Among the biggest winners in Tuesday's early trading are
PVH Corp. (
Shares of rare earth-mining firm Molycorp have finally landed on
Terra Firma, rallying more than 7% this morning. That's cold
comfort to investors who have seen the stock plunge from $70 in the
spring of 2011 to below $10 in recent sessions.
This miner has been beset by a litany of woes, from missed
production targets to higher-than-expected mine development costs.
Management miscalculated the burn rates and waited too long to
shore up a flaggingbalance sheet , so the company is currently
seeking to raise $480 million in fresh capital.
While the company lines up fresh investors, it was at least able
to deliver some good news: Molycorp just announced that a key mine
in northern California is expected to come on line before the end
of the year, which should help to start to bring in some
Trading at less than 20% off its52-week high , shares may
eventually have robust rebound potential. Yet it's unwise to buy
into a stock while a company is still seeking to raise funds, so
this is a good opportunity to research this stock and make a
decision once the financing efforts are completed.
One way to top estimates
If a company delivers quarterly revenues, expenses andprofit
margins right in line with estimates, then how can it deliver
better-than-expected bottom-line results? By shrinking the share
count even faster than analysts had expected. That helps explain
why apparel vendor PVH Corp. (formerly known as Phillips-Van Heusen
Corp.) was able to beat the $1.20 earnings-per-share (EPS )
consensus by a nickel.
Shares are rallying -- to a 25-year high -- on management's
decision to raise fiscal (January) 2013 EPS guidance to around
$6.25-6.30 a share, from a previous estimate of $6.15-$6.25. That
would represent a solid 17% jump over fiscal 2012 levels. PVH is
benefiting from strong global demand for licensed apparel by
designers such as Tommy Hilfiger and Calvin Klein. Stunningly,
European sales were up 15% from a year ago. As we saw on Monday,
Aug. 27, with
Tiffany & CO. (
, European consumer spending -- at least among well-heeled
consumers -- appears far more resilient than many would have
expected. "The team continues to deliver the right product at the
right time and is elevating the brand and price points," notes
Lazard's Diana Katz, who sees shares moving up to $97.
Shares of watch maker Movado are up even more sharply -- nearly
20% -- though sales growth wasn't quite as impressive as that seen
by PVH. Instead, a very tight lid on costs led to excellent
bottom-line results. Movado earned $0.32 a share, well ahead of the
$0.18 a share consensus forecast, and raised EPS guidance for the
fullfiscal year by a commensurate amount. Investors shouldn't be
too surprised: Movado exceeded EPS forecasts by at least 50% in
three of the past four quarters.
Still, the stunning rally may be partially due to ashort squeeze
as investors have been betting against retail names. And with this
stock shooting sharply past its 52-week high this morning,
investors may want to wait to see if a market-induced pullback
brings this stock back to earth.
Action to Take -->
Among these three, Molycorp appears to be the most intriguing stock
for major upside. Demand for rare-earth minerals is likely to keep
growing at a solid clip, and as long as China maintains a lid on
rare-earth exports, Molycorp could line up solid demand for all of
its output. Still, waiting for the current round of capital raising
to be completed appears prudent.
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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