Stocks in the News — week of November 4, 2013 (Nov. 8th update)

 

Priceline Reports Third Quarter EPS up 48% Year-Over-Year

(PCLN, $1072.47, up $49.58 near the close)

Priceline.com reported third quarter earnings per share (EPS) of $17.30 vs. consensus $16.15 and last year’s $11.66; with gross travel bookings up 37.5% vs. a year ago.  The company also announced a CEO change as of January 1, 2014.

Reuters reported eleven investment firms raising their price targets on Priceline shares today.  I would like to take this opportunity to say that investors should ignore price targets coming from fundamental analysts, because the numbers are more often than not a belated reaction to good/bad news, pulled out of thin air, and overly cautious.  I would, however, pay close attention to anything that technical analysts have to say about potential price movement.

Subscribe now to read today’s buy/hold/sell recommendation, and my recent report on PCLN shares.  (11-08-13)

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Time Warner’s Third Quarter Exceeds Expectations

(TWX, $66.48, down $1.21 midday)

Time Warner Inc. reported a strong third-quarter yesterday.  Adjusted earnings per share (EPS) came in at $1.01 vs. the consensus estimate of $0.89, and last year’s $0.84.  Revenue gains came in on target, led by growth in advertising and cable network subscriber fees.  Share repurchases were $1.08 billion for the quarter, and are expected to total $3.65 billion for the full-year.

Morgan Stanley commented today, “We continue to find shares attractive given (1) accelerating growth from ’14-’16, (2) multiple sources of margin upside vs. consensus, and (3) the benefits of above-average financial leverage.”

The spin-off of Time Warner’s publishing group, Time Inc., will take place in the second quarter of 2014.

Subscribe now to read my buy/hold/sell recommendation from today, and my recent report on TWX from October 7.  (11-07-13)

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Merck Muses Over “Sum of the Parts” Strategies

(MRK, $45.77, up $0.41 midday)

Merck & Co. Inc. is considering spinning off its animal health and consumer products divisions in order to unlock shareholder value, a Wall Street euphemism for “increasing the share price”.  Generally speaking, large multi-national companies often find that their stock is worth more when they employ a “sum of the parts” strategy via spin-offs, as shareholders end up owning stock in two or three companies, rather than only the parent company.

Recent successful spin-offs include the Abbott Labs (ABT) spin-off of Abbvie Inc. (ABBV) and the News Corp. (NWSA) separation from 21st Century Fox (FOXA).

Wall Street expects Merck’s earnings per share to fall 9% this year, then climb 1%  and 8% in 2014 & 15.  The dividend yield is 3.76% and the PE is 13.1.  

Merck’s stock is on a very slow multi-year uptrend, currently on a pullback to May 2013 support levels.  

Not only is there no compelling reason to buy Merck shares, but I would consider selling as the stock approaches near-term resistance at $49, unless a stock spin-off is announced in the interim.  At that point, I would re-examine the wisdom in holding MRK and waiting for the spin-off vs. selling MRK and reinvesting in a growth stock for capital gains.

Read more about today’s news from Bloomberg:  Merck Seen Unlocking $13 Billion with Breakup.

Read my recent report on Merck & Co.

Goodfellow LLC rating:  Hold, Public.  (11-06-13)

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Send questions and comments to research@GoodfellowLLC.com.

Happy investing!

Crista Huff

President

Goodfellow LLC

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