These three companies just didn't live up to Mr. Market's expectations last week. Whether there was a target set by the company's own management, by Wall Street analysts, or by the market at large, that miss can have serious consequences.
Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down. Today, we have both short-term memory loss and long-term amnesia, and we'll see where this train takes us. And it's still National Poetry Month. Hence, the verse snippets where you might expect headlines. Enjoy!
Only remember me; you understand
It will be late to counsel then or pray.
-- "Remember," Christina Rosetti
Let's serve up some flash memory as an appetizer. Everybody expected a loss out of memory maker Spansion
According to research firm iSuppli, Spansion recently became the single largest memory supplier for mobile phones, edging out former No. 1 Intel
This has an eerie ring of former parent company AMD. Seems like there's a family streak of chasing market share at nearly any price. Spansion share prices have never been lower than they are these days, so if you're buying the efficiency argument, this could be a good time to buy. Me, I'll wait for some proof of a true turnaround first.
Where art thou, Muse, that thou forget'st so long
To speak of that which gives thee all thy might?
-- "Sonnet 100," William Shakespeare
We're moving on to a more permanent memory specialist in data storage expert Imation
You see, not only did Imation release financial results, but the same day, the company acquired the recordable media business of TDK in a $300 million deal. The combination itself makes plenty of sense -- TDK has a well-known and liked global consumer brand, while Imation has the hardcore technical know-how and product quality to impress uber-nerds like myself. And, the purchase price seems affordable, especially as a 90% or more stock-swap structure. Historically speaking, Imation doesn't often trade in the upper $30s per share like it's doing today.
The timing is interesting, too. Making a push into consumer-oriented branding only days after adding a brand management expert to its board of directors (Geneva Watch Group CEO Mark Lucas, with a background in marketing for Gillette, Duracell, and Nestle) can't be a mere coincidence. Imation will be interesting to watch from here.
Don't you hear the whistle blowing?
Rise up so early in the morn.
Don't you hear the captain shouting
"Dinah, blow your horn?"
-- "I've Been Working On the Railroad," Traditional
At the last stop, we'll buck the downbeat trend. Eastern railroading colossus CSX
The company raised shipping prices by 4%, while volume fell by about as much. While that sounds like a break-even situation, it also means that the costs of delivering similar-sized revenues just went down a bit, so it's a strong operational showing.
Management also indicated strong expectations for the rest of the year -- volume should pick up, and there's another round of aggressive price increases on the way. But the real boost seems to have come from another SEC filing that day, saying that an activist hedge fund plans to increase its stake in the company by $500 million.
They fight over juice in their Terrible Twos,
But some daughters and sons start with Terrible Ones!
If I don't make sense today, please refer to the verse above -- it explains my lack of rest, even on the weekends. Likewise, some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps and which really are stuck in the mud. Come back next week, and we'll take a look at another batch of mishaps and disappointments. It'll be fun and educational, and for the last time in a long while, a little bit poetic.
Further Foolish reading:
- Getting Railroaded by CSX
- What Is Wrong With Spansion?
- First and Goal
- Take cheap when you can get it
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Fool contributor Anders Bylund is an AMD shareholder but holds no other position in the companies discussed this week. Once upon a time he really did work for the railroad. The Fool has a disclosure policy, and you can see his current holdings for yourself.