Sunday, May 18, 2008

stuff on names already mentioned

lcav, in addition to taking a hatchet to its generous dividend, chopping the payout to $0.06 a quarter from $0.18, ceo steve strauss had the following business update: “Recent news reports of the FDA panel review of post-Lasik quality of life matters have not caused a material change in our pre-operative or treatment appointment cancellations. However, the number of bookings quarter-to-date of pre-operative appointments have dropped approximately 20%. Our new marketing creative continues to outperform our older marketing messages across all media, but appointments are significantly softer than prior periods and prior year levels.”

even though few should have been overly surprised that procedure volume is punk (after all, the stock had already dropped from a 52-week high of more than $50), as discretionary consumer spending, especially on elective surgery, is weak, depressed lcav shares quickly shed another 20% of their value. many were clearly disappointed with the dividend cut, which has taken the yield down to 'only' 2.8%.

lcav is inexpensive, trading now for 51% of sales and for less than nine times the current reuters estimates eps forecast, while the balance sheet is rich in cash and poor in debt. with the potential market for laser vision correction procedures in the us at about 120 million procedures, versus only 1.4 million or so completed in 2007, i'd state it's ok to buy the stock up to 10.

lcav wasn't the only one to get beat up this week, as ers plummeted in price the other day after reporting a big decline in quarterly earnings. empire, a distributor of value-added, semi-finished aluminum products, saw revenue in the quarter drop 15% on a year-over-year basis and eps tumble to $0.11, compared to $0.24 a year ago.

in the company’s 10-Q filing, management blamed the revenue shortfall on “lower shipment volumes in our North American market” and said, “Our gross profit margin was negatively impacted by lower sales as well as continued pricing pressures due to increased competition in our North American market from both domestic and overseas sources. This strong competition compressed the fabrication premiums which we in turn can charge our customers. Additionally, our extrusion manufacturing facility continued to operate significantly below capacity, which resulted in excessive fabrication costs and diminished our overall profitability.”

because net income actually doubled on a sequential basis, and the shares now trade for 14 times cyclically-depressed earnings and for just 10% of sales and 1.4 times tangible book value, while yielding 4.2%, i remain optimistic about the long-term prospects for the stock. i'd still buy it up to 5.

disclosure: long ers; DO YOUR OWN DD!!

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