Buy or Sell? Wednesday's Winners: JOSB, TFM, SEE, WLP
While many traders are away from their desk during this last week of August, they're missing out on an unexpected -- and welcome -- trend: Retailers and other consumer-facing vendors are delivering some concrete results. On Monday, we saw a solid profit report from Tiffany & Co. (NYSE: TIF). On Tuesday, PVH Corp (NYSE: PVH) and Movado (NYSE: MOV) delivered upbeat quarterly reports, and today Jos. A Bank is doing the same.
Jos. A Bank, which sells men's suits, shoes and other business attire at more than 500 stores throughout the United States, delivered earnings of 83 cents per share in the company's second quarter -- a dime ahead of consensus forecasts, thanks to a 13% spike in year-over-year quarterly sales. Shares are rising by an even greater amount in today's trading.
While store-based sales were solid, up 6% from a year ago, the upside apparently came from even stronger results for the company's Internet and catalog-based sales. The total gains could be attributable to a slightly improved employment picture -- which now has more people in the work force than a year ago -- or to the buying of new clothes in anticipation of re-entering the work force.
If employment trends continue to strengthen, then quarterly results should continue to strengthen. And that may help this stock extend today's gains. After all, earnings per share now look set to approach $4 this year, which means that this stock is valued at around 12 times projected profits.
The Whole Foods coattail
Investors have been anticipating solid quarterly results from wholesome grocery chain The Fresh Market as shares have tacked on a 10% gain since late July. Those investors weren't disappointed when the actual numbers rolled in this morning, and shares are up another 5% to an all-time high.
Though this company has only been public for less than two years, it has proven to be just as popular as rival Whole Foods (NYSE: WFM). That company pioneered the premium/healthy grocery segment, and The Fresh Market surely doesn't mind riding its coattails. Though both companies have been around for more than three decades, it is Whole Foods that educated consumers to the merits of healthy groceries, as its base of around 330 stores is three times the size of The Fresh Market.
Investors are able to make a handy comparison of these two rivals to see which one is the better bargain. In terms of price-to-sales (P/S), Whole Foods is more appealing, trading at 1.6 times trailing sales, while The Fresh Market trades at around 2.65 times trailing sales. On a forward price-to-earnings (P/E) ratio basis, The Fresh Market is valued at nearly 50 times projected 2013 profits, while Whole Foods' forward multiple is a more reasonable (though still high) 33. On both counts, Whole Foods looks like the better deal.
Change is good
Investors are bidding up shares of WellPoint, the second-biggest U.S. health insurer, and food-packager Sealed Air on word that both companies are in search of new leadership. The CEOs at each firm, which have failed to deliver promised results, have been pushed onto the iceberg by their respective boards.
The change at Sealed Air should come as little surprise. The company had a solid long-term track record in the food packaging business, but ventured outside its field of expertise with a $4.3 billion acquisition in June 2011 of Diversey , which provides cleaning and sanitation services to large corporations. At the time, Sealed Air CEO William Hickey (who will be sticking around until a replacement is in place) promised a great deal of cross-selling synergies and cost cuts, of which few tangible signs have thus far been apparent.
That doesn't mean the deal is a bust, only that it will take a lot longer to achieve those goals. Still, as progress is made, the stage is set for rising profits. Analysts expect per-share profits to rebound more than 30% in 2013 to around $1.35. Shares, trading for little more than 10 times that view, look appealing, considering further cost cuts and sales synergies could spike profits even higher in 2014 and beyond -- especially as the mends.
Action to Take --> Investors love a turnaround story, and Sealed Air, despite posting lackluster results in recent quarters, has ample room to improve results. The slow economy may constrain results for a while longer, but the longer-term potential for profit gains makes this a stock to dig into.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.