By Roger Choudhury
Here, we review some of the Friday, February 25th buy recommendations of Jim Cramer, host of Mad Money on CNBC (6pm EST, Monday through Friday). Since then, for comparison purposes, the S&P 500 (SPY) is +0.31% and the Dow is +1.07%. For the review on his February 24 buy and sell recommendations, click here.
Cramer Buy Recommendations
Acme Packet (APKT) is down 4% since February 25. In 2010, GAAP EPS grew by 125% to $0.63, after +55.56% in 2009. Revenues also grew handsomely by 63.46% to $231 million, after a good performance in 2009 with 21.57% growth. The EBT margin improved to 28.78% from 16.54%.
In 2011, analysts expect non-GAAP EPS to be between $0.92 and $1.19, and the company expects $1.05. Non-GAAP EPS in 2010 was $0.80. Q1 2011 results are released on April 25. Analysts expect between $0.20 and $0.26. In comparison, the company posted a non-GAAP EPS of $0.16 in Q1 2010.
APKT trades with a price-to-sales multiple of 20.5. This is the highest multiple ever for these shares. Although the company has almost no debt, APKT may be overvalued here. Nevertheless, investors have high expectations for this company.
Acme Packet is the leader in session delivery network solutions, and enables the trusted, first-class delivery of next-generation voice, data and unified communications services and applications across IP networks. Its Net-Net product family fulfills demanding security, service assurance and regulatory requirements in service provider, enterprise and contact center networks. Based in Bedford, Massachusetts, Acme Packet designs and manufactures its products in the US, selling them through over 140 reseller partners worldwide. More than 1,300 customers in 105 countries have deployed over 12,000 Acme Packet systems, including 90 of the top 100 service providers and 30 of the Fortune 100.
Range Resources (RRC) is +5.7% since February 25. In 2010, the company extended losses with a GAAP EPS of - $1.53 from - $0.35 in 2009. Revenues did grow by 14.51% to $1.039 billion, after -31.42% in 2009. Gross margin improved to 87.33% from 85.25%.
In 2011, the Street forecasts non-GAAP EPS to come in between $0.39 and $1.76, after the company posted a non-GAAP EPS of $0.56 in 2010. Q1 2011 results are released on April 25. The Street expects between $0.03 and $0.35. In comparison, the non-GAAP EPS was $0.16 in Q1 2010.
Shares trade with a high P/S multiple of 8.3. In 2007 and 2009, those multiples were 8.9 and 8.5, respectively. The company has a debt-to-equity ratio of 0.88. We also wrote about RRC, in “6 Energy Companies with Undervalued Natural Gas Reserves.”
Joy Global (JOYG) is up by 1.5% since February 25. In FY 2010 through October, GAAP EPS dropped slightly by 0.23% to $4.40, after expanding by 27.83% in FY 2009. Revenues also fell by 2.06%, after +5.25% in 2009. On the bright side, the EBT margin improved to 19.27% in FY 2010 from 18.97% in FY 2009.
For FY 2011, analysts expect non-GAAP EPS to be between $5.19 and $5.83, after producing $4.40 in non-GAAP EPS in FY 2010. Q1 2011 already showed $0.96, which was an improvement from $0.73 in Q1 2010. The next earnings release is on June 2, when analysts forecast non-GAAP EPS to be between $1.29 and $1.50. In comparison, Q2 2010 posted $1.15.
JOYG shares trade with a P/S multiple of 2.7. This level is the highest since the 2005-06 era, when EPS had triple digit percentage increases and revenues grew 20-35%. We would wait to see Q2 2011 results before putting our chips in. This company has a debt to equity ratio of 0.26. Skim the company outlook, here. Joy Global is a worldwide leader in manufacturing, servicing and distributing equipment for surface mining through P&H Mining Equipment and underground mining through Joy Mining Machinery.
Costco (COST) is down 2.3% since February 25. In FY 2010 through August, GAAP EPS grew by 18.22% to $2.92, after dropping by 14.53%. Revenues grew by 9.13% to $77.94 billion, after shrinking by 1.46% in FY 2009. Warning, the EBT margin is razor thin at 2.64%. It was 2.40% in FY 2009.
In FY 2011, non-GAAP EPS is projected to be between $3.30 and $3.48, according to analysts. The actual non-GAAP EPS in FY 2010 was $2.93. Q1 and Q2 2011 already produced $1.50. For the same period of time in FY 2010, the same figure was $1.30. Q3 results come out on May 25, with the Street expecting between $0.73 and $0.78. In comparison, Q3 2010 posted $0.66.
COST shares trade with a P/S multiple of 0.4. This multiple has been between 0.3 and 0.6 since 2001. With the continuing and disappointing consumer spending statistics, we believe this multiple is reasonable. The company has a low debt to equity ratio of 0.19. Costco currently operates 581 warehouses, including 424 in the US and Puerto Rico, 80 in Canada, 22 in the UK, 7 in Korea, 6 in Taiwan, 9 in Japan, 1 in Australia and 32 in Mexico. The company plans to open an additional 15 to 16 new warehouses (including the relocation of a warehouse to a larger and better-located facility and the reopening of San Marcos, CA., closed for an onsite relocation) prior to the end of its 2011 fiscal year on August 28, 2011. Here is the latest Costco presentation.
Heinz (HNZ) is down 1.7% since February 25. In FY 2010 through April, GAAP EPS fell by 6.55% to $2.71, after +10.27% in FY 2009. Revenues were +3.42% in FY 2010, but +0.77% in FY 2009. EBT margins in FY 2010 and FY 2009 remain strong at 12.30% and 12.77%, respectively.
For FY 2011, the Street expects non-GAAP EPS to be between $3.07 and $3.12, compared with the actual $2.87 in FY 2010. The company predicts to be within the range of $3.04 and $3.10. Through Q3 2011, non-GAAP EPS was $2.37, which is higher than the $2.26 through Q3 2010. The next earnings announcement would be on May 23, with analysts expecting between $0.69 and $0.74. In comparison, Q4 2010 produced $0.60.
HNZ shares trade with a P/S multiple of 1.5. In 2006 and 2007, those multiples were 1.7 and 1.6, respectively. The current multiple is in line, given continued EPS growth of 3-4% and revenue growth of 5%-plus. Keep in mind that the company has a debt to equity ratio of 1.42.
Travelzoo (TZOO) is +65.5% since February 25. In 2010, GAAP EPS shot up by 150% to $0.80, after improving from - $0.29 to $0.32 in 2009. Revenues grew by 20.02% to $113 million, after +15.44% in 2009. Moreover, the EBT margin improved to 20.82% from 14.57%.
In 2011, the Street expects non-GAAP EPS to be between $1.05 and $1.22. In 2010, non-GAAP EPS was $0.80. The next earnings announcement is on April 25. The Street forecasts EPS between $0.25 and $0.29. In comparison, Q1 2010 non-GAAP EPS was $0.15.
TZOO shares trade with a P/S multiple of 9.4. From 2002 to 2010, those multiples were 8.1, 9.9, 52.4, 7.8, 7.3, 2.8, 1.0, 2.1, and 6.0, respectively. Projected EPS growth is aggressive, but not explosive enough to merit the current P/S multiple. This company has no outstanding debt. Travelzoo is a global Internet media company. With more than 22 million subscribers in North America, Europe, and Asia Pacific and 24 offices worldwide, Travelzoo publishes deals from more than 2,000 travel and entertainment companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value.
Citigroup (C) is down by 5.5% since February 25. In 2010, GAAP EPS turned positive to $0.35 from - $0.80 in 2009. In 2008, GAAP EPS was - $5.59. Revenues rose by 7.87%, after jumping by 52.08% in 2009. Also, the EBT margin improved to 15.22%.
In 2011, the Street expects non-GAAP EPS to be between $0.32 and $0.55. In 2010, the actual figure was $0.35. The next earnings release is on April 18. The Street forecasts between $0.06 and $0.15. In comparison, Q1 2010 produced non-GAAP EPS of $0.15.
Citigroup shares trade with a price to sales multiple of 1.5. In its heyday, these shares traded with multiples in the 3’s. Citigroup is worth a look. However, the company has a debt to equity ratio of 2.34.
Southwestern Energy (SWN) is +13.1% since February 25. In 2010, GAAP EPS returned to green to $1.73 from - $0.10 in 2009. It was $1.64 in 2008. Revenues were +21.67%, after dropping 7.17% in 2009. Additionally, the EBT margin improved significantly to 38.13%.
In 2011, analysts expect non-GAAP EPS to be between $1.16 and $2.73. In 2010, the actual non-GAAP EPS was $1.73. On April 25, Q1 2011 results are announced. The Street expects between $0.33 and $0.50. In comparison, Q1 2010 produced non-GAAP EPS of $0.49.
SWN shares trade with a P/S multiple of 5.7. From 2005 to 2009, the multiples were 8.0, 7.9, 7.7, 4.3, and 7.7, respectively. Moreover, the company has a debt to equity ratio of 0.37. The company offered capital investment and guidance here (pdf). Profitability is highly influenced by NYMEX natural gas prices. $5 per Mcf would be ideal to increasing profits from 2010 levels.
Northern Oil & Gas (NOG) is down 11.2% since February 25. In 2010, the company reported GAAP EPS of $0.14, which was an increase of 75%, after +14.29% in 2009. Revenues jumped by 213.32%, after +301.40% in 2009. The EBT margin in 2010 was 25.44%.
In 2011, analysts expect non-GAAP EPS to be between $0.99 and $1.26. In 2010, the actual non-GAAP EPS was $0.31. The next earnings release is on May 2, with analysts seeking between $0.16 and $0.23. In comparison, Q1 2010 produced a non-GAAP EPS of $0.04.
NOG shares trade with a P/S multiple of 31.2, with 2009 and 2010 also having multiples in the low 30s. If the company continues this aggressive revenue growth in 2011, expect capital appreciation of at least 10% to 15%. Northern Oil and Gas is an exploration and production company based in Wayzata, Minnesota. Northern Oil's core area of focus is the Williston Basin Bakken and Three Forks play in North Dakota, and Montana. The company provided an operational update recently here with some guidance. Also, the company has no material long-term debt obligations.
Halliburton (HAL) is +5.1% since February 25. In 2010, GAAP EPS grew by 58.27% to $2.01, after falling by 25.29% in 2009. Revenues increased by 22.47% to $17.97 billion, after dropping by 19.72% in 2009. The EBT margin improved to 14.77% from 11.46%.
In 2011, the Street estimates non-GAAP EPS to be between $2.70 and $3.15. In 2010, the actual figure was $2.06. On April 18, there will be an earnings release. The Street expects between $0.55 and $0.67. In comparison, Q1 2010 produced $0.28 for non-GAAP EPS.
HAL shares trade with a P/S multiple of 2.3. This is the highest P/S since 2007 with 2.4. In 2010, the multiple was 2.1. In those years, EPS grew by around 60%. The company also has a debt-to-equity ratio of 0.37. If the company hits the higher end of the earnings estimates for the year, we expect the P/S multiple to be 2.5x. Here is a company overview for 2011.
Nabors (NBR) is +6.3% since February 25. In 2010, GAAP EPS returned to green to $0.33 from - $0.30 in 2009. It was $1.93 in 2008. Revenues grew by 20.3% to $4.21 billion, after -33.94% in 2009. The EBT margin in 2010 was slim at 1.95%.
In 2011, non-GAAP EPS is forecasted to be between $1.51 and $1.92, according to analysts. In 2010, the actual non-GAAP EPS was $1.13. Also, the company expects 50-60% growth in non-GAAP EPS. The next earnings release is on April 18, when the Street expects between $0.29 and $0.38. In comparison, Q1 2010 produced non-GAAP EPS of $0.21.
NBR shares trade with a P/S multiple of 2.0. From 2001 to 2007, the multiples were 2.7, 3.5, 3.4, 3.4, 3.5, 1.9, and 1.6, respectively. Also, the company has a manageable debt to equity ratio of 0.58. Given consistent quarterly EPS growth this year resulting in 30%+ EPS growth in 2011, then would merit a multiple as high as 2.4x. The company outlook for 2011 is here.
CARBO Ceramics (CRR) is up 16.9% since February 25. In 2010, GAAP EPS grew by 49.78% to $3.40, after dropping by 49.67%. Revenues were up by 38.38% to $473 million, after dropping by 11.85% in 2009. The EBT margin improved to 25.23% from 23.34%.
In 2011, analysts expect non-GAAP EPS to be between $4.00 and $4.59. In 2010, non-GAAP EPS was $3.40. Q1 2011 results come out on April 25. The Street forecasts between $0.86 and $1.15. In comparison, actual non-GAAP EPS in Q1 2010 was $0.82.
CRR shares trade with a P/S multiple of 6.6. This is the highest multiple in the period from 2001 to 2010, with 2005 posting a multiple of 5.4. Also, the company has no debt on its books. CARBO Ceramics’ mission is two-fold: to improve production and recovery rates in oil and natural gas reservoirs; and to provide services and products to reduce its clients’ business risks. CARBO is the world's largest supplier of ceramic proppant, the provider of the world's most popular fracture simulation software, and a provider of fracture design and consulting services. The company also provides a broad range of technologies for spill prevention, containment and countermeasures, along with geotechnical monitoring.
Hess (HES) is down 0.9% since February 25. In 2010, the company grew GAAP EPS by 185.02% to $6.47, after declining by 68.65%. Revenues expanded by 17.06% to $34.61 billion, after shrinking by 28.17%. The EBT margin also improved to 9.57% from 5.15%.
In 2011, the Street expects non-GAAP EPS to be between $2.45 and $11.13. In 2010, non-GAAP EPS was $5.15. The next earnings release is on April 25, when analysts expect between $1.10 and $2.20. In comparison, actual non-GAAP EPS in Q1 2010 was $1.49.
HES shares trade with a P/S multiple of 0.8. The highest multiple was in 2007 with 1.0, but since 2001, the multiples were no higher than 0.7. Also, the company has a debt-to-equity ratio of 0.33. Revenue growth in excess of 20% this year would make a strong case for a P/S multiple of 0.9. Here is the strategy in 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.