Stock Letter’s Readers Leap for Lumber
Is National Lumber & Supply Inc. a $12 stock? John Dessauer, publisher of Dessauer’s Journal of Financial Markets, a Cape Cod-based stock letter, thinks so.
And in the weeks since Dessauer recommended that investors load up on National, the Fountain Valley lumber and hardware retailer has been trading close to its 12-month high of $7.75 a share. Traded over the counter, National Lumber closed Friday at $6.75 a share.
The company, which briefly traded for as high as $13.25 a share after its 1983 initial public offering at $10 a share, has been one of Wall Street’s more lackluster performers. During 1987, for instance, National sold for as low as $4.25 a share.
Keeping the price in the tank has been National Lumber’s expansion-related losses. One of the region’s fastest growing do-it-yourself home improvement chains, National Lumber lost $154,000 during the year that ended Jan. 31, 1986. Company officials expect to report another--but smaller--loss for the fiscal year just ended.
However, the stores that National Lumber opened during 1984 and 1985 are beginning to mature, and as a result, revenues have been improving steadily, says V.J. Carnevale, National Lumber’s chief financial officer.
Indeed, for the fiscal fourth-quarter ended Jan. 31, he said, revenues appear to be up 15% to 20% compared with a year earlier. He would not talk about earnings. While Carnevale won’t make any projections, Dessauer told Stock Watch that he expects National Lumber to “be back in the black numbers nicely this year.” National Lumber, he said, could earn as much as a $1 a share during the company’s current fiscal year--or about $5.6 million based on 5.6 million shares outstanding.
At 12 times projected earnings, Dessauer said, National Lumber should trade at about $12 a share within the next 6 to 12 months. Depending on investor reaction to the renewed earnings, he added, the stock could even hit $15 a share.
Although he agrees that National Lumber’s performance is improving, Frank Podbelsek, an analyst with the Los Angeles brokerage of Wedbush Securities, said he believes Dessauer’s projections “may be too optimistic,” although he said he has not yet formulated an earnings estimate of his own.
Regardless of whether the earnings come in the way Dessauer predicts, the boost his recommendation gave National Lumber stock demonstrates just how widely some stock letters are read. “He must have quite a following,” said National Lumber’s Carnevale. “We have been getting a lot of calls.”
Recently, Stock Watch reported that securities analysts were downgrading their current-year earnings estimates for Scan-Tron Corp., which reported a disturbing sales drop for its fiscal second-quarter, ended Dec. 31.
Although the drop itself was modest--only 1.2% from the previous year--it was unnerving enough to start the Tustin-based company’s stock price skidding from the $16-a-share range to its present level of about $11 a share.
The analysts said they were dropping their estimates in part because they were at a loss to explain the unusual sales drop.
However, in a newly issued “buy” recommendation, analyst Paul Salazar, of Los Angeles-based Crowell, Weedon & Co., says he might know why.
“The decline in sales of standard testing forms in November most likely reflected inattention to certain accounts on the part of some sales personnel,” Salazar writes. “Management is attempting to rectify the situation by closely monitoring sales calls per day per sales person.”
Salazar, who recently began following Scan-Tron, estimates that the company will earn 70 cents to 75 cents a share for the fiscal year that ends June 30. Salazar’s earnings projection is in line with most Wall Street estimates. Last year, the company earned 65 cents a share.
