Why Martha Stewart Living (MSO) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Martha Stewart Living Omnimedia, Inc.  (MSO) are trading down -3.65% to $3.96 on Tuesday afternoon following a Reuters report that a New York court has allow a lawsuit against the company to go through.

Age Group, a company that manufactures and licenses products for distribution, sued Martha Stewart Living last year for breach of contract and other claims.

In July 2009 Age Group entered into a four year licensing deal with Martha Stewart Living to market and sell pet products.

Four months later Age Group and PetSmart (PETM) made a deal that PetSmart would buy Stewart-brand pet products from Age.

The lawsuit claims Martha Stewart Living realized it undervalued Stewart-brand pet products and began withholding approval of pet products in order to get PetSmart to contact Martha Stewart Living directly, bypassing Age Group, Reuters reports.

On Monday a Manhattan Supreme Court Justice denied a request from Martha Stewart Living to dismiss the lawsuit.

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TheStreet Ratings team rates MARTHA STEWART LIVING OMNIMD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MARTHA STEWART LIVING OMNIMD (MSO) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that revenues have generally been declining."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 500.00% and other important driving factors, this stock has surged by 70.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 528.5% when compared to the same quarter one year prior, rising from $1.11 million to $6.98 million.
  • MARTHA STEWART LIVING OMNIMD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MARTHA STEWART LIVING OMNIMD continued to lose money by earning -$0.01 versus -$0.83 in the prior year. This year, the market expects earnings to be in line with last year (-$0.01 versus -$0.01).
  • MSO, with its decline in revenue, underperformed when compared the industry average of 4.0%. Since the same quarter one year prior, revenues fell by 15.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, MARTHA STEWART LIVING OMNIMD's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: MSO Ratings Report

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