price to sales ratio
WESTERN UNION CO. $17 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 701.3 million; Market cap: $11.9 billion; Price-to-sales ratio: 2.3; WSSF Rating: Above Average) will buy Custom House, Ltd., a Canadian company that provides business-to-business payment services to over 40,000 small- and medium-sized companies. The purchase reduces Western Union’s reliance on consumer-to-consumer transactions, which account for about 85% of its business, and should add $100 million a year to its revenue. The deal should close by September 30. To put the $370 million all-cash purchase price in context, Western Union earned $223.9 million in the first quarter of 2009, up 8.1% from $207.1 million a year earlier. Earnings per share rose 18.5%, to $0.32 from $0.27, on fewer shares outstanding. However, the year-earlier earnings included a $24-million pre-tax restructuring charge, mainly caused by the closure of its San Francisco facility. Without this expense, its latest earnings grew 1%. Revenue fell 5.1%, to $1.2 billion from $1.3 billion. Over 80% of Western Union’s agents are outside the United States, so the higher U.S. dollar hurts their contribution. Excluding foreign currency effects, revenue was flat. Western Union is a buy.
BECKMAN COULTER INC. $53 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 63.4 million; Market cap: $3.4 billion; Price-to-sales ratio: 1.1; WSSF Rating: Average) makes lab equipment that doctors and medical researchers use to detect substances in blood and other bodily fluids. These systems are designed to simplify and speed up complex tests. Beckman has installed more than 200,000 systems in over 130 countries. Hospitals and clinics account for about 85% of Beckman’s revenue. It gets the remaining 15% from universities and medical research labs.
Supplies and services cut its risk
...
Bombardier makes most of its money from its airplane operations. This is a highly cyclical industry, and the recession has hurt demand for new planes. That’s mainly why Bombardier’s shares are down over 50% from last June’s peak of around $9. However, Bombardier’s passenger-railcar business, while not as profitable, adds stability. The long-term outlook for this division remains bright, particularly as more people move to cities and governments increase spending on public-transit systems. BOMBARDIER INC. (Toronto symbols BBD.A $3.78 and...
BOMBARDIER INC. (Toronto symbols BBD.A $3.78 and
BBD.B $3.65, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $6.4 billion; Price-to-sales ratio: 0.3; SI Rating: Extra Risk) is the world’s third-largest maker of commercial aircraft, after Boeing and Airbus. Bombardier’s aerospace division supplies about half of its revenue and two-thirds of its profits.
The remaining revenue and earnings come from Bombardier’s transportation division, which controls 22% of the global market. This makes Bombardier the world’s largest maker of passenger railcars and commuter trains. The company sells most of its trains under long-term contracts with large, well-financed customers, such as national railways and municipal transit authorities. This helps offset the cyclical nature of Bombardier’s aircraft business.
Bombardier’s revenue fell from $15.6 billion in 2005 (the company’s fiscal year ends January 31) to $14.8 billion in 2006, but rose to $19.7 billion in 2009 (all amounts except share price and market cap in U.S. dollars). It lost $0.08 a share (or a total of $122 million) in 2005. But thanks to a major restructuring of its railcar business, earnings jumped from $0.11 a share (or $192 million) in 2006 to $0.56 a share (or $1 billion) in 2009.
The recession has hurt demand for new aircraft. In the latest fiscal year, Bombardier delivered 349 planes, down from 361 the previous year. Orders for new planes fell more than 50%, to 367 from 698.
Despite the drop in deliveries, the aerospace division’s revenue rose 2.6% in fiscal 2009, to $10 billion from $9.7 billion the previous year. The gain was the result of higher selling prices for business jets, and increased revenue from repairing and maintaining aircraft. Its gross profit margin (its gross profits as a percentage of its revenue) rose to 9.0% from 5.8%. The division’s $23.5-billion order backlog is equal to 2.4 years of revenue.
...
BBD.B $3.65, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $6.4 billion; Price-to-sales ratio: 0.3; SI Rating: Extra Risk) is the world’s third-largest maker of commercial aircraft, after Boeing and Airbus. Bombardier’s aerospace division supplies about half of its revenue and two-thirds of its profits.
The remaining revenue and earnings come from Bombardier’s transportation division, which controls 22% of the global market. This makes Bombardier the world’s largest maker of passenger railcars and commuter trains. The company sells most of its trains under long-term contracts with large, well-financed customers, such as national railways and municipal transit authorities. This helps offset the cyclical nature of Bombardier’s aircraft business.
Bombardier’s revenue fell from $15.6 billion in 2005 (the company’s fiscal year ends January 31) to $14.8 billion in 2006, but rose to $19.7 billion in 2009 (all amounts except share price and market cap in U.S. dollars). It lost $0.08 a share (or a total of $122 million) in 2005. But thanks to a major restructuring of its railcar business, earnings jumped from $0.11 a share (or $192 million) in 2006 to $0.56 a share (or $1 billion) in 2009.
The recession has hurt demand for new aircraft. In the latest fiscal year, Bombardier delivered 349 planes, down from 361 the previous year. Orders for new planes fell more than 50%, to 367 from 698.
Despite the drop in deliveries, the aerospace division’s revenue rose 2.6% in fiscal 2009, to $10 billion from $9.7 billion the previous year. The gain was the result of higher selling prices for business jets, and increased revenue from repairing and maintaining aircraft. Its gross profit margin (its gross profits as a percentage of its revenue) rose to 9.0% from 5.8%. The division’s $23.5-billion order backlog is equal to 2.4 years of revenue.
...
CANADIAN UTILITIES LTD. (Toronto symbols CU $35 (class A non-voting) and CU.X $35 (class B voting); Income Portfolio, Utilities sector; Shares outstanding: 125.6 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.6; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates power plants in other parts of Canada, the U.K. and Australia. ATCO Ltd. (Toronto symbols ACO.X and ACO.Y) owns 52.3% of Canadian Utilities. The company is evaluating a proposal to merge its Frontec division with ATCO’s Structures business. Both perform similar functions, including building temporary structures, airfields and communications systems for clients in the resource and construction industries. Canadian Utilities did not say how much this move would save it, but it plans to make a decision by the end of the second quarter. Meanwhile, Canadian Utilities earned $145.4 million, or $1.16 a share, in the three months ended March 31, 2009. That’s 3.3% less than the $150.3 million, or $1.20 a share, it earned a year earlier. If you disregard unusual items, including an insurance benefit stemming from an unplanned outage at its U.K. power plant in the year-earlier quarter, its earnings per share fell 1.7%. This plant is now operating normally, and that helped increase the company’s revenue by 3.8%, to $768.6 million from $740.6 million....
With bonds yielding just 2% to 3%, we believe that income-seeking investors are better off sticking with high-quality utility stocks, such as these four electricity generators. All have consistently posted strong earnings, and have long histories of raising their dividends. Unlike bond-interest payments, which are taxed as regular income, their dividends qualify for the dividend tax credit. They also have greater capital-gains potential. TRANSALTA CORP. $20 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 197.8 million; Market cap: $4 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates over 50 electrical-power plants in Canada, the United States and Australia. TransAlta uses coal to generate 60% of its electricity, and owns three coal mines (two in Alberta and one in Washington State). This helps keep its costs down. Natural gas fuels 30% of the company’s electricity production, and hydroelectric and other sources account for 10%....
TRANSALTA CORP. $20 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 197.8 million; Market cap: $4 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates over 50 electrical-power plants in Canada, the United States and Australia. TransAlta uses coal to generate 60% of its electricity, and owns three coal mines (two in Alberta and one in Washington State). This helps keep its costs down. Natural gas fuels 30% of the company’s electricity production, and hydroelectric and other sources account for 10%. This heavy dependence on coal has made TransAlta a target for environmentalists. To comply with tougher carbon-emission regulations, the company has teamed up with TransCanada Corp. to capture and store carbon emitted from TransAlta’s coal-fired power plants. The project could cost $400 million. The federal government plans to contribute $20 million to $30 million, and the two companies will probably split the rest....
FORTIS INC. $23 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 169.8 million; Market cap: $3.9 billion; Price-to-sales ratio: 0.9; SI Rating: Above Average) generates and distributes electricity in five Canadian provinces. It also owns power plants in the U.S. and Caribbean, as well as hotels and commercial real estate in Atlantic Canada.
Fortis is still benefiting from its July 2007 purchase of Terasen Inc., which distributes natural gas in B.C. In the three months ended March 31, 2009, Fortis’s revenue rose 4.8%, to $1.2 billion from $1.1 billion.
Terasen, driven by higher rates and increased natural gas use during the winter, accounted for 60% of this. Earnings rose 1.1%, to $92 million from $91 million. However, earnings per share fell 5.5%, to $0.52 from $0.55, on more shares outstanding. Gains at Fortis’s Canadian power plants offset a 43% drop at its Caribbean operations, as colder-than-usual weather and the recession hurt tourism. (The Caribbean power plants account for 7% of Fortis’s revenue.) Terasen’s earnings were flat.
Fortis is taking advantage of low real-estate prices to add to its properties division, which generates 4% of its revenue. In April, it paid $7 million for the 214-room Holiday Inn Select hotel in Windsor, Ontario. Despite the recession, this division is maintaining an occupancy rate of 96.0%, down slightly from 96.6% a year earlier.
The company has asked regulators for permission to raise rates at its Canadian operations this year (this includes Terasen). However, continued weakness at Fortis’s Caribbean operations will probably weigh on this year’s earnings. The stock trades at 15.3 times the company’s projected 2009 earnings of $1.50 a share. That’s a higher p/e than other utilities, but reasonable in light of Fortis’s high-quality operations and geographic diversity. The $1.04 dividend yields 4.5%.
...
Fortis is still benefiting from its July 2007 purchase of Terasen Inc., which distributes natural gas in B.C. In the three months ended March 31, 2009, Fortis’s revenue rose 4.8%, to $1.2 billion from $1.1 billion.
Terasen, driven by higher rates and increased natural gas use during the winter, accounted for 60% of this. Earnings rose 1.1%, to $92 million from $91 million. However, earnings per share fell 5.5%, to $0.52 from $0.55, on more shares outstanding. Gains at Fortis’s Canadian power plants offset a 43% drop at its Caribbean operations, as colder-than-usual weather and the recession hurt tourism. (The Caribbean power plants account for 7% of Fortis’s revenue.) Terasen’s earnings were flat.
Fortis is taking advantage of low real-estate prices to add to its properties division, which generates 4% of its revenue. In April, it paid $7 million for the 214-room Holiday Inn Select hotel in Windsor, Ontario. Despite the recession, this division is maintaining an occupancy rate of 96.0%, down slightly from 96.6% a year earlier.
The company has asked regulators for permission to raise rates at its Canadian operations this year (this includes Terasen). However, continued weakness at Fortis’s Caribbean operations will probably weigh on this year’s earnings. The stock trades at 15.3 times the company’s projected 2009 earnings of $1.50 a share. That’s a higher p/e than other utilities, but reasonable in light of Fortis’s high-quality operations and geographic diversity. The $1.04 dividend yields 4.5%.
...
EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.3 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.7; SI Rating: Average) generates and distributes electricity to roughly 600,000 customers in Nova Scotia and Bangor, Maine. Over the past few years, Emera has steadily expanded into new areas in order to cut its reliance on Nova Scotia, which still accounts for 85% of its revenue. It owns 12.9% of the Maritimes & Northeast natural-gas pipeline and 50% of a hydroelectric facility in Massachusetts. Emera has also expanded into the Caribbean region. In January 2007, it paid $22 million for 19% of the main power utility in St. Lucia. Last September, it bought 25% of Grand Bahama Power Company for $41 million. In April 2009, Emera formed a partnership with Algonquin Power Income Fund (Toronto symbol APF.UN), which owns or has interests in 41 hydroelectric facilities in Canada and the United States. Emera will pay $27.6 million for a 9.9% stake in Algonquin, with an option to buy an additional 5% of the fund over the next two years....
TRANSCANADA CORP. $30 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 619 million; Market cap: $18.6 billion; Price-to-sales ratio: 2.0; SI Rating: Above Average) has won a $320-million U.S. contract to build, own and operate a 310-kilometre natural-gas pipeline in Mexico. (It already owns a 130-kilometre gas pipeline in the country.) To put this in context, TransCanada earned $343 million (Canadian), or $0.55 a share in the first quarter of 2009. TransCanada has a 25-year contract to use the new pipeline to supply fuel to two power plants owned by Mexico’s state-owned electric company. It should begin operating in March 2011. TransCanada is a buy.