Search

DIEBOLD INC. $39 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.3 million; Market cap: $2.5 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.9%; TSINetwork Rating: Average; www.diebold.com) is a leading maker of automated teller machines (ATMs). It also makes safes, vaults and building-security systems. The company gets 52% of its revenue from overseas.

Diebold’s revenue rose 10.1%, from $2.7 billion in 2009 to $3.0 billion in 2012. That’s mainly because of pent-up ATM demand in the wake of the 2008 financial crisis. As well, U.S. banks had to upgrade their ATMs to comply with the Americans with Disabilities Act. However, revenue in 2013 fell 4.5% to $2.9 billion, due to slowing sales of ATMs to regional U.S. banks and unfavourable currency rates.

The company earned $0.97 a share (or a total of $65 million) in 2009, but it lost $0.37 a share (or $25 million) in 2010 due to goodwill writedowns and other charges. Earnings rebounded to $2.21 a share (or $143 million) in 2011, but additional writedowns cut them to $1.20 a share (or $77 million) in 2012.
...

IDEXX LABORATORIES INC. $122 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 51.6 million; Market cap: $6.3 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www. idexx.com) earned $3.58 a share in 2013, up 12.6% from $3.18 in 2012. Sales rose 6.5%, to $1.4 billion from $1.3 billion. These gains are mainly because veterinarians are buying more of Idexx’s equipment for detecting diseases in pets.

The company recently launched two new products that should increase this year’s sales by 7.5% to 8.5%. Its earnings should also rise to $3.85 a share. However, the stock has jumped 32% in the past year and now trades at a high 31.7 times the 2014 forecast.

Idexx is still a hold....

INTERNATIONAL BUSINESS MACHINES CORP. $193 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.0 billion; Market cap: $193.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.ibm.com) continues to expand its cloud-computing businesses.

It recently paid an undisclosed sum for Cloudant, a private firm that creates large databases on remote servers. IBM feels Cloudant’s technology will also enhance its analytics services, which help businesses analyze large amounts of data and improve their efficiency.

The company expects its cloud revenue to reach $7 billion in 2015. That’s equal to 7% of its overall 2013 revenue of $99.8 billion.
...

3M COMPANY $133 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 662.7 million; Market cap: $88.1 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.3m.com) feels that rising pollution in China will spur demand for its face masks and water filters. As a result, the company now predicts that its Chinese revenue will rise 15% annually over the next five years. That’s much higher than 3M’s overall annual revenue growth rate of around 5%.

3M is a buy.

ALCOA INC. $12 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.1 billion; Market cap: $13.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.0%; TSINetwork Rating: Average; www.alcoa.com) is doubling production of aluminum truck wheels at its plant in Hungary. Demand for these wheels is strong, as they are much more resistant to rust and corrosion than steel wheels. Engineered products like these also cut Alcoa’s reliance on selling less-profitable bulk aluminum.

The company will spend $13 million to upgrade the facility. That’s equal to 4% of the $357 million, or $0.33 a share, that Alcoa earned in 2013. It expects to complete the project in early 2015.

Alcoa is a buy.
...

WAL-MART STORES INC. $76 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.2 billion; Market cap: $243.2 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.walmart.com) will soon let customers trade in their used video games for a credit they can use to buy other merchandise. The company will then refurbish the games and resell them in its stores.

This move should help Wal-Mart attract more customers and could spur video game console sales. As well, profit margins on used games tend to be much higher than those on new games.

Wal-Mart is a buy.
...

BOEING CO. $124 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 743.4 million; Market cap: $92.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www. boeing.com) has discovered hairline cracks on the wings of 40 of its 787 Dreamliner passenger planes that are currently in production.

The problem, which does not affect planes already in service, is because the Japanese company that makes the wings changed its manufacturing process. Boeing feels it can make repairs quickly, which would let it meet its target of delivering 110 Dreamliners this year.

Boeing is a buy....

FAIR ISAAC CORP. $54 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 34.9 million; Market cap: $1.9 billion; Price-to-sales ratio: 2.7; Dividend yield: 0.1%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. The company also makes software that helps credit card issuers control fraud and analyze cardholder spending patterns.

In its fiscal 2014 first quarter, which ended December 31, 2013, Fair Isaac’s earnings fell 17.6% to $26.2 million, or $0.73 a share. A year earlier, it earned $31.8 million, or $0.88. Revenue fell 3.0%, to $184.3 million from $190.0 million. The declines mainly resulted from a big order in the year-earlier quarter.

The company also raised its research spending by 24.3% in the latest quarter, to $18.1 million (or 9.8% of revenue) from $14.6 million (or 7.7%) a year earlier.
...

BROADRIDGE FINANCIAL SERVICES INC. $37 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 119.4 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.

In its fiscal 2014 second quarter, which ended December 31, 2013, Broadridge earned $31.2 million, up 43.1% from $21.8 million a year earlier. Earnings per share rose 47.1%, to $0.25 from $0.17, on fewer shares outstanding.

Revenue gained 5.6%, to $520.6 million from $493.2 million. Revenue from contracts that pay Broadridge recurring fees (two-thirds of the total) rose 9% and accounted for almost all of the overall gain. The remaining third comes from one-time events, such as special shareholder meetings and distributing information when a mutual fund changes managers.
...

GENERAL MILLS INC. $51 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 614.5 million; Market cap: $31.3 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.generalmills.com) is one of the world’s largest food makers. Its top brands include Big G (cereal), Green Giant (canned and frozen vegetables), Pillsbury (baking dough), Old El Paso (tacos), Progresso (soups and salads) and Yoplait (yogurt).

In its fiscal 2014 third quarter, which ended February 23, 2014, the company’s sales fell 1.2%, to $4.38 billion from $4.43 billion a year earlier. General Mills raised its prices to cover rising costs, but it sold less food, partly because unusually cold winter weather kept U.S. shoppers at home. Unfavourable currency exchange rates, particularly in Venezuela, also weighed on sales.

Earnings rose 3.1%, to $410.6 million from $398.4 million. Per-share earnings gained 6.7%, to $0.64 from $0.60, on fewer shares outstanding. However, if you exclude unusual items, such as gains on hedging contracts General Mills uses to lock in wheat and corn prices, per-share earnings fell 6.1%, to $0.62 from $0.66.
...

CINTAS CORP. $59 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 120.1 million; Market cap: $7.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.cintas .com) is selling its document-shredding operations to Toronto-based Shred-it International. In exchange, Cintas will receive 42% of the combined company, which will use the Shred-it brand, plus $180 million in cash. To put that in context, Cintas earned $84.6 million, or $0.69 a share, in the quarter ended February 28, 2014.

The partners plan to make this business more profitable by combining plants and pick-up routes. The sale will also let Cintas focus on its larger uniform rental and office cleaning operations.

Cintas is a buy....

PHILIPS ELECTRONICS N.V. ADRs $34 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 913.3 million; Market cap: $31.1 billion; Priceto- sales ratio: 1.0; Dividend yield: 2.9%; TSINetwork Rating: Average; www.philips.com) has agreed to merge its LED (light emitting diode) lighting product business in Saudi Arabia with local firm General Lighting.

As part of the deal, Philips will also contribute $235 million, which is equal to 42% of the $566 million, or $0.59 per ADR, that it earned in the quarter ended December 31, 2013. In return, Philips will receive a 51% stake in the combined company.

Teaming up with a well-established local firm should help Philips take advantage of fast-growing demand for LED lighting, particularly as the Saudi government aims to cut its energy use.
...

QUAKER CHEMICAL CORP. $75 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 13.2 million; Market cap: $990.0 million; Price-to-sales ratio: 1.4; Dividend yield: 1.3%; TSINetwork Rating: Average; www.quakerchem.com) makes lubricants and chemicals that keep mechanical parts from rusting.

Quaker needs oil to make its products, and rising crude prices have slowed its earnings growth. As well, it gets 60% of its sales from overseas, and the higher U.S. dollar has also weighed on its results.

The company has raised its prices and cut its costs in response. It has also acquired smaller, related firms, which has helped increase its sales and earnings.
...

BRIGGS & STRATTON CORP. $22 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 47.0 million; Market cap: $1.0 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest maker of lawn mower engines. The company also makes a variety of other home and garden equipment, such as portable power generators, pressure washers and snow blowers.

In Briggs’s 2014 second quarter, which ended December 31, 2013, its sales fell 5.1%, to $416.6 million from $439.1 million a year earlier.

Sales of engines to manufacturers (61% of total sales) fell 3.1%, mainly because the year-earlier sales benefited from strong generator demand after Hurricane Sandy. A lack of major storms also caused sales of consumer products (39%) to decline 13.2%.
...

MTS SYSTEMS CORP. $68 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.3 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.8%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that manufacturers use to test the behaviour of materials, machines and structures. This helps its clients reduce errors and costs.

The company recently announced a new restructur-ing plan, including job cuts and technology investments. This initiative should make its testing division, which supplies 80% of its revenue, more productive. MTS gets the remaining 20% of its revenue by making sensors for industrial equipment.

...

TENNANT CO. $63 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.5 million; Market cap: $1.2 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.1%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also manufactures cleaning gear for garages, stadiums, parking lots and city streets.

The company continues to benefit from strong demand for products featuring its ec-H20 technology, which uses electricity to make tap water act like a detergent.

In 2013, Tennant’s sales rose 1.8%, to $752.0 million from $739.0 million in 2012. Overseas markets supply a third of the company’s sales. If you disregard the negative impact of currency exchange rates, sales rose 2.8%.
...

CISCO SYSTEMS INC. $22 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.2 billion; Market cap: $114.4 billion; Priceto- sales ratio: 2.5; Dividend yield 3.4%; TSINetwork Rating: Average; www.cisco.com) plans to invest $1 billion over the next two years on building a new cloud-computing service, which will let businesses lease data processing and storage systems instead of buying their own.

This is a small investment for Cisco, which earned $2.5 billion, or $0.47 a share, in its latest quarter. However, cloud computing could become an important new business for Cisco, and cut its reliance on selling routers and other networking hardware.

Demand for cloud services is growing fast, as they let corporations and government agencies cut their computing costs. Moreover, these big clients are more likely to trust wellestablished suppliers like Cisco instead of other cloud competitors like Amazon.com, which cater mainly to smaller businesses. (Note— Amazon is a recommendation of Stock Pickers Digest, our newsletter that focuses on aggressive investments.)
...

MCDONALD’S CORP. $96 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 989.9 million; Market cap: $95.0 billion; Price-to-sales ratio: 3.4; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.mcdonalds.com) operates 35,400 fast food restaurants in 119 countries. The company serves a wide variety of food, but it’s best known for its hamburgers and french fries.

McDonald’s continues to renovate its restaurants, launch new menu items— such as premium coffee— and appeal to cost-conscious consumers through its popular Dollar Menu. These improvements raised its revenue by 23.6%, from $22.7 billion in 2009 to $28.1 billion in 2013.

Same-store sales rose just 0.2% in 2013, because the company attracted 1.9% fewer customers, which offset higher spending per visit.
...

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stock picks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

FAIR ISAAC CORP. (New York symbol FICO; www.fairisaac.com) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns....

SUN LIFE FINANCIAL (Toronto symbol SLF; www.sunlife.ca) sells savings, retirement, pension and life insurance products to individuals and corporations....

STATE STREET CORP. $73 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 415.2 million; Market cap: $30.3 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.9%; TSINetwork Rating: Average; www.statestreet.com) sells accounting and administrative services to large investors, like mutual funds and pension plans.

State Street has raised its quarterly dividend by 13.3%, to $0.34 a share from $0.30. The new annual rate of $1.36 yields 1.9%. State Street also plans to repurchase $1.8 billion worth of its shares by June 30, 2016. It spent $1.65 billion on buybacks in 2014.

The company’s fee income rises and falls with the value of the mutual funds and other securities it manages. Thanks to improving stock markets and new contracts, it will likely earn $5.16 a share in 2015, up from $5.09 in 2014. The stock trades at 14.1 times that forecast.

...

CAMPBELL SOUP CO. (New York symbol CPB; www.campbellsoupcompany.com) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices. Wal-Mart accounts for 19% of its sales....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on buying stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

TRILOGY ENERGY CORP. (Toronto symbol TET; www.trilogyenergy.com) owns oil and gas properties in central Alberta’s Kaybob and Grande Prairie areas. About 58% of Trilogy’s production is natural gas. The remaining 42% is oil....