Imperial Sugar Still Tastes Sweet

Dec.11.09 | About: Imperial Sugar (IPSU)
What goes up sometimes goes down. In just three months, Imperial Sugar (NASDAQ:IPSU) rose more than 50%, from $12 to over $18, while in just one day it gave nearly the whole shooting match back when it reported 4th Quarter earnings below expectations. The shares plummeted nearly 25% to the mid-fourteen area, which represents about a 50% retracement of its recent gains. The stock price simply went up too much in too short of a timeframe.
A huge dose of profit taking corrected the shares from a much overbought condition to one of very oversold. The selloff certainly provides a nice buying opportunity, as the last three instances the shares fell, they quickly rebounded to even higher levels
Bargain hunters and shorts, covering to book profits, should help provide the fuel for the share’s next rally phase. The stock’s technical health is still intact as it remains above its key 200 day moving average line and has the positive chart pattern of making “higher highs” and “higher lows”.
The culprit: The market just got ahead of itself on this one and priced the shares assuming a blowout quarter. Sellers simply ran to the exits all at the same time when the earnings did not materialize. Both analysts who cover the company, BWS Financial and “ “ each reported in their respective research notes (after the earnings announcement) that the company is still on track to earn over $2.28 eps (BWS financial) and $3.07 ( in 2010.
Both analysts also stressed the earnings shortfall was simply the result of IPSU’s Port Wentworth refinery not being up and running at the capacity they had modeled for. Both analysts expect that 1st Q results will include Port Wentworth at full production.

Author's Disclosure: long IPSU