Johnson Controls to Cut Jobs
Building and automotive systems manufacturer
said it plans to cut jobs and consolidate manufacturing facilities as part of a plan to restructure its operations.
The company plans to take a pretax charge of $450 million to $500 million in its 2008 fiscal fourth quarter. The actions target reductions in the company's cost base by decreasing excess manufacturing capacity because of lower industry production and the continued movement of vehicle production to low-cost countries, especially Europe. The company didn't indicate the number of jobs it will slash, but did say the moves should be completed by early 2010.
We have avoided auto-related companies as the sector continues to deliver nothing but disappointing news to investors quarter after quarter. When the sector does start to show some life, we do believe Johnson Controls is one of the companies to watch. Johnson Controls has a 1.66% dividend yield, based on its closing stock price Tuesday of $31.39.
Johnson Controls isn't a recommended dividend stock at this time, holding a Dividend.com rating of 3.2 out of 5 stars.
Joy Global Shares Lower
Joy Global Inc.
seemingly did everything right last quarter, but the stock is falling Wednesday.
The company said sales jumped 47% to $903.8 million on strong demand for its mining equipment products and services. The company's bookings in the third quarter more than doubled from the prior year to $1.5 billion, reflecting the combination of continued strength in the international markets and a resurgence of the U.S. underground coal market. Orders for original equipment increased more than threefold, while aftermarket orders rose 40%. Underground equipment orders also increased 89% to a record $743 million in the quarter.
The company raised its 2008 earnings guidance to $3.37 to $3.52 a share, up from a previous forecast of $3.15 to $3.30 a share. The consensus estimates are for the company to make $3.29 a share.
We removed the stock from our recommended list on July 22, when shares were trading at $65.75. We were concerned back then that the cyclical nature of the commodity business was beginning to take its toll. Stocks like Joy Global were losing the expected pop from any good news the company might issue, which is usually a sign that the tide is turning. We would caution long-term investors to avoid trying to catch a bottom in the shares, but do think shorter-term investors that are nimble enough may be able to maneuver in and out of the shares on any major swings. The company has a dividend yield of 1.06%, based on Tuesday's closing stock price of $68.97.
Joy Global isn't a recommended dividend stock at this time, holding a Dividend.com rating of 3.2 out of 5 stars.
Ambac Takes Another Step in the Right Direction
said Tuesday it received regulatory approval from the commissioner of insurance in Wisconsin to capitalize and reactivate Connie Lee Insurance, its financial guarantee subsidiary.
Connie Lee plans to conduct business under a new name, and will focus on the U.S. municipal and global public purpose financing markets. Ambac Assurance will inject $850 million into Connie Lee, which will operate as a separate corporate and legal entity within Ambac Financial. Ambac seeks to obtain stand-alone triple-A ratings for Connie Lee, and has worked extensively with Moody's and Standard and Poor's towards that goal. Connie Lee expects to write new insurance policies no later than the fourth quarter of 2008.
The company also is submitting formal business proposals to the major credit-rating agencies in an effort to obtain a stand-alone "AAA" rating for the new insurance unit. Bond insurers like Ambac rely on top ratings to generate new business.
This development is the latest in a string of positive news that could contribute to getting Ambac back on its feet. We are increasingly optimistic on the stock the longer it can sustain above the $5 level. Investors should keep in mind that a stock like Ambac, which has seen dramatic declines in the past year, can still be extremely volatile. We would recommend the stock at this point only for shorter-term investors that can maneuver quickly in and out of the stock. Long-term investors will have a better opportunity as more of a foundation is built into the stock price.
Ambac isn't a recommended dividend stock at this time, holding a Dividend.com rating of 2.5 out of 5 stars.
Corning Slashes Earnings Outlook
has consistently met earnings estimates and has a history of reaffirming its guidance. This quarter, however, won't be so glowing.
The company slashed its third-quarter sales and profit outlook, citing slower shipments of glass used in flat-screen televisions and computers. The company's new forecast is for earnings of 43 cents to 45 cents a share on sales of $1.58 billion to $1.62 billion. The company's previous guidance was for profit of 48 cents to 51 cents a share on sales of $1.65 billion to $1.72 billion.
Management is blaming supply-chain issues as well as customers cutting orders so they can work off some excess inventory. The company's display-glass business is expected to fall 5%, in contrast to previous guidance, which called for sales to be flat or rise up to 5%.
We removed the stock from our recommended list in early July at $22.60. We didn't see a catalyst to lift the shares, and also the stock was unresponsive to positive news or guidance the company was issuing. Couple that with a small dividend yield of 1.03%, based on the closing stock price Tuesday of $22.60, and the signs for underperformance become more pronounced. We would avoid the shares for now, but will reassess our stance if the valuation becomes more attractive.
Corning isn't a recommended dividend stock at this time, holding a Dividend.com rating of 3.1 out of 5 stars.
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At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.
Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.