This Week in Earnings for Value Investors

by: Vince Martin

As value investors, we are constantly updating our screens, looking for the next undervalued company to add to our portfolio. Here, then, a list of a few solid value stocks with earnings reports this week that might give us reason to add them to our portfolio -- or kick them off the watchlist.


AVX Corporation (NYSE:AVX): Component maker AVX reports before the bell, with a conference call at 10 am EST. Analysts expect 39 cents per share, up from 31 cents a year ago. AVX has a billion in cash, with no debt, and an enterprise value-to-earnings (EV/E) ratio of 6.5, plus a 1.43% dividend yield.


Hawaiian Airlines (NASDAQ:HA): An airline value stock? Believe it. HA has $1.43 per share in cash net of debt (27% of market cap). From 2007-2010, HA generated $265 million in free cash flow, managing to stay profitable through the 2008-09 downturn. Its current enterprise value? $193 million. The stock currently trades at $5.26, a ten-month low, and investors may look to jump in ahead of earnings, or wait and see if the stock's recent struggles are deserved. More speculative types may want to look at in-the-money options; the August 5 is bid at only 45 cents, needing only a 3.6% rise before expiration to reach break-even.

Tellabs (NASDAQ:TLAB): Another struggling stock, Tellabs is attempting to move from being a fixed-line communication equipment provider into the mobile arena. With $3.19/share in free cash relative to a $4.33/share stock price, TLAB offers downside cushion and some serious upside potential (you can read a more detailed analysis I wrote last week; scroll down to #6.) TLAB is expected to post a small loss (for the quarter and the year) as the turnaround takes hold; a swing to a profit could be a bullish piece of news for a stock that desperately needs it.


Medicines Co (NASDAQ:MDCO): The acute care pharmaceutical maker reports before the market on Wednesday, with a conference call at 8:30 am. The company has beat estimates for the last five quarters, according to Bloomberg Businessweek, with analysts expecting 31 cents for the second quarter. MDCO has an enterprise value of about $11/share, very acceptable for a company projected to earn $1.31 this year and with 3 different drugs in phase III trials.

Corning (NYSE:GLW): The specialty glass and ceramics manufacturer reports before the open, with analysts expecting 47 cents per share, down from 52 cents a year ago. The company projects $10 billion in sales by 2014 (up from $7 billion over the last twelve months) and currently sports a EV/E under 8.

Integrated Silicon Solution (NASDAQ:ISSI): ISSI will announced after the close on Wednesday; the maker of memory chips is expected to have earned 29 cents in the fiscal third quarter ended June 30th. With $2.47 in free cash per share, and projected earnings of $1.22/share for 2011, ISSI has a forward EV/E of just 5.3. The stock has been range-bound the past few months, sitting at $8.94 after bouncing repeatedly off support around $8.50, and an earnings beat could set up a nice run to near February highs over $11 a share.


Tessera Technologies (NASDAQ:TSRA): Tessera reports after the market close on Thursday, giving final numbers after pre-announcing disappointing revenue figures for the quarter a few weeks back. Analysts are looking for 25 cents per share. The stock has bounced back strongly as of late from a 52-week low, but upside figures to be limited given the company's lowered guidance. Value investors may want to show patience and look for a more attractive entry point if earnings match the reduced guidance, given the stock's recent 15% no-news run up. (For a more detailed bull case on TSRA, check out my Instablog post recommending the stock a few weeks back, and, yes, I am bragging a little bit.)

Benchmark Electronics (NYSE:BHE): Benchmark is expected to earn 31 cents a share, down slighly from 33 cents in the second quarter of 2010. The maker of circuit boards sports an EV/E of 8.3, with one-third of its market cap in cash on the balance sheet.

Cray Inc. (NASDAQ:CRAY): The maker of supercomputers has consolidated around its current price of $6.37 heading into Thursday's announcement after the close. The nature of Cray's business makes its quarterly earnings a bit volatile; as the company noted in its press release announcing first quarter results, "the company's quarterly and annual results are highly dependent on completing a handful of large transactions already contracted as well as securing additional opportunities." One of the opportunities mentioned offered revenue in the range of $50 million, or about 15% of the company's trailing twelve-month sales. Should that transaction be completed, CRAY should offer a blowout quarter. Cray offers $3/share in cash and a trailing EV/E of 4.55, though that ratio will most likely rise after the quarter, as analysts are looking for a loss of 20 cents per share.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CRAY, BHE, TSRA, GLW, MDCO, TLAB, HA, AVX over the next 72 hours.