What an interesting week for earnings, for both some of the bigger and smaller names, and that's without even getting into the Facebook (FB) saga, which has already garnered more than its share of coverage. It's a dead horse that I am unwilling to beat.
On Wednesday, Corning (GLW) enjoyed a solid day, rising 11% after beating consensus estimates on both earnings (38 cents versus 37 cents) and revenue ($2.75 billion versus $2.69 billion). Revenue was up 10% sequentially and year/over year. The company also raised full-year revenue guidance for 2018 from $11 billion to $11.3 billion, and suggested that margins will also expand in the second half.
Corning continues to be shareholder "friendly" in terms of returning cash to its owners via dividends and buybacks. The dividend has doubled over the past five years. During that time, the company has reduced shares outstanding by about 45%. The combination of rising dividends in conjunction with stock buybacks can be very powerful. GLW had stumbled between January and April, but this week's performance puts it back into positive territory year to date (+8%). The stock now yields 2.1%, but there are likely further dividend hikes to come.
On the other end of the size spectrum is Richardson Electronics (RELL) which posted its third consecutive profitable quarter, and first profitable year since 2013. For the fourth quarter, revenue rose nearly 22% year over year, and the company beat the "consensus" (just one analyst follows the name) on both top ($45.5 million versus $43 million) and bottom lines (14 cents per share versus 6 cents). For the full year, revenue rose 19.2% to $163.2 million, and the company earned 30 cents a share, versus a 55 cent loss last year.
The balance sheet remains solid; (RELL) ended its fiscal year with $60.5 million or $4.67 per share in cash -- half of its market cap -- and no debt. Shares are up 46% year to date but RELL still trades at just 1.14 X net current asset value, a very cheap valuation. It currently yields 2.5%. I'd love to see the company use some of its cash to buy back shares. That would send a positive signal to investors, and perhaps help pull the name out of obscurity.
Then there's the other side of the coin, toy name JAKKS Pacific (JAKK) , which did not have a good quarter. My very speculative choice for a toy industry rebound, JAKK reported a 72 cents a share loss for the second quarter well off the 49 cent loss consensus. The company also missed on revenue ($105.8 million versus $117 million consensus). The company pointed to the lingering effects of the Toys R Us bankruptcy as the cause for the bad quarter, but did point to positive developments in some product lines, including the Incredibles 2 line.
Shares, which seem to trade more like options on company survival than a stock these days, were on a roll between late March and early July, rising more than 60%, before giving much of that back recently. Still hanging in the balance is the offer from current shareholder Meisheng, which in January offered to increase its stake to 51% of the company for $2.95/share, a 23% premium to yesterday's closing price. On Wednesday's earnings call, the company reiterated that it is still considering the expression of interest, which Meisheng "recently affirmed."
The third quarter, usually the company's largest in terms of revenue and profits, may be of the "make or break" variety this year. Consensus estimates (five analysts cover the name) are calling for revenue of $263 million, and earnings per share 78 cents. Not surprisingly, there is a huge dispersion among the estimates from a low of 41 cents a share to a high of $1.22, which should make it all the more interesting.
My JAKK position has now come full circle; after a nice on-paper gain, I am about back where I started. That's par for the course when you buy a "dog with fleas."
