TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety-first" approach to investing aims to reduce risk while seeking outperformance on a total return basis.
to "buy." The company makes and markets processed food products, including, of course, ketchup worldwide.
The numbers: Fiscal second-quarter revenue declined 5.6% to $2.5 billion as net income and earnings per share fell 9.8% to $175 million and 42 cents, respectively. Profitability metrics declined a bit, with the operating margin falling 83 basis points to 13% and the net margin dropping 31 basis points to 6.9%. Heinz has a weak financial position, as reflected by more than $5.1 billion of debt and just $373 million in cash. But the company has proven that it has a resilient business model.
The stock: Heinz has dropped 4% in 2009, outperforming the
Dow Jones Industrial Average
and underperforming the
S&P 500 Index
. The stock trades at a low price-to-earnings ratio of 12, offers a high 4.6% dividend yield and has a record of payout increases.
to "buy." The company provides property catastrophe reinsurance to personal and commercial property insurers worldwide.
The numbers: Fiscal first-quarter revenue fell 21% to $85 million as net income and earnings per share plummeted 88% to $8.3 million and 15 cents, respectively. Profitability declined significantly, with the operating margin shedding 6,655 basis points to 14% and the net margin dropping 7,098 basis points to 9.7%. However, IPC has an ideal financial position, with zero debt and $122 million of cash. Despite a difficult quarter, we believe IPC is poised for success and is currently on sale.
The stock: IPC Holdings has fallen 6% in 2009, in line with the Dow Jones Industrial Average. The stock trades at a low 2010 price-to-earnings ratio of 5.71 and pays a 3.14% dividend yield.
to "hold." The company is a short- to medium-haul truck load carrier.
The numbers: Fiscal first-quarter revenue fell 23% to $115 million as net income declined 3.5% to $14 million and earnings per share remained flat at 15 cents on a lower share count. However, the operating margin improved 229 basis points to 15% and the net margin climbed 269 basis points to 13%. The company has zero debt, but liquidity needs improvement. Although quarterly results were favorable, we believe the company could be headed for further revenue declines because of the recession. And its stock is trading at a premium.
The stock: Heartland Express has fallen 8% in 2009, underperforming the Dow Jones Industrial Average and the S&P 500. The stock trades at a high price-to-earnings ratio of 20 and offers a weak dividend yield of 0.55%.
to "hold." The company provides management, technology and policy consulting to government and commercial clients worldwide.
The numbers: Fiscal first-quarter revenue fell 10% to $158 million as net income and earnings per share dropped 25% to $5.9 million and 38 cents, respectively. The operating margin fell 141 basis points to 7% and the net margin dropped 74 basis points to 3.72%. The company has a high quick ratio of 1.63 but an excessive $226 million debt burden. The quarterly results were unfavorable and ICF may post further revenue declines because of strained government and business budgets.
The stock: ICF has ascended 4% in 2009, outperforming the Dow Jones Industrial Average and the S&P 500. The stock is trading at a fair price-to-earnings ratio of 15, but doesn't pay dividends.
to "hold." The company sells novelty items, such as balloons, specialty films and flexible food containers.
The numbers: Fiscal first-quarter revenue fell 11% to $9.6 million as net income dropped 68% to $90,000 and earnings per share fell 70% to 3 cents. The operating margin fell 114 basis points to 4.8% and the net margin deteriorated 167 basis points to 0.9%. The company has a weak cash position, with a quick ratio of 0.4 and a large $17 million debt load. Although the company has posted erratic performances lately, it retained profitability in fiscal 2008.
The stock: CTI has declined 13% in 2009, underperforming all major U.S. indexes. Yet the stock is trading at a very low price-to-earnings ratio of 5.47. CTI doesn't pay dividends.