Among the biggest losers in Tuesday's early trading are
Patriot Coal (NYSE:
Top Percentage Losers -- Tuesday, June 22,
Company Name (Ticker)
|Patriot Coal (NYSE:
*Table includes companies with minimum market
capitalizations of $200 million and three month trading
volumes of at least 100,000 shares. All percentage returns
are listed as of 12:20PM Eastern Standard Time . Click on
ticker symbols for up-to-the-minute price quotes and
percentage gain data.
Another Shoe drops for Walgreen
Fast on the heels of a dust-up with rival and partner
CVS Caremark (NYSE:
just delivered a sobering bit of news Tuesday morning: Quarterly
sales are weak and expenses are too high. That combination led to a
profit shortfall, pushing shares down -6%.
Some of the weakness is beyond management's control. For example,
it was a mild flu season, reducing store traffic. And the recent
acquisition of the Duane Reade pharmacy is leading to temporarily
bloated integration expenses. But the biggest factor here may be
that this industry is simply too crowded. Pharmacy chains are now
ubiquitous, and as more stores keep opening, they are cannibalizing
sales from existing stores. Excluding prescription drugs,
Walgreen's same-store sales rose just +0.1%, which after accounting
for price increases means unit volumes are dropping.
Walgreen is remodeling stores at a fast pace to boost sales, but
early results have not been promising. We'll get a truer picture of
the company's margin profile and sales execution once that process
is complete and the Duane Reade stores have been fully integrated.
Action to Take -->
Right now, this is a "show-me" stock, and shares are unlikely to
find favor until management can point to more impressive sales and
profit trends. And that may not happen for quite awhile
Patriot's Mine Woes
In the business of energy exploration, stuff happens. Damage to a
key property can lead to reduced output and rising costs, as we've
seen with the
Patriot Coal (NYSE; PCX)
is today's poster child for technical troubles. The company's
Harris Mine had a recent roof cave-in, leading management to
announce Monday evening that the damage is irreparable and
coal-mining at that site will cease. That's pushing shares down
more than -10% in Tuesday trading.
This mine was nearing the end of it useful life and was set to
close next year anyway. And unlike BP, Patriot Coal took action
PRIOR to any major problems, and isn't facing any liabilities. But
it is still a big deal. The Harris Mine produced high-grade
metallurgical coal that fetches a premium for its use in
steel-making operations. So analysts' estimates need to come down.
Analysts at Brean Murray think per-share profits will be shaved by
$0.40-0.60 both this year and next. (Notably, their lowered 2011
forecast of $1.38 a share in earnings is still well above the
Only a handful of mines can produce this high-grade coal.
is one operator, and could benefit from rising prices now that
supply has been reduced. Shares of ANR are flat on Tuesday, and
have fallen nearly -30% since mid-April on concerns that steel
production may cool off.
Action to Take -->
Both of these stocks look attractive, trading at less than five
times earnings before interest, tax, depreciation and amortization
(EBITDA) (on an
Resources may be the stronger near-term play, as analysts start to
boost estimates on the basis of higher metallurgical coal
Weak Housing Starts
Dampen the Sector
of the National Home Builders slumped to a three-month low,
according to just-released data. As feared, the expiration of
home-buyer tax credits has led to yet another housing slowdown.
That's causing pain for homebuilders - and the materials suppliers
that benefit from new home construction.
USG Corp. (NYSE:
, for example, is seeing its shares fall -5% on the downbeat news.
The company, which provides sheet rock made from gypsum, is on
track to keep losing money until new home construction takes off.
The company is on track to lose more than -$2.50 a share for the
second straight year, though losses are expected to moderate in
Action to Take -->
When the housing market turns around, USG should go back to earning
$2 or $3 a share. This is a name to watch when housing starts to
improve, as it has a huge amount of operating
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.
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