recent acquisitions

BANK OF AMERICA CORP. $38.30, New York symbol BAC, earned $1.2 billion in the three months ended March 31, 2008, down 77.4% from $5.3 billion a year earlier. Earnings per share fell 80.2%, to $0.23 from $1.16. Most of the drop was due to a $4.8 billion increase in its loan loss provisions to cover potential future losses in its home equity, small business and homebuilder portfolios. It also wrote down $1.9 billion worth of securities. Revenue fell 6.6%, to $17.0 billion from $18.2 billion. The company’s retail banking and wealth management operations are still doing a good job attracting new clients, thanks partly to recent acquisitions. That should help Bank of America maintain its $2.56 dividend, which yields 6.7%. However, its pending takeover of troubled mortgage lender Countrywide Financial Corp. adds to its short-term risk. Bank of America is a hold....

METRO INC. $25.25, Toronto symbol MRU.A, earned $58.1 million in its second quarter ended March 15, 2008, down 6.0% from $61.8 million a year earlier. Per-share earnings fell 3.8%, to $0.51 from $0.53, on fewer shares outstanding. If you exclude restructuring costs in the year-earlier quarter, earnings per share fell 8.9%. Sales in the quarter crept up to $2.37 billion from $2.36 billion, while same-store sales rose 0.3%. Strong price competition continues to hurt profits at Metro’s Ontario stores. However, the company is beginning to realize the benefits of a new computerized information system. A new distribution warehouse will also improve efficiency at its Quebec stores. Metro is a buy for aggressive investors....

FIRSTSERVICE CORP. $33.56 (Toronto symbol FSV; SI Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.6 million; Market cap: $958.8 million) operates in the rapidly growing service sector, providing services in the following areas: commercial real estate; residential property management; integrated security services; and property improvement services. The company continues to expand profitably through acquisitions and internal growth. Both avenues still offer lots of potential for expansion in the fragmented service sector. Firstservice reports 28.8% higher revenues in its first quarter ended June 30, 2007, to $419.3 million from $325.5 million a year earlier. (All figures except share price in U.S. dollars.) Earnings per share rose 29.8%, to $0.61 from $0.47....

H.J. HEINZ CO. $45 (New York symbol HNZ; Income Portfolio, Consumer sector; Shares outstanding: 319.2 million; Market cap: $14.4 billion; WSSF Rating: Above average) is one of the world’s biggest food companies. Overseas markets supply roughly half of Heinz’s sales. Its flagship product, Heinz Ketchup, accounts for over 60% of ketchup sales in the United States. The company also makes other condiments, as well as frozen and canned foods and baby food. Heinz’s revenue grew from $8.2 billion in 2003 to $8.9 billion in 2005, but fell to $8.6 billion in 2006 (fiscal years end April 30). Earnings before unusual items rose from $2.03 a share (total $713.4 million) in 2003 to $2.34 a share ($827.7 million) in 2005, but fell to $2.18 a share ($750.2 million) in 2006....

CANADIAN UTILITIES LTD. $47 (Toronto symbol CU) has raised its dividend each year since 1972. The new annual rate of $1.26 a share yields 2.7%. Thanks to higher electricity rates and gains from its natural gas storage operations, first quarter profits rose 57.4%, to $1.07 a share from $0.68 a year earlier. Buy. EMERA INC. $21 (Toronto symbol EMA) earned $0.36 a share in the three months ended March 31, 2007, down 10% from $0.40 a year earlier. A large industrial customer of subsidiary Nova Scotia Power recently resumed operations, which increased electricity sales. However, the extra revenue failed to cover the higher initial production costs. This a short-term setback, and should not hurt Emera’s $0.89 dividend, which yields 4.2%. Buy. PENGROWTH ENERGY TRUST $19 (Toronto symbol PGF.UN) paid out 92% of its cash flow in distributions in the first quarter of 2007, which is higher than comparable energy trusts. But that’s largely due to the timing of recent acquisitions. Pengrowth’s payout ratio in 2007 should average around 87%. It currently pays monthly distributions of $0.25 a unit (15.8% yield). Buy.

DOW JONES & CO. INC. $55.80, New York symbol DJ, jumped 55% after News Corp. offered to buy the company for $60.00 a share, probably in some combination of cash and News Corp. stock. News Corp. owns several media properties, including Fox Broadcasting and the New York Post. It feels The Wall Street Journal and other Dow Jones publications and web sites will strengthen the new business-news cable channel it plans to launch later this year. The Bancroft family owns 82.4% of Dow Jones’ class B shares, which carry 10 votes each. This plus their regular common stock holdings gives them 64.2% of the total votes. Right now, roughly half of the family’s members oppose the News Corp. offer. However, a formal rejection could trigger a lawsuit accusing the company’s directors of breaching their fiduciary duty to act in the best interests of all stockholders....

FAIR ISAAC CORP. $36.31, New York symbol FIC, fell about 10% after the company cut its earnings and revenue forecasts for the rest of the fiscal year ending September 30. The company now expects to earn between $1.55 and $1.65 a share, on revenue of $795 million to $805 million. Fair Isaac had previously forecast 2007 earnings of $2.15 a share on revenue of $870 million. The stock now trades at 23.0 times the midpoint of its new fiscal 2007 profit range. But Fair Isaac continues to spend close to 10% of its revenue of $14 a share on research, so it’s more profitable than it appears. The company did not immediately provide a reason for the lower forecasts, which helped fuel the drop. But it seems to be having trouble reorganizing its salesforce into teams that serve clients, rather than specializing in product lines. Fair Isaac feels this will help it develop better relationships with its clients, and spur them to buy more of its products....

SHAWCOR LTD. $27 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 74.0 million; Market cap: $2.0 billion; SI Rating: Average) is profiting from recent acquisitions, as well as its plan to improve efficiency at its pipeline coating plants. In 2006, income from continuing operations rose 13.6%, to $1.25 a share from $1.10 a year earlier. Revenue grew 5.0%, to $1.06 billion from $1.01 billion. Energy prices will probably remain high in 2007, which should continue to spur demand for ShawCor’s products and services....

BORDERS GROUP INC. $21.32, New York symbol BGP, has struggled lately, due to strong price competition from Internet booksellers and discount retailers. It earned $1.61 a share before unusual items in its fourth fiscal quarter ended February 3, 2007, down 13.9% from $1.87 a year earlier. Sales rose 3.4%, to $1.5 billion from $1.45 billion. However, same-store sales fell 2.8% at its superstores, and 6.2% at its Waldenbooks mall-based chain. The company aims to improve profits with several new initiatives. It plans to close or sell half of its mall-based stores and form its own publishing operation. It will also launch its own bookselling new web site, to replace its current venture with Amazon. Borders is also looking at selling its international operations, or transforming them into franchises. Each of the facets of this plan makes sense to us, but it will take at least a year for Borders to complete them all. However, profits should begin to rise again in 2008. The company will probably maintain its $0.44 dividend, which yields 2.1%....

ALLTEL CORP. $61.59, New York symbol AT, may soon decide to put itself up for sale, to take advantage of the consolidation trend in the telecommunications industry. However, likely buyers such as AT&T and Verizon would face huge anti-trust hurdles. Even without a takeover, Alltel still has plenty of long-term appeal. Its focus on smaller cities and rural areas lets it avoid direct competition with larger wireless providers. It’s also doing a good job of expanding its revenue by offering new services. Alltel is a buy....