In a day where crude oil reached $53 a barrel, the CIA confirmed that Saddam Hussein had no weapons of mass destruction at the time of the U.S. invasion in March 2003, and authorities encouraged healthy adults and children to skip this year's flu vaccine because of a shortages, stocks held steady. The major indexes dipped just about half a percent in afternoon trading.
In today's Motley Fool Take:
- Costco's Warehousing Money
- Discussion Board of the Day: Sirius
- Amgen's Next Blockbuster
- Quote of Note
- Wish Upon a Starbucks
- More on Fool.com Today
Costco's Warehousing Money
Motley Fool Stock Advisor
For the year, Costco reported earnings growth of 22%, to $1.85 per share on a fully diluted basis. And here's what I find interesting: Costco's fourth-quarter earnings also came in quite strong, at $0.62 per share, well ahead of expectations. Why is this interesting? Well, because the last time I checked, Costco has to operate in the exact same environment as other retailers, and yet it is one of the few that isn't claiming that weather issues -- particularly the passel of hurricanes that have bedeviled Florida and much of the South and East Coast -- have had a deep impact on its results. Target
My point is that there's something else going on, and Costco's benefiting, rather than suffering, from it. Perhaps consumers are finally putting the brakes on what has been an amazing string of heavy spending over the last 18 months. Yes, the storms, and the lingering summer weather, and the moon being in the seventh house and all of that have an impact. But they are not THE deciding factors, and some of the declines we're seeing point to some deeper variables at work.
Costco also benefited from some improved operating margins, with administrative expenses rising slower than net revenues. That's a good thing. Costco has never been a company that has built monuments to management -- its corporate headquarters are famously Spartan. Costco does, however, provide compensation and benefits packages to its rank-and-file employees that far exceed that of its competitors, something that has drawn ire from some investors. I think these particular investors are wrong.
For the year thus far, Costco has opened 22 new warehouses. The company did not provide a balance sheet with its earnings report (grrrrr) but has had a longtime policy of building new warehouses out of cash flow -- thus the company typically has minimal long-term debt. Costco intends to open another 10 stores by the end of the year. One thing to keep in mind is that these warehouses tend to pay for themselves within about five years. Costco's building somewhat aggressively, and unless its economics change dramatically, this means that there should be good things to come for its shareholders.
Discussion Board of the Day: Sirius
How important will Howard Stern be to Sirius? Will satellite radio put a dent in free radio? Would you go with XM or Sirius if you wanted to buy a satellite radio receiver today? All this and more -- in the Sirius discussion board. Only on Fool.com.
Amgen's Next Blockbuster
It's been a good week for biotech titan Amgen
The osteoporosis market is huge and represents a large opportunity for Amgen. Fosamax had $1.6 billion in sales in the first half of this year, and both Evista from Eli Lilly
Amgen investors sure hope a drug like AMG 162 gets approved to give the company's stock a shot in the arm. From the early 1980s through 1999, Amgen's stock was a once in a lifetime phenomenon. However, over the last five years, there has been a disconnect between the performance of the company and the stock. Despite tremendous increases in revenues and profits, the stock is only up 29% over the past five years. An annual increase in value of less than 6% is probably not what shareholders in the world's largest biotech company are expecting.
The problem was that coming out of the biotech mania of 1999, profits have had to catch up to the company's market cap. Compared to revenues of $3 billion and profits of $1.1 billion back in 1999, revenues and profits in 2004 should triple to over $10 billion and $3 billion, respectively. Against that stellar performance, a measly 29% gain in stock price is disappointing.
Now with a P/E back in the mid 20s, the company is valued such that Amgen shareholders should be rewarded in the future if products like AMG 162 are successful.
For additional articles on the biotech industry, see:
Fool contributor Charly Travers does not own shares of any company mentioned in this article.
Quote of Note
"Courage is doing what you're afraid to do. There can be no courage unless you're scared." -- Eddie Rickenbacker
Wish Upon a Starbucks
Shares of Starbucks
It isn't too surprising that some investors might be skittish. There are lots of people who have been waiting to prove that Starbucks is overvalued and can't sustain heated growth.
Meanwhile, last week Starbucks confirmed a long-awaited price hike. While I and many of my Foolish colleagues don't think a little pocket change would deter Starbucks loyalists, some folks surmise that maybe an average $0.11 more would cause some sort of mass defection to cheaper coffee providers like Allied Domecq's
In its press release last night, Starbucks revealed that in September, it grew consolidated net revenues by 23% to $624 million, after adjusting for an additional week this year.
Granted, 7% growth in same-store sales is a less punched-up number than Starbucks has typically been able to produce over recent months. However, much like a recent incident when some investors panicked that maybe Starbucks was about to lose its star power, it bears repeating that Starbucks has always pegged its long-term same-store growth rate in the 3% to 7% range to begin with. Over the last couple months, some investors have gotten some handy little discounts with which to buy shares of the coffee house.
Although Starbucks did say earlier this summer that it expected to exceed the 3% to 7% targeted growth rate for the balance of the year, maybe we should give a little credence to its mention of the 250 Starbucks outlets that had to weather the storms in Florida. Despite the fact that what has become a nearly universal "hurricane excuse" is getting to be a little tired, the reality is that evacuations and officials' strong suggestions that citizens stay indoors, not to mention days of cleanup afterward, don't really sound conducive to Floridians' luxury coffee breaks.
Starbucks shares were down 3% in recent trading. Although news headlines blared of Starbucks' slowing sales last night, to my way of thinking, that sounds more dire than it really is. With a particularly tough hurricane season drawing to a close, and the fact that Starbucks' same-store sales growth remains at the high end of its targeted range, long-term investors likely have little to be concerned about at this moment.
Alyce Lomax does not own shares of any of the companies mentioned.
More on Fool.com Today
Does your financial advisor care more about your retirement or his? Robert Brokamp offers some hints in Financial Predators.... Tim Beyers and Seth Jayson face off over Apple's future in In Defense of the iEmpire and Apple Is Rotten.... Many of us are bewildered by common documents -- with dangerous results, Selena Maranjian says in A Dazed and Confused America.
In other news:
For a list of all our stories from today, see our Today's Headlines page.