Never trade on the headline news. It always come back to bite you in the #$%$. I see we were down about $3 out of the gate and are now up about $2.50. Someone threw away about $5.50. Wish i was that rich that I could throw away $5.50 per share.
We are back over $31 as WTI is pushing $44. SE, KMI & other pipelines and MLP midstream companies seem to trade with oil even though most of the assets are in natural gas and gas is increasing in usage.
MMM ran up in price during 2012 - 2014 and then hit the strong dollar. Since then we have basically back and filled going sideways. The PE fully reflects the stock price so splits will not entice people to buy more MMM. Volumes are higher because you have to buy 2X the number of shares to invest the same amount of money. Eventually the dollar will stabilize and growing sales will finally lift dollar denominated revenues and earnings. Reducing the share count also helps. They have great cash flow so unless there is a takeover of another company using cash it just piles up. They have been increasing the dividend at a good clip every year. If you are looking for big price action buy a Biotech or FB or TSLA.
I originally bought TIS for the divy and some capital gains. But as I started to see that they were going to be more than just a small regional player I continued to buy on the dips. I do not think a lot of share owners really have any idea what is happening and their growth plans. Unfortunately they had to swap out paper machines in OK while still trying to run the company which effected earnings. I think once things settle down and they get Barnwell up and running they should have the cash flow to expand into the Northeast and open a plant some place like PA where they can cover all of New England and the Middle Atlantic states and also pick-up Ohio. They really do not have to pick up much market share to propel the stock price into the $50 - $100 range over 4 or 5 years.
Actually there is a lot of growth due to CAPEX. Utilities profits are based on the rate base. All gas distribution companies are in the process of replacing their mains per the FERC and states must give them rates to match the investment. D also is placing aerial cable in the ground in out lying areas. Finally there is a lot of investment being dropped into the MLP and the purchase of STR. Lots going on.
More like $30. Its a small company that is in the process of expanding and now has some decent leadership. Based on what I heard on the conference call they have had to make a number of changes in their team and in procedures. Lots of moving parts in both the pacific coast and the Barnwell start up. I would expect the stock to move higher as they expand the business with pretty good margins.
Orchids Paper Products beats by $0.26, beats on revs (TIS) :
Reports Q1 (Mar) earnings of $0.56 per share, excluding non-recurring items, $0.26 better than the Capital IQ Consensus of $0.30; revenues rose 27.5% year/year to $47.7 mln vs the $43.22 mln Capital IQ Consensus.
"I am extremely pleased that, after achieving an approximate 20% improvement in sales and Adjusted EBITDA in 2015, we have continued to grow significantly in 2016, with a very strong performance in the first quarter... As we look forward into 2016, we will continue to make improvements in quality and cost although the normal headwinds associated with the start-up of our South Carolina facility could affect earnings for several quarters. Additionally, we exceeded our 20,000 ton annual limit under the Fabrica supply agreement in March. As a result, until the contract resets on June 1, we will share margins under the terms of the contract, which we expect will reduce our earnings in the second quarter by approximately $1.0 million compared to the first quarter."
The declaration date for the 2nd quarter dividend is the end of the 1st week of May (historically). The X-dividend date is about one week later and payout around the 1st of June. They have a very short time between declaration and payout.
As far as increase the CEO has said as recently as thios past quarter that they expect a minimum of 10% increase which would be about the same as last year or 6 cents per quarter (24 cents for the next 4 quarters). Since they have pretty much figured out what their capital structure will look like and have a good feel for cash flow the increase is now one time per year as with most companies. Even at this years low earnings per share estimate of $6.09 the company is still paying out only 40%. They can only invest so much and $9 billion in debt is low for a $45 billion market cap company. At the lowest rates on debt since the 1930's it is crazy not to use some leverage.
Even more importantly because it is in the midstream business it got pulled down with the MLPs. It is the ETF's that package a lot of garbage with some good stocks that screw things up. SE often gets lumped in with them. Actually SEP is one of the best MLP's. I also think the problems with DCP midstream also caused some problems last Fall.
I think it is hard for even the pro analysts to value this company. First it was a family of stocks that consolidated into one but was still being run like an MLP. The collapse of the MLP space drove down the price as traders looked at KMI as a quasi MLP. The price drop screwed up everything because they no longer could use the stock to help fun the CAPEX program w/o flooding the market with shares. I think the Buffett purchase stabilized things. There are a lot of opportunities in this business as the industry is still trying to provide pipelines to move gas from shale areas, provide gas to electric utilities to produce power and get gas to New England.
One of the things that hurts all of those companies is natural gas prices as a big part of their earnings came form gas. You get the impression that their problems are all due to oil prices. In addition COP has a lot of midstream and does make money from it. While most is from moving their own product they apparently save a lot of money transporting both oil and gas. OXY has pretty good midstream business plus the chemical company which helps pay their dividend. Over the long pull these businesses will be fine and in fact both OXY and COP have become much more efficient developing their property. Not just because they are squeezing the service companies but just better managed.
Two reasons: The biggest is the dollar has weakened to $1.1326 to the Euro so when companies report earnings in dollars they are higher plus it helps sales since Emerson does not have to raise prices to get the same margin results. Emerson does a lot of business in the Euro zone. Secondly, oil has rallied to WTI = $40.04 and Brent = $41.55. It appears that investors think that oil may go higher. Recent events seem to have scared the short sellers in oil out of the market and perception in investments is very important. As a result, higher oil prices could mean more business for EMR. The process control business has been getting killed on the reduction in oil and gas companies' reductions in their CAPEX. This may not happen immediately but again markets trade on perception and future growth.
Today the market is looking ahead and saying EMR earnings should do a lot better in the future due to the two things I high lighted above. The first reason however, is the biggest.
It is not an oil company. Their only exposure to commodities is through a 50% interest in DCP midstream. It is primarily a refiner with interests in chemicals, midstream and fuel marketing. In order for Buffet to take a 25% position in this company is traders have to be in the market constantly or they would drive the price through the roof. They still need to buy another 10% of the company to reach their filed goal with the SEC.
I have looked at lots of UTEs including OTTR years ago and did not like what I saw. I see that where most companies are close to all time highs that OTTR is off about $5 or around 15%.
SO & DUK are primarily electrics and have resisted getting involved with gas. Their interest in gas has a lot to do with owning some infrastructure to haul gas to gas fired electric generators.
VVC has increased the dividend by a larger % because they got rid of all the garbage businesses they owned where they were losing their shirts. Wholesaling business never made money and coal mining was even worse. They got involved in wholesaling when utility execs thought they could run non-regulatory businesses and do the same thing that Enron was doing. Duke almost went under 10 years ago. They had no business in those businesses.
MDU has had the same problem with oil exploration. The CEO and everyone involved should have been fired. Utilities are bought for stability not the ups and down of oil and gas exploration. They were greedy SOBs who thought it would help them jack up their salaries.
I do not think anyone can forecast the price of oil. Too many moving parts. The delta between supply and demand is less than in past oil cycles. Capital needed to keep supply up has been cut to the bare bones worldwide. The natural 3 - 5% decline in oil fields without massive reinvestment and about one million increase in demand each year will balance things and prices will go higher. I think traders are already starting to factor that in. Problem is as prices go higher how much new investment will come in to increase supply again.
Like OXY because they are very concentrated in the Permian, where they have their own midstream capabilities, and certain mideast areas where they just finished a big natural gas investment. The US advantage in feedstock is also helping their chemicals company.
Goldman is still trying to get the customers they convinced to short oil out of the market without getting killed. There must be some one out there orchestrating this short squeeze and smells blood.
Oil companies are interested in buying assets that make sense for them which usually properties that adjoin their existing oil fields. They want to develop economies of size. COP for example may actually buy or swap property that gives them economies and sell property where they do not have a big presence.
All three of the utilities have natural gas distribution businesses which is the real value. The POM merger is in question as to whether it will go through. The value in these mergers is the NG distribution business which has built in growth due to the requirement to replace the cast iron pipe which has become dangerous in recent years due to age. Utilities deferred this because states did not what to increase gas rates to customers. The FERC has put a gun to the heads of all state commissions and mandated that certain gas mains be replaced. It will take 20 - 30 years. Remember utilities make money on rate of return for their undepreciated investment. This is built in growth without adding a customer. Since NG is so cheap and plentiful in most of the US it is the perfect time to do this. VVC has said that over the next few years that between some growth and the pipe replacement that NG will make up 1/2 of earnings. Whoever buys VVC will just merge the electric into their company and reduce some cost through size. In the mean time VVC price will waffle around as growth continues and fear over competion from rising interest rates in bonds tugs in two different directions. VVC is my gas utility which I bought about 7 years ago when I moved to Indiana. I bought shares over time and am double what I paid. I also own D, NEE & WEC all of which are involved in both gas and electric. D & NEE also own pipelines.
Was at the LOW store in Avon, IN Monday . They do not have the outdoor section opened and stocked with plants yet. However they have a good selection of tracker / mowers and a full compliment of grills and other outdoor appliances. The salesman by the grills said things were moving.