Stock Buy: SanDisk Corp

SanDisk Corp (SNDK: 46.1025 0.00 0.00%) continues to shine with its fifth consecutive earnings surprise. Estimates are rising along with the share price as a result.

Company Description

SanDisk Corp. makes memory-based semiconductors for a variety of consumer electronics. The flash storage devices are used in removable cards, USB drives and are hardwired into other products.

Another Great Quarter

Back in April SanDisk reported its fifth consecutive earnings surprise. Revenue surged 65% on a year-over-year basis, to $1.1 billion. The company saw its mobile products sales increase by more than 100%.

Earnings per share came in at an impressive 88 cents, topping the Zacks Consensus Estimate by 39 cents.

Late in the press release the CEO was quoted, "With the year off to a record start, SanDisk is poised to benefit from flash memory demand in growth markets in 2010 and beyond."

Estimates Pop

Following the earnings release, SanDisk analysts raised estimates across the board. The Zacks Consensus Estimate for 2010 rose more than $1 to $3.46 per share.

Next year's projections are averaging $3.20, up 47 cents. While the earnings do tapper slightly in 2011, the estimates are calling for income to double before 2012.

The Valuations

The stock continues to trade at a bargain. SNDK is exchanging hands 14 times 2011 earnings. With a PEG of 0.8, that growth is also coming at a discount.

The Chart

Shares of SNDK have been on a tear since the original feature in March. While the stock is showing some volatility as of late, the overall trend is clearly higher.

Read the March 9th Feature Here

 

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service

Last Week's Aggressive Growth Zacks Rank Buy Stocks

Spreadtrum Communications Inc (SPRD: 9.61 0.00 0.00%) soared on the most recent earnings release, which showed the company scooping up market share. Read Full Article.

Libbey Inc. (LBY: 13.52 0.00 0.00%) beat expectations with its latest quarterly announcement, as sales rose 10% for the global tableware company. Read Full Article.

Culp, Inc. (CFI: 12.28 0.00 0.00%) continued its streak of beating expectations with the most recent earnings surprise. Sales continue to improve and the stock is trading at a nice value as well. Read Full Article.

Avis Budget Group (CAR: 11.19 0.00 0.00%) is trading just above a level of support and with solid valuations, making a great entry point. Read Full Article.

 

Stock Buy: America’s Car-Mart Inc.

Who said the auto industry is down and out?

America's Car-Mart, Inc. (CRMT: 24.16 0.00 0.00%), which operates 97 automotive dealerships in 8 states and also has a successful car financing slogan "Buy Here/Pay Here", on Jun 3 reported record full year earnings.

When I last reviewed America's Car-Mart in September 2009, the company was, even then, seeing sales growth of 10% as consumers turned to the company's attractively priced autos and easy financing.

Since then, the company has surprised on estimates 3 quarters in a row, including on Jun 3 for the fiscal fourth quarter.

Earnings per share for the fiscal fourth quarter were 62 cents per share compared to 43 cents in the year ago quarter. The Zacks Consensus was calling for 58 cents.

Revenue continued to rebound, growing 14% to $88.8 million from $77.9 million a year ago. Same store sales rose 11.8%.

Customer Credit Is Starting to Turnaround

The financing arm is also improving. The provision for credit losses fell to 19.3% of sales versus 20.8% a year ago. Accounts 30 days past due improved a tad to 2.7% from 2.8% as of Apr 30, 2009.

Net charge-offs also decreased while down payments increased 9.2% from 8.6% in the fourth quarter of 2009.

Share Repurchases

America's Car-Mart has been repurchasing shares. Since Feb 1, 2010, it has repurchased 4.1% of its common stock.

The Board has recently authorized another repurchase program up to 1 million shares.

Zacks Consensus Estimates Rise

4 estimates out of 5 have moved higher for fiscal 2011 over the last 30 days. The Zacks Consensus has risen by 5 cents to $2.62 per share in that time.

Earnings are expected to grow by 16% over last year.

Is It Still a Value Stock?

America's Car-Mart has gotten cheaper since I last reviewed it in 2009. Back then, it was trading at 12.7x forward earnings. Now it is trading at just 9x.

The company also still has an attractive price-to-book ratio of 1.6 which is well within the parameters of a "value" stock.

America's Car-Mart is now a Zacks #2 Rank (buy) stock.

Read the Sep 11, 2009 article.

Update to Previous Value Zacks Rank Buy Stocks

Jo-Ann Stores, Inc. (JAS: 39.64 0.00 0.00%) has surprised on the Zacks Consensus 5 quarters in a row, which is impressive as that time period covered the darkest time of the retail recession. Read the full article.

Harbin Electric Inc. (HRBN: 17.06 0.00 0.00%) is a dirt cheap Chinese stock. The company is trading at just 6.6x forward earnings, well under its industry average of 14. Read the full article.

DXP Enterprises Inc. (DXPE: 15.80 0.00 0.00%) is seeing its markets begin to improve as the global economy recovers. Analysts are bullish and expect earnings growth of 45.9% in 2010. Read the full article.

Men's Wearhouse Inc. (MW: 19.56 0.00 0.00%) has put together a nice string of earnings surprises, beating each of the last 4 quarters by 35.8%. But are the retailer stocks weakening here? Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Stock Buy: Monro Muffler Brake, Inc.

Monro Muffler Brake, Inc. (MNRO: 38.03 0.00 0.00%) continues to trade near its all-time high on better than expected Q4 results from late May that included a 12% earnings surprise. With an average earnings surprise of 7% over the last year and estimates on the upswing, shares of MNRO have some solid upward momentum.

Fourth-Quarter Results

Our last look at the company's business came on May 27 with better than expected Q1 results. Revenue for the period was up 26% from last year to a record $147 million. Earnings also came in strong at 28 cents, 12% ahead of the Zacks Consensus Estimate, pushing its average earnings surprise to 7% over the last four quarters.

The company also saw some solid margin expansion, with gross margin adding 60 basis points to 39% on improved labor productivity.

Balance Sheet

Although Monro's cash and equivalents of $11 million might not seem that impressive on first glance, the company's balance sheet is still in good shape with just $99 million in total debt.

Estimates

The solid quarter sent estimates higher, with the current year adding 9 cents to $2.00 and the next year adding 15 cents to $2.42, a bullish 21% growth projection.

Valuation

After the recent string of gains, shares of MNRO trade at a premium to their peers with a forward P/E multiple of 18.5X.

2-Year Chart

Shares of this Zacks #2 rank stock have been pressuring the all-time high for the last few months without being able to muster the strength to push higher. Look for support at the trend line on any weakness, take a look below.

Read the Feb 16 MNRO article here

 

Last Week's Momentum Zacks Rank Buy Stocks

Packaging Corp. of America (PKG: 22.32 0.00 0.00%) recently rebounded from a long-term trend line after hitting a new multi-year high just above $26 in late April on earnings that met expectations. Estimates have been on the rise ever since, with the next year now projecting bullish 39% earnings growth. Read Full Article.

Sanmina-SCI Corp. (SANM: 15.25 0.00 0.00%) recently rebounded from a key trend line after hitting a new multi-year high in late April at $15.85. The recent gains come on the heels of the company's return to profitability after posting better than expected Q1 results in late April that included a 15% earnings surprise. Read Full Article.

Lifetime Brands, Inc. (LCUT: 15.86 0.00 0.00%) recently hit a new multi-year high at $15.99 after returning to profitability in its early May, Q1 results. Estimates are on the rise as the company benefits from a strong consumer environment. Read Full Article.

Impax Laboratories, Inc. (IPXL: 20.49 0.00 0.00%) just hit an all-time high at $22.39 on the heels of the early success of its generic Flomax drug and the continued success of its generic Adderall drug. Although the company expects sales of these two new products to cool moving forward as other competitors enter the space, they should still positively impact the bottom line for quite some time. Read Full Article.

 

Stock News : Boeing, J&J, Bristol-Myers, Exxon, BP, Rio Tinto, BHP Billiton, Lloyds, RBS, Barclays

BP (BP: 27.02 0.00 0.00%) - Co. boosts cash and available credit by USD 5bln, says co. cash and available credit now tops USD 20bln and says co. is borrowing against Rosneft stake. (Sources) - Co. is on track to plug its leaking Gulf of Mexico oil well within a fort night. The operation to close the well is further ahead than the company has disclosed. Sources in Houston, Texas, say it could be finished in mid-July, ahead of the public target of early August. However, clean up efforts in the Gulf of Mexico faced a new threat as the first tropical storm of the season, Alex, began to form close to the Deepwater disaster. (Sunday Times/Independent)

UK

Britain's banks will have to permanently bolster their balance sheets by as much as GBP 130bln - equivalent to GBP 5,200 for every household in Britain - under new rules agreed by world leaders at the G20 summit. (Telegraph)

BP - Co. says cost of response to Gulf of Mexico's oil spill to data amounts to USD 2.65bln. (Sources)

Vodafone  (VOD: 21.66 0.00 0.00%)- Vodafone Egypt says talks with Telecom Egypt, on selling co.'s 55% stake in Vodafone Egypt, has ended due to disagreement on stake size. (Al-Mal)

Lloyds (LYG: 3.32 0.00 0.00%) /RBS (RBS: 13.55 0.00 0.00%) - New lending targets for the bailout banks are being drawn up by the government amid mounting concerns that growth of small and medium sized businesses is being stifled by the lack of credit from the banking industry. (Observer)

Barclays (BCS: 17.14 0.00 0.00%) - Co. will announce plans to accelerate its expansion in Spain, Portugal and Italy this week, cashing in on the woes of local rivals. (Sunday Times)

Standard Chartered - Co. sees H1 income to be broadly flat vs. 2009, and sees H1 cost growth to exceed income growth. Co. says loan impairment trends are very good and co. is tracking towards a strong H1 performance. Co. also sees H1 loan impairment under half H1 2009. (Sources)

AstraZenca - An experimental drug from a promising new class of medicines being developed by Bristol-Myers and co. significantly reduced blood sugar in patients with advanced Type 2 diabetes in a late-stage clinical trial. (RTRS)

Rio Tinto (RTP: 48.78 0.00 0.00%) /BHP Billiton (BHP: 67.99 0.00 0.00%) - Co.s Iron ore joint venture could be delayed beyond year-end due to European Commission investigations. (Australian Financial Review)

BAE Systems - Co. is set to cut hundreds of jobs in its UK vehicles business in the coming weeks, after co. lost out on a key armoured vehicle contract to US rival General Dynamics earlier this year and ahead of the squeeze on military spending that is part of the Government's deficit reduction plan. (Sunday Telegraph)

British Airways (BAY: 79.44 0.00 0.00%) - Co. has made another attempt to defuse it long-running dispute with cabin crew by offering part-time contracts to about 800 Heathrow staff. (Sunday Times)

Prudential - Co. is planning a boardroom shake-up that could pave the way for the departure of Chairman Harvey McGrath. (Sunday Times)

Reed Elsevier - Private equity groups are pressing the co. to consider a sale of its exhibitions arm after the professional publisher re-buffered buyers' interest in the division in the past few months. (Sunday Times)

US

Equities endured a volatile session as investors digested an assortment of US economic data. The financial sector was the best performing in the S&P 500 after Congress reached an agreement on financial reform which had less stringent rules compared to what was previously expected. Elsewhere, Research in Motion (-10.8%) weighed on the NASDAQ 100 after they disappointed with their earnings. The volatility continued heading into the final stages of trade and the S&P 500 closed up 0.30% at 1076.86, the DJIA closed down 0.05% at 10147.81 and the NASDAQ 100 closed down 0.33% at 1838.52.

Fed's Bullard said that US financial firms are headed into a two-year limbo period as regulators fill in the blanks left in the massive reform legislation. (RTRS)

J&J (JNJ: 58.70 0.00 0.00%) - An experimental co. diabetes drug led to improved blood sugar control and weight loss when used in combination with metformin, according to data from a mid-stage study. (RTRS)

Boeing (BA: 68.77 0.00 0.00%) - Co. has suffered another setback on its 787 aircraft programme, saying it would halt flight tests while it inspected problems with assembly of the tail plane. The co. estimates it will take eight days to inspect the tail planes of the handful of aircraft that it has assembled to date. Elsewhere, co. workers in St. Louis have accepted a contract with the plane manufacturer, avoiding a strike that would have gone into effect Monday if the deal had been rejected (Sunday Times/AP) Big Pharma stocks - Wall Street appears to be overly pessimistic about large pharmaceutical companies, and some of the stocks could rally 30% over the next year, according to a cover story in the June 28th edition of Barron's. (Barron's)

Bristol-Myers (BMY: 25.57 0.00 0.00%) - An experimental drug from a promising new class of medicines being developed by co. and AstraZeneca significantly reduced blood sugar in patients with advanced Type 2 diabetes in a late-stage clinical trial. (RTRS)

Exxon (XOM: 59.10 0.00 0.00%) - Co. announces completion of all-stock transaction for XTO, says nearly all of XTO's 3,300 employees are transitioning to the new organisation. (RTRS)

Europe

German Banks - The German government could sell its stakes in Commerzbank, Aareal Bank, HRE and WestLB, according to the chief controller at the German Financial Markets Stabilisation. (Euro am Sonntag) In other news, German banks are not threatened by a new crisis, according to the head of country's banking association. (Sueddeutsche Zeitung)

E.ON - Co. may sell its 3.5% stake in Gazprom in the near future, according to sources. (Vedomosti)

Siemens - Co. wants to make itself less vulnerable to credit crisis, so is founding its own bank. The group isn't planning a retail bank, but one where it can do its own banking business. (Sueddeutsche Zeitung)

Infineon - The Russian government called on Germany to let holding company Sistema take a 29% stake in co, a German newspaper reported, citing no sources. (FT Deutschland) However, co. says it is not engaged in participation talks with Russia's Sistema. (Sources)

Vivendi - Co. will ink a deal for a holding in the listed, India-based Reliance Communications for USD 4.3197 - USD 5.3996 a share, according to sources. (Times of India)

EADS - Dubai Aerospace Enterprise is seeking to renegotiate plane orders with co. and Boeing as it attempts to reduce its debt levels, according to sources. (Les Echos)

Accor - Co. will on Tuesday present shareholder with a plan to spin off voucher and prepaid services arm Edenred, according to co.'s boss. (Journal du Dimanche)

More banks to face stress tests. (FT) The number of European banks subjected to stress tests is likely to rise, with sources suggesting that as many as 100 institutions will be involved in a broader exercise to shore up market confidence. European Union leaders have already agreed to publish stress test results for 26 banks next month - mainly big, cross-border institutions - to address concerns about the eurozone's exposure to sovereign debt. But one German government official said those tests, which are being conducted by the Committee of European Banking Supervisors (CEBS), would be expanded to cover "significant market share" in each market - about half of all bank balance sheets in each country.

According to the Spanish PM Zapatero, stress tests of Spain's financial sector will prove the strength of the country's banks. (Sources)

Telefonica - Co. is eyeing a GBP 1bln stock market listing for Atento, its little known call centre arm. (Sunday Times)

Unicredit - Co. could become a takeover target, according to sources. (Il Sole 24 Ore)

Roche - Co.'s experimental diabetes drug taspoglutide showed good results in a series of late-stage studies, the group said on Saturday, after the drug suffered a severe setback just recently. (RTRS)

ABB - Co.'s CFO says co. is looking for further acquisitions following its recent buys. He envisages takeovers in the size of USD 0.5-3.0bln. (Finanz & Wirtschaft)

Julius Baer - Co. is looking at becoming a bank in Italy by either buying a company with a license or buying a license itself. (Milano Finanza)

 

Stock Buy: LaCrosse Footwear

LaCrosse Footwear (BOOT: 18.91 0.00 0.00%) is a Zacks #2 Rank stock with strong prospects for growth, an attractive dividend yield, and a reasonable valuation.

The company has an expected long-term EPS growth rate of 17.5%, a dividend yield of 2.6%, and it trades at 15x 2010 the Zacks Consensus Estimate.

Business

LaCrosse Footwear designs, develops, manufactures, and markets footwear and apparel for the work and outdoor markets. The company has two brands: DANNER and LACROSSE.

Impressive First-Quarter Results

On April 22, LaCrosse Footwear announced net sales of $34.2 million, an increase of 32.1% from the year-ago quarter. The company reported EPS of $0.25, easily beating the Zacks Consensus Estimate of -$0.01.

The upside was driven by stronger than anticipated sales in its government sales channel and higher profit margins. The company's gross margin expanded 230 basis points year-over-year, due to improved manufacturing efficiencies.

Estimates

After the company's impressive first-quarter report, analysts boosted their estimates for 2010 and 2011. The Zacks Consensus for 2010 increased 16 cents to $1.24, while the Zacks Consensus for 2011 is higher climbed 3 cents to $1.19.

Balance Sheet

LaCrosse has a debt-free balance sheet. After paying a special dividend of $1.00 per share, the company ended the first quarter with $19.7 million in cash, which is a record high for the company. The company also reduced its inventory 22% compared to the first quarter of 2009.

Read the April 22 commentary on Microchip Technology.

Last Week's Growth and Income Zacks Rank Buys

Leggett & Platt (LEG: 21.46 0.00 0.00%) continues to generate impressive year-over-year growth because of a rebound in its end markets and tight cost controls. This Zacks #1 Rank stock trades at 18x 2010 consensus EPS estimates and 14x 2011 consensus EPS estimates.Click here for a closer look.

Caterpillar (CAT: 64.71 0.00 0.00%) is a blue chip industrial with operations around the globe. If you believe in the global economic growth story, then you want to own a name like CAT. This Zacks #2 Rank stock trades at 20x 2010 earnings and 14x 2011 earnings. click here.

Neenah Paper (NP: 19.50 0.00 0.00%) business is going so well you could say they are printing money. Its growing sales base coupled with cost-cutting efforts has the company generating stellar earnings growth. Click here for more details.

Rockwell Automation (ROK: 52.14 0.00 0.00%) has bright prospects for growth, especially in emerging markets. This Zacks #2 Rank stock trades at 18x fiscal 2010 EPS estimates and 14x fiscal 2011 EPS estimates. Click here to read more.

 

BlackRock IShares’ Big Move: Active ETFs With Reduced Disclosure

As we discussed different ways in which the actively-managed ETF structure could be improved, one of the biggest concerns that was recognized had to do with the degree of disclosure required by actively-managed ETFs in the US. Active ETFs in the US are regulated such that issuers and managers need to provide complete disclosure of their holdings with a 1-day lag. The problem that creates for managers and the resulting reluctance of issuers to enter the Active ETF space is significant as managers fear their portfolio strategies being copied and front-run, as voiced by several major names like PIMCO and Janus Capital highlighted in the article.

Reported by Bloomberg, BlackRock iShares – by far the largest issuer of ETFs in the world – is now seeking approval from the SEC for actively-managed ETFs "that would keep some of their assets undisclosed". If such a modification to the Active ETF structure gets approved by the SEC, many issuers and managers would be much more comfortable in bringing strong active managers to the Active ETF space without fear for their strategies being front-run. In more than 2 years of existence, the Active ETF space has not seen the arrival of big name active managers operating funds within the ETF wrapper. Only very recently has there been some promise of that changing, with Grail Advisors forming a partnership with DoubleLine which is lead by the illustrious Jeffery Gundlach, a fixed-income manager who is spoken of in the same company as Bill Gross. However, even then, the actively-managed emerging market bond ETF that Grail and DoubleLine have filed for does not have Jeffery Gundlach's name behind it. Given that emerging market bond strategy is the only one within DoubleLine that is not currently lead by Jeffery Gundlach provides the hint that even DoubleLine wants to evaluate the success of their first product before putting its star manager behind a new Active ETF. If the modification in structure proposed by iShares comes to pass, that would definitely go a long way towards providing confidence to star managers that their investment know-how and trading strategies will not be "given away" at the end of each day.

SEC's Concern

The head of SEC's investment-management arm, Andrew Donohue, mentioned in the Bloomberg piece that he was primarily concerned about disrupting the process that "keeps a fund's per-share net asset value and share price closely aligned". This is a genuine concern because if fund disclosure was to happen less frequently, then the market maker who has the responsibility of arbitraging to keep the ETF price close to NAV will have difficulty in doing that effectively. Without knowledge of what the fund's holdings were on the previous day, the creation/redemption process – the means by which the arbitrage process occurs – will likely be hampered as the market maker would be operating with a stale view of the fund's composition.

Learning From Neighbours?

As was proposed in this article, a good idea might be to pick up a few regulatory insights from other countries and how they regulate actively-managed ETFs. In Canada, Active ETFs are not required to provide daily disclosure of holdings. In fact, the leading provider of these products in Canada, Horizons AlphaPro, discloses holdings only once a month, which is still better than most mutual funds. However, they provide complete disclosure of the fund to the ETF's market makers so that they have all the information they need to make markets and minimize the discount/premium of the ETF share price from NAV. So that's a framework worth considering by the SEC – providing complete but confidential disclosure of the fund holdings to the market maker or AP on a daily basis while providing public disclosure with a lower frequency in order to safeguard the manager's value proposition.

Fundamental Difference

Looking at the bigger picture, there is a fundamental difference in how actively-managed ETFs have been evaluated by regulatory bodies in the US versus those in Canada that has resulted in the policy requirements for each. In the US, Active ETFs have been seen as "ETFs" first and actively-managed funds second. Hence, the US requirement to provide daily disclosure of holdings as is the norm for all other ETFs. In Canada, they are considered first to be actively-managed funds and are thus regulated in much the same way that active mutual funds are regulated in Canada.

How this debate plays out will be very interesting to see and the approach that the SEC takes to regulate actively-managed ETFs in the US will likely have huge ramifications on the attractiveness of these products to issuers and renowned active managers. BlackRock iShares, being the biggest ETF issuer, has already lead the way in bringing up the issue with the SEC. If the SEC decides to address these concerns, it could be a big win for the Active ETF issuers.