There's nothing like a blue-ribbon corporate marriage to get traders' juices flowing, and Procter & Gamble's ( PG) bid for Gillette ( G) certainly qualifies.
It's not just the rich investment banking fees that will get investors and bankers in a lather. It's the speculation over who will be next to the altar. One prime candidate is Alberto-Culver ( ACV)), a beautifully run company that I first wrote about in August . Back then, I said the stock was a classic defensive play that had done well amid the bear market on steady increases in revenue, income and cash flow. This story was underappreciated then, and it continues to be now, because the company has a couple of weird odds and ends in addition to its strong-selling V05 shampoo line: a line of food products such as Molly McButter and Mrs. Dash, and a terrific chain of retail shops called Sally Beauty.
Record Sales and Profits
On Thursday, however, the stock got a lot more love as traders pushed it to a new high on the heels of a blowout earnings report. The company posted record sales and profits in its fiscal 2005 first quarter ending Dec. 31. Those were boosted by nice-looking results from its lines of shampoo products. Sales hit $848 million, and, excluding a noncash charge, earnings hit $51.9 million. Without the charge, earnings per share came in at 56 cents, vs. 47 cents the prior year. Additionally, the Sally Beauty Supply chain grew to 2,361 stores in North America, Europe and Japan, and its profiessional distributors sales division expanded as well. The company said all were backed by higher marketing budgets made possible by early debt retirement. Like most independent vendors, Alberto-Culver is said to have a combative relationship with the retailing mandarins at Wal-Mart ( WMT), and thus it might make an ideal partner for a similarly disaffected firm. In light of the P&G deal with Gillette, it would make perfect sense for Colgate-Palmolive ( CL) to come knocking, or perhaps a much bigger suitor, such as Unilever ( UL).