Friday, March 5, 2010

3/5/10 Midafternoon Report: With Oscars approaching, the market is "Up" as economists "Blind Side"d by fewer job losses while strength of recovery remains "Up in the Air"

The market is running again as a result of the jobs report and inertia.  According to the (No)Labor Department, the economy lost 36k jobs in February while the unemployment rate stayed steady (and for those cunning linuists or Nabokov fans, that is back to back anagrams) at 9.7%.  This was better than the estimates of 68k job losses but is not a definitive enough number (like 42) to give investors a real read on the direction of the economy.  However, beating estimates is all that matters even though we know estimates are inherrently flawed like a supermodel with a hairy ass.  Some economists partially blamed snowstorms for the job losses, while others blamed companies for wanting to be profitable.  The (No)Labor Department chimed in and said job losses from snowstorms were unquantifiable like the square root of a negative number (imaginary numbers be damned), the number of one night stands by Paris Hilton, or how many licks it takes to get to the center of a tootsie pop.

In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection.  German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support.  This was not helped by Germany's economic minister Rainer Bruederle who tried to "rainer" on Greece's parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany "does not intend to give a cent" to Greece.  Of course Money McBags isn't falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle.  Also, some guy named Jean-Claude Juncker (and one can only hope he isn't a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece." Money McBags has been saying all along that Greece isn't going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless.  This Greek default hysteria has been a more overblown news story than Tiger Wood's love of filth or anything having to do with tea baggers that doesn't involve Kim Kardashian.

In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s.  The market is in full blast off mode as the economy is not getting worse today, just getting sideways.

In small stock news, everything is fucking up so good on you for owning anything that is publicly traded.  Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call.  The stock is down 50% in the past 3 months after a massive rally on expected sales improvement.  Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some).  NTRI's Q was actually not too bad.  Without one time charges they earned $.18 on a shrinking sales decline of only 7%.  These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year.  The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it.  The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone.  They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps.  That is a bigger let down than for a gold digger who married into the Madoff family.  Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel.  So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates.  Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results.  While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers.  Look, I'm no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets?  Really.  It's like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture.  Either way, the company is back down to where it was in October before the anticipation of better things to come.  That said, if we step back for a second and look at the company, it's actually not a terrible buy right now.  Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that.  NTRI has a 4.5% dividend yield and spits out a ton of cash.  The company is trading at an EV/EBITDA of around 6x last year's EBITDA and with guidance for 2010 in the same range, the multiple should be the same.  Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them.  NTRI has fixed some of their operations and still has solid brand equity and remains profitable.  It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o' fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down).  Anyway, do your own research here but more than anything, enjoy the weekend.

No comments: