Wednesday wallop, continued:
Black-boxed in: Black Box(BBOX Quote - Cramer on BBOX - Stock Picks), a seller of networking products and a rollup of more than 62 cable installation companies over three years, has been
chided here for making itself out to be different (and, yes,
better) than every other company remotely related to the space. (It was the only networking-related company in recent quarters, it seems,
not to feel the pinch of the downturn in tech spending.)
Then it delayed the report of fiscal first-quarter earnings. Delays are
rarely a good sign, but Black Box's explanation was that it was waiting for the
Financial Accounting Standards Board to issue new rules that allow more favorable treatment for the amortization of goodwill.
Which brings us to Tuesday's earnings release: On the surface, the 89 cents earnings per share looked as though it beat analyst expectations of 86 cents. But wait: The FASB accounting change added 13 cents. Back that out and you're at 76 cents, which is not just a miss, it's a
big miss. It's even down from the prior quarter's FASB goodwill-adjusted 99 cents. (Black Box did a pro forma, applying the new FASB rule to the prior quarter.) Worse, the company's revenue was down sequentially from the prior quarter
despite having acquired seven companies in the quarter. (Imagine what happens when the company stops making acquisitions!)
Black Box, which was
trumpeted here at the end of its fiscal fourth quarter by Michael Halpern of
Dorchester Advisors, attributed 9 cents of the sequential decline to trouble at three of its 77 offices. Those three offices were New York, Seattle and Nashville, Tenn. If three offices can cause a 9-cent problem, what happens if the 74 other offices have trouble? (Remember
Black Box saying it was different? Truth be told, it's not.)
PolyMedica minutes: Medical products distributor
PolyMedica(PLMD Quote - Cramer on PLMD - Stock Picks), the focus of
an item here Monday, had an earnings conference call Tuesday and continued to avoid questions this column has been asking. CEO Steven Lee, however, did stick by his long-running comment that "we believe" the
FBI's investigation into the company's billing practices is "civil." (Never mind that almost
all FBI investigations are criminal.) He did not say whether he was telling analysts lately that the FBI was about to issue an apology to the company for the fuss its investigation has raised (one of the key questions we raised).
Lee also discussed the
NYSE's decision to rescind its approval of PolyMedica's Big Board listing. He said PolyMedica still doesn't know the reason for the reversal, though he did say the company may simply choose to stay on the
Nasdaq. (The overriding speculation among analysts is that the NYSE's change of heart was tied to PolyMedica's large short position. The only problem with that theory is that the same short position existed when the NYSE approved PolyMedica's listing. And the NYSE, in the past, has taken companies with large short positions -- companies like
CHS Electronics(CHSWQ Quote - Cramer on CHSWQ - Stock Picks), which publicly fought with short-sellers before
and after its switch to the NYSE three years ago. The company has since been liquidated.)
Finally, Lee played what I'd like to call the takeover card -- that is, when all else fails, try to spark interest in the stock by talking about how odd it is that your company hasn't been acquired. "There were three premier properties in diabetes," Lee said in response to a takeover-related question. "There was
Inverness,(IMA Quote - Cramer on IMA - Stock Picks), which was bought by
Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks);
MiniMed(MNMD Quote - Cramer on MNMD - Stock Picks), which was purchased by
Medtronic(MDT Quote - Cramer on MDT - Stock Picks); and there's PolyMedica Corporation, with its large patient base ... of almost half a million chronically ill seniors. So we're obviously the last major one of those three left and this is an exciting category to many people. So I'm not going to comment on value. But clearly we're feeling lonely out here." Can't help but wonder why.
Chatting about Chang's: P.F. Chang's(PFCB Quote - Cramer on PFCB - Stock Picks) reported what looked like a 1 cent per share earnings beat this morning. But the beat was only because of a lower tax rate, and that's the good news: The company also guided investors to expect earnings this year of $1.14 to $1.18; Thomson Financial/First Call consensus expected $1.18. (Put another way, it's guiding down by as much as 4 cents.) What's more, comp-store sales gained just 3.4%, down from 5.4% the prior quarter -- the continuation of a steady slide over recent quarters. (The same trend exists for average weekly sales.)
At the same time, labor costs are inching upward. (Ah, the old stranglehold.) More telling, perhaps, is that comp-store sales at older units (those open before 1996) actually
fell by 2.6%. Translation: These days, the company is stuck in the age-old retail/restaurant conundrum of being forced to build new restaurants in order to grow. (Hardly what you would call a
quality growth story, especially when the company hasn't disclosed how much cash it has left for expansion.)
Heads-up: Don't forget to catch me on
CNBC's "red flag alert" at 11:50 a.m. EDT Monday.
Herb Greenberg
RSS
