Businesses with a Buzz
13 Louisiana Public Companies Worth Watching
JANE SANDERS ILLUSTRATION
Here are profiles of selected public companies headquartered in Louisiana, including the company name, followed
by its stock symbol; a description of its business; and a brief analysis by researchers, including student researchers in Tulane University’s Burkenroad program.
CEO: Glen F. Post III
Web site: www.CenturyLink.com
Market cap: $10.2 billion
Business: CenturyLink Inc., together with its subsidiaries, operates as an integrated communications company providing local and long-distance voice services, wholesale network access, high-speed Internet access, other data services and video services in the continental United States.
Analysis: Formerly known as CenturyTel Inc., this rural-focused telecom carrier is the fourth-largest telephone company in the United States. Analyst Chuck Carnevale in June gave the company mixed reviews with regard to future prospects. The company’s historical earnings growth rate has been significantly above average, he said, but future growth is expected to be lower. Cognizant of this fact, CenturyLink increased its dividend ratio dramatically and recently showed a yield above 8 percent.
CLECO Corp. (CNL)
CEO: Michael H. Madison
Web site: www.Cleco.com
Market cap: $1.6 billion
Business: Cleco Power focuses on generation, transmission and distribution of electricity services.
Analysis (Burkenroad): Cleco’s new power plant –– Rodemacher 3 –– increased the company’s capacity, reducing dependence on purchased power and converting Cleco from a net buyer to a net seller of electricity. Along with recently completed acquisitions, this plant has increased Cleco’s capacity by more than 80 percent. The Louisiana Public Service Commission approved Cleco’s request to raise base rates, providing still more upside for the stock.
The company’s wholesale power business is expected to fuel growth.
Entergy Corp. (ETR)
CEO: J. Wayne Leonard
Web site: www.Entergy.com
Market cap: $13.9 billion
Business: Entergy Corp., together with its subsidiaries including Entergy Louisiana and Entergy New Orleans, operates as an integrated energy company in the United States. It primarily engages in electric power production and retail electric distribution operations.
Analysis: Entergy Corp. in June ranked among the Top 10 stocks in the Standard & Poors 500 index with the highest sustainable dividend yield, based on analysis by investment blogger Geoffrey Ching. On the downside, Citigroup issued a downgrade of the company’s stock based on the rising cost of uranium, which is needed for Entergy’s nuclear power operations. Continued hot weather could boost demand for electric power and bolster many utilities, including Entergy.
Gulf Island Fabrication (GIFI)
CEO: Kerry J. Chauvin
Web site: www.GulfIsland.com
Market cap: $247 million
Business: Gulf Island Fabrication Inc. is a global leader in the fabrication of oil and gas drilling and production platforms. The company provides a range of services including the fabrication of offshore and inshore platforms, living quarters, electrical buildings, process vessels, skids and small modules.
Analysis (Burkenroad): Lack of new projects has decreased the company’s backlog, and uncertainty of demand makes the outlook for Gulf Island negative in the short run. However, the company’s financials are strong. Through its conservative accounting and well-planned capital expenditures in the past, the company remains debt-free and, consequently, flexible with prospective investments. Despite dealing with a few years of economic pressures, the company realized a profit of $39.5 million in 2009. Notes Peter Ricchiuti, an assistant dean of the Freeman School of Business at Tulane University, “They have never had a money-losing quarter since going public.”
Hornbeck Offshore Services (HOS)
CEO: Todd M. Hornbeck
Web site: www.HornbeckOffshore.com
Market cap: $413 million
Business: Hornbeck provides transportation and services to the oil and gas industry, including offshore supply vessels and transportation services in the Gulf of Mexico, certain international markets and Puerto Rico.
Analysis (Burkenroad): The Gulf of Mexico market was difficult even pre-oil disaster, with both low demand and oversupply in the transportation sector. However, analysts deemed Hornbeck well- positioned to ride out the pressures. Having managed its debt load effectively while adding to its high-tech fleet, management has options for reducing costs. Says Ricchiuti, “The company is wonderfully managed, and their fleet is second to none.”
Hornbeck’s vessels, however, focus on serving the deepwater drilling industry, which is why CEO Todd Hornbeck filed one of the first oil disaster lawsuits against BP.
IBERIABANK Corp. (IBKC)
CEO: Daryl G. Byrd
Web site: www.IberiaBank.com
Market cap: $1.44 billion
Business: IBERIABANK Corp. operates as the holding company for IBERIABANK, which offers commercial and retail banking products and services in the United States.
Analysis (Burkenroad): IBERIABANK is the second-largest bank holding company in Louisiana, having expanded into southern Florida by acquiring two failing institutions there. The loss-sharing plan between IBERIABANK and the FDIC greatly reduces the risk of the acquisitions, and the company says it will shop for more such opportunities. While many banks are suffering from bad loans during the financial crisis, IBERIABANK has successfully avoided large charge-offs. “They’ve been incredibly smart and maybe a little bit lucky,” says Ricchiuti. “And they’re getting great deals on those banks from the FDIC.”
Lamar Advertising Co. (LAMR)
CEO: Kevin P. Reilly Jr.
Web site: www.Lamar.com
Market cap: $2.39 billion
Business: Lamar Advertising Co., together with its subsidiaries, provides outdoor advertising services in the United States, Canada and Puerto Rico. The company offers outdoor advertising displays, such as billboards, bulletins, posters, digital billboards, logo signs and transit advertising displays.
Analysis: Advertising businesses generally take big hits during economic downturns. As their clients seek to cut costs, advertising budgets are often the first to go. Lamar Advertising has suffered along with its peers. Aggravating the situation is the Gulf oil disaster. Morgan Stanley in June lowered its estimate of Lamar’s stock price growth, citing projections for decreased tourism traffic in the region, which could weigh on Lamar’s outdoor advertising revenues.
McMoRan Exploration Co. (MMR)
CEO: James R. Moffett
Web site: www.McMoRan.com
Market cap: $1.12 billion
Business: McMoRan Exploration pursues shallow-water deep-shelf drilling operations in the Gulf of Mexico. The company explores for, develops and produces oil and natural gas.
Analysis (Burkenroad): The company’s exploration strategy is focused on “deep gas play,” drilling at depths from 15,000 to 25,000 feet in the shallow waters of the Gulf of Mexico and even on “ultra-deep” plays below 25,000 feet. McMoRan is one of the largest acreage holders on the outer continental shelf of the Gulf and onshore in the Gulf Coast area with rights to more than 1 million gross acres. A major discovery by the company in January 2010 showed huge potential, and the company has 10 to 15 additional similar prospects that, if flow tests are successful, would ensure sustainable growth in the near term. The impact of the Gulf oil disaster on the company’s future is uncertain. Ricchiuti says the potential of the company could be huge, but “investors should know this is a real wild card.”
Pool Corp. (POOL)
CEO: Manuel Perez de la Mesa
Web site: www.PoolCorp.com
Market cap: $1.14 billion
Business: Pool Corp. is a wholesale distributor of swimming pool and pool-related products and has also entered the irrigation and landscaping industry.
Analysis (Burkenroad): Swimming pools remain a luxury item, and such products suffer during broad economic downturns. Still, compared with its peers, the company has performed well despite the negative economic environment and adverse weather impacts in the northern and central U.S. markets. The company’s stock price is closely tied to the struggling housing market. Pool Corp.’s ongoing acquisition strategy –– most recently acquiring General Pool & Spa Supply –– further improves the company’s market-leading position. With normalization in new pool and irrigation construction levels expected in the fairly near future, Pool Corp. could enjoy growth opportunities.
Shaw Group Inc. (SHAW)
CEO: J. M. Bernhard Jr.
Web site: www.ShawGrp.com
Market cap: $3 billion
Business: The Shaw Group is an international full-service engineering and construction firm with an integrated pipe fabrication business. It provides engineering, consulting, remediation, fabrication and facilities management services to public and private clients.
Analysis (Burkenroad): Shaw’s strengths include a strong balance sheet, good ties to the environmental and infrastructure sector and access to leading technology. The heavy construction sector is sensitive to economic cycles and will generally lag an economic recovery. The current economic climate has proved a challenge to this sector, but Shaw’s strong balance sheet and multiple business segments should allow it to emerge in a strong position. Long-term prospects appear good, but the near term is subject to ups and downs in the broader economy.
Superior Energy Services (SPN)
CEO: Terence E. Hall
Web site: www.SuperiorEnergy.com
Market cap: $1.52 billion
Business: Superior is a leading provider of specialized oil field services and equipment related to the drilling and production needs of oil and gas companies, including well intervention, rental tools, marine services and oil and gas production.
Analysis (Burkenroad): Superior plans to expand internationally and aims to generate a third of its revenues from its international business with a focus on well intervention and rental tool products. Because of an increase in oil and gas demand, the company has increased its focus on deepwater intervention markets worldwide and in the Gulf of Mexico. Superior faces various risks common to its sector, but the company’s strong balance sheet, its ability to generate cash and its strategy of growing internally and through acquisitions of other companies will help keep it ahead of its competitors. Ricchiuti notes that Superior is a leader in the oil field business of plug-and- abandonment. If more drillers are forced to close and remove idle installations in the Gulf, Superior could benefit, he says.
Tidewater Inc. (TDW)
CEO: Dean E. Taylor
Web site: www.tdw.com
Market cap: $2.1 billion
Business: Tidewater Inc., through its subsidiaries, provides offshore supply vessels and marine support services to the offshore energy industry through the operation of a fleet of marine service vessels. It offers services to support various phases of offshore exploration, development and production.
Analysis: Investment researcher Neil Carvin wrote in June that, although a Tidewater vessel was on the scene at the Deepwater Horizon when the rig failed, the lion’s share of Tidewater’s business has been outside the United States for many years. International operations were responsible for 90 percent of the company’s vessel revenue in fiscal 2010. The long-term strength of the company’s balance sheet has helped Tidewater modernize its fleet. The company will be ready to exploit the situation when offshore activity picks up again. However, worldwide economic turmoil and the Gulf disaster make the timing for the recovery uncertain.
Whitney Holding Corp. (WTNY)
CEO: John C. Hope III
Web site: www.WhitneyBank.com
Market cap: $965 million
Business: Whitney Holding Corp. operates as the bank holding company for Whitney National Bank, which provides community banking servicesto commercial, small business and retail customers.
Analysis: The largest remaining locally based banking company in the New Orleans area, Whitney Holding Corp. has hit a lot of bumps in recent years, thanks largely to its overly heavy investment in real estate in markets such as Florida, where the valuation bubble has popped. Adding to the difficulty of recovering from the real estate hits is the possibility that the bank’s clients in the energy industry and others could be affected by the Gulf oil disaster. On the upside, some analysts believe that Gulf area banks could benefit from growing deposits as oil disaster victims receive compensation for their claims. Richard Bove, vice president of equity research for Rochdale Securities LLC, recently placed Whitney among several banks likely to gain deposits.
For investors who like to put their money into businesses close to home, Louisiana offers many opportunities. The state is home to dozens of companies whose stock shares trade in the public marketplace. Reflecting the economic structure of the region, many of these businesses are focused in industries that are stalwarts of the Louisiana economy.
Just as Louisiana’s economic health follows the currents of the state’s major industries, the stock prices of companies within those sectors also rise and fall with the tide. At the moment, that makes for somewhat difficult investing.
Many of Louisiana’s public companies, including several that we profiled in these pages, operate in the oil and gas sector. That industry, even during “normal” periods, is subject to volatility stemming from factors that range from geopolitical pressures to the weather. But thanks to the big oil disaster in the Gulf of Mexico, current times are anything but normal in this industry.
Ricchiuti says uncertainty rules at the moment because so much remains unknown about the outcome of the BP oil disaster.
“You have extremes –– some analysts are saying maybe BP won’t make it, and others say now’s the time to buy BP,” Ricchiuti says. “It’s an interesting time because people haven’t really been able to sift out who’s going to be affected which way.”
Ricchiuti notes that deepwater drilling, while comprising only a portion of the Gulf oil business, held much of the promise for the industry’s future growth. “Everybody agrees that the last place in the lower 48 states to make a great oil discovery was the deepwater Gulf of Mexico,” he says. After the April deepwater accident became a disaster, the future of deep drilling turned cloudy.
The awful turn of events may –– or may not –– have an effect on a number of Louisiana’s publicly traded companies, even those outside of the energy industry. Banks, for instance, could develop loan problems if their borrowers lose business or lose jobs. In fact, any of the companies we profiled here could feel the impact of a regional downturn resulting from the oil spill.
Meanwhile, most Louisiana public companies are quite healthy, and many show strong signs of growth.