Wall Street Stock Forecaster Hotline – Friday, September 30, 2011

GENUINE PARTS CO., $50.80, New York symbol GPC, distributes auto parts to over 5,700 independent stores in North America. The company also operates about 1,000 auto parts stores under the NAPA banner. Auto parts account for roughly 50% of its sales. It gets the other 50% by distributing industrial parts, office furniture and electrical equipment.

This week, the company agreed to buy 30% of privately held Exego Group, which distributes auto parts through 430 company-owned stores in Australia and New Zealand. The deal closes on December 1, 2011.

Genuine will pay $150 million for this stake. That’s a little less than the $151.8 million, or $0.96 a share, that Genuine earned in the three months ended June 30, 2011. Genuine Parts has an option to buy the remaining 70% of Exego, provided Exego reaches certain earnings targets.

This is Genuine Parts’ first major purchase outside of North America. However, teaming up with an established company like Exego cuts the risk of expanding into unfamiliar markets.

Genuine Parts is a buy.

Please make sure you are logged in to your account to access these articles. Click here if you’ve lost your password.

Genuine Parts was recently covered in the October 2011 issue of Wall Street Stock Forecaster. Click here to access it.

BOEING CO., $60.51, New York symbol BA, delivered its first 787 Dreamliner plane this week. The buyer was Japan’s All Nippon Airlines.

Production problems delayed this initial delivery by three years. Still, the plane’s long-term outlook remains bright. That’s because the 787 uses 20% less fuel than older airliners, and is cheaper to maintain.

The National Labor Relations Board recently blocked Boeing’s plan to shift some of the 787 production to a new non-union plant in South Carolina from a unionized plant in Washington State. Boeing is appealing this decision. Still, this setback should have little impact on its delivery schedule.

Boeing has orders for 821 Dreamliners. In all, these deals are worth $145 billion. That’s equal to 2.2 times the company’s annual revenue of $65 billion.

Boeing is a buy.

Please make sure you are logged in to your account to access these articles. Click here if you’ve lost your password.

Boeing was recently covered in the June 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Boeing was recently covered in the Wall Street Stock Forecaster Hotline for August 12, 2011. Click here to access it.

CHEVRON CORP., $92.59, New York symbol CVX, announced this week that it will proceed with its proposed Wheatstone liquefied natural gas project in northwestern Australia.

This project involves pumping natural gas by pipeline from an offshore drilling platform to an onshore terminal. From there, the gas will be cooled to a liquid form and shipped by tanker to customers in Asia.

Chevron will own 73.6% of Wheatstone, and will operate the project. The company’s share of the $29-billion construction cost is $21.3 billion. That’s equal to 11% of Chevron’s $185.5-billion market cap. Wheatstone should begin operating in 2016.

The company has already signed long-term contracts for 60% of Wheatstone’s production. That cuts the project’s risk.

Chevron is a buy.

Please make sure you are logged in to your account to access these articles. Click here if you’ve lost your password.

Chevron was recently covered in the October 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Chevron was recently covered in the Wall Street Stock Forecaster Hotline for February 18, 2011. Click here to access it.

NEWMONT MINING CORP., $62.95, New York symbol NEM, links future dividend hikes to the price of gold: it will raise the quarterly rate by $0.05 a share for each $100-per-ounce rise in its average selling price for gold in the preceding quarter.

The company has now enhanced this policy. If gold prices exceed $1,700 an ounce, it will raise the quarterly dividend by an additional $0.025 a share, for a total increase of $0.075 a share.

If gold prices rise above $2,000 an ounce, Newmont will raise the dividend by an additional $0.05 a share, for a total increase of $0.10 a share.

The company last paid a quarterly dividend of $0.30 a share on September 29, 2011. The implied annual rate of $1.20 yields 1.9%.

Gold prices have moved down from their peak of $1,918 an ounce in August 2011 to today’s price of $1,626. Still, this new policy gives investors an opportunity to automatically profit when gold prices rise.

Newmont Mining is a buy.

Please make sure you are logged in to your account to access these articles. Click here if you’ve lost your password.

Newmont was recently covered in the September 2011 issue of Wall Street Stock Forecaster. Click here to access it.

Newmont was recently covered in the Wall Street Stock Forecaster Hotline for July 15, 2011. Click here to access it.

MCCORMICK & CO. INC., $46.16, New York symbol MKC, makes spices, herbs, seasonings, specialty foods and flavours. It sells these products to grocery stores and other clients in the food industry.

McCormick recently paid $113 million for 85% of a new joint venture with Kohinoor Foods Ltd. This new business will sell rice and other foods in India. In addition, McCormick bought Kamis S.A. for $286 million. Kamis makes and sells spices, seasonings and mustard in Poland, Russia, Ukraine and Romania.

Contributions from these acquisitions helped push up McCormick’s sales by 15.8% in the three months ended August 31, 2011, to $920.4 million from $794.6 million a year earlier. The latest earnings were far ahead of the consensus sales forecast of $872 million.

Earnings fell 10.2%, to $92.0 million, or $0.69 a share, from $102.4 million, or $0.76 a share. Still, the latest earnings beat the consensus forecast of $0.64 a share. An unusual tax benefit in the year-earlier quarter added $0.10 a share to the company’s earnings. Without that item, earnings per share would have risen 4.6%.

McCormick continues to pay rising costs for its spices, including pepper and cinnamon. Higher packaging costs are also squeezing the company’s profit margins. However, savings from an ongoing cost-cutting plan should save McCormick $50 million in fiscal 2011. That’s up from its earlier savings target of $45 million.

These savings will also let the company keep raising its dividend. The current annual rate of $1.12 a share yields 2.4%.

McCormick is a buy.

Please make sure you are logged in to your account to access these articles. Click here if you’ve lost your password.

McCormick was recently covered in the October 2011 issue of Wall Street Stock Forecaster. Click here to access it.

McCormick was recently covered in the the Wall Street Stock Forecaster Hotline for September 9, 2011. Click here to access it.

Our next Hotline will go out on Friday, October 7, 2011.