Boring Portfolio

Previewing Earnings
... from Andrew,
Carlisle & Pentair

By Greg Markus
(TMF Boring)

ANN ARBOR, Mich. (July 15, 1998) -- The Boring Portfolio advanced 0.44% Wednesday ahead of quarterly earnings reports due tomorrow morning from three of the eight companies in which we hold equity stakes. We'll be covering the follow-up conference calls for all three and will provide you with timely summaries.

First up is Andrew Corp. (Nasdaq: ANDW). Its stock was up today, as well, rising $13/16 to a bid of $17 15/16.

As you may recall, back on June 17 Andrew warned that results for its fiscal third quarter would fall short of analysts' expectations. The company attributed the shortfall to slower spending in the U.S. wireless infrastructure market and in Southeast Asia.

At that time, Andrew's management estimated that sales and diluted earnings per share for the June quarter might be 5% to 10% below last year's quarterly sales of $209 million and diluted EPS (excluding one-time charges) of $0.31. That suggests sales in the neighborhood of $190 million and EPS of $0.28. The latter figure jibes with what Zack's and I/B/E/S are showing.

No question about it, Andrew has been a disappointing investment so far this year. And I'm under no illusion that the situation is likely to improve noticeably in the next quarter.

A new fiscal year begins for Andrew on October 1, however, and there is, I believe, a reasonable prospect of seeing sales and earnings perk up in FY99, particularly if the PCS buildout picks up steam in the U.S. and if strong consumer interest in Internet connections via cable modems spurs the necessary infrastructure investment.

As for a worse-case scenario, it's difficult for me to see Andrew's stock heading much lower. After all, Andrew is not some crazy uncle locked in the basement. This company is a leading provider of cable, antennas, and related products that are essential to the global communications industry. The company also has little debt, $118 million in cash and equivalents at the end of last quarter, and sports a return on equity north of 20%.

I look forward to seeing Andrew's quarterly report Thursday morning and listening to what the company has to say in the follow-up conference call.

I also look forward to finding out how Carlisle Companies (NYSE: CSL) fared these past three months. The last few weeks of that period encompassed the still-continuing strike at General Motors (NYSE: GM). Sales of products to GM account for less than 5% of Carlisle's revenues, but I'm sure that Carlisle's assessment of that situation will be a topic of interest in the follow-up conference call.

Of equal interest -- at least to me -- will be an update on how some of Carlisle's other segments are performing. The construction industry is going gangbusters, and I expect that this will reflect favorably on sales of Carlisle's roofing products. Also, Carlisle's aerospace and communications wire factories have been running full-tilt for some time now, and I want to learn more about how well those facilities are coping with demand.

Syracuse, NY-based Carlisle -- and more specifically the company's fine management -- was featured in Tuesday's Bore Recap, by the way.

Only a handful of analysts follow this undiscovered gem of a company. As best as I can determine, they are looking for Carlisle to earn between $0.75 and $0.78 per share on revenues of around $370 million. (The last figure comes from Value Line.) In the year-ago period, the company made $0.68 per share on sales of $337 million.

Carlisle's stock closed up $7/16 to $46 3/8 today.

Also reporting tomorrow is Pentair (NYSE: PNR). We haven't had a lot to say about Pentair this quarter, primarily because the company's divisions have been quietly going about their business of manufacturing and selling some of the best professional tools, electrical enclosures, and pumps you'll find anywhere.

Pentair has virtually no exposure to ailing Southeast Asian markets (nor does Carlisle, for that matter), and so we'll see no "surprise" in that regard from the Pentair folks in St. Paul, Minnesota. On the other hand, I'm looking for good news from Pentair's European operations.

Zack's shows a consensus EPS forecast of $0.55 for Pentair's June quarter, based on a survey of four analysts who follow the company. That would work out to a 17% gain over last year's $0.47. Value Line is looking for revenues of around $485 million, which would constitute about a 15% gain over last year's second quarter.

Pentair's stock closed down $11/16 to $41 3/16 in very light trading Wednesday.

Busy day tomorrow. I'd better rest up. Zz-z-z-z.

FoolWatch -- It's what's going on at the Fool today.

07/15/98 Close

Stock  Change    Bid 
 ANDW  +  13/16 17.94 
 CGO   -  1/2   36.00 
 BGP   +  1/16  38.38 
 CSL   +  7/16  46.38 
 CSCO  +  11/16 95.50 
 FCH   +  3/16  31.13 
 PNR   -  11/16 41.19 
 TBY   +  1/16  9.00 
                   Day   Month    Year  History 
         BORING   +0.44%   2.75%   7.14%  34.82% 
         S&P:     -0.24%   3.61%  21.06%  88.99% 
         NASDAQ:  +1.33%   5.27%  27.01%  91.61% 
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     38.38   240.92% 
   6/26/96  150 Cisco Syst    35.93     95.50   165.77% 
   8/13/96  200 Carlisle C    26.32     46.38    76.16% 
    3/5/97  150 Atlas Air     23.06     36.00    56.13% 
   4/14/98  100 Pentair       43.74     41.19    -5.84% 
   5/20/98  400 TCBY Enter    10.05      9.00   -10.40% 
   11/6/97  200 FelCor Sui    37.59     31.13   -17.20% 
   1/21/98  200 Andrew Cor    26.09     17.94   -31.25% 
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  15350.00 $10847.51 
   6/26/96  150 Cisco Syst  5389.99  14325.00  $8935.01 
   8/13/96  200 Carlisle C  5264.99   9275.00  $4010.01 
    3/5/97  150 Atlas Air   3458.74   5400.00  $1941.26 
   4/14/98  100 Pentair     4374.25   4118.75  -$255.50 
   5/20/98  400 TCBY Enter  4018.00   3600.00  -$418.00 
   11/6/97  200 FelCor Sui  7518.00   6225.00 -$1293.00 
   1/21/98  200 Andrew Cor  5218.00   3587.50 -$1630.50 
                              CASH   $5528.69 
                             TOTAL  $67409.94