Mid Cap and Large Cap Watch List member UST Inc. (NYSEARCA:UST) reported significantly better than expected financial results. Sales of $491 million were slightly ahead of the consensus estimate but earnings per share of $0.87 ($0.90 excluding charges) were nicely ahead of the $0.85 consensus.
The smokeless tobacco segment continued to show improvement, particularly with regard to their new premium brands, but the real story was in the wine business:
In the second quarter 2007, net sales for Ste. Michelle Wine Estates increased 28.3 percent to $79.5 million. Strong growth was driven by the incremental benefit from the distribution of Antinori products and the acquisition of Erath in the back half of last year, combined with continued product innovation, increased distribution and favorable acclaim on the company’s core brands. Total premium case sales advanced 19.5 percent to 1.2 million cases. Net sales growth combined with good cost control as a result of Project Momentum led to a 19.7 percent increase in operating profit to $11.2 million.
I’ve had the Ste. Michelle, and can recommend it. The stock also continues to grow on me, particularly given their guidance:
As a result of the strength in second quarter 2007 results, the company is increasing its 2007 diluted earnings per share guidance. On a GAAP basis, diluted earnings per share is targeted at $3.21, with a range of $3.16 to $3.27 and reflects an additional $.03 in charges in the second half of 2007, comprised of Project Momentum related restructuring charges and lease charges in connection with the sale of the company’s headquarters. On an adjusted non-GAAP basis, the diluted earnings per share target has been raised $.03 to $3.35, with a range of $3.30 to $3.41.
The consensus was anticipating such a move, as the existing estimate was for $3.36. The stock is not exactly priced cheaply on the basis of current earnings, but turnaround stories seldom are.
UST 1-yr chart: