These are some of the top pre-market analyst upgrades we have seen early this Friday morning:
Jon C. Ogg
January 16, 2009
Shares of Unisys Corp. (NYSE: UIS) are trading up 8% today after capitulating to activist investor MMI Investments, LLP, which is one of the largest shareholders of Unisys. Unisys has delayed its annual meeting to July 24 to allow it more time to "explore certain portfolio rationalization and other actions that may enhance shareholder value" with its investment banker Bear Stearns.
If this sounds familiar at 247WallSt.com, it is because this was listed as one of "turnarounds that hasn’t turned around" recently. In the we noted: "When you backdate the news and look at the history of the company you’d think that the turn may have already started. But shares are barely above 52-week lows and are barely off of multi-year lows too."
MMI was one of the reasons we named Brinks (NYSE: BCO) to our Special Situations newsletter, and is also part of the reason we have not wanted to close out that position to lock in would-be profits. You can look at their last proxy filing to see how involved MMI can get.
MMI sent a shareholder letter in early January to urge its review of alternatives, and part of that encouragement included its government services business. We are not actually under the belief that a mega-premium buyout is in the cards for Unisys. We are not overly encouraged by an already-leveraged balance sheet that is too heavy in goodwill and intangible assets. But we do believe that the company can continue to make cuts as needed and can streamline certain operations that are not contributing to the bottom line. The company is still underperforming compared to analyst estimates, but it has at least come back to ‘quarterly profitability’ and that is at least a start.
Those of you who trade turnarounds will want to keep this one on your watch lists. It may be a long slow road, but it looks like the car is at least out of the shop even if it isn’t on the road yet.
Jon C. Ogg
February 19, 2008
Shares of Brinks Co. (NYSE: BCO) are up significantly after today earnings report. We have been behind Brinks for several months now, and it is still an active stock on our Special Situation subscriber letter. This has approached our own $70 price target before the market malaise took it lower. It actually never even did hit our downside panic levels, but we have a hedged scenario anyhow.
This morning Brinks managed to beat earnings quite handily. Brinks posted earnings at $1.16 EPS, well above the $0.74 estimate from First Call; revenues were up more than 18% to $882.8 million, yet First Call only had estimates at $819.5 million.
Furthermore the company put 2008 goals for organic growth of high-single digits for revenues with operating profit margins at or above 8%. Not only that, but Brinks is looking further out to 2010 with a goal of sustaining that rate of revenue growth and boosting its operating margins to 10%.
Our Special Situation thrust here was only partially based upon improving results, although we did expect a turn there again. We have been tracking increased activist investor activity and after we reviewed the books, the business stance, its minor units that could be parceled out, and other factors, we determined that this stock could reach roughly $70.00. Our entry area was in the mid-$50’s in September 2007, and we didn’t want to note the profits by taking them too soon in the mid-$60’s by early November.
As always, we laid out an options trade that allowed for hedging the transaction to minimize risk. This is crucial for many turnarounds and for many businesses that have special situations they are working through. In short, it’s important to have protection when management may intentionally or inadvertently take actions that result in negative shareholder value.
Jon C. Ogg
January 31, 2008
Cramer has a new method for predicting takeovers. Four of the fourteen largest buybacks have either been taken over or have agreed to be taken over in the last few months. Cramer thinks the other 10 are great buyback targets as well. Cramer has 3 picks out of these 10. His #3 pick was United Stationers (USTR-NASDAQ) and his #2 pick was Brinks (BCO-NYSE). He also said that he is only focusing on buyout candidates that he thinks are good all on their own.
The #1 pick from Cramer in buybacks is Weight Watchers (WTW-NYSE). I hate to tout any ex-picks here but this was one of my buyout picks last summer when the shares were sliding and sliding because of a potential leveraging effect and what would probably a better diet and nutrition plan than others.
Jon C. Ogg
May 7, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.
Cramer has a new method for predicting takeovers. Four of the fourteen largest buybacks have either been taken over or have agreed to be taken over in the last few months. Cramer thinks the other 10 are great buyback targets as well. Cramer has 3 picks out of these 10. His #1 pick will be after the Lightning Round. He also said that he is only focusing on buyout candidates that he thinks are good all on their own.
Cigna (CI) is on the list but he’s already highlighted it recently. Sonic (SONC) and Cracker Barrel (CBRL) would have been on Cramer’s list except that he thinks they are too vulnerable to consumer spending and too vulnerable to higher gasoline prices.
The #3 pick is United Stationers (USTR-NASDAQ) which has bought back 20% of its outstanding shares. The company should have improving margins and there are only three analysts covering the stock.
The #2 pick is Brinks (BCO-NYSE) that bought back 21% of its stock. He thinks the fundamentals are great on this one. This one is a home security play and a play for securely transporting financial and luxury goods.
What is funny is that since Cramer hates ETF’s so much, he neglected to tell you about PowerShares Buyback Achievers Portfolio (AMEX:PKW). This is an ETF that actively invests in companies who are buying back shares. As far as which of these are good and bad, United Stationers is one that has many competitors that go through periods where they look good and bad. They are ultra-sensitive to economic cycles and business spending. But Brinks on the other hand is one that is solid. The stock is up on its 52-week highs, but here is thing: this company already transports massive amounts of luxury goods that the millionaires and billionaires already use. This one makes sense, and it would have been a perfect play for Berkshire Hathaway earlier if the size was larger than $3 Billion.
Jon C. Ogg
May 7, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.
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