I'm intrigued by the number of positive surprises that I've seen this earnings season, and the companies that have been issuing better-than-expected numbers.
Cabela's (CAB) put up great numbers last week and has to be turning some heads given its performance the past couple of years. You don't hear much from skeptics any more about the credit-card operation, which seems to be running like a well-oiled machine, or complaints about the size and museum-like feel of its stores, or the distances between locations. Cabela's is the real deal, with a loyal customer base that pays its bills.
At the high end of retail, Saks (SKS) delivered a strong fourth quarter with revenue up nearly 7%, and earnings beating the $0.14 consensus estimate by $0.03. Same-store sales rose a very healthy 7.7% for the quarter and 9.5% for the full year. I'm still impressed with the way this company improved its capital structure coming out of the bleak 2008-2009 period.
Saks ended this fiscal year with $200 million in cash and $375 million in debt. Total debt stood at $598 million in 2009 and $507 million last year, so this is a leaner Saks. Of course, it's still an interesting way to gain exposure to top-quality real estate, given the companies properties, the crown jewel being its Fifth Avenue store in New York.
Perhaps the most interesting development was not earnings related. Earlier this week, Gannett (GCI) announced a dividend surprise in the form of a 150% increase. That's the second increase this year, and has taken the company's quarterly dividend from $0.04 to $0.20, putting the indicated yield above 5%. Shares were up 8.5% after the announcement, but settled for a 4% gain on the day.
Although I expected Gannett to raise the dividend at some point, the level of the increase was surprising. I believed that it would be more gradual, but I'm pleased. Given the somewhat tepid response of the markets, I'd surmise that there's still quite a bit of skepticism that the company has legs, or the size of the increase was already priced in, or a combination of both. In any event, here's a company generating significant free cash flow with management that has the confidence to put forth a meaningful change in dividend policy. I still like the story. The dividend yield has yet to make its way into mainstream data, so once the realization hits that this is a 5% or more yielder, I expect more interest from investors.
In microcap-land is the little known Charles & Colvard (CTHR), which manufactures and sells moissanite, a nearly colorless jewel made from silicon carbide. Fourth-quarter sales more than doubled, and net income more than quadrupled, sending shares up 28% Thursday to $3.90 on 8x normal average volume. I'd all but forgotten about this former net/net, which was a member of my first index devoted to companies trading below net current asset value, the Cheap Stocks 21 Net/Net Index, unveiled in early 2008.
The company has no analyst coverage, which is not surprising given its $76 million market cap, but I'll be watching. This was a $25 stock back in 2005, when the company generated $43.5 million in sales. But it has quite a ways to go to get back to that level, given 2011's $16 million revenue figure.
