares to Overweight from Neutral and raised its target to $13 from $10.50.
Goldman added Research in Motion (NASDAQ: RIMM) to its Conviction Buy List and removed Riverbed (NASDAQ: RVBD) from the Conviction Sell List.
J.M. Smucker (NYSE: SJM) was raised to Buy from Underperform at Merrill Lynch.
Coffee is keeping Procter & Gamble (NYSE: PG) wired, even as it exits the home-brew business, finalizing the sale of Folgers to The J.M. Smucker Co (NYSE: SJM). The company raised its fiscal second-quarter and full-year 2009 forecasts due to better-than-expected proceeds from the sale of America's biggest-selling coffee brand. Previously, Procter & Gamble had expected a gain of 50 cents per share; now the company expects 63 cents per share in profit. The gain is partly due to the unusual method of sale called a "reverse Morris Trust" transaction; P&G will spin off Folgers to its shareholders, then simultaneously Folgers and J.M. Smucker will merge to form a new company.
As a result, earnings per share will be $1.63 for the quarter, the company said, and between $4.28 and $4.38 for fiscal 2009.
The sale of Folgers may have been timely for Procter & Gamble, as consumers who have been pressed financially have not yet returned to brewing coffee at home, instead downgrading from pricey independent coffeeshops and Starbucks (NASDAQ: SBUX) to better values for enormous cups of brewed coffee (with a side of deep-fried pastries) at Dunkin' Donuts and the like. If the economy continues to decline, perhaps Folgers will see a resurgence; for now, P&G is happily focusing on its core brands while Smucker works in a different customer base which values "iconic" comfort food brands.
The J. M. Smucker Company (NYSE: SJM) is a leading North American maker of fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages. Company brand names include Smucker's, Jif, Crisco, Eagle Brand, Hungry Jack, Laura Scudder and Robin Hood. The firm also markets Pillsbury, Pillsbury Doughboy, Carnation, Borden, and Elsie brand products under license. ConAgra Foods (NYSE: CAG) is a major competitor.
Smucker pleased investors earlier in the month, when it reported fiscal Q1 EPS of 82 cents and revenues of $663.7 million. Analysts had been looking for 77 cents and $647.2 million. Management also guided FY09 EPS to $3.45-$3.50 ($3.44 consensus) and FY09 revenues to $3.8-$4.0 billion ($3.86B consensus). The outlook figures take into account the previously announced purchase of Procter & Gamble's (NYSE: PG) Folgers coffee business.
MOST NOTEWORTHY: ExxonMobil, Susquehanna and BJ's Wholesale were today's noteworthy upgrades:
Bernstein upgraded shares of ExxonMobil (NYSE: XOM) to Outperform from Market Perform to reflect the company's best of industry returns and high credit rating, which they feel makes for a safe investment in the current environment.
Keefe Bruyette upgraded shares of Susquehanna (NASDAQ: SUSQ) to Market Perform from Underperform on valuation and believes the company is unlikely to have to raise capital.
JP Morgan raised BJ's Wholesale (NYSE: BJ) to Overweight from Neutral citing improvement in the company's ability to convert free trial customers to paid members and strong June sales, which could result in EPS upside for Q2-Q4.
OTHER UPGRADES:
J.M. Smucker (NYSE: SJM) was lifted to Buy from Hold at Deutsche Bank.
France Telecom (NYSE: FTE) was upgraded to Overweight from Neutral at HSBC.
This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.
The town of Orrville sits on the northern edge of the Ohio Amish area, and has that same bucolic feel. A friendly town that once was no more than a railroad stop for the agriculture, and a bedroom community for the heavy industries, of Wooster and Massillon, it is now best known as the jam capital of America, the home of the big (and growing) J.M. Smucker Company (NYSE: SJM).
Smucker has more than just its office in Orrville. For over 100 years, it has made jam in its factory right in the center of town. Of the 8,500 Orrville residents, 1,100 currently work for Smucker. It also operates the Simply Smucker's store in town, where visitors can view 350 varieties of Smucker's products, some available for taste-testing.
Since its fortunes and Orrville's are intertwined, it's fortunate for the community that Smucker appears on Fortune magazine's annual list of the top 100 companies to work for year after year, even finishing number one in 2004. The company is also known for its local charitable contributions. This year, for example, Smucker and its employees provided almost half of all funds raised by the United Way of Orrville.
Well-known maker of peanut-butter and jelly products J.M. Smucker (NYSE: SJM) reported earnings for Q4 and the full fiscal year on Thursday. The market didn't like the report in the least. The stock closed down well over 8% at the end of yesterday's session.
Here's what happened. For the fourth quarter, net sales increased 20%, but that was little consolation to the bottom line, which dropped 11%, as earnings per diluted share came in at $0.67 versus $0.75 in the year-ago period. The top line also was the beneficiary of some inorganic growth based on acquisitions. If you adjust for certain items, bringing the earnings up to $0.73 per diluted share, the decrease in the bottom line improves to 3%, but a decline in this case is still a decline. Plus, earnings expectations were not met. The company came in five pennies shy of Wall Street's wishes, according to estimates posted at earnings.com.
For the fiscal year, J.M Smucker's top line increased 18%, also due in part to acquisitions. On both a reported and an adjusted basis, earnings per diluted share jumped 9% to $3.00. Margins really suffered during the quarter and the year. Input costs are inflating, and they're becoming difficult to manage.
Folgers has created some great brand messages, including the classic, "The best part of waking up is Folgers in your cup."
Well, this morning, we got another message. P&G (NYSE: PG) will merge the Folgers unit into the operations of The J. M. Smucker Company (NYSE: SJM). The deal comes to about $3 billion.
P&G, which has owned Folgers for more than 45 years, has been actively shopping the deal. All in all, the transaction looks smart. It's an all-stock arrangement and, as a result, is tax-free to all parties. Smucker will also issue a $5 per share special dividend.
In a move to help cut expenses and save on fuel prices, UAL Corporation (NASDAQ: UAUA), parent of United Airlines, will reduce its 460 airplane fleet by 70 jets. Not yet known is how may jobs will be affected, the Wall Street Journal reported.
In an all stock deal, J.M. Smucker Co. (NYSE: SJM) is expected to buy Folgers coffee from The Proctor & Gamble Company (NYSE: PG) for an estimated $2B, according to the Wall Street Journal. Folgers, the best selling ground coffee in the U.S., has annual sales of about $1.6B.
The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) lost $500M-$700M on some of its hedging positions in Q2, which have contributed to a larger than expected loss that could result in the bank raising more capital by selling a stake to an outside investor. Lehman has begun negotiations with potential investors, including asset managers and Asian banks, sources said.
OTHER PAPERS:
According to sources, the Rocky Mountain News reported that troubled home builder Beazer Homes USA Inc (NYSE: BZH) is pulling out of Colorado. Beazer, which is being investigated for mortgage fraud by several government agencies, has built homes in the suburbs of Denver and in Colorado Springs.
When the J.M. Smucker Company (NYSE: SJM) presents at tomorrow's Lehman Brother Back-to-School Consumer Conference, look for the company to make prominent mention of the fact that its brand of peanut butter, Jif, was not involved in the peanut butter recall earlier this year. But Smucker certainly profited from the recall with increased peanut butter sales that resulted in a 40% or $19.6 million rise in 1Q 2008 operating income. Net sales for the quarter increased 17% to $561.5 million, and diluted EPS increased 42% to $0.71. Investors always like when earnings grow faster than sales.
Smucker recently completed the acquisition of Eagle Brands, maker of canned milk and other baking products. This is a good fit with other Smucker baking related products including Pillsbury and Crisco. During the first complete quarter following acquisition, Eagle Brands contributed $43.5 million to net sales. The company sold its manufacturing facility in Scotland as well as its nonbranded grain products in Canada in order to concentrate on domestic manufacturing and quality control.
The company is sticking with its previously mentioned FY 2008 guidance of sales growth of 8%, half from organic growth and half from acquisitions. Commodity costs will continue to increase for Smucker, as for its competition. Smucker needs to keep a tighter lid on administrative and selling expenses in light of costs increases, some of which cannot be passed on to consumers in the form of higher prices. Interest expense increased by $4 million due to Eagle Brands acquisition, so the company must monitor its debt load.
The stock is up almost 10% for the year, opening the year trading at $49.30, and currently trading at $54.86, with a dividend yield of 2.2%.
The J.M. Smucker Co. (NYSE: SJM) spooned out some healthy numbers for their first quarter 2008 ending July 31st. Benefiting, no doubt, from the disappearance of competing peanut butter brand Peter Pan from store shelves after it was found contaminated with salmonella, Smucker's brand Jif was one of the leading contributors in bringing home net income of $40.8 million, or $0.71 per share, well above analyst estimates of $0.65. The earnings were 42% above 2007 same quarter.
Almost half of the earnings, however, came from the recently-acquired Eagle brand businesses, on a volume of $43.5 million. Other Smuckers brands showing strong performance for the quarter were Crisco, Pillsbury and Uncrustables.
The results suggest the company is on track to continue its growth, up to $157 million on sales of $2.1 billion in 2007 and up 70% in shareholder return since 2002.
Looking forward, the company may find the Eagle brands impacted by sharply rising milk prices, and since approximately 20% of Smucker's sales are to Wal-Mart, that company's fortunes can affect Smucker's bottom line. Also, Peter Pan is resuming sales after a six-month hiatus, which could impact sales.
Nonetheless, with a strong stable of American staples and consistent recent success, Smucker is worth a look in a tumultuous market.
MOST NOTEWORTHY: Amazon.com (AMZN), YRC Worldwide (YRCW), SanDisk (SNDK), Activision (ATVI), Royal Dutch Shell (RDS.A) and KB Home (KBH) were today's noteworthy downgrades:
BWS Financial cut Amazon.com (NASDAQ: AMZN) shares to Sell from Hold on valuation.
YRC Worldwide (NASDAQ: YRCW) was assumed with an Underweight rating, down from Neutral, as JP Morgan is cautious on the industry's L-T-L pricing.
UBS downgraded SanDisk (NASDAQ: SNDK) to Neutral from Buy on valuation.
Gabelli downgraded shares of Activision (NASDAQ: ATVI) to Hold from Buy to reflect their expectation of increasing competition for some of the company's key titles.
Royal Dutch Shell (NYSE: RDS.A) was downgraded to Underweight from Neutral at HSBC on valuation.
Matrix believes the prolonged weakness in the housing market is eliminating economic profits and cut KB Home (NYSE: KBH) to Strong Sell from Sell...
OTHER DOWNGRADES:
Citigroup and ABN Amro cut Rio Tinto Group (NYSE: RTP) to Hold from Buy.
Merrill Lynch downgraded J.M. Smucker (NYSE: SJM) to Sell from Neutral.
First Albany downgraded shares of Travelzoo (NASDAQ: TZOO) to Neutral from Buy.
At one time Chinese billionaire Stanley Ho owned the casino business in Macau. But after the Chinese government extended licenses to outside operators such as Las Vegas Sands (NYSE:LVS) and MGM Mirage (NYSE:MGM), Ho's Sociedad de Jogod de Macau (SJM) casinos have dropped to 63% of the market, much of the loss in the high-roller segment. JPMorgan forecasts SJM's share will drop to about 25% within three years. Although SJM owns 17 casinos in Macau, many are aged, run down, and away from the center of development for the coming mega-casinos on the Cotai Strip.
Now Ho has struck back with his biggest, most opulent casino, the almost $400 million Grand Lisboa Hotel. The ostentatious design, even by casino standards, was inspired by the Faberge egg and built in the form of a golden lotus flower topped with long, frond-like plumes.
The magnitude of the project, while huge in comparison with Ho's earlier casinos, pales in the light of the Galaxy Entertainment's planned Coati Mega Resort, Melco PBL's Crown Macau, the Sands' Macau Venetian Casino Resort and whatever the Virgin Group decides to do with the 20 hectares acres they have purchased.
2006's lush returns only hastened development projects in Macau, but with all the huge investments underway, one has to wonder if the customer base will expand quickly enough to pay off. While new investors offer the glitzy, modern facilities, Ho's fortunes are tied to aged properties. Will the Grand Lisboa be enough to keep him in the game?
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Analyst upgrades:
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Folgers has created some great brand messages, including the classic, "The best part of waking up is Folgers in your cup."
J.M. Smuckers
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At one time Chinese billionaire Stanley Ho owned the casino business in Macau. But after the Chinese government extended licenses to outside operators such as Las Vegas Sands (NYSE:
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