Read the Ten Cheap Products Making American Companies Billions

All of the companies that make the most money from selling inexpensive items have exceptionally strong brands. They are highly recognizable and held in high regard. Coca-Cola, which makes billions of dollars off its trademark drink Coke, is the most valuable brand in the world, according to brand valuation company Interbrand. According to Brand Z, McDonald’s, producer of the world’s favorite french fries, is the most valuable brand. Other brands, such as Cheerios, Campbell’s, and Starbucks, are also instantly recognizable.

These products have such strong brands partly because their parent companies spend huge sums of money on advertising. In 2011, Procter & Gamble, maker of Gillette razors, spent $9.3 billion on ads for all products — 11.3% of its total sales. This amount increases substantially each year, reflecting the lengths companies must go to preserve market share. Ian Cook, chief executive of Colgate-Palmolive, recently promised “increased advertising support behind many new and existing Colgate products” in 2012 to protect its global standing. The company said it had increased advertising spending in the fourth quarter to $428 million, up 5% from one year ago.

Additionally, these brands benefit from having been around for years and having existed in the public conscious a very long time. Products such as Coke, Colgate toothpaste, and Dole bananas have been around since the 19th century. Campbell’s soup and Cheerios have been household staples since the middle of the 20th century. Consumers have grown to trust the brands and expect a certain level of quality.

24/7 Wall St. reviewed the 500 largest companies by sales to identify the ones that focus on inexpensive consumer goods and low-priced food products. We then looked at the most inexpensive products sold for less than $5 and hold the highest market share. These are the cheapest products making American companies billions.

The unofficial closing bells put the DJIA down more than 53 points to 11,493.88 (-0.46%), the NASDAQ fell nearly 2 points (-0.07%) to 2,521.28, and the S&P 500 fell about -0.41% or nearly 5 points to 1,188.05.

There were several analyst upgrades and downgrades today, including Microsoft Corp. (NASDAQ: MSFT) started as ‘hold’ at ThinkEquity. Other ratings actions included Gilead Sciences Inc. (NASDAQ: GILD) raised to ‘outperform’ at BMO and raised to buy at Citigroup; Netflix Inc. (NASDAQ: NFLX) re-initiated as ‘sell’ with a $60 price target at Canaccord Genuity; Amgen Inc. (NASDAQ: AMGN) cut to ‘market perform’ at BMO; Wynn Resorts Ltd. (NASDAQ: WYNN) cut to ‘neutral’ at Janney Capital; and Cree Inc. (NASDAQ: CREE) maintained as ‘buy’ with $33 target price at Canaccord Genuity.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: LDK Solar Co. Inc. (NYSE: LDK) is up nearly 7.5%, at $3.04; Campbell Soup Co. (NYSE: CPB) is down about -5.6%, at $31.74; Hormel Foods Corp. (NYSE: HRL) is a fraction at $28.82; Suntech Power Holdings Co., Ltd. (NYSE: STP) is up more than 17%, at $2.62; and Brocade Communications Systems, Inc. (NASDAQ: BRCD) is up more than 13%, at $5.08.

Be sure to check our story on the dismal showing of the Chinese solar stocks and then try to figure out why LDK and STP shares are up today. Investors have got to believe the stocks have hit bottom. Perhaps, but LDK is pretty shaky, regardless of investors’ hopes.

Several other standouts from today are as follows…

Frontline Ltd. (NYSE: FRO) is down nearly -41%, at $3.07, after posting a new 52-week low of $2.97 earlier today. The company reported awful earnings and said that it would either need to restructure or go out of business.

Alcatel-Lucent (NYSE: ALU) is down nearly -15%, at $1.59, a penny more than a new 52-week low set earlier today. The company is dogged by liquidity and cash flow concerns.

Groupon, Inc. (NASDAQ: GRPN) is down nearly -13.5%, at $20.40, after posting a new post-IPO low of $20.03 earlier today. Apparently investors have figured out that there are other companies competing hard in the same space and that there are few barriers to keep more competitors out.

Focus Media Holding Ltd. (NASDAQ: FMCN) is up more than 15%, at $17.80. The company was torched yesterday by allegations of mis-statements related its reporting. The CEO disputed yesterday’s allegations in a conference call today, and reiterated the company’s intention to continue buying back shares.

Royale Energy Inc. (NASDAQ: ROYL) is up nearly 12%, at $3.27. The company announced a new gas well flowing at 3 million cubic feet/day and said that it would begin selling the gas within 2 weeks.

Stay tuned for Wednesday. Here’s a list of other noteworthy events scheduled for tomorrow(all times Eastern):

• 7:00 a.m. – Mortgage Bankers Association purchase applications
• 8:30 a.m. – Durable goods orders
• 8:30 a.m. – Initial unemployment benefits claims
• 9:55 a.m. – Reuters/University of Michigan consumer sentiment index
• 10:30 a.m. – EIA weekly natural gas status report (moved up from Thursday)
• 11:00 a.m – EIA weekly petroleum status report

Your email address

subscribe

terms and conditions

Paul Ausick

Bank of America Corporation (NYSE: BAC) is actually indicated higher this morning by over 1% at $5.57 despite reports that it has been warned by regulators to bolster its financial position.

Brocade Communications Systems Inc. (NASDAQ: BRCD) may have turned in a net loss after items and options, but non-GAAP earnings were $0.16 EPS and $550 million versus estimates of $0.14 EPS and $527.4 million.  Shares were up 6% last night and the $4.48 close of Monday is still up 6.7% at $4.78 on Tuesday morning. 

Campbell Soup Company (NYSE: CPB) reported that normalized earnings were down nominally from a year earlier at $0.82 EPS and that sales fell 1% to $2.16 billion; estimates were $0.79 EPS on $2.2 billion in sales.

Chico’s FAS, Inc. (NYSE: CHS) reported that its third-quarter earnings was $0.16 EPS but after $0.02 in acquisition costs, while estimates were $0.20 EPS.  Sales were $538.5 million versus estimates of $548.5 million. Same-store sales in the quarter rose 3.7% versus 5% or more expected and it turned in another $0.05 dividend for a 1.8% or so dividend yield.

Focus Media Holding Ltd. (NASDAQ: FMCN) was crushed yesterday with roughly a 40% drop after short seller Muddy Waters raised concerns about the company.  The company has denied the allegations and said that the information provided was misrepresented.  Shares are trading up 12% at $17.40 so far this morning, but this is a fluid situation and the “Muddy Waters” stocks tend to remain highly volatile for a period after a report of this sort is issued.

Market Vectors Egypt Index ETF (NYSE: EGPT) has not traded but trading on the Egyptian Exchange was halted after a 4.5% broad market drop due to continues protests and violence in Cairo after reports of dozens of deaths.

Harman International (NYSE: HAR) had its CEO featured on a Jim Cramer interview last night and Cramer said it is now getting to be a bargain at barely 10-times earnings with 20% growth possibilities.  Zacks also named it the value stock of the day this morning. 

Hewlett-Packard Co. (NYSE: HPQ) is now down 1% at $26.59 despite having been up almost 4% after earnings.  Some wanted a better path to a return of growth but frankly the report and even the lower guidance should have been enough to quell at least some fears about the company.

Jack in the Box Inc. (NASDAQ: JACK) was up 4% in the after-hours on Monday after beating earnings estimates with higher same-store sales. Volume is very light and the stock is only indicated up 1% so far in early bird trading.

Medtronic Inc. (NYSE: MDT) has reported earnings of $0.84 EPS adjusted on $4.13 billion in sales; estimates were $0.82 EPS and $4.1 billion in sales. The medical devices giant has guided its fiscal year (April-2012) to $3.43 to $3.50 EPS versus estimates of $3.44 EPS.

Netflix, Inc. (NASDAQ: NFLX) had its secondary and placement offering announcement last night and now shares are getting hit all over again after a SELL rating was slapped on the stock.  Netflix is trading down 5.2% at $70.60 in active trading.

Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) is getting acquired after receiving a “going private” letter a month ago.  Monday’s ADS close in New York was $39.39 and the buyout price $41.35 per ADS.

JON C. OGG

We have earnings previews for the following: Analog Devices Inc. (NYSE: ADI); Brocade Communication Systems Inc. (NASDAQ: BRCD); Hewlett-Packard Co. (NYSE: HPQ); Tyson Foods Inc. (NYSE: TSN); Campbell Soup Co. (NYSE: CPB); Nuance Communications, Inc. (NASDAQ: NUAN); Pandora Media Inc. (NYSE: P); and Deere & Co. (NYSE: DE).  Estimates are from Thomson Reuters and these are broken out by day.

Monday

Analog Devices Inc. (NYSE: ADI) has estimates of $0.64 EPS and $728.17 million in revenue; next quarter estimates are $0.60 EPS and $707.37 million in revenue.  With shares around $35.50, the 52-week range is $29.23 to $43.28.

Brocade Communication Systems Inc. (NASDAQ: BRCD) is not a market mover but it is still way off its year high while some of its peers have been calling things better in their business of late.  Estimates are $0.10 EPS and $527.38 million in revenue; next quarter estimates are $0.11 EPS and $535.6 million in revenue.

Hewlett-Packard Co. (NYSE: HPQ) is hardly even in the midst of a turnaround.  Meg Whitman is still getting her hands around the business and Dell gave a mixed report of late.  Estimates are $1.13 EPS and $32.06 billion in revenue; next quarter estimates are $1.11 EPS and $31.44 billion in revenue. We will be looking at the company’s comments around manufacturing problems for drives for its PC around the flooding in Thailand.

Tyson Foods Inc. (NYSE: TSN) has estimates of $0.31 EPS and $8.19 billion in revenue; next quarter estimates are $0.39 EPS and $8.17 billion in revenue.  At $19.50, its 52-week trading range is $15.46 to $20.12.

Tuesday

Campbell Soup Co. (NYSE: CPB) has estimates of $0.79 EPS and $2.21 billion in revenue; next quarter estimates are $0.66 EPS and $2.16 billion in revenue.  Shares are right at $33.50 and the 52-week range is $29.69 to $35.66.  This one in the middle of a strategy change to get back to more flavorful soups and away from being such low-salt.

Nuance Communications, Inc. (NASDAQ: NUAN) is also set for Tuesday and the speech-to-text software leader’s estimates are $0.41 EPS and $393.33 million in revenue; next quarter estimates are $0.38 EPS and $378.78 million in revenue.  At $24.00, the 52-week trading range is $15.56 to $26.97.

Pandora Media Inc. (NYSE: P) is still kicking around after its IPO.  The online music playing company has estimates of -$0.01 EPS and $71.44 million in revenue; next quarter estimates are -$0.03 EPS and $82.25 million in revenue.  Its stock is around $12.55 and the post-IPO range has been $9.33 to $26.00.

Wednesday

Deere & Co. (NYSE: DE) has estimates of $1.43 EPS and $7.87 billion in revenue; next quarter estimates are $1.26 EPS and $6.17 billion in revenue.  At 74.50, Deere has a 52-week range of $59.92 to $99.80.
JON C. OGG

Anheuser-Busch Inbev SA (NYSE: BUD) is up 0.25% at $52.84 and the 52-week range is $49.05 to $64.77.

Altria Group, Inc. (NYSE: MO) is FLAT at $26.81 and the 52-week range is $23.20 to $28.13; Reynolds American Inc, (NYSE: RAI) is up 0.3% at $37.60 and the 52-week range is $29.05 to $39.87.

Campbell Soup Company (NYSE: CPB) is up 0.7% at $32.59; 52-week range is $29.69 to $36.99.  ConAgra Foods, Inc. (NYSE: CAG) is down “only” 0.4% at $24.12; 52-week range is $21.02 to $26.60.

Kimberly-Clark Corporation (NYSE: KMB) is up $0.03 at $71.04; 52-week range is $61.00 to $71.78.  Procter & Gamble Company (NYSE: PG) is up $0.05 at $63.23; 52-week range is $57.56 to $67.72.

Sometimes a little win or a small loss feels like a big victory.  With just under an hour until the market close, the DJIA is down almost 200 points at 10,720 and the closest handle on the S&P 500 down almost 2.1% is 1,108.  Another day, another bunch of lost dollars for the public.

JON C. OGG

We have been searching for deep value stocks of late now that the market sell-off has taken out a large bite from the value of many major companies.  Some analysts group food differently than beverages, but our screen includes all of the following to identify the best value: Campbell Soup Co. (NYSE: CPB); The Coca-Cola Company (NYSE: KO); ConAgra Foods, Inc. (NYSE: CAG); Dr. Pepper Snapple Group, Inc. (NYSE: DPS); General Mills, Inc. (NYSE: GIS); Hormel Foods Corporation (NYSE: HRL); Kellogg Company (NYSE: K); Kraft Foods Inc. (NYSE: KFT); Pepsico, Inc. (NYSE: PEP); Tyson Foods, Inc. (NYSE: TSN); and Smithfield Foods Inc. (NYSE: SFD).

We are looking at food and beverages separately today in identifying the best value for investors looking for safe havens in the storm.  This sector is already very defensive in nature, and we found that the defensive sector of consumer products actually has a market premium due to investors seeking safety.  The good news is that the food and beverage sector has a few differences.

Campbell Soup Co. (NYSE: CPB) recently traded at $30.85 and its market cap is $10 billion.  The stock’s 52-week trading range is $29.69 to $36.99.  The current value is trading at a price-to-book ratio of about 9 to 1.  Its forward price earnings multiple is 12.2 and its return on equity is 78.8%.  The canned soup company currently pays a dividend yield of about 3.8% to investors.  Thomson Reuters has a consensus price target of $34.00, implying roughly 10.2% upside to the most recent price.  Campbell is under a new CEO and undergoing some change.  It is hard to imagine that this is a luxury good or a health food group stock, but the company has been under fire from private-label soups in the past and it is now going to add more salt and flavors to regain some market share.  Due to the correction, there is almost a turnaround element here.

The Coca-Cola Company (NYSE: KO) recently traded at $69.37 and its market cap is $159 billion.  The stock’s 52-week trading range is $56.01 to $71.77.  The current value is trading at a price-to-book ratio of about 4.5 to 1.  Its forward price earnings multiple is 16.1 and its return on equity is 41.29%.  The beverage giant currently pays a dividend yield of 2.71% to investors.  Thomson Reuters has a consensus price target of $77.86, implying roughly 12.2% upside to the most recent price. What is so interesting about Coca-Cola is that it just the magic 52-week high list right after Labor Day.  Coke and water, you gotta drink!  This is a huge position for Warren Buffett, but chances are that it will be that way in a decade from now (or for his successor).

Be advised that many earnings estimates have not been updated in days and some of these estimates may have already changed.

Tuesday, August 30

Barnes and Noble Inc. (NYSE: BKS) has very few estimates but the company is now under a shadow since it lost Liberty as a bidder even if it got an investment from it. Shares are trading around $ 11.40; the 52-week trading range is $8.45 to $21.06.

China Finance Online Co Ltd. (NASDAQ: JRJC) has too few estimates to count but we are going to watch because the financial information provider is under the China cloud.  Shares are trading around $2.84; the 52-week trading range is $2.35 to $8.59.

Dollar General Corp. (NYSE: DG) has estimates of $0.47 EPS and $3.54 billion in revenues.  Shares are trading around $33.50 and the 52-week trading range is $26.64 to $35.09.  We love this one long-term, but always keep in mind that private equity sellers are an overhang any time the price rises too much.

DryShips Inc. (NASDAQ: DRYS) has estimates of $0.22 EPS; shares are around $3.08 and the year’s range is $2.19 to $6.44.  Shares were up double-digits on Monday as it announced the exchange offer of shares by Ocean Rig UDW.

Wednesday, August 31

Fresh Market Inc. (NASDAQ: TFM) has estimates of $0.20 EPS and $273.9 million in revenues.  Shares are trading around $34.95, the 52-week trading range is $30.86 to $46.85.

Zale Corp. (NYSE: ZLC) has to be looked at after Tiffany beat so well last week.  It has estimates of -$1.53 EPS and $336.65 million in revenues.  Shares are trading around $4.75, the 52-week trading range is $1.50 to $6.90.

Thursday, September 1

Ciena Corporation (NASDAQ: CIEN) has been a poor performer in the tech selling and it should be assumed that its outlook will be weak if its peers are any indication.  The communications equipment maker has estimates of -$0.21 EPS and $443.3 million in revenues.  Shares are trading around $12.10 and the 52-week trading range is $10.33 to $29.24.

Finisar Corporation (NASDAQ: FNSR) has also been battered with tech stocks.  It has estimates of $0.21 EPS and $228.3 million. Shares are trading around $18.08, and the 52-week trading range is $12.26 to $46.09.

H & R Block Inc. (NYSE: HRB) has estimates of -$0.39 EPS and $275.1 million in revenues.  Shares are trading around $14.95 and the 52-week trading range is $10.13 to $18.00.

Jos A Bank Clothiers Inc. (NASDAQ: JOSB) is very thinly covered but it almost always has a large short interest.  The clothier has estimates of $0.67 EPS and $209.7 million in revenues.  Shares are trading around $45.99 and the 52-week trading range is $36.41 to $57.14.

Friday, September 2

Campbell Soup Co. (NYSE: CPB) has estimates of $0.37 EPS EPS and $1.57 billion in revenues. Shares are trading around $31.70, the 52-week trading range is $29.69 to $37.59.

Teavana Holdings Inc. (NYSE: TEA) is one that we do not have the research quiet period wrapped up yet but the company will give its first earnings report.  At $23.90, the recent post-IPO range is $20.28 to $29.35.

JON C. OGG

Kraft may be winning today in defensive stocks, but that is because of its break-up.  It is some of the other stocks in our go-to defensive list that are holding up very well today.  These all have dividends and will have business whether Europe and other worries torpedo the stock market or not.  And on a day like today, we are looking for companies that are only down less than half the broader market. These winners or “less of losers” are in the following: Pepsico, Inc. (NYSE: PEP); ConAgra Foods, Inc. (NYSE: CAG); Campbell Soup Company (NYSE: CPB); McDonald’s Corporation (NYSE: MCD); Altria Group, Inc. (NYSE: MO); Vector Group Ltd. (NYSE: VGR); Procter & Gamble Company (NYSE: PG); Colgate-Palmolive Company (NYSE: CL); Kimberly-Clark Corporation (NYSE: KMB); Johnson & Johnson (NYSE: JNJ); and American Water Works Company, Inc. (NYSE: AWK).

If you can eat it and drink it…

Pepsico, Inc. (NYSE: PEP) $64.49, actually up $0.01 probably because it has a snack-food business like Kraft that could be spun off if it wanted to.  Do not hold your breath for Pepsi to bust up its empire.  The 3.3% yield helps too. Percent from 52-week high: 10.7%.

ConAgra Foods, Inc. (NYSE: CAG) is down only 1.4% at $24.73 and it has a 3.7% yield.  It could have some break-up too but Kraft was different than ConAgra.  Percent from 52-week high: 7.5%.

Campbell Soup Company (NYSE: CPB) is down 1.2% at $32.54 with its 3.6% dividend yield but the company already outlined some of its challenges ahead.  Percent from 52-week high: 14.0%.

McDonald’s Corporation (NYSE: MCD) is a winner even when it loses as “the you gotta eat somewhere” move steers folks to Micky D’s.  After having recently hit new all-time highs, it is down only 0.25% at $85.32.  Its dividend is just under 3% now. Percent from 52-week high: -5.1%.

Can I bum a smoke?…

Altria Group, Inc. (NYSE: MO) is down 0.6% at $26.18.  Do you need an explanation beyond the 5.9% dividend yield? Percent from 52-week high: -7.7%.

Vector Group Ltd. (NYSE: VGR) is down only 0.2% at $17.49 and it has closer to a 9% dividend yield.  If Obama and Boehner both smoke, they probably had many more smokes in the last month than normal. Percent from 52-week high: -16.3%… that is down enough you might wonder how ‘defensive’ it is.

Shaving, deodorant, diapers and more….

Procter & Gamble Company (NYSE: PG) is down only 0.4% at $60.49 with its 3.4% dividend. Percent from 52-week high: -11.0%.

Colgate-Palmolive Company (NYSE: CL) is down 0.5% at $83.91 with a 2.7% yield.  Percent from 52-week high: 6.5%.

Kimberly-Clark Corporation (NYSE: KMB) is down a bit more at -1% at $63.89, but it offers the best yield in consumer products at 4.3%. Percent from 52-week high: 7.1%.

Johnson & Johnson (NYSE: JNJ) is the real medical or drug winner on a day where drug stocks are not holding up, but it also has consumer products.  J&J is down ‘only’ 0.9% at $62.83 with a 3.6% yield.  Percent from 52-week high: 8.0%.

H2O, You Know You Need Water…

American Water Works Company, Inc. (NYSE: AWK) had earnings that went well to the higher part of guidance but profit taking has come here too.  Shares are down 1.2% at $27.95 and that takes it back within striking distance of the 10% correction from the high.  It almost never gives a 10% pullback opportunity for buyers. The 3.3% dividend can’t be too bad either. Percent from 52-week high: 9.0%.

*****

The DJIA is down 2.7% or 324 points to 11,571.53 today.  When you see stocks down half that amount or almost up on the day, it doesn’t take a rocket scientist to figure out that money is not fleeing these names.

JON C. OGG

On the eve of installing soon-to-be Chief Executive Denise Morrison, Campbell fine-tuned its revenue and profit guidance for 2011 and 2012. The new CEO and her management team have actually been running the company since early March and will officially take over with the start of Campbell’s fiscal year on August 1. Coincident with announcing its financial guidance, the iconic purveyor of processed and packaged foods is freshening its strategic vision in up-to-date and innovative terms.

For fiscal 2012, Campbell estimates that profit will fall 4% to 6% and that its sales will be flat to up 2%.  The company expects final earnings slightly greater than $2.49 per share for fiscal 2011, only about 1% above the 2010 earnings.  The company’s prior guidance had looked for 2011 earnings to decrease 1 percent to 3 percent.  Revenue for 2011 is still expected to be flat.  Campbell Soup’s return on equity screens out above 70%, but its trailing PE is 14.1 and its forward PE is 13.7.

One issue that was working against the food brands in general, and particularly Campbell Soup, is private label brand initiatives from grocery stores and other stores.  Another risk is simple meals rather than just other canned products.  Part of the move started in the recession as consumers were willing to try almost anything to save money and the packaging did not matter.  The big difference is in the price.  That being said and something that is a game-changer if it holds, one plan of the company is to alter recipes and even to come out with higher-end soup products.  The company is also going to try go for more flavor and is going to increase its marketing budget.

The shares were down for part of the pre-market this morning, but apparently Wall Street decided that enough is enough.  The shares closed up 1.3% today at $34.59 and the 52-week price range is $32.11 to $36.37.  Campbell shares hit $40 at the peak of 2008, and they hit $42 at the peak of 2007.  The stock was above $50 in the late 1990s.  Campbell does currently offer a dividend yield of about 3.4% for investors, which is more in-line with defensive stocks rather than luxury stocks.

Many of the true defensive stocks have been hitting all-time highs up until the recent weeks.  Campbell still has a long way to go before its stock gets to any all-time high.  The fear this morning was that guidance was being taken as soft, but the prevailing thought is that perhaps the new team is giving very easy targets to hit.  That may seem unfair to some, but setting expectations low and overdelivering is no new concept.  The question boils down to whether or not the new strategy will pay off.

JON C. OGG

The second wave of austerity has less do to emergency circumstances than it does to an acknowledgement that government deficits cannot be sustained long term. That is true at the federal government level, even though it has the opportunity to raise money in the global capital markets. States and municipalities do not.

The ten largest layoffs announced in June include three municipal entities. The Philadelphia School District said it will cut 1,360 people. “Although the Philadelphia School District has already shed more than 3,000 workers from its payroll, more pink slips are coming,” an official told Philly.com on July 1.

The Florida Department of Juvenile Justice announced it would cut 1,229 people. According to MiamiHerald.com, about 1,300 workers in Florida lost their jobs after the state’s governor Rick Scott signed a budget plan for reducing the size of the state government bureaucracy.

The State of New Hampshire said it would fire 1,100 people, as the state struggles with a deficit.

The government cuts may seem relatively small in June, but the figures will get much higher as the year passes.

Among private sector jobs, the largest single announced layoff was by Perkins & Marie Callender’s. The restaurant chain filed for Chapter 11.

The nation’s largest defense contractor, Lockheed Martin (NYSE: LMT) said it plans to fire 1,200 people. The firm said there will be reductions in employment across its Aeronautics business area as part of a plan to improve the affordability of its products and increase operational efficiency.

Unemployment figures are out on Friday. Most economists believe that non-farm payrolls moved higher by 100,000 for June. Based on jobs news over the last several weeks, that number is optimistic.

Douglas A. McIntyre