price to sales ratio

TRANSCANADA CORP. $36 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 690.0 million; Market cap: $24.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.4%; SI Rating: Above Average) recently began pumping crude oil from Alberta to refineries in the U.S. Midwest through the first phase of its $12-billion U.S. Keystone pipeline project. It is now building the second phase, which should begin operating in 2011. TransCanada plans to add a third phase to this project. Called Keystone XL, this new pipeline will supply oil refineries in Texas. U.S. environmentalists and politicians have criticized Keystone XL. In response, TransCanada will reduce the pressure of the oil in the pipeline. That will lower the line’s capacity, but it should help TransCanada secure approval for the project. The company hopes to complete Keystone XL by the end of 2013....

CANADIAN NATIONAL RAILWAY CO. $64 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 465.4 million; Market cap: $29.8 billion; Price-to-sales ratio: 3.8; Dividend yield: 1.7%; SI Rating: Above Average) operates the largest freight rail network in Canada. It also serves 16 U.S. states. Ottawa nationalized CN in 1922, as railways were critical to Canada’s early growth. CN became a publicly traded company in 1995. CN hauls grain and fertilizers (20% of its 2009 revenue), consumer and industrial goods (20%), petroleum products (19%), forest products (17%), metals and minerals (11%), coal (7%) and automotive products (6%). Revenue rose 17.2%, from $7.2 billion in 2005 to $8.5 billion in 2008, mainly due to acquisitions. However, 2009 revenue fell 13.1%, to $7.4 billion....

Big companies like GE and 3M are examples of “GNP (Gross National Product) stocks”. Because they are already huge and sell to a wide variety of customers, investors feel their earnings growth may only match the growth of the overall economy. However, both GE and 3M successfully restructured their businesses during the recession. The resulting cost cuts should push their earnings higher for years to come. As well, the savings are freeing up cash for dividend increases and share buybacks. GENERAL ELECTRIC CO. $16 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.7 billion; Market cap: $171.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 3.0%; WSSF Rating: Above Average) is one of the world’s largest manufacturers....

UNITED TECHNOLOGIES CORP. $71 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 929.1 million; Market cap: $66.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.4%; WSSF Rating: Above Average) is another example of a “GNP stock” with improving growth prospects. Investors think of United Technologies as a GNP stock because of its diverse operations. It has six divisions: Pratt & Whitney aircraft engines; Otis elevators; Carrier heating and air conditioning equipment; Sikorsky helicopters; Hamilton Sundstrand aircraft controls; and UTC Fire & Security, which provides building-security and fire-protection services. Like GE and 3M, United Technologies laid off workers and closed plants during the recession. It expects these cost cuts to save it $860 million a year by 2012....

Under the new financial-reform law, the Securities and Exchange Commission will develop rules to prevent conflicts of interest in the credit rating industry. The law also creates new standards for credit analysts, including passing qualifying examinations. The new law will raise these three rating providers’ costs. However, all three have improved the quality of their ratings since the 2007/2008 financial crisis. The stricter requirements will also make it difficult for new competitors to enter the credit-rating field. Moreover, the recent market lull has depressed their share prices and p/e ratios. MCGRAW-HILL COMPANIES LTD. $30 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 315.5 million; Market cap: $9.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; WSSF Rating: Average) gets around 70% of its earnings and 45% of its revenue from its Standard & Poor’s division, which provides financial information, including credit ratings on bonds. The company also publishes textbooks and magazines, and owns nine television stations....

GANNETT CO. INC. $14 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 238.2 million; Market cap: $3.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.1%; WSSF Rating: Average) has signed a deal with Internet-search provider Yahoo Inc. (Nasdaq symbol YHOO) that should let it sell more ads on the web sites of its newspapers and TV stations. That should help Gannett offset declining print advertising. Meanwhile, Gannett’s earnings per share rose 32.6% in the three months ended June 27, 2010, to $0.61 from $0.46 a year earlier. Savings from job cuts were the main reason for the higher earnings. Revenue fell 1.6%, to $1.37 billion from $1.39 billion. Gannett is a buy.

APPLE INC. $261 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 913.6 million; Market cap: $238.4 billion; Price-to-sales ratio: 4.2; No dividends paid; WSSF Rating: Average) will give users of its new iPhone 4 smartphone a free rubber bumper that fits over the device. This bumper seems to solve the reception problems that some users have reported. The company estimates that this solution will cost it $175 million. That’s small compared to the $3.25 billion, or $3.51 a share, Apple earned in the three months ended June 26, 2010. That’s up 78.0% from $1.8 billion, or $2.01 a share, a year earlier. Sales rose 61.3%, to $15.7 billion from $9.7 billion. Despite the reception problems, demand for the new iPhone remains strong....

VERIZON COMMUNICATIONS INC. $29 (New York symbol VZ, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.8 billion; Market cap: $81.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 6.6%; WSSF Rating: Average) owns 55% of Verizon Wireless, which is the largest wireless provider in the U.S.; U.K.-based Vodafone plc owns the other 45%. This business has 92.1 million customers in 50 states, and accounts for 60% of Verizon’s revenue. The remaining 40% comes from its wireline division, which sells local and long-distance telephone service to over 27 million customers in 28 states. In the past few years, Verizon has shifted its focus toward its wireless and high-speed Internet businesses. As part of this plan, it has spun off (or handed out shares of) many of its less-profitable operations....

FRONTIER COMMUNICATIONS CORP. $7.70 (New York symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 991.8 million; Market cap: $7.6 billion; Price-to-sales ratio: 1.1; Dividend yield: 9.7%; WSSF Rating: Average) sells Internet and traditional telephone services to 6.2 million customers in 27 states. Its clients are mainly in rural and suburban areas. The deal with Verizon tripled Frontier’s size. As well, many of these new clients are in areas with little high-speed Internet access. That gives Frontier a strong growth opportunity. As well, it can combine some of its current functions with those of the new Verizon business. That should free up cash that Frontier can use to expand its Internet operations. The $0.75 dividend, down from $1.00 before the purchase, seems safe and yields 9.7%. We’re adding Frontier to our Income Portfolio. For now, the stock is a hold.

Toyota and Honda made deep cost cuts during the recession. That should help them increase their long-term profitability. However, we prefer Honda for new buying. That’s because Toyota is relying on customer incentives to spur car sales in the wake of several safety recalls. These extra expenses will offset the benefits of its other cost cuts for the next year or so. TOYOTA MOTOR CO. ADRs $70 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.6 billion; Market cap: $112.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.6%; WSSF Rating: Above Average) is Japan’s largest carmaker. The stock has moved down from its recent high of $92 in January 2010. That’s because of bad publicity over recalls to fix sticky gas pedals and other problems. However, these defects only affected a small number of vehicles, and Toyota’s quick response helped limit any permanent damage to its brand....