With the AT&T (NYSE:T) and T-Mobile (OTCQX:DTEGY) deal shot down, AT&T’s failure may cause it to be underpriced by the market. U.S. Bancorp (NYSE:USB) and Stanley Black & Decker (NYSE:SWK) represent two quality companies that investors should certainly look into. EOG (NYSE:EOG) is a good way to get some oil exposure in a portfolio. Let’s see what specifically has been happening with these 5 stocks:
AT&T, Inc. has finally decided to stop trying to make its merger with T-Mobile USA feasible to regulatory authorities. That means AT&T will have to pay a hefty sum to T-Mobile parent Deutsche Telekom, but it also means AT&T can focus its attention elsewhere. Meanwhile, The New York Times is reporting that Deutsche Telekom will probably try to find a new company to merge T-Mobile with. Sprint Nextel (NYSE:S) and Dish Network (NASDAQ:DISH) are two possibilities, since both companies have valuable spectra that would be a good match for T-Mobile’s network. The other result of the failed AT&T deal is that Sprint Nextel and Cellular South are no longer going to move forward with their respective antitrust lawsuits. Regardless, an AT&T and Verizon (NYSE:VZ) duopoly seems unavoidable now. Comcast (NASDAQ:CMCSA) and Time Warner Cable (TWC) simply aren’t willing to do what it takes to put together a formidable competitor. Additionally, MetroPCS (PCS) appears to be sticking with its plan to focus on serving densely populated cities. Comparing value metrics between AT&T and Verizon, AT&T has the lower price to earnings ratio, while Verizon has lower price/earnings to growth and price to sales. Additionally, Verizon is somewhat better on margins than AT&T – those numbers for AT&T are 57.22% gross and 16.16% operating.
U.S. Bancorp has been on an upward trend, and investors should be excited about a new asset purchase that was made by U.S. Bancorp’s Elan Financial Services subsidiary. Elan will be buying credit card debt from FIA Card Services, owned by Bank of America (NYSE:BAC). This is a wise move for U.S. Bancorp, because it’s one of the few banks that can take on any more risk right now. U.S. Bank has also been doing well with its public relations. Described here, a Facebook campaign in which the bank gave away $15,000 should help it to develop relations with a host of new small business owners. On the other hand, some writers are questioning U.S. Bank’s other decisions. Specifically, the bank’s reaction to the Dodd-Frank Wall Street Reform Act seems to be a bit lackadaisical. Additionally, some aspects of U.S. Bank’s credit card strategy may not be aggressive enough to maximize profits. Important competitors for U.S. Bancorp include JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC). Those stocks have much lower price to earnings, price/earnings to growth, and price to sales ratios, which reflect the uncertainty currently surrounding those companies. Additionally, U.S. Bancorp has higher quarterly revenue growth and operating margin than JPMorgan Chase and Wells Fargo.
Stanley Black & Decker, Inc. has been moving up, and the company just released $400 million worth of 10-year notes. Those notes will be used for general corporate purposes as well as repaying the company’s shorter-term debt. Fortunately for Stanley Black & Decker, the notes were rated highly by all three major rating agencies due to the company’s foothold in the market for its products. In fact, Stanley Black & Decker had a rather strong earnings report back in November. Earnings went way up since November from last year, mostly because of success with operations outside the U.S. Both revenues and margins improved, as multiple divisions saw significant improvement. Other good news for Stanley Black & Decker comes in the form of its acquisition of Niscayah and high demand for its products in the future. Important competitors for Stanley Black & Decker are Danaher (NYSE:DHR) and Snap-on (NYSE:SNA). Those stocks have lower price to earnings ratios but higher price/earnings to growth ratios. At 37.10% gross and 10.98% operating, margins for Stanley Black & Decker are still lagging behind peers a bit. As for cash flows, $1.344 billion came in during 2010, while $893 million came in during the first 9 months of 2011.
Paychex, Inc. (NASDAQ:PAYX) has been up and down lately, as the company just released a mixed earnings report. The company was able to beat earnings estimates, but revenue was lower than expected. Regardless, both revenue and earnings did increase since this quarter last year. Meanwhile, Paychex Insurance Agency, one of the company’s subsidiaries, is providing an important new service that could help to bring in new customers. Here’s what Paychex’s Kevin Hill had to say:
Determining eligibility for the small business tax credit is anything but cut and dry, and that’s why we’re seeing many employers shy away from it, leaving money on the table. In our role of partner and resource to our clients, it’s our goal to ensure they have the tools they need to do what’s best for them and their business.
Overall, Paychex will be a wise choice for investors if the U.S. employment situation improves, especially because this stock isn’t exposed to the situation in Europe. Important competitors for Paychex include Automatic Data Processing (NASDAQ:ADP) and Insperity (NYSE:NSP). Those stocks have higher price to earnings ratios, but Paychex has the highest price to sales ratio by far. Meanwhile, margins for Paychex are terrific – those numbers are 68.98% gross and 38.29% operating.
EOG Resources, Inc. is on a slight upward trend, and the company’s latest investor presentation can be found here. Right now, the company’s “game plan” is to benefit from strong oil/liquids growth, bolstered by their operations at Eagle Ford and St. James. In fact, EOG hopes to keep its margins up by making first-move plays and keeping costs down. The company has also emphasized its focus on keeping debt down, which seems reasonable at a time when cash flow isn’t as strong as it always has been. Geographically, EOG will focus its exploration on North America as well as international opportunities with the right characteristics. The company also hopes that recovery on existing plays can be improved upon. Important competitors for EOG include Anadarko Petroleum (NYSE:APC), Apache (NYSE:APA) and Sonde (NYSEMKT:SOQ), although Apache is the only one to turn a profit in the past 12 months. As for value metrics, Apache has lower ratios for price to earnings and price to sales than EOG, but its price/earnings to growth ratio is higher. That might be explained by Apache’s significantly higher margins – those numbers for Apache are 83.29% gross and 22.47% operating. Investors should note that EOG has a beta of 1.45.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.