For Immediate Release
Chicago, IL – September 9, 2010 – Zacks.com Analyst Blog features: Lincoln National Corporation (LNC), Hartford Financial Services Group Inc. (HIG), Deutsche Bank AG (DB), American International Group Inc. (AIG) and Casey’s General Stores Inc. (CASY ).
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Here are highlights from Wednesday’s Analyst Blog:
Lincoln, Hartford Warrants on Sale
As part of the bailout funds repayment by the insurers through the Troubled Asset Relief Program (TARP), the US Treasury Department plans to conduct auctions to dispose of its remaining warrants held in Lincoln National Corporation (LNC) and Hartford Financial Services Group Inc. (HIG).
During the recession of 2009, the US Treasury provided financial aid to many banks and financial institutions and received warrants in exchange. A warrant gives the purchaser the right to buy common stock at a fixed price or sometimes at steep discounts. For companies that have repaid their TARP, the Treasury is now providing an option to buy back the warrants at a negotiated price.
The Treasury plans to sell 52.09 million Hartford warrants and 13.05 million Lincoln warrants in the auction. The Hartford warrants come at a fixed price of $9.79 per share and the Lincoln warrants are available for $10.92 each.
The warrants will be sold at public auctions over the next several weeks, with Deutsche Bank Securities Inc., an arm of Deutsche Bank AG (DB), acting as the government’s auction agent and the sole book running manager.
Besides the liberation from pay restrictions and government intervention in the internal affairs of the companies, these warrant sales will provide an additional return to the American taxpayer from the Treasury's investments in these financial institutions.
Through the TARP, the US government had provided billions of dollars of support to several banks and other major insurance companies to help them shore up their capital positions in the wake of major investment losses.
Among the major life insurance companies, Hartford received $3.4 billion in government aid on June 26, 2009, which it repaid on March 31, 2010. Lincoln National received $950 million from the bailout fund on July 10, 2009, repaying in full on June 30, 2010. Only American International Group Inc. (AIG) is left to pay its remaining $132 billion out of the $182.3 billion provided at the peak of the economic meltdown.
Casey’s Q1 Meets Expectations
Convenience stores operator, Casey’s General Stores Inc.'s (CASY ) fiscal 2011 first-quarter GAAP net income declined 15.6% to $37.3 million from $44.2 million in the year-ago period. Excluding legal and advisory expenses related to the hostile takeover offer by Canadian convenience stores giant Alimentation Couche-Tard Inc., Casey’s posted adjusted earnings of 81 cents per share in the quarter, matching the Zacks Consensus Estimate.
During the quarter, Casey’s total revenue recorded a 14.7% growth to $1.36 billion from $1.19 billion in the year-ago quarter. The growth was primarily driven by a 6.8% year-over-year increase in gasoline volumes to 358.6 million coupled with same-store sales growth of 2.0% and 2.4% in Grocery and Other merchandise and Prepared Food and Fountain segments, respectively.
Casey’s gross profit in the quarter expanded 6.4% year-over-year to $234.0 million, while gross margin declined 140 basis points (bps) to 17.2%. Margins at Gasoline and Grocery and Other merchandise divisions declined, while that in the Prepared Food and Fountain remained flat.
Casey’s operating expenses increased 15.1% to $152.4 million mainly due to expenses associated with staving off the hostile acquisition bid by Alimentation Couche-Tard coupled with increased costs related to stores. Consequently, operating income (gross profit less operating expenses and depreciation and amortization) fell 11.2% year-over-year to $62.0 million from $69.8 million in the year-ago period.
At quarter-end, Casey’s had cash and cash equivalents of $198.1 million, compared to $170.8 million in the year-ago period. Long-term debt at the end of the quarter was $165.7 million, reflecting a long-term debt-to-capitalization ratio of 16.2%.
Moving forward, Casey’s expects to ramp up store count by 4% to 6% in fiscal 2011 and commenced the construction of 13 new stores and 9 replacement stores in the first quarter. The Zacks Consensus Estimate on the company’s earnings for the fiscal is currently pegged at $2.65 per share, which moved up 6 cents over the past month as 4 of 7 covering analysts raised expectations, while 1 moved in the opposite direction. The most accurate estimate is even more bullish at $2.71 per share, indicating a potential upside of 2.26% over the Zacks Consensus Estimate.
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