March 25, 2008
Knobias Clip Report (03-24-2008)
By admin
Submitted By Knobias ClipReport
TUES: Shares Gain on Positive Home Sales Data
Monday’s session saw a continuation of the rally seen on the Thursday with the continuation of the slowdown in the commodity rally as well as positive sentiment in the financials with the raised bid price on Bear Stearns by JP Morgan.
Also increasing investor sentiment were upbeat home sales numbers. The National Association of Realtors reported sales of existing homes in February rose for the first time in seven months. The number rose 2.9% to a seasonally adjusted rate of 5.03 million which beat the 4.85 million pace expected by economists. Inventories of unsold homes fell 3% to 4.03 million which represented a 9.6 month supply at the February sales pace. The increase in sales was coupled with a decrease in prices which fell to $195,900 which was down 8.2% from a year earlier.
With housing and the consumer retail stocks falling over the past year in close correlation, the same can be said for their bounce back. With that in mind, one name that might be wise to watch for a bottom in housing is Tuesday Morning Corporation (TUES).
The Company is a closeout retailer of upscale home furnishings, housewares, gifts and related items in the United States. Their 790 locations across the US specialize in selling deeply discounted home accessories.
The name had been under fire with the decline in consumer confidence and the housing market debacle. In January the Company reported some declining numbers which confirmed the weak environment it was enduring.
Net sales for the second quarter ended December 31, 2007 were $308.7 million compared to $321.3 million for the quarter ended December 31, 2006, a decrease of 3.9%. Comparable store sales for the quarter ended December 31, 2007 decreased by 7.6% comprised of a 7.2% decrease in traffic and a 0.4% decrease in average ticket. The sales numbers resulted in earnings of 50c a shares versus 57c a share in the year before quarter.
In the second quarter release, the Company guided for net sales of $920 million to $940 million and earnings of 55c to 62c for the year.
Kathleen Mason, President and Chief Executive Officer, stated in the press release, “We are aggressively responding to the pressures of the home furnishings macro environment. We believe the flexibility of our format will enable us to continue generating positive cash flows and long term profitability.”
In February, the Company terminated their dividend to preserve cash and noted that it would consider other alternative for its excess cash flow in the future. The move caused shares to plunge which might have been the formation of a bottom. Over the past year, shares have fallen from the $15 area to the $5 range and on Monday, crossed their 50 and 20 day moving averages on a 7% gain fueled by the positive home sales news. With any continuation of positive housing data, the name could be one to follow over the coming months. Investors would be wise to watch.
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