Stock Hits & Misses

It’s no secret that 2009 took its toll on business. A look at publicly traded companies with headquarters in the Ozarks shows which ones used the challenging economy to restructure and develop new strategies, and which came out of 2009 on top.

When companies are faced with a stale or declining economy, the tendency is to focus on bottom-line growth or reducing costs, said Andy Stewart, managing principal at Waddell & Reed Inc.

“When companies have to evaluate their spending, it’s possible that they end up with a stronger balance sheet when the economy starts expanding again,” he said.

Here’s a look at area companies that are ironing out balance sheet kinks and the ones that spent 2009 in growth mode. What does 2010 hold? Time will tell, but public companies make predictions.

Expansion Mode

O’Reilly Automotive Inc. (Nasdaq: ORLY)

The sector: Car parts and accessories retailer

The numbers: O’Reilly reported a 36 percent increase in 2009 revenues to $4.85 billion compared to $3.58 billion in 2008. Earnings per share increased to $2.26, up from $1.49 in 2008. The company’s debt-to-equity ratio is 0.27. Stocks traded at a high of $42.93 in 2009 and a low of $26.47.

The upshot: O’Reilly increased its store count to 3,421 in 2009 and opened two distribution centers. The company plans to add three distribution centers during the first half of 2010. Standard & Poor’s analysts predict increased buying power with vendors and efficiency improvements because of the additional centers. And the economy should continue to work in O’Reilly’s favor, Stewart said, since people are less likely to buy new cars and will spend more on upkeep of their existing vehicles. The company predicts a 3 percent to 5 percent revenue increase in 2010, which at first disappointed analysts.
O’Reilly shares closed Feb. 25 at $39.50.

Jack Henry & Associates Inc. (Nasdaq: JKHY)

The sector: Software provider for banks and credit unions

The numbers: Jack Henry’s year-to-year earnings per share continue to increase, with fiscal 2009, which ended June 30, at $1.23 compared to $1.17 in fiscal 2008. S&P estimated earnings per share for fiscal 2010 at $1.36. The company’s debt-to-equity ratio is 1.0. Its highest stock price in 2009 was $24.66, with a low of $14.29.

The upshot: Increasing revenues and gross profits, as well as the company’s October acquisitions of Pemco Technologies and Goldleaf, put Jack Henry in a good position for 2010, Stewart said, though he pointed out that most analysts list the company as a hold.
“The company looks positive, it looks like it’s going in the right direction, but there are always a couple of factors that go into buying,” he said. “One, is it a good time to own? Two, is it a good time to buy?”
S&P projects fiscal 2010 revenues to increase 11 percent, with $75 million attributed to the Pemco and Goldleaf acquisitions.
Jack Henry shares closed Feb. 25 at $22.58.

Restructuring & Rethinking

Leggett & Platt Inc. (NYSE: LEG)

The sector: Home, office and commercial furniture manufacturer

The numbers: Despite a 25 percent decrease in revenue in 2009 compared to the previous year, earnings per share remained relatively flat, with 2009 hitting 74 cents, compared to 73 cents in 2008. Leggett’s debt-to-equity ratio is 2.3. The company’s full-year gross margin was 20.6 percent, its highest since 2000, according to a company news release. In 2009, Leggett & Platt shares traded at a high of $21.44 and a low of $10.03.

The upshot: Of the southwest Missouri-based companies that needed to take a hard look at operating expenses, Leggett & Platt benefited from an early reorganization process that started in 2007. By 2008, the company was selling operating units and by the time the recession hit, it had cash available from those sales, said Michael Smith, partner at Kansas City Capital, noting the company is positioned as best as it can be considering the products it manufactures. Smith projects revenues will remain relatively flat in 2010. S&P analysts agree, and they predict a 6 percent increase in 2011.
Leggett shares closed Feb. 25 at $18.85.

Paul Mueller Co. (OTC: MUELPK)

The sector: Stainless steel manufacturer

The numbers: Paul Mueller’s year-end price of $20.10 per share in 2009 was its lowest in more than 10 years and 59 percent lower than its 2008 closing price of $34. Its debt-to-equity ratio is 145.6, compared to an industry debt-to-equity of 43.5, according to Reuters. Mueller shares traded at a high of $34 in 2009 and a low of $15.90.

The upshot: Mueller officials spent 2009 shifting the company’s focus from top-line growth to bottom-line savings. Among the moves: staffing cuts reduced annual expenses by $13 million; installation of an Enterprise Resource Planning system eased the tracking of orders and production costs; and a new agreement with the Sheet Metal Workers union that included a revised health care plan and an agreement by staffers to forgo a wage increase that was scheduled to take effect in April 2009.
Mueller shares closed Feb. 25 at $22.

GuildMaster Inc. (OTC: GLDU.PK)

The sector: Home accents designer and manufacturer

The numbers: GuildMaster stock ended 2009 with a closing price of 6 cents per share. While the year-end price was 2 cents higher than its 2008 closing price, the company underwent a 1:5 reverse split in November 2009. The company’s stock hasn’t been above $1 since May 2004, though as recently as March 2008, its closing price, adjusted for dividends and splits, was $1.05.

The upshot: GuildMaster, formerly Decorize, spent 2009 reworking its business plan. The company committed to maintaining $2 million in warehouse merchandise for quick shipment to customers and doubled its showroom space in its major markets. While Waddell & Reed’s Stewart noted there wasn’t enough financial information to comment on GuildMaster specifically, he said as a general rule, businesses increasing availability of a product can be seen as a positive move.
GuildMaster shares closed Feb. 25 at 6 cents.[[In-content Ad]]