Are These Tour de France Equities Worth the Cheer?
Arturo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The month-long Tour de France odyssey has entered its second half. Notably, the standards of some publicly traded companies are flying in this iconic bikathon across most of France and also occasionally touching parts of nearby countries. The main rationale for their participation, of course, is the global popularity and marketing value of this annual event which marks its centennial this year.
Garmin (NASDAQ: GRMN) has been harnessing the marketing potential of the Tour since 2008 to promote international sales of its navigation, communication and information devices and applications. Last year, the company was joined by Japan-based electric and electronic appliance manufacturer Sharp (NASDAQOTH: SHCAY.PK) as the title sponsor of the Garmin-Sharp team, one of two squads now bearing the U.S. banner in the multination cycling contest.
Stars in the roadshow
The team has made its presence felt in the Tour with a win of one of its riders, Daniel Martin, in stage 9 of the tour. This early victory and the possibility of loftier team standing in the leader board en route to the race finish should help bring some cheer and refocus investor interest on Garmin.
The company’s sales have been taking a beating lately with declines across all its segments except in its fitness unit, which grew by 2% during the first quarter. In significant moves, Garmin recently introduced production innovations for cyclists and golfers which likewise bring attention to its other initiatives to further cultivate shareholder value via new product offerings in its automotive, aviation, and marine segments.
Sharp, in the same vein, stands to have its maiden Tour appearance as a rallying point to gain investor interest on its efforts to weather the difficulties in its Japanese home territory. The French road show can also serve as veritable medium for the company to draw attention to its campaign for a larger slice of the markets in China, Europe, and North America, coupled with the bid to reinvent itself into a more service-oriented organization.
A tiring entry
Suspect though is the Tour’s corporate worth for RadioShack (NYSE: RSH), the Texas-based electronic retailer, which is a title sponsor for the Luxembourg pro cycling team. True, this company has over 4,000 retail outlets, but its operations can’t truly be called global in scale. These outlets are confined to the U.S., Puerto Rico, and the Virgin Islands. To its credit though, RadioShack is now reportedly scrapping its cycling sponsorship and shifting its strategic business focus to Asia.
Nevertheless, recovery for RadioShack can be comparable to Tour de France stages across the Alps or the Pyrenees. The company had four straight quarters of losses in 2012, and its 2013 first quarter setback worsened to a $0.35 loss per share compared to the $0.05 loss of a year earlier. Its shares are currently trading about 25% below last year.
A Sharp pick is dull
The same investor trepidation can likewise be said about Sharp, which had successive losses in its previous five quarters. If it’s any consolation though, diluted normalized per share loss for the 2013 first quarter was trimmed to 46.81 Yen from the 105.56 Yen per share loss a year earlier.
On the other hand, investors pedaling toward Garmin may be a lot smoother. The surge in innovation that analysts are looking for in this company materialized in two product introductions this July: a versatile tracking system for sporting dogs and its first portable heads-up navigation display for smartphone apps.
Garmin forges ahead
This year, the company will also start its partnership with Mercedes Benz for the installation of Garmin navigation software to the car manufacturer’s models. Product launches have also been announced recently for the company’s aviation, avionics and marine segments.
Value investors will likewise be delighted with Garmin’s 5.2% annual dividend yield, the tops in its industry. Additionally, its trailing 12-month profit margin and operating margin of 20.22% and 21.28%, respectively, are robust indicators for a consumer electronics company. The company’s balance sheet, moreover, is solid with $1.24 billion in total cash and no debt as of the most recent quarter.
A foolish take to the finish
Joining the sports aficionados all over the world, tracking the daily leader board of the Tour de France offers a chance to partake in the thrills as the multi-stage race progresses. It can likewise be an occasion to cheer on an equity in the mold of Garmin in much the same way, as its advance among stock market tickers can be well appreciated.
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Arturo Cuevas has no position in any stocks mentioned. The Motley Fool owns shares of RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!