FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay

Can Tupperware Party in 1998?

When asked about the company, any investor that still has faith in the future performance of Tupperware (NYSE: TUP) invariably begins the investment thesis with its "great brand." Indeed, the international manufacturer and direct seller of food storage containers is among a select group of companies whose name is synonymous with the product itself. The company has operations in more than 74 nations and its products are actually sold in more than 100 foreign countries. Of course, the benefits derived from infiltrating the ranks of the burgeoning middle-class hordes around the world is offset by multiple and varied currency exposure, as well as potential economic blowups (although the risk is normally diffused). Yesterday, Tupperware reported net income of $15.4 million in its first quarter of 1998, or $0.26 per share, which was $0.01 ahead of estimates.

The results were 38.1% below prior-year EPS numbers, but only down 21.6% net of foreign currency losses. In addition, the firm showed signs of strength in the U.S. (2.6% revenue gain), which continued the trend begun in the fourth quarter. Tupperware currently trades at 15 times its very distant 1998 EPS estimate of $1.68, which is quite a discount to the premiums afforded more successful consumer brands. Spun-off from food equipment and appliance maker Premark International (NYSE: PMI) in May of 1996, Tupperware has continued to struggle primarily due to lower priced "knock-offs" flooding large discount chains and taking market share from the company. However, the company has responded by aggressively expanding its product line as well as introducing new designs and colors and engaging in licensing arrangements.

There are signs that currency woes may be bottoming out in the Asia-Pacific region, and the company has some easy earnings comparisons going forward. Assuming the company makes the estimates for 1998 earnings ($1.68 * 60.5 million shares with no more buybacks) of $101 million, it will generate sizable cash flow of $169 million (adding back depreciation & amortization of $68 million and assuming no deferred taxes). With this stash the company can make roughly the same amount of capital expenditures to sustain its business ($68 million) as well as pay its hefty dividend ($60 million), which currently yields 3.34%. When including the current buyback total of 2.6 million shares in the first quarter, the company will probably not be free cash flow positive in 1998 (no changes in working capital), but will be in a solid position to keep generating its strong returns on average capital of 22%. This coupled with continued international expansion (the company entered Russia and Turkey in 1997) may have investors in Tupperware smiling by the new year.

UPS

IBM (NYSE: IBM) picked up $3 15/16 to $115 1/8 after reporting fiscal Q1 EPS of $1.06 versus $1.16 a year ago, beating the Street estimate by a penny. Revenues rose 2% to $17.6 billion in the quarter, while net income slipped 20% to $1 billion, due in part to currency translation and weakness in Asian markets.

Fundtech Ltd. (Nasdaq: FNDTF) gained $2 3/8 to $24 3/8 after the payment and cash management software developer agreed to acquire the cash management and wire transfer businesses of CheckFree Corp. (Nasdaq: CKFR) for $18.25 million in cash. Fundtech also reported Q1 EPS of $0.03, beating the First Call mean estimate by $0.02.

Wireless equipment systems company Telxon Corp. (Nasdaq: TLXN) was lifted $6 13/16 to $34 1/2 after The Wall Street Journal reported that bar code scanner technology developer Symbol Technologies (NYSE: SBL) offered to buy the company for as much as $38 per share. The price represents a 37% premium to Telxon's closing price of $27 11/16 yesterday. Symbol's CEO told Reuters this morning that the company wants a "friendly, negotiated deal" for Telxon. Symbol was also up $1 9/16 to $37 9/16.

Internet auctioneer ONSALE Inc. (Nasdaq: ONSL) was bid up $2 1/8 to $31 7/8 after agreeing to become the "premier auction content provider" for the Yahoo! Computers site launched today by Internet content aggregator Yahoo! (Nasdaq: YHOO).

Market Guide (Nasdaq: MARG) shot up $18 11/16 to $26 11/16 after announcing it will provide stock screening and other financial information to America Online's (NYSE: AOL) investment research area.

Internet video transmission technologies firm InterVU Inc. (Nasdaq: ITVU) tacked on $3 5/8 to $28 3/4 after General Electric's (NYSE: GE) NBC television network launched its VideoSeeker on-demand Internet video service, which will be managed by InterVU.

Relational database management software developer Red Brick Systems (Nasdaq: REDB) added $2 1/16 to $7 3/16 after online bookseller Amazon.com (Nasdaq: AMZN) chose the company's Red Brick Warehouse to provide data warehousing services.

EMC Corp. (NYSE: EMC) rose $2 1/16 to $41 9/16 after Bear Stearns started coverage of the computer storage systems manufacturer with a "buy" rating.

Atlanta-based bank and thrift holding company Premier Bancshares (AMEX: PMB) gained $1 to $26 after Interstate/Johnson Lane upgraded the company to "strong buy" from "long-term buy."

Lincare Holdings (Nasdaq: LNCR) moved up $4 13/16 to $79 3/16 after the home healthcare firm company set a two-for-one stock spilt.

Internet investment company CMG Information Services (Nasdaq: CMGI) advanced $6 5/8 to $101 1/2 after announcing a two-for-one stock split.

Earnings Movers

Sundstrand Corp. (NYSE: SNS) up $5 1/4 to $64 15/16; Q1 EPS: $0.88 vs. $0.58 last year; Estimate: $0.73

Ben & Jerry's Homemade (Nasdaq: BJICA) up $1 3/8 to $20 1/8; Q1 EPS: $0.05 vs. $0.15 loss last year; Estimate: $0.01 loss

Citrix Systems (Nasdaq: CTXS) up $4 3/8 to $58 7/8; Q1 EPS: $0.36 vs. $0.18 last year; Estimate: $0.34

MedQuist Inc. (Nasdaq: MEDQ) up $3 1/2 to $45; Q1 EPS: $0.23 vs. $0.15 last year; Estimate: $0.19

Network Associates (Nasdaq: NETA) up $6 1/2 to $70 3/4; $0.56 vs. $0.18 (before charges) last year; Estimate: $0.54

Physio-Control International (Nasdaq: PHYS) up $3 to $21 5/8; Q1 EPS: $0.16 vs. $0.15 last year; Estimate: $0.10

Information Analysis (Nasdaq: IAIC) up $3/4 to $16; Q1 EPS: $0.01 vs. $0.07 loss year ago; Estimate: $0.06 loss

DOWNS

SmithKline Beecham (NYSE: SBH) lost $3 to $57 7/8 after the British pharmaceutical company reported first quarter earnings per American Depositary Receipt of about $0.43 per share compared with $0.40 for the prior-year period. The First Call mean estimate was $0.47. The company's sales were hurt by an "unusually low incidence of respiratory illness." The company plans to increase R&D investment by 16% to 17% and thus expects low double-digit EPS growth this year.

Digital signal processor manufacturer DSP Group (Nasdaq: DSPG) plunged $3 5/16 to $21 1/8 after reporting first quarter earnings of $0.31 per share versus $0.21 for the year-earlier period. The analysts' mean estimate was $0.30, according to Zacks.

Industrial and automotive parts manufacturer Mark IV Industries (NYSE: IV) was cut $1 to $20 1/2 after announcing that it expects first and second quarter earnings to be $0.03 to $0.05 below last year's levels. The company added that fiscal 1999 (ending Feb. 28, 1999) earnings won't meet expectations and will fall in the range of $1.68 to $1.75 per share. That compares with $1.66 a share for the year before and the First Call mean EPS estimate of $1.83.

Prison management company Corrections Corp. of America (NYSE: CCA) dropped another $3 to $26 7/8 after yesterday announcing a merger with prison real estate investment trust CCA Prison Realty Trust (NYSE: PZN) in a stock swap valued at about $3.17 billion. As part of the deal, CCA also acquired privately held prison owner and management company U.S. Corrections Corp. for $265 million. CCA was down $3 5/16 to $34 3/16. PaineWebber downgraded Corrections Corp. to "neutral" from "buy."

Computer products direct marketer CDW Computer Centers (Nasdaq: CDWC) sank $7 1/8 to $53 3/4 after reporting first quarter earnings of $0.68 compared with $0.52 for the year-earlier period. Gross profit margin declined to 12.8%. The company said it expects gross margin to remain below 13% and it may decline slightly from the Q1 figure.

Earnings Movers

Reltec Corp. (NYSE: RLT) down $2 1/4 to $46 7/8; Q1 EPS: $0.06 vs. $0.04 last year; Estimate: $0.05

Remedy Corp. (Nasdaq: RMDY) down $7/16 to $24 5/8; Q1 EPS: $0.08 vs. $0.16 last year; Estimate: $0.06

Borden Chemicals and Plastics (NYSE: BCU) down $1 1/4 to $7; Q1 EPS: $0.22 loss vs. $0.12 loss last year; Estimate: $0.09 loss

APAC TeleServices (Nasdaq: APAC) down $1 1/8 to $10 3/16; Q1 EPS: $0.10 vs. $0.18 last year; Estimate: $0.11

Integrated Silicon Solution (Nasdaq: ISSI) down $29/32 to $9 13/32; Q1 EPS: $0.00 vs. a loss of $0.08 last year; Estimate: $0.03

Infinium Software (Nasdaq: INFM) down $2 1/16 to $17 9/16; Q2 EPS: $0.10 vs. $0.06 (before charges) last year; Estimate: $0.10

Zomax Optical Media (Nasdaq: ZOMX) down $1 1/2 to $18 1/4; Q1 EPS: $0.13 vs. $0.07 last year; Estimate: $0.10

IONA Technologies (Nasdaq: IONAY) down $2 3/4 to $32 7/8; Q1 EPS: $0.10 vs. $0.08 last year; Estimate: $0.13

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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool Editing Brian Bauer (TMF Hoops), another Fool Jennifer Silber (TMF Amused), Fool at last