Monday After the Bell: Earnings from Annie's, Norwegian Cruise Line, Masco

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As of this writing on February 8, the Dow Jones Industrial Average has closed at 13,992, very close to the key technical and psychological level of 14,000. Numerous analysts are commenting that the stock market has reached a so-called “triple top,” as the Dow Jones average reached an all-time high of 14,164 during October 2007.

In addition to reaching near-record levels on the Dow Jones index, the S&P 500 also reached record highs of 1527 during March 2000 and 1565 during October 2007. As of February 8, the S&P 500 closed at 1518, within fractional distance of the March 2000 high.

I’ll be watching for any signs of change in market sentiment during the coming week. I’m seeing some signs of froth in the market, as investors become cautious with the upcoming sequestration talks in Washington.

While I keep a careful eye on the broader market indices, here are three specific stories I’ll be following for earnings after the bell on Monday, February 11.

Annie’s (NYSE: BNNY)
Monday, Feb. 11 after market close; EPS $0.15 / Revenue $36.60M

Annie’s manufactures and markets a variety of natural and organic foods. The Berkeley, CA headquartered company went public on March 28, 2012 with an IPO priced at $19.00 per share. Shares have zigged and zagged in Annie’s short history as a public company, reaching a high of $48.87 on September 19 before closing at $36.55 most recently on February 8.

The Wall Street community has been universally bullish on Annie’s since the IPO. Currently, the mean (average) price target lies at $42.71, and the highest price target on Wall Street is $52.00. Analysts at Credit Suisse met with company management in December and believe Annie’s has substantial room for growth. Following the stock’s 20% decline in recent months, the analysts believe the current market price is attractive for long-term investors.

On January 22, Annie’s announced a voluntary recall of its frozen pizza products in a press release on its website. The company states there is potential for fragments of metal wire mesh to be contained in the frozen pizza after it was discovered a metal mesh screen failed at a third-party flour mill. Shares have hardly reacted following the announcement, and analysts at both RBC Capital and JPMorgan advised that any weakness in the stock presents a buying opportunity. RBC believes the voluntary recall will likely be considered “old news” in a few months.

Revenue at Annie’s has grown 20% in the last year.

Norwegian Cruise Line (NASDAQ: NCLH)
Monday, Feb. 11 after market close; EPS $0.01 / Revenue $512.7M

The Miami, Florida based Norwegian Cruise Line recently completed an initial public offering on January 17 at $19.00 per share, and began trading on the NASDAQ exchange on January 18 in the $25.00 range. The initial range for the IPO was set for $16 - $18 per share, but the price increased due to strong demand.

Norwegian, valued at $5.6 billion as of February 8, joins larger competitors Carnival Corporation and Royal Caribbean Cruises on the public exchanges, both of which are also Miami-based.

In its brief history as a public company, Norwegian currently has analyst coverage from two Wall Street firms. Japanese firm Nomura Securities initiated coverage with a Neutral rating and $30 price target. In contrast to Nomura, Stifel Nicolaus is notably more bullish, initiating coverage with a Buy rating and $33 price target on January 28.

Investors will gain further clarity from the company itself as well as the Wall Street community following Monday’s fourth quarter earnings report. During the third quarter 2012, operating income increased 8.8% compared to the prior year, while operating margin improved to 25.8% from a previous 24.0%. Both are positive trends, giving credence to the company’s timing for their public IPO.

Masco (NYSE: MAS)
Monday, Feb. 11 after market close; EPS ($0.01) / Revenue $1.80B

Masco Corporation manufactures, distributes and installs home improvement and building products. The Company is a manufacturer of a number of home improvements and building products, including faucets, cabinets, architectural coatings and windows, and the installer of insulation for the new home construction market (description from company website).

Shares of Masco have risen 38% in the last year as investors gain further confidence in the strength of the American housing recovery. In addition to Home Depot, Masco is an alternative way to play a 2013 housing rebound in contrast to the actual homebuilders, all of which are stretched in valuation. Homebuilder Beazer Homes, which I wrote about back on November 15, has rallied a massive 26% between November 15 and February 8 alone.

On January 18, Credit Suisse raised Masco to Outperform from Neutral with a $22 price target from a previous $14 twelve-month target. A possible reason for the upgrade is that Masco significantly reduced its operating costs during the downturn, and is well-positioned for improvement in incremental operating margin going forward.

Among Masco’s numerous business lines, the company’s decorative and architectural products segment includes popular items such as Behr paint, a top-seller at Home Depot. Masco’s businesses are also benefitting from an increase in private residential fixed investment, which has grown consecutively for the last five quarters according to data from the St. Louis Federal Reserve.

Aside from Credit Suisse, equity research analysts at Bank of America Merrill Lynch recently initiated coverage of Masco with a $22 price target.

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