Three Stocks for Cowboys and Aliens (CAB, RTN, DWA)

The traditional start of the summer movie season is just a month away. Among the films vying to be this year's blockbusters is Cowboys & Aliens. This DreamWorks film stars Daniel Craig, Harrison Ford and Olivia Wilde as denizens of a small Arizona town in 1873 who have to fend off an invasion by extraterrestrial marauders. Cabela's for the Well-Equipped Cowboy For today's modern, well-equipped cowboy, the go-to place has to be Cabela's CAB, the Nebraska-based sporting goods superstore chain. The company reported record fourth-quarter results, and it also recently announced further expansion into Canada with a new store in Saskatoon. Earnings in recent quarters have topped consensus forecasts. The long-range EPS growth forecast for Cabela's is 14.7%. Founded in 1961, Cabela's is a leading specialty retailer—and the world's largest direct marketer—of hunting, fishing, camping and related outdoor merchandise. Its stores are as big as 246,000 sq. ft. and include such features as waterfalls, simulated mountainsides, aquariums, in-store shooting galleries and meeting and banquet facilities. Through its subsidiary, World's Foremost Bank, the company also issues and manages the Cabela's CLUB Visa card, one of the drivers of the recent strong results. The stock is trading at 16x current 2011 earnings estimates. Longbow Research just upgraded Cabela's, due in part to its healthy profit margins. Analysts on average have recommended buying CAB for more than 90 days. Their mean price target is currently $33.78. The share price has pulled back from the 52-week high of $32.37 but is still up more than 25% year-to-date. The stock has outperformed the broader market in recent weeks. Raytheon Helps Fight Back the Invaders When it comes to fending off extraterrestrial attack ships, we no doubt will depend on Patriot, Sidewinder and Tomahawk missiles, courtesy of Raytheon RTN. In fact, this leading defense contractor was just awarded a $58 million contract to upgrade Patriot missiles for the U.S. Army. In addition to missile systems, the company also offers products and services for satellite communications, cybersecurity, air traffic control and food safety, mainly for the military and the U.S. government. Raytheon is scheduled to release first-quarter results on Thursday, April 28. While per-share earnings are expected to be 9 cents lower than a year ago, Raytheon has topped estimates in most recent quarters—by 21 cents per share in the fourth quarter. The long-term EPS growth forecast is 8.1%. The stock is trading at 10.3x 2011 earnings estimates, which is in line with the industry average. The 1.2 PEG ratio may suggestion overvaluation, though. Raytheon's dividend yield is 3.3% and its return on equity is a respectable 18.5%. Short interest is less than 2% of the float. Shares have traded mostly between $49 and $52 over the past three months, but have pulled back a bit in recent days. Year-to-date, Raytheon has underperformed the broader market, as well as competitors Boeing BA and Lockheed Martin LMT. DreamWorks Animation Knows About Aliens and Monsters In 2004, DreamWorks spun off its animation unit. And DreamWorks Animation DWA knows a thing or two about aliens and other monsters. This Glendale, California-based producer of animated feature films has brought us the Shrek franchise, Megamind, How to Train Your Dragon and Monsters vs. Aliens. DreamWorks Animation's entry into this summer's blockbuster sweepstakes is Kung Fu Panda 2, which opens in May. However, analysts are not anticipating a lot from first-quarter results: EPS are expected to be about half what they were a year ago, while revenue is predicted to be down by a third. But things look better for the current quarter, which will include the release of Kung Fu Panda 2. The consensus forecast for the second quarter calls for annual earnings growth of about 38% and a revenue bump of more than 30%. And note that DreamWorks Animation has bested consensus earnings estimates in recent quarters. The stock is trading at 13.7x full-year earnings estimates, which is less than the industry average. With the share price still lingering in the neighborhood of the 52-week low of $25.17, the stock could use a boost from a monster opening weekend for Kung Fu Panda 2. The company's next big release, Puss in Boots, is not due until November.