Reuters: Thain regrets nothing he did at Merrill Lynch and during its merger with Bank of America (NYSE:BAC).
Reuters: Trump put his support to the bondholders of his casino business.
FT: A Chinese court ruled against Microsoft (NASDAQ:MSFT) in an intellectual property case. Read More
There are a number of ways to rank brand values. One of the most important is the level at which a brand contributes to the market value of a public company.
24/7 Wall St. asked Corebrand, the brand research and consulting firm, to look at the top 100 brands based their contribution to market capitalizaton. Using this method, the hardest working brand was Hershey (NYSE:HSY), followed by Coca-Cola (NYSE:KO) and Harley-Davidson (NYSE:HOG)
Corebrand described the process briefly to 24/7 Wall. St.
24/7 Wall St.: Corebard often refers to the brands on this list as the”hardest working brands”. How did you come to that description?
Corebrand: There are a lot of people measuring and examining the “strongest brands” or the “most valuable brands”. Our opinion is that examining one without the other is somewhat meaningless. How “strong” a brand is nice to know but not very relevant unless you understand how that strength benefits business. Similarly, “value” is little more than a measure of corporate size unless you understand the drivers of that value and how to influence it. By examining the strength of the brand and it’s contribution to total market value, we can help companies and their leadership manage that strength and value over time.
24/7 Wall St.: Is there any advantage or disadvantage to having a brand value be a very large percentage of market cap in the present and as an indication of a company’s future performance?
Corebrand: The brand will need to be in balance with the rest of the company’s assets. A company should strive to have it’s brand strong enough to fend off competitors or changing market conditions but not so strong that it becomes overly dependent on the brand as a single driver of value. If a company can achieve and maintain its appropriate maximum strength without becoming over-dependent, it will see greater returns in bull markets and retain greater value in bear markets.
The list: Read More
Reuters: Ken Lewis will step down as CEO of Bank of America (BAC)
Reuters: Cisco (CSCO) bought Tandbeg for $3 billion.
Reuters: The IMF raised forecasts for US GDP but warned on its growing debt.
Reuters: Turnaround experts say the collapse of CIT (CIT) would be a mess. Read More
These are the top ten analyst upgrades and downgrades we have seen from Wall Street this Friday morning with about two hours until the market opens for trading:
Charles Schwab (SCHW) Cut to Hold at Citigroup.
Hershey Foods (HSY) Cut to Sell at Deutsche Bank, but was Raised to Neutral at Credit Suisse.
Leap Wireless International (LEAP) Started as Buy at SunTrust Robinson Humphrey.
MetroPCS (PCS) Started as Buy at SunTrust Robinson Humphrey.
Microsoft (MSFT) Cut to Market Perform at FBR.
Netflix (NFLX) Cut to Underperform at Oppenheimer.
Potash Corp. (POT) Cut to Neutral at JPMorgan.
ProLogis (PLD) Raised to Neutral at JPMorgan.
RadioShack (RSH) Raised to Outperform at RBC.
SunPower (SPWRA) Raised to Outperform at FBR.
JON C. OGG
JULY 24, 2009
These are some of the top pre-market analyst upgrades we have seen early this Thursday morning with more than two hours until the market opens:
Jon C. Ogg
January 22, 2009
These are not all of the early calls from analysts out there, but these are some of the calls that may impact the prices of these shares this summer Monday morning:
There is one key thing that the U.S. Dollar weakness could bring about if the dollar stays where it is. If it continues its slide next year even though our interest rate futures are calling for more than a 100-basis point rise, our land and our companies may become targets for foreigners buying assets on the cheap. Some deals are already rumored and some would be easy to come into the fold as well.
The major U.S. companies failed to rise to a call for arms by buying up every bit it could after the Asian Contagion in 1998 as our last chance to buy those properties worldwide. Now that The US Dollar has become the US Peso, it seems that the U.S. could see a realm of US-based companies come under acquisition fire that could ultimately change the flags of large current brands. There are literally dozens more that could fit the bill here, but all of these companies are probably "CFIUS-free" as far as critical infrastructure or key to national security.
"Richie Rich & Retail"
Saks Inc. (NYSE: SKS) isn’t even at a $2 Billion market cap right now and may be one of the few high-end retail crown jewels that could still easily be acquired by a foreign buyer. Despite some defenses and despite the company having paid out cash in lumps in the past, this chain is perhaps the largest luxury sales channel in the U.S. that is a pure play and with all that oil money sloshing around, it could easily make a nice trophy buy that is a money maker to boot.
"Two Huge Food Scores"
Hershey Co. (NYSE: HSY) is worth close to $9 Billion now and any deal would only come if very friendly to founding family members because of controlling voting stakes and tiered stocks. After the Buffett-Wrigley-Mars transaction, anything is possible in the sector. Options have been active as well, although it is possible this may be just on an "efficient" partnership or venture as well.
What about Whole Foods Markets Inc. (NASDAQ: WFMI)? Whole Foods cannot be taken down in a hostile deal, or it would at least have trouble in that manner, but as Europeans have looked at some of our luxury brands and a market cap of almost $4 Billion it is fathomable. This might seem counterintuitive that the largest organic or health chain could be gobbled up by a foreign entity, but it isn’t out of the realm of possibilities considering its higher margins than traditional food grocers.
"Taking the biggest bite in financials"
E*TRADE Financial Corp. (NASDAQ: ETFC) could be the cheapest score for any overseas buyer that wants to suddenly stabilize a volatile financial that has been down and out with the simultaneous goal of HSBC is buying its Indian operations and it just upped its authorized number of shares… ever wonder the the TD meant in TD Ameritrade brand? Toronto Dominion. Are there any other cheap ways to buy 4.3 million online trading accounts without making any major dent in a large US Bank?
"Taking Our Beer & Booze Away"
Constellation Brands Inc. (NYSE: STZ) is a stock that has had its share of problems in the last 12 months, but with a market cap of under $5 Billion and the huge brans name portfolio of brand ownership or distribution in wine, beer, and spirits this could easily be put into an international portfolio. Some individual states might throw up the foreign control flags, but the U.S. as a whole wouldn’t be able to claim the national security card.
Anheuser-Busch Companies Inc. (NYSE: BUD) is one of the current "takeover rumor" stocks with InBev as the leading candidate. While this has a $40 Billion market cap and seems like it would be a stretch, that isn’t really Wall Street’s attitude. Major large brand and distribution channels could be partly financed by selling off part of its distribution unit and other units.
"Telecom"
Sprint Nextel Corp. (NYSE: S) has already been a rumor target of Deutsche Telekom and others of late, and even with a $24 Billion market cap this would probably not get much government blocking because of the inherent trouble the company has let itself get into.
Leap Wireless International Inc. (NASDAQ: LEAP) has a mere market cap of just over $4 Billion and frankly would have no infrastructure issues from the Feds. It would be easy to imagine a Carlos Slim wanting to gobble this up or another bid from the south, particularly as many of its customers would make more and more calls south-bound. It was once a MetroPCS merger candidate in a failed deal, but the buyer here would have to be able to instantly scale those figures up into profitability. But Cricket and pre-paid cellular isn’t exactly CFIUS material.
"Metals Galore"
US Steel Corp. (NYSE: X) has a market cap of almost $20 Billion and Alcoa, Inc. (NYSE: AA) has a market cap north of $32 Billion, so neither are exactly small fish. But here is the issue: the international metals and mining companies have no become so large that either company is actually considered small in the global scheme now. Both have also been rumor targets. Heaven help us if the metals and mining giants get to control aspects of supply, demand, and manufacturing.
"We Will Control All You See"
Lamar Advertising Co. (NASDAQ: LAMR) is a company that might make a nice trophy for China’s Focus Media or another larger ad and display company perhaps out of Europe. This company is still held by insiders and it wouldn’t go down without a fight if it wasn’t a friendly deal, but with under a $4 Billion market cap and with it not having any critical infrastructure there wouldn’t be any issue of a foreign owner here.
When we saw the Mars acquisition of William Wrigley Jr. Co. (NYSE: WWY) in perhaps the largest food merger, the first thing that came to mind besides "what a premium" was "What does this do for the valuation of Hershey Co. (NYSE: HSY)." JPMorgan (NYSE: JPM) and Goldman Sachs (NYSE: GS) are providing the lion share of the financing for Mars, and the Oracle of Omaha will provide about $6.5 Billion in financing. The market cap for Wrigley was $17 Billion before the buyout and about $22 Billion after.
Before this deal, Wrigley was almost 15% off of its 52-week lows, and the buyout premium has this one up almost another 25% higher. This was approximately 20-times EBITDA and about 32-times 2008 consensus EPS estimates.
Hershey on the other hand closed Friday at $34.74, only 3.5% ahead of $33.54 low over the last year. Hershey trades at about 19-times 2008 consensus EPS estimates. According to Capital IQ, Herhey’s market cap is almost $7.9 Billion before any increase today and it notes that the EBITDA multiple is 9.8 based on the most recent data. Hershey was also only valued at half of the Wrigley market cap, so in theory financing would be easier to round up.
If all these comparisons are correct on an "on the fly" analysis, you could in theory say that the premiums could be 50% to 100% for Hershey. The problem is that Hershey has an earnings challenge and its stock was battered harder. Its raw material costs have escalated in recent years and its dependence on chocolate means its core ingredients are under the whims of some unstable regions in Africa. This would also not be much of a premium to the all-time highs. Lastly, it is believed by many that the Hershey family and descendants don’t want to ever give up.
What do these stocks have in common other than stickling their products in your mouth? Founding families still in charge or in at least a dominant role. When you have founding families in control or when you have dual classes of stock, about the only mergers that work are friendly mergers where the money for them is just too much to say no to. They generally want to be included for the future in the new company too for posterity. The only hostile deals that work in these cases are the hostile deals that turn friendly, still reward the families beyond imagination, and keep them at least somewhat on for posterity.
After looking over all of this with a quick look, we won’t say that Hershey is all of a sudden worth 50% more than it was Friday. In fact, it may not be worth significantly more than $40.00. But this Wrigley premium probably just raised the floor on Hershey for the time being.
Shares of Cadbury Schwepps plc (NYSE: CSG) are also indicated higher by 3% in pre-market trading. Hershey shares are indicated up about 5% pre-market.
You can join our open email distribution list to hear about previews for other mergers, spin-offs, break-ups, IPO’s, and other special situations.
Jon C. Ogg
April 28, 2008
Jon Ogg produces and edits the Special Situation Investing Newsletter; he does not own securities in the companies he covers.
The trust that controls ownership of Hershey (HSY) forced six directors on the public company’s board to leave. Another two independent directors decided to go with them. In matter of a day, they were all replaced.
The trust blamed the board for the company’s current sorry state. Quoted in The Wall Street Journal, it representative said the trust is "actively engaged in an ongoing process, the goal of which has been to ensure vigorous Company Board focus on resolving the Company’s current business challenges and on implementing new growth strategies."
The trust also recently replaced the company’s CEO.
The entire incident is a silly game made less silly by the fact that Hershey shares have dropped from almost $57 earlier this year to $41, near a 52-week low.
The heart of the matter is that the trust has enough power to have acted at any time. It did not. That cost the company’s other public shareholders dearly.
And, that is the shame of it.
Douglas A. McIntyre
According to Reuters, BHP Billiton (BHP) will not sell its petroleum division, as had been rumored, to finance a bid for Rio Tinto (RTP).
Reuters writes that most of the Hershey (HSY) was pushed out by the trust that controls the company. The reason given was the company’s poor performance.
Reuters reports that Disney (DIS) will enter the crowded Japanese cell phone market with its own branded phone.
Reuters writes that NYMEX took a stake in Norway’s IMAREX.
The Wall Street Journal writes that HSBC (HBC) may have to increase its reserves for bad subprime mortages.
The Wall Street Journal writes that the cable industry will figh FCC efforts to cap its growth and help small channels get carriage on cable systems.
The Wall Street Journal reports that Citigroup (C), JP Morgan (JPM), and Bank of America (BAC) are closer to setting up a fund to bail out funds with asset that do not trade due to the credit crisis.
The Wall Street Journal writes that Intel (INTC) will introduce its next generation of chips which do not required traditional silicon architechture.
The Wall Street Journal writes that a filing by CountryWide (CFC) discloses that any cut in it credit rating could badly damage its ability to raise money.
The New York Times writes that doctors may have over-reacted to problems with stents from makers like Boston Scientific (BSX) and Johnson & Johnson (JNJ)
The New York Times writes that a fund put together by major banks to give short-term loans to structured investment vehicles will do nothing to help many of these funds.
The New York Times writes that Intel (INTC) will introduce a chip which will help video quality of content delivered over the internet.
The FT writes that the Citigroup (C) board is telling CEO candidates that they will have broad powers to sell off units or even break the bank up.
The FT writes that OPEC will ask large oil consuming countries to insure demand in the future instead of making huge investment in alternative energy.
Barron’s writes that there is a rumor that Google (GOOG) might by Sprint (S).
Bloomberg writes that BHP promised to buy-back $30 billion in shares if it buys Rio Tinto.
Douglas A. McIntyre
Hershey (NYSE:HSY) posted a dismal earnings report. If lower sales didn’t make it bad, higher material costs and higher marketing costs made it worse. The candy maker posted EPS of $0.27 after items and on a comparable basis posted $0.68 EPS before one-time items. Unfortunately, Wall Street estimates were $0.71 and the same period last year was $0.78. Sales were down 1% to $1.4 Billion, short of the $1.44 Billion estimate.
Shares are indicated down almost 3% at $43.00, and that will qualify it for the 52-week lows and well under the high of $56.75 for the year. This is actually almost 3-year lows. If you’ll recall, Hershey recently lost its CEO who supposedly had trouble managing the company with a dual-class structure.
Maybe some ‘public company structures’ should be changed. Or maybe they just shouldn’t be public. Common stock buyers of Hershey are basically second class citizens.
Jon C. Ogg
October 18, 2007
STOCK TICKERS: ABK, ACA, BZH, LEN, DHI, RYL, CC, BX, FIG, FINL, HGSI, HSY, HW, JNY, NLS, REDE, TRMP, UBET, TZOO, WB
The DJIA may have hit 14,000 earlier. A pullback here, some bad news there, and all of a sudden there are still many little piggies being sold off. Here are some of the main stocks hitting 52-weeks lows today, and it is even an edited-down list:
AMBAC (ABK) $80.05
Whoops, insuring and guaranteeing debt.
ACA Capital (ACA) $6.40
Yep, still no word out of the company yet. Trading and guaranteeing CDO’s and derivates isn’t what it was cracked up to be, and we still don’t know their real situation.
Beazer Homes (BZH), Lennar (LEN) DR Horton (DHI), Ryland (RYL)
One of its comps calling for crummy to 2009…ouch.
Circuit City (CC) $13.63
You knew this one wasn’t bottomed out yet.
Blackstone (BX) $25.95
Schwarzman isn’t responsible for this added drop, but he’ll do for the blame.
Fortress Inv. Group (FIG) $22.28
This hedge fund, boy…are they in private equity and CDO’s? Not an intraday low, but its lowest close.
Finish Line (FINL) $7.88
Glad I removed it from the BAIT SHOP of buyout candidates when I did, this one must have 10 piggies in each of their shoes.
Human Genome Sciences (HGSI) $8.61
Maybe genomics is such a 1990’s term.
Hershey (HSY) $47.84
This one was very overvalued for something you eat, so it squirts.
Headwaters (HW) $16.43
Jones Appareal (JNY) $26.62
Weren’t these guys supposed to sell out?
Nautilus (NLS) $9.14
When will a growth exercise and fitness company that warned be touted as a value stock?
Redenvelope (REDE) $5.05
Still don’t know anyone who has used this online e-tailer.
Trump Entertainment (TRMP) $9.50
The Donald’s casino operator can’t find a bottom without reaching under his back.
YouBet.com (UBET) $2.04
Bet this one isn’t done?
Travelzoo (TZOO) $23.00, prior intraday low was $23.16; high was $40.00+.
Online travel carnage continues….maybe France, Hong Kong, and Japan aren’t worth it.
Wachovia (WB) $49.98 close..prior 52-week low was $50.32.
Banks, they need someone to "Watch-ova-ya"
Jon C. Ogg
July 20, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
ADSK cut to Hold at Citigroup.
ALEX cut to Mkt Perform at Wachovia.
ALVR cut to Sector Perform at CIBC.
BMI cut to Neutral at Baird.
CLWR cut to Hold at Jefferies.
CYBS cut to Mkt Perform at JMP Securities.
FFCH raised to Neutral at Sun Trust Robinson Humphrey.
KR cut to Hold at BB&T.
HSY cut to Peer Perform at Bear Stearns.
ITT cut to Neutral at JPMorgan.
MAN raised to Buy at B of A.
NUE raised to Outperform at Credit Suisse.
PFGC cut to Hold at BB&T.
RTSX started as Buy at Deutsche Bank.
SLG raised to Outperform at Wachovia.
STX raised to Outperform at Bear Stearns.
SWY cut to Hold at BB&T.
SYY cut to Hold at BB&T.
TRN started as Overweight at JPMorgan.
WLSC cut to Equal Weight at Lehman.
X cut to Neutral at Credit Suisse.
Jon C. Ogg
July 20, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Hershey Company (NYSE:HSY) is actually putting in new 52-week lows, and not even a new coffee chocolate with Starbucks (NASDAQ:SBUX) is helping the chocolate-maker’s shares. The company posted sales of $1.05 Billion, almost identical to 2006, and its net income was $0.01 GAAP and $0.35 EPS before charges. Unfortunately, even though First Call was expecting $0.35 EPS and $1.07 Billion in revenues, that is well over a 10% drop from last year. Adverse dairy prices and the slower-to-improve economy were the culprits, and that global supply chain transformation was a significant charge.
The outlook is the main issue here. The company forecast is now expecting sequential improvement in organic net sales that will result in full year 2007 growth in the low-single digit range. But Hershey said that higher dairy costs will continue to pressure margins for the balance of the year, and branding investments will result in a mid-single digit decline in earnings per share-diluted from operations for 2007.
Let’s pretend the company managed to actually hit the estimate of $2.45 for fiscal 2007. Even after the near 3% drop today, that represents a forward P/E ratio of 19.8. If it can meet the 2008 target of $2.68, its forward P/E for 2008 is going to be 18.11. It sure doesn’t sound like the company is expecting to hit at least 2007 estimates, so that theoretical forward P/E ratio is lower then reality. Unfortunately this is somewhat comparable to Coca-Cola NYSE:) and Pepsico (NYSE:PEP), but those businesses are solid and growing. For Hershey, anything south of $48.96 will mark a new 52-week low close and even worse if you look at a two-year picture.
As a reminder, Hershey is one of those companies that is also immune from excessive outside control or influence and is deemed equally immune to any hostile outside buyout as super-shares are controlled by the founding family members.
Jon C. Ogg
July 19, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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