Imperial Sugar: Earnings Preview

Imperial Sugar (IPSU) is scheduled to release fiscal 2009 first quarter results prior to the market open on Thursday, February 5. A conference call to discuss the results will be followed at 11:00 am EST. First call estimates call for revenues of $132 million, producing a loss of $6.9 million or 59 cents per share.

Estimates are too bleak: Forecasts include a sequential $7 million rise in revenues, yet surprisingly produce a loss 28% greater than fourth quarter results ( 59 cent projected loss versus a 46 cent loss). This makes little sense, as conventional wisdom dictates: more sales, usually helps the bottom line, rather than hurts it. A more reasonable estimate of earnings, according to my number crunching, falls closer to the 30-35 cent loss vicinity. Recent favorable commodity sugar price trends is reason for optimism. The spread between raw sugar and white refined sugar has expanded. This spread essentially represents IPSU’s gross profit margin. The bigger it is, the more money it puts in its pocket.

Good news leaking out? The stock absolutely skyrocketed Friday, despite the backdrop of a very dismal overall market day. The shares screamed 15% higher, closing near their highs , and earning a coveted spot on the nasdaq top ten percentage gainer’s list. Its high relative strength could be evidence, that results will indeed exceed expectations, as the smart money seems to be already confirming this, by appaerently jumping on for the ride, as evidenced by Friday’s strong move up.

Bottom line: Look for IPSU to obliterate estimates, consequently sending the shares into a “soar mode” and simultaneously inflicting some serious pain on the shorts, as they are squeezed to the limit. Further aiding IPSU’s cause: two Broker upgrades within the last 5 weeks . It would not be surprising to see the stock price challenge the $15 mark by the middle of February.

The worm has definitely turned for IPSU.

Disclosure: Long IPSU

Comments

[whatswrong:]

Any comments on IPSU's quarter and the subsequent 11% drop in the stock price?

Feb 09 11:12 AM

[Mark Krieger:]

I think the drop was atributable of a little selling into the good news..(classic case of buying the rumor and selling the news) i think the selloff provides a much better enrty point, as I hate chasing stocks. I think the fact the short interest has dropped over 90% is a good sign (smart money does not wan to be short)-I think Schultze has probably completed its selling program and that there is a good chance this company will be acquired near the $20 mark by Cargill.


On Feb 09 11:12 AM whatswrong wrote:

> Any comments on IPSU's quarter and the subsequent 11% drop in the
> stock price?

Feb 09 11:28 AM

[whatswrong:]

So based on what you are saying you did not see anything that occured in the quarter or was revealed on the conference call that would worry you?


On Feb 09 11:28 AM markkrieger wrote:

> I think the drop was atributable of a little selling into the good
> news..(classic case of buying the rumor and selling the news) i think
> the selloff provides a much better enrty point, as I hate chasing
> stocks. I think the fact the short interest has dropped over 90%
> is a good sign (smart money does not wan to be short)-I think Schultze
> has probably completed its selling program and that there is a good
> chance this company will be acquired near the $20 mark by Cargill.
>

Feb 09 11:40 AM

[whatswrong:]

Do you have any concerns over anything that was revealed in the 10Q or the conference call?

Feb 09 03:03 PM

[Mark Krieger:]

Not really..management kept a extremely tight lip on information dissemenated during the CC, and this leads me to believe a takeover deal could be imminent.


On Feb 09 03:03 PM whatswrong wrote:

> Do you have any concerns over anything that was revealed in the 10Q
> or the conference call?

Feb 09 03:19 PM

[petermac:]

This stock has been getting sold long by a program. At the top of every min it get sold. Talking about oversold. Why the 1.1 million shares traded/ This smells because no instational follow through.

Feb 25 12:26 PM