Complaints of recession and investment portfolio laggards aside, publicly traded companies in general have not fared badly during the past year. True, the market is not sporting the soaring stock prices – and inflated expectations – of 2007, but stocks today seem to offer a more rational reflection of the underlying value of a great many growing companies.
Take the S&P 500 Index as an example. For the first half of 2012, these large-capitalization equities posted a highly respectable total return of almost 9 percent. The more narrowly focused Dow Jones Industrial Average returned just above 6 percent during the same period, also not shabby.
Public companies based in Louisiana turned in a solid performance, overall, during the past year, even given ups and downs in the state’s dominant energy sector. Some oil and gas producers and energy service companies had to deal with persistently low natural-gas prices and with a continued slow rebound in offshore drilling since the 2010 oil spill in the Gulf of Mexico.
Other sectors, such as banking, meanwhile enjoyed a more favorable environment as borrowing activity began to pick up while their costs for deposits remained low.
At Tulane University’s A.B. Freeman School of Business, student researchers in the Burkenroad program follow many public companies based in Louisiana and the surrounding region. Assistant Business Dean Peter Ricchiuti oversees the program and teaches students the ins and outs of stock analysis.
The group annually publishes the Burkenroad Reports, which contain the students’ analyses of some 40 companies, based on financial reviews, site visits and interviews with top executives.
Stocks in the Burkenroad program also form the core of the Hancock Horizon Burkenroad Small-Cap Mutual Fund, which is managed by Hancock Bank and now has $80 million in assets. For the first half of 2012, the fund posted an annualized return of 5.4 percent and a three-year return of 18.5 percent.
To learn more about the fund, visit www.hancockhorizon.com or call Hancock Investor Services at (888) 346-6300.
The following are brief profiles of five Louisiana-based companies evaluated annually by student researchers in the Burkenroad Reports program, which is overseen by Peter Ricchiuti, Tulane University’s assistant business dean.
Each of the profiles includes a description of the company’s business and a brief comment by Ricchiuti and other researchers.
CLECO Corp. (CNL)
Pineville
Top executive: J. Patrick Garrett, chairman
Website: www.cleco.com
Market capitalization: $2.58 billion
Stock price information (as of July 5, 2012)
52-week range: $30.06-42.98
July 5 close: $42.79
Business: The utility holding company, through its subsidiary Cleco Power, engages in generation, transmission, distribution and sale of electricity to approximately 280,000 customers in Louisiana, and 10 communities in Louisiana and Mississippi. Founded in 1934, the company deals in a mixture of coal, petroleum coke, lignite, oil and natural gas-generated power. It also owns and operates a natural gas-fired power plant and a natural gas interconnection system.
Analysis: The company posted a $1 million earnings increase for first-quarter 2012, with income of $30 million, or 50 cents per diluted share. In announcing the quarterly results in early May, CEO Bruce Williamson reaffirmed expectations that CLECO will post full-year profits in the range of $2.34 to $2.44 per share.
Like other dividend-paying stocks, particularly in the utility sector, CLECO has attracted increasing investor interest. The stock price recently has set new highs, and its nearly 3-percent yield helped it win a spot among “rock-solid retirement stocks” on a list published in early July in the financial blog Seeking Alpha.
A potential upside Ricchiuti sees for stockholders: “There aren’t that many publicly traded utilities of CLECO’s size any more, and most people think that at some point the company will be taken over by a larger utility.”
Energy Partners Ltd. (EPL)
New Orleans
Top executive: Gary Hanna, president, CEO
Website: www.eplweb.com
Market capitalization: $684 million
Stock price information (as of July 5, 2012)
52-week range: $9.99-18.49
July 5 close: $16.37
Business: This independent oil and natural gas exploration and production company, founded in 1998, has interests in producing oil and natural gas assets in Gulf of Mexico waters offshore Louisiana. With estimated proved reserves of 37 million barrels of oil equivalent, it has working interests in 19 producing fields in the gulf. In the latest Central Gulf lease sale, the company was the high bidder on six leases covering more than 27,000 acres.
Analysis: Since emerging from bankruptcy in 2009, Energy Partners has made steady progress. First-quarter 2012 results showed a 47 percent increase in revenue from a year earlier, and the company posted net income of $1.5 million, after a year-earlier loss of $14.5 million.
Energy Partners was among “six well-balanced energy stocks” noted recently in the Minyanville financial blog, based on its strong balance sheet, positive cash flow and “strong production growth profile.”
Pointing out that most energy companies of Energy Partners’ size are more heavily endowed with natural gas then oil, Ricchiuti notes that the persistently low price of gas has held many of them down. “Energy Partners is really pretty heavy on oil,” he says. “That’s turned out to be the good side to be on.”
Shaw Group Inc. (SHAW)
Baton Rouge
Top executive: Jim Bernhard Jr., chairman, president, CEO
Website: www.shawgroup.com
Market capitalization: $1.85 billion
Stock price information (as of July 5, 2012)
52-week range: $18.98-32.49
July 5 close: $28.07
Business: Founded in 1987, the company provides technology, engineering, construction, maintenance and facilities management services to electric utilities, government agencies, oil companies, and industrial corporations worldwide. Shaw Group has several specialty units, including power, environmental, energy and chemicals, and manufacturing units. It also provides plant design, engineering and various services to owners and operators of nuclear power plants.
Analysis: A bumpy market in the nuclear power sector in the last few years caused rough going for Shaw’s nuclear business, but the company has managed revenue growth and continues to land lucrative contracts. In late June, it announced a contract to implement a services program for oil and gas-fired power plants throughout the Kingdom of Saudi Arabia. In May, it signed a deal to provide maintenance at a nuclear power plant that serves 800,000 residences in Kansas and Missouri.
The company also is investing in North Carolina-based NET Power LLC, in line with its plans to build a new type of natural gas-fired power plant. The commissioning of the plant is scheduled for 2014.
Moody’s Investors Service said in May that the company’s decision to sell most of its energy and chemicals business to Technip for cash proceeds of $300 million will reduce the volatility of its earnings and boost its liquidity. Meanwhile, Shaw Group’s stock price remains near the upper end of its 52-week range.
IBERIABANK Corp. (IBKC)
Lafayette
Top executive: Daryl Byrd, president, CEO
Website: www.iberiabank.com
Market capitalization: $1.51 billion
Stock price information (as of July 5, 2012)
52-week range: $42.51-59.64
July 5 close: $51.18
Business: With $11.8 billion in assets, the corporation is the largest bank holding company headquartered in Louisiana, operating from 175 branch offices in Louisiana, Arkansas, Tennessee, Alabama, Texas and Florida. Founded in 1887, the company today also operates 22 title insurance office in Arkansas and Louisiana; mortgage offices in 12 states; and a wealth-management firm in four states. In addition, IBERIA Capital Partners, an investment banking firm, is based in New Orleans.
Analysis: For first-quarter 2012, the company posted a 32 percent jump in profit as compared with a year earlier. During the past few years IBERIABANK has made a substantial move into the Florida market through federally assisted acquisitions of banks that had been weakened by poor lending practices. Recently, the company announced its first unassisted acquisition in Florida, of the $376 million-asset Florida Gulf Bancorp Inc.
“IBERIABANK seems to have made all the right calls at the right time,” Ricchiuti says, praising the company’s well-planned expansions. He notes that the company also has been unusually successful in starting an investment banking operation from scratch.
“Typically, a bank will just buy an investment banking firm, but instead, they handpicked the best people in the region to build a new company. To me, it meant they were really in it for the long run,” he says.
Pool Corp. (POOL)
Covington
Top executive: Manuel Perez de la Mesa, president and CEO
Website: www.poolcorp.com
Market capitalization: $1.94 billion
Stock price information (as of July 5, 2012)
52-week range: $22.60-41.27
July 5 close: $40.81
Business: This distributor of swimming pool supplies, equipment and related products also offers pool construction and recreational products, from pool surface and decking materials to pool toys and games, spas and grills. Its customers include swimming pool remodelers and builders, retail swimming pool stores, pool repair and service businesses, landscape construction and maintenance contractors, and golf courses. The company was founded in 1993 and has some 3,200 employees in 290 locations around the world.
Analysis: “Solid top-line growth” has driven the surging performance of Pool Corp. in recent quarters, according to an April report by Zacks Equity Research, which noted a nearly 16 percent jump in net sales in first-quarter 2012. Hot weather and a recovering economy have pushed the company’s stock price to new highs.
“The stock has done really well, proving to the market in the last couple of years that even with very few new pools being built, they could grow earnings,” Ricchiuti says.
With some analysts suggesting the housing market has finally hit bottom and will begin climbing soon, the outlook for swimming pool construction may be getting brighter. “They’re in a great position to benefit from new pools when housing starts to turn upward,” Ricchiuti says. n
