price to sales ratio

AMERICAN EXPRESS CO. $35 (New York symbol AXP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.6; WSSF Rating: Average) earned $0.44 a share in the three months ended September 30, 2009. That’s down 40.5% from $0.74 a year earlier. The latest earnings excluded a $0.10-a-share gain related to the restatement of earnings in prior year. This was done to correct errors in the way the company converted foreign subsidiaries’ earnings into U.S. dollars. Revenue fell 16.0%, to $6.0 billion from $7.2 billion. The company wrote off 8.6% of its credit- and charge-card loans, up from 5.7% a year earlier. However, that’s an improvement over 9.7% in the previous quarter. Accounts that are more than 30 days past due also fell from the previous quarter. Moreover, average spending per cardholder rose 6.9% from the previous quarter. American Express is a buy.

SONY CORP. ADRs $29 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $29.0 billion; Price-to-sales ratio: 0.4; WSSF Rating: Average) will let users of its PlayStation 3 video game player instantly view movies and TV shows from Netflix Inc. (Nasdaq symbol NFLX). Netflix operates an online movie-rental service with over 100,000 titles. Users will have to sign up with Netflix to use this service. However, Netflix already has 11.1 million U.S. subscribers, and many of them no doubt already own a PlayStation 3. This new service should also spur PlayStation 3 sales ahead of the Christmas shopping season. Sony is a buy.

PHILIPS ELECTRONICS N.V. ADRs $25 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 926.7 million; Market cap: $23.2 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) gets roughly 50% of its revenue by making consumer electronics, such as TV sets, DVD players and kitchen appliances. Netherlands-based Philips also makes lighting equipment (25% of revenue) and medical equipment (25%). Each American Depositary Receipt represents one Philips common share. The weak economy continues to hurt consumer-electronics demand. As well, slow automotive and construction markets have dampened sales at Philips’s lighting division. Moreover, hospitals and clinics are putting off orders for CAT and MRI scanners because of uncertainty over U.S. health-care reforms. In response, Philips aims to lower its annual expenses by 600 million euros (1 euro = $1.47 U.S.). It will mainly accomplish this by cutting 6,000 jobs, or 5% of its workforce. So far, the company has saved 118 million euros. It expects to save as much as 159 million euros by the end of this year....

The recession has hurt the earnings of these two high-quality shipping companies. However, both are doing a good job of controlling their costs. This should improve their profitability, particularly as the economy rebounds. The recent drop in fuel costs also brightens their prospects. However, we prefer FedEx to Arkansas Best right now, as its larger international operations lower its reliance on North America. FEDEX CORP. $74 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 312.5 million; Market cap: $23.1 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) delivers packages and documents in the U.S. and over 220 other countries. FedEx earned $0.58 a share in its first quarter, which ended August 31, 2009. That’s down 52.8% from $1.23 a year earlier. Revenue fell 19.7%, to $8 billion from $10 billion. Like most shipping companies, FedEx added a surcharge to its fees when fuel costs were rising. But now that oil prices have fallen to around $77 a barrel from last year’s peak of $148, FedEx is getting less revenue from these surcharges....

INTERNATIONAL BUSINESS MACHINES CORP. $122 (New York symbol IBM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $158.6 billion; Price-to-sales ratio: 1.7; WSSF Rating: Above Average) is looking to increase its software sales to businesses with a new suite of programs that use the free Linux operating system. Many businesses put off upgrading their computers when Microsoft launched Windows Vista in 2007. IBM hopes to convince these customers to use its cheaper software instead of upgrading to Microsoft’s new Windows 7 operating system. Linux has been slow to catch on due to compatibility issues with certain software. But IBM’s backing should help offset these concerns. IBM is a buy.

NCR CORP. $10 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.2 million; Market cap: $1.6 billion; Price-to-sales ratio: 0.4; WSSF Rating: Average) will cut 2,200 jobs, or 10% of its workforce, by the end of this year. Because of the recession, banks are buying fewer of its automated teller machines (ATMs). As well, retailers have cut spending on new cash registers. The layoffs should help NCR cut its annual costs by up to $250 million by the end of 2011. If you exclude severance and other unusual costs, NCR earned $30 million, or $0.19 a share, in the third quarter of 2009. That’s down 67.4% from $92 million, or $0.55 a share, a year earlier. Sales fell 17.7%, to $1.1 billion from $1.4 billion. Despite the slower sales, the long-term outlook for ATMs remains strong, particularly in China and India. As well, demand for new technologies, such as self-serve check-out terminals and kiosks, should rise. That’s because they help retailers lower their costs....

J.C. PENNEY CO. INC. $33 (New York symbol JCP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 235.9 million; Market cap: $7.8 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) has entered into a 10-year alliance with clothing maker LIZ CLAIBORNE INC. $5.69 (New York symbol LIZ; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 95.1 million; Market cap: $541.1 million; Price-to-sales ratio: 0.2; WSSF Rating: Extra Risk). Under the terms of the deal, J.C. Penney will become the only U.S. department store selling Liz Claiborne’s women’s clothing brands. The deal also includes accessories, shoes, household products and men’s clothing. J.C. Penney will start selling these lines next fall. This arrangement should help draw traffic to J.C. Penney’s stores, and cut Liz Claiborne’s risk. J.C. Penney is a buy. However, Liz Claiborne is still a hold.

CHEVRON CORP. $76 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $152.0 billion; Price-to-sales ratio: 0.8; WSSF Rating: Above Average) is the second-largest integrated oil company in the U.S. by market cap, after Exxon-Mobil. Chevron gets about 85% of its earnings from producing oil. The remaining 15% comes from its refineries, its petrochemicals business and its 22,000 gasoline stations, which operate under the Chevron, Texaco and Caltex banners. Chevron has increased its oil and natural-gas reserves by roughly 1 billion barrels a year for the past seven years. At the end of 2008, it directly controlled 7.9 billion barrels, plus an additional 3.3 billion through joint ventures and affiliated businesses. The company produces about 920 million barrels a year.

Rising reserves spurred growth

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $39 and CU.X [class B voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 125.6 million; Market cap: $4.9 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates power plants in other parts of Canada, and in the U.K. and Australia. In August, Canadian Utilities received preliminary approval from the Alberta government to build and operate a new high-voltage transmission line between Edmonton and Calgary. Final approval for this project should come later this year. The line is part of a wider plan to make Alberta’s electricity grid more reliable. This new line will cost $1.65 billion, and will probably take several years to complete. To put this in context, Canadian Utilities earned $73.5 million, or $0.59 a share, in the three months ended June 30, 2009....

TRANSCANADA CORP. $33 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 624 million; Market cap: $20.6 billion; Price-to-sales ratio: 2.3; SI Rating: Above Average) operates a 59,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. It also owns or invests in 20 electrical power plants. To diversify its operations, TransCanada is building the $12-billion U.S. Keystone pipeline, which will pump crude oil from Alberta’s oil sands to refineries in Illinois. TransCanada has already signed contracts with oil shippers at an average term of 18 years. In total, these deals represent 83% of Keystone’s capacity. The new pipeline’s first phase should start operating early next year. TransCanada plans to extend Keystone to the U.S. Gulf Coast by 2012....