acquisition strategy
WYNDHAM WORLDWIDE, $12.12, symbol WYN on New York, rose 35% this week after it reported higher first-quarter profits. In the three months ended March 31, 2009, Wyndham’s earnings, excluding one-time items, rose 19.4%, to $74 million, or $0.41 a share, from $62 million, or $0.35 a share, a year earlier. Analysts had been expecting $0.35 a share. Revenue fell 11%, to $901 million from $1.01 billion, as Wyndham’s hotels saw fewer guests. Moreover, the company gets about a third of its revenue from its overseas operations, and the higher U.S. dollar hurt their contribution. Despite the lower revenue, Wyndham’s profits were higher than in the year-earlier period. This was mainly because the company took steps to lower its costs, including its marketing and administrative expenses. Wyndham is one of the world’s largest hospitality companies, with 7,000 franchised hotels worldwide. It operates under a number of quality brands, including Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Wingate by Wyndham, Baymont Inn & Suites, Microtel Inns & Suites, Hawthorn Suites, Howard Johnson, Travelodge, Knights Inn and AmeriHost Inn....
Eagle Rock Energy Partners LP, $5.50, symbol EROC on Nasdaq (Shares outstanding: 55.7 million; Market cap: $306.4 million), is a limited partnership that operates in the upstream, midstream and royalty-fee segments of the U.S. oil and natural gas industry. Eagle Rock produces and explores for natural gas through its upstream business. In turn, midstream involves gathering, compressing, treating, processing and transporting the gas. Eagle Rock also buys and manages royalty interests, either directly or by investing in other partnerships. Eagle Rock is a master limited partnership. As such, it is publicly traded and at least 90% of its cash flow must come from real estate or natural resources. Limited partnerships do not pay income tax, and are required to distribute their “available cash” to unitholders. Eagle Rock first sold units to the public at $19 each, and began trading on Nasdaq in October 2006....
AltaGas Income Trust, $15.30, symbol ALA.UN on Toronto (Units outstanding: 76.3 million; Market cap: $1.2 billion), extracts, processes and distributes natural gas. It also processes natural-gas liquids. AltaGas has five segments: 1) The field-gathering and processing division operates 6,500 kilometres of pipelines that move natural gas from producing wells to more than 70 field-gathering and processing facilities in Alberta....
Veolia Environnement, $21.08, symbol VE on New York (Shares outstanding: 472.5 million; Market cap: $10.0 billion), is a Paris-based utility. Veolia helps clients manage water, waste, energy and transportation. The company has operations throughout the world, and its clients include towns, cities and states, as well as private and public companies. Veolia first sold shares to the public at $39, and began trading on New York in October 2001. In 2003, it changed its name from Vivendi Environnement to Veolia Environnement. Veolia operates through four subsidiaries:...
Bunge Ltd., $47.41, symbol BG on New York (Shares outstanding: 121.6 million; Market cap: $5.8 billion), is an agribusiness, fertilizer and food-products company. Bunge (pronounced BUN-gee) mainly operates in North and South America. It is the largest soybean processor in the Americas, and one of the largest soybean-product exporters (soybean products include vegetable oil and margarine). Bunge is also the world’s leading oilseed processor and seller of bottled vegetable oil. The company first sold shares to the public at $16, and began trading on New York in August 2001. Bunge has three main segments: i) Agribusiness, which accounts for 71% of Bunge’s total sales, buys grains and oilseeds from farmers and stores, blends and sells them to customers like animal feed and food manufacturers. Through its agribusiness segment, Bunge handles soybeans, rapeseed, sunflower seed, canola, wheat and corn. It also manages a network of 275 country elevators in North and South America and Europe, and processes oilseeds into meal, oil and other by-products....
Oracle Corp., $17.11, symbol ORCL on Nasdaq (Shares outstanding: 5.05 billion; Market cap: $86.3 billion), makes and sells database software and middleware (software that connects computer servers). Companies use Oracle’s database-management software to store and access data. Oracle also offers software for data warehousing, customer relationship management and supply chain management. In the three months ended November 30, 2008, revenues rose 6%, to $5.7 billion from $5.4 billion a year earlier. Earnings rose 8.2%, to $1.75 billion, or $0.34 a share, from $1.6 billion, or $0.31 a share. Oracle spent 11.6% of its sales in the quarter on research and development. In the latest quarter, new software license sales fell 3%, software updates and product support were up 15% and services fell 2%. Services contributed 20% of sales, while software accounted for 80%. Geographically, revenues from the Americas rose 8.6%, Europe, Africa and the Middle East, 1% and the Asia Pacific region, 6.2%....
URS Corp., $41.93, symbol URS on New York, (Shares outstanding: 83.5 million; Market cap: $3.5 billion) is one of the largest engineering-design services firms worldwide. The San Francisco-based company is also a major U.S. federal government contractor for systems engineering and technical assistance as well as operations and maintenance services. URS (formerly United Research Services) is organized into three divisions. i) The URS Division (32% of revenues) provides planning, design and construction management services for transportation and water resources infrastructure, as well as for healthcare complexes, schools, courthouses and other public buildings. ii) The EG&G Division (23% of revenues) serves the U.S. federal government, including the Departments of Defense and Homeland Security. The division provides systems engineering and technical assistance for the development of weapons systems, and maintains and repairs vehicles and other military equipment. EG&G (Edgerton, Germeshausen and Grier) was founded in 1947 by three MIT professors. URS acquired EG&G Technical Services in 2002. iii) The Washington Division (45% of revenues) provides engineering, construction and management for infrastructure, power, mining, oil and gas, industrial/process and defense projects. The division design, builds, operates and maintains transportation systems and power-generating facilities. The Washington Division also manages high-risk facilities for the U.S. Department of Energy, including nuclear waste management and disposal programs....
SAPUTO INC. $28 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 206.4 million; Market cap: $5.8 billion; SI Rating; Average) is Canada’s largest producer of dairy products, including milk, butter and cheese. It also produces dairy products in the United States, Argentina and Europe. These operations account for 97% of its revenue. The remaining 3% comes from its bakery operations, which make snack-cakes, cookies and tarts. Much of the company’s recent growth comes from 16 acquisitions of bargain stocks over the past 10 years. We generally downplay companies that expand through acquisitions, due to the hidden risk that comes with most new purchases. However, Saputo has a strong record of picking up struggling operations with bargain stocks and quickly turning them around.
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SYMANTEC, $19.99, symbol SYMC on Nasdaq, rose this week after it reported that earnings excluding one-time items rose 36.4% in the three months ended March 28, 2008, to $309.4 million from $226.8 million a year earlier. Earnings per share rose 50%, to $0.36 from $0.24, on 8.2% fewer shares outstanding. Excluding the impact of acquisitions, revenues rose 14.0% to $1.55 billion from $1.36 billion. In the latest quarter, earnings gained from strong sales in Europe (up 17.3%) and Asia (up 18.7%). International sales (52.5% of revenues) rose 15.2%. U.S. sales (47.5% of revenues) rose 11.5%, despite difficult economic conditions. Symantec’s consumer business, which represents 29% of the company’s total revenues, grew 9.9%. Revenues from Symantec’s services business (6.2% of revenues) grew 11.8%. Security and data management sales (28.4% of revenues) grew 21.5%, and storage and server management sales (36.4% of revenues) rose 10.6%....
SAPUTO INC. $29 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 205.8 million; Market cap: $6.0 billion; SI Rating: Average) is Canada’s largest producer of dairy products. It accounts for around 35% of Canada’s cheese production, and 25% of milk output. Major brands include Saputo, Armstrong, Stella and Dairyland. Canada supplies 60% of its total sales. The company is also one of the top five cheese producers in the United States, with roughly 5% of that market. Saputo’s U.S. businesses account for 30% of its sales. The remaining 10% of its sales come from dairy operations in the UK, Germany and Argentina. Heavy regulation limits expansion opportunities in Canada, so Saputo has focused on expanding its U.S. and international operations through acquisitions. That’s riskier than internal growth, but Saputo has a strong history of identifying operations that can benefit from its economies of scale and marketing expertise. The high Canadian dollar also makes foreign purchases more affordable....