Wednesday, July 29, 2009

3 Stocks With Accelerating Growth

Screens by Jack Hough (Author Archive)

J.M. Smucker

For a 112 year-old concern, Smucker (SJM: 50.61, +0.19, +0.37%) looks lively. In its fiscal fourth quarter ended April 30 the company increased sales 9%, or 81% including the contribution from Folgers coffee, which it bought in November 2008. Adjusted profit for the quarter swelled 40% to $1.02 a share. Wall Street had expected just 63 cents a share. Packaged food sellers in general have done well of late, with Americans eating more meals at home to cut costs. Smuckers sells staples like Hungry Jack pancake mix, Pillsbury rolls, Crisco shortening and of course its namesake peanut butter and jam. Coffee seems an especially strong performer for Smuckers. During the four weeks ended June 19 industry coffee sales increased less than 1%, while sales of Smuckers' coffees, including Folgers and Dunkin’ Donuts beans and grounds, rose 7%. The stock seems fairly priced at 14 times earnings and it carries a dividend yield of 2.8%. One mildly negative sign: With shares up 17% this year, company insiders have been cashing in stock options of late.

Marvel

This year was supposed to prove a difficult one for Marvel (MVL: 39.26, +0.12, +0.30%), since more than 30% of its sales come from economically sensitive consumer products based on its comic book heroes, and since none of the company’s sure-thing film franchises (Spiderman, X-Men) have releases scheduled. But Marvel’s first-quarter sales shot 75% higher on demand for "Iron Man" and "The Incredible Hulk" on DVD. Analysts still expect full-year earnings per share to shrink to $1.35 from $2.61 last year. That puts shares at a worrisome 29 times 2009 earnings. Wall Street’s early forecast -- guess, really -- is that 2010 earnings will rebound to $2.06. Even that figure puts today’s stock price at 19 times earnings -- pricey. Encouragingly, Marvel has topped analysts’ earnings forecast by an average of 36% over its past four quarters. But it will have to keep the upside surprises coming to justify the valuation.

LHC Group

Americans are growing fatter and living longer. Together, the two trends suggest steady growth in demand for everyday care for conditions like diabetes, high blood pressure and chronic pain. LHC Group (LHCG: 26.17, +1.23, +4.93%) dispatches aides to patients’ homes to help with housekeeping, bathing and meal preparation, and sends nurses to help with health care. The company also operates long-term care and rehabilitation centers. It targets rural markets, which tend to be underserved by other nursing agencies, and which skew older than cities. All is moving in the right direction for LHC at the moment except for its stock price. Sales are forecast to increase 33% this year and earnings per share 30%. Debt is negligible. But shares have lost 31% year to date. An ongoing government review of the company’s Medicare business, expected to wrap up by the end of the third quarter, is likely making stockholders nervous, although analysts believe the matter relates to documentation problems, not inappropriate levels of service. Also, health-care companies of all sorts have depressed valuations at the moment as Congress ponders a greater role for government in medicine, at the possible expense of business. Perhaps the fears are already priced into the stock and then some. It goes for just 11 times earnings.

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