These five stocks are trading near their 52-week lows, but are they bargains? I take a look at some basic metrics and recent headlines to see how they hold up to their peers on a relative value basis.
Kellogg Company (NYSE:K) – This cereal manufacturer is currently trading near $49. It has ranged from $48.10 to $57.70 over the past 52 weeks. Its dividend yield is 3.5 percent or $1.72. Earnings per share are $3.24, and its price to earnings ratio is 15.11. The company’s market capitalization is over $17 billion.
K’s third quarter financial results were somewhat disappointing. Management said improvements to manufacturing require expenditures of $70 million over the rest of the year. Third quarter net income fell to $290 million from $338 million for the same period last year. Net sales increased 5 percent year over year. Company officials expect growth in operating profit and earnings per share to be less than long-term annual targets but estimate internal net sales to increase 4 to 5 percent over targets.
Analysts at Deutsche Bank and Stifel Nicolaus downgraded their recommendations for K from “Buys” to “Holds.” All in all, recommendations trend strongly toward “Hold” with some “Strong Buys/Buys” remaining as well as an “Underperform.”
Its competitor General Mills Inc. (NYSE:GIS) is trading near $40, which is toward the high end of its 52-week range of $34.54 to $40.24. Its dividend yield of 3.2 percent is slightly less than K’s. Earnings per share of $2.61 are also lower, and its price to earnings ratio, 15.24, is slightly higher. GIS’s market capitalization is over $25 billion. In its most recent quarterly filing, GIS reported an increase in net sales of 9 percent, with 3 points attributed to its recent purchase of yogurt maker Yoplait. Costs were also up. Management expects its pace of growth to continue throughout the remainder of its fiscal year. Analysts at Argus recently downgraded GIS’s recommendation from “Buy” to “Hold.” Overall, recommendations are across the board from a few “Strong Buys” to several “Buys” and “Holds” to an “Underperform.”
Both companies offer recognized, trusted brands with dividend histories that date to before the Great Depression. One is larger; one is cheaper. Choosing which to consider boils down to personal preference. Both offer long term and income investors opportunities for consistent dividends while maintaining stability.
Tootsie Roll Industries, Inc. (NYSE:TR) - This candy maker is currently trading near $24 a share. Its price has ranged from $22.82 to $29.98 over the past 52 weeks. Its dividend yield is 1.40 percent or $0.32. Earnings per share are $0.73, and price to earnings ratio is 32.89. The company’s market capitalization is almost $1.5 billion.
TR’s net sales were down year over year for the most recent quarter, totaling $186.8 million versus $191 million. Net earnings were also down to $18 million versus $26.5 million. Company officials said the timing of sales impacted short term results as well as higher ingredient costs, packaging costs, operations, distribution and freight.
In other news, TR filed a trademark infringement lawsuit against rolling shoemaker Rollashoe LLC for calling its shoes “Footzyrolls.” Rollashoe called the suit frivolous. No analyst recommendation trends were available.
Its larger cap rival The Hershey Company (NYSE:HSY) is currently trading over $57 a share and has ranged from $45.67 to $60.96 over the past 52 weeks. Its dividend yield is 2.50 percent or $1.38. Earnings per share are $2.70, and price to earnings ratio is 21.25. HSY’s market capitalization is almost $13 billion.
HSY reported increases in sales and earnings for its third quarter ended Oct. 2. Net sales totaled $1.624 billion, up from $1.547 billion for the same period last year. Net income totaled $197 million, or $0.86 per share (diluted), which was up year over year from $180 million or $0.78 per share.
Analysts at Argus upgraded HSY to “Buy” from “Hold” earlier this year. Most recommendations trend toward “Hold” with some “Strong Buy/Buys” and an “Underperform.”
At first glance TR seems like it might be worth further consideration, but a closer look is discouraging. I would skip over its competitor HSY at this time, too.
C.R. Bard, Inc. (NYSE:BCR) – This designer and manufacturer of medical, surgical and diagnostic instruments is currently trading near $87 a share. It has ranged from $80.80 to $113.84 over the past 52 weeks. Its dividend yield is 0.90 percent or $0.76. Earnings per share are $3.89, and price to earnings ratio is 22.42. The company’s market capitalization is almost $7.5 billion.
BCR reported an increase in consolidated net sales of 17 percent, 10 percent of which was attributed to favorable currency exchange rates. The total figure was $232.7 million. Net income increased 2 percent year over year. Company officials remain optimistic about the company’s recent acquisitions, new products, and growth.
Analyst recommendations trend strongly toward “Hold” with a few “Strong Buys/Buys” and “Underperforms.”
Its competitor Boston Scientific Corporation (NYSE:BSX) is currently trading near $6 a share and has ranged in price from $5.26 to $7.96 over the past 52 weeks. It does not pay a dividend. Earnings per share are $0.38, and price to earnings ratio is 15.57. Its market capitalization is just under $8.75 billion. Quarterly revenue fell year over year by 2.20 percent, and quarterly earnings fell by 25.30 percent. Analyst recommendations trend strongly toward “Hold” with some “Strong Buys/Buys” and an “Underperform.”
BCR’s dividend yield is relatively low, but it is ranked a five star Dividend All Star, having increased its payments every year of at least the last 20 years. Even though it is trading close to its 52-week low, it is still priced at a premium to its earnings. I wouldn’t urge investors to buy this stock today, but I do think BCR deserves a closer look by experienced investors seeking to diversify into mid-cap growth companies in the healthcare sector.
ResMed Inc. (NYSE:RMD) – This manufacture of equipment used for diagnosing and treating sleep and respiratory disorders is currently trading near $26 a share. It has ranged from $24.79 to $35.90 over the past 52 weeks. It does not pay a dividend. Earnings per share are $1.41, and price to earnings ratio is 18.48. Its market capitalization is over $4 billion.
Third quarter revenue of $314.8 million set a record for the company, increasing 12 percent year over year. Net income totaled $50.5 million, a decrease of 11 percent. Management attributes the decrease in earnings to unfavorable currency exchange rates of the Australian doll and the euro against the dollar.
Analysts at Feltl & Co. downgraded the firm’s recommendation from “Strong Buy” to “Buy” in October. Other recommendations trend toward “Hold” with some “Strong Buys/Buys.”
Its larger cap competitor Covidien Plc (COV), which is based in Dublin, Ireland, is currently trading just over $45 a share and has ranged from $41.35 to $57.65 over the past 52 weeks. Its dividend yield is 2 percent or $0.90. Earnings per share are $3.76, and price to earnings ratio is 12.11. Its market capitalization is almost $22 billion.
COV reported a 15 percent increase year over year in net sales for its fourth quarter -- $3.0 billion versus $2.67 billion. Most of the increase was attributed to favorable currency exchange rates and an extra selling week in the reporting period. Expenses were also up. Unadjusted operating income of $596 million was up from $443 million.
Analyst recommendations trend very strongly toward “Strong Buy/Buy” with a couple of “Holds.”
I like both of these companies. RMD’s primary focus is sleep apnea, so it is specialized, and it is a smaller company with opportunities for growth. COV split from Tyco International in 2007 and has paid dividends regularly since then. It is also a strong company. Investors looking to diversify their healthcare holdings should take a look at these sooner than later.
Booz Allen Hamilton Holding Corp. (NYSE:BAH) – This management and technology consulting service is currently trading near $14 a share. It has ranged from $13.33 to $20.29 over the past 52 weeks. It does not pay a dividend. Earnings per share are $1.30, and its price to earnings ratio is 10.73. Market capitalization is almost 2 billion.
BAH reported a 4.5 percent increase in revenue for its second fiscal quarter ended Sept. 30. Revenue totaled $1.43 billion versus $1.37 billion year over year. Net income of $75.3 million was up significantly from $14.8 million for the same period last year. Backlog reached a record level.
Analyst recommendations are split, with most falling in the “Strong Buy/Buy” category, a few as “Hold,” and one as “Underperform.”
BAH’s competitor Accenture Inc. (NYSE:ACN) is currently trading near $58 a share. It has ranged from $43.88 to $63.66 over the past year. Its dividend yield is 2.40 percent or $1.35. Earnings per share are $3.40, and price to earnings ratio is 17.05. The company’s market capitalization is over $37 billion.
Results for the fourth fiscal quarter ended Aug. 31 showed net revenue of $6.7 billion – a 23 percent increase (excluding currency adjustments) year over year. Net income for the quarter totaled $638 million, which was up from $510 million for the same period last year.
Analyst recommendations trend toward “Strong Buy/Buy” with some “Holds.” In early November, Barclays Capital downgraded its rating from “Overweight” to “Equal Weight.” Robert W. Baird downgraded its recommendation from “Outperform” to “Neutral” in October. Deutsche Bank also initiated coverage that month with a “Buy.”
BAH relies heavily on the federal government market, and in particular, civil, intelligence and defense markets. Though economic conditions have been challenging in these areas, company officials believe the backlog signals growth in the coming quarters and years. Compared to its industry, it is trading at a value to its earnings. ACN, which is the larger, stronger company, is a leader in its industry, but it is trading at a premium to its earnings. I don’t recommend investors act on one metric alone, and a closer examination of quarterly and annual filings would be prudent.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.