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Morningstar Alert: AIN Failed to meet EPS estimates again

AIN
01-30-06 09:14 PM
Failed to meet EPS estimates again
For the past two fiscal quarters, this stock's reported EPS has lagged the consensus EPS estimates. For details, go to
http://quicktake.morningstar.com/Stock/earningsestimates.asp?Symbol=AIN

AIN has fundermental trouble in both high expense, high raw materials cost and shrinking product demand. This is a downtrend stock. It is overvalued and I am in short position.
 
Comment on AIN based on its earnings report:

I believe AIN is overvalued and is on the downtrend channel and should be traded lower than $30. It is a good short candidate. Following is my analysis:

AIN lower its fourth quarter earning estimation and guidance two weeks before they announce a positive result. Read carefully what CFO said, the surprise is due to less than expected compensation and tax cost. The positive earning is not from strong business or operating income. If it were not the tax and compensation, AIN's earning will be very urgly.

Also pay attention that CFO confess that the energy cost is a big concern to their business also analysts report that raw material's price is much higher than before and paper price is lowing. The demand of AIN's products is shrinking (you can compare 2003-2005 financial statement) and invetories increased. In addition, AIN also invest and require other companies which will cost the company's significant amount of cash. AIN's paper business tanking force them to switch their business midel and put more investment into applied technologies area. Switching business model is risky.

Valueline Analyst downgraded AIN from 3 to lowest 5 and Morningstar reports that AIN miss again its EPS estimation. Exclued the "surprised" tax and compensation save, AIN has a very negative earnings for fourth quarter. Also company lower its guidance for 2006 which give hits that the earning for 2006 Q1 won't be as lucky as this time.

Here is the earnings report that I reference:

"The latest results came as a surprise because company officials had predicted less than two weeks ago that earnings per share for 2005 would be $2.18.

During a conference call Friday, Michael Nahl, the company's chief financial officer, said the difference was due to the fact that compensation and tax costs had been less than anticipated. He said Albany International wouldn't make earnings projections again in the future.

For the fourth quarter, the company earned $14.1 million, or 44 cents a share, on sales of $247.9 million, up from $12.0 million, or 38 cents a share, on sales of $238.4 million in the 2004 quarter.

Fourth-quarter earnings were negatively impacted by higher petroleum costs and pricing pressure in Europe, according to the company. Those two factors decreased fourth-quarter earnings by 20 cents a share.

Chief executive Joseph Morone said high energy costs will not go away, but the company has put a new management team in place in Europe that will correct the pricing issues.

At the time it made earnings projections earlier in the month, Albany International also announced plans to invest $150 million over four years in manufacturing facilities in Asia and Latin America. Morone said that especially in Asia, margins are higher on products made in the region. ?
 
Motley mentioned AIN's problem in early Oct 2005 and all those concerns turn out to be true in AIN's 4Q announcement and somber guidance for 2006.
Oil price will not be reliefed soon and this will keep increasing AIN's cost.Also paper industy is on the downtrend due to the fond of paperless.

Also in Cramer's recap he point out that "Albany's stock, which is near a 52-week high, is expensive, said Cramer. Cramer is not a fan of any other publicly traded U.S. textile stocks. "They're all bad companies," he said. "For a bad company in a bad spot, good news like this is not enough," he said."

Here is what motley said about AIN:

"Those are solid numbers, but investors aren't impressed. The firm's shares had fallen about 2% in Monday morning trading.

Why so? Well, while CEO Frank Schmeler remains sanguine about his company's future prospects, he also sounded some cautious notes in the earnings announcement. Among other things, Schmeler characterized market conditions for Albany's doors unit as "mixed" because of slow economic growth in Europe. In addition, he noted "increased concern" and predicted slowing sales for the company's engineered fabrics division, which manufactures products for the pulp and paper industry.

That latter concern, however, is based partly on currently high energy costs. If those prices ebb -- as history and falling gas-pump prices suggest they will -- that should help mitigate some of Schmeler's concerns, all while helping Albany International's investors continue their peaceful slumber.
"
 
The whole paper clothing industry is taking its step toward south due to shrinking demand around the world. Look at Textile Industrial (^YHOh809) sector index, it is turning red in the last several trading days. AIN not only in the downtrend industry, but also has more serious problem with higher cost in raw materials. From the RA and TA, AIN is the worst company in the paper clothing industry. With market it red, AIN is the stock you can make cash by shorting. From its TA chart, its next bottom will be around $33-34.
 
The Paper & Paper Products group's technical rating of E ranks. AIN receives an overall rating of D+, which is in the 50th percentile of all stocks in the Investor's Business Daily database. (E is the Lowest and A is the highest). From AIN's 52 high $40, it has strong selling presure, by looking its weekly chart, obviously a downside trend. A good short sell stock to hedge market downside risk.

IBD Stock Checkup Analysis:
Albany Intl Corp Cl A receives an overall rating of D+, which is in the 50th percentile of all stocks in the Investor's Business Daily database. The overall rating is calculated using five proprietary ratings that measure each stock's Technical and Fundamental qualities and the Technical and Fundamental qualities of the industry group that it resides in, as well as a rating on the stock's current price attractiveness.

Albany Intl Corp Cl A receives a Technical Rating of 63, which places it 9th out of 41 stocks in the Paper & Paper Products group.

Albany Intl Corp Cl A receives a Fundamental Rating of 62, which places it 3rd out of 41 stocks in the Paper & Paper Products group.

Albany Intl Corp Cl A receives an Attractiveness Rating of 72, placing it 6th out of 41 stocks in its group.

The Paper & Paper Products group's technical rating of E ranks it in the 9th percentile of the 197 different Investor's Business Daily Industry Groups. The Paper & Paper Products group's fundamental rating is E, ranking it in the 9th percentile of all groups.
 
In RHEO under $4. A 70% cut last Friday due to unsatisfied result of its Phase III trail. Do some number and you will see its not risky now to buy. Total outstanding 42M shares and floating only 15M. Last Friday there was 21M shares traded and today has 3 more shares done. under $5 is unshortable and most of shares been sold which means no more shares to sell.

The unsatified result is due to the unusual placebo group response make the diffence between placebo group and drug testing group not significant. But the drug testing group do show positive results. Since the problem is from the not significant difference, RHEO will redo the trial and will update the data later. RHEO is not a dead fish and just like ELN. I am in it here for a rebounce play. No target yet, but will see.
 
MPS will announce earning Feb 8. It is good time get in now. Look at ACN, its good earning is an signal to IT outsourcing industry. My model shows 16 cents for 4Q and total 53 cents for year 2005. I am pretty sure MPS will give a strong guidance for 2006 base on global IT outsourcing trend. $14 is a cheap price for MPS. I am aiming for $16-18 for 3 months.
 
WDC and EMC will be the next AMD and INTC. Data storage sector will be the fashion in wall street soon. Over the next several years, demand for storage technology should continue to be fueled by the explosive growth of data, and data security and compliance concerns.

Despite intense competition and some natural slowdown in EMC's top-line momentum as the revenue base gets larger, the company appears well positioned to make the most of the healthy growth in the storage arena.

WDC to gain market share in the mobile hard-drive arena and continue to bring new products to the market through the 2008-2010 period.

I am holding EMC and WDC as data storage sector, you can also look at STX and MXO which both of them already up too much. EMC is the best play here.
 
Still not late to buy back RES after oilfield sector porfit taken last week. RES will announce its earning and guidance next week, it will be a big jump. Oilfield sector getting hotter and hotter. It doesn't matter whether oil price goes up or down, oilfield equitments always are demanded. RES is definated worth > $40.

Here are all the oilfield stocks, after comparing other companies, you will see RES is the best one base on its TA and cost benifit ratio:

BHI DO HAL MS NE RDC RES SLB WHQ SII GSF RIG TKP ESV BJS
 
MPS bears by 3 cents.Price up. I believe Analysts will upgrade MPS soon due to MPS's IT outsoursing business and 2006 guidance. My target for MPS is $22.

Earnings rose 77 percent to $20 million, or 19 cents per share, from $11.3 million, or 11 cents per share, a year earlier.

Analysts on average expected profit of 16 cents per share, according to Reuters Estimates.

Revenue rose 1 percent to $425 million, compared with estimates of $431 million.

The company said it expected first-quarter revenue of $420 million to $435 million, compared with analysts' estimates of $434 million.
 
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