Investopedia: Expectations Gnaw At Wolverine

Would the real footwear market please stand up? Athletic shoe companies like Nike (NYSE:NKE) and Adidas (OTCBB:ADDYY) have been quite strong, and so has fashion-oriented Steven Madden (Nasdaq:SHOO). And then there are the likes of Collective Brands (NYSE:PSS), Brown Shoe (NYSE:BWS) and Skechers (NYSE:SKX) with weak sales and even weaker stocks.

Wolverine (NYSE:WWW) is on the stronger end of the range, even if the Street was not falling over itself to reward the company for solid second quarter results. Then again, if conservatism is the biggest sin of Wolverine, long-term shareholders should not be bothered by the quarterly noise. (For related reading, see Strategies For Quarterly Earnings Season.)

To continue, click below:
http://stocks.investopedia.com/stock-analysis/2011/Expectations-Gnaw-At-Wolverine-WWW-NKE-SHOO-PSS-BWS-SKX-TBL0713.aspx

Investopedia: VF Corp Laces Up Timberland

I've been thinking (and writing) for a little while now that several footwear stocks just look too cheap relative to even modest growth expectations. Apparently VF Corp (NYSE:VFC), one of the largest apparel makers in the world, agrees. Before the open of trading, VF Corp announced that it was acquiring outdoor footwear maker Timberland (NYSE:TBL) in a cash deal worth roughly $2 billion. 

For VF Corp, this is an interesting expansion into new territory. For Timberland shareholders, it is a bittersweet end for a company that has not only been run well, but has frequently been lauded by the ethical investing crowd for its policies and philosophies. There's even something here for investors with no direct stake in either company - perhaps it is at least partial validation that footwear companies have traded too low in this latest market pullback.


The Deal to Come
Assuming that all of the necessary "i's" are dotted and "t's" crossed, VF Corp will acquire Timberland for $43 per share in cash. That represents a premium of 43% to Friday's closing price, a little less than $3 from the all-time high for the stock (set just back in late April, prior to a major fall due to an earning miss), and pretty much the full value for the shares.


To read the full piece, please follow the link:
http://stocks.investopedia.com/stock-analysis/2011/VF-Corp-Laces-Up-Timberland-VFC-TBL-PSS-BWS-SKX-KSWS-WMT0613.aspx

Investopedia: The Best And Worst Of Times In Shoes

Shoes are a weird business. You never can tell what is going to resonate with the public at any particular point in time - after all, people have fallen over themselves trying to get a hold of plastic shoes, shoes with little clear windows in the heel and shoes that allegedly build muscle. At the same time, it is a ridiculously competitive industry with price points all over the map.

With that backdrop, perhaps it should not be so surprising that the performance of shoe companies and retailers is also all over the map. Companies like DSW (NYSE:DSW) and Timberland (NYSE:TBL) have leveraged solid financial momentum into good stock performance, while the stocks of more bargain-oriented retailers like Collective Brands (NYSE:PSS) and Brown Shoe (NYSE:BWS) have had some struggles.

Brown Shoe, DSW Not Looking So Green
Brown Shoe has been all over the map for years, and Tuesday's poor earnings report will not help. Not only did sales growth of 7% miss estimates, but the margins were a mess. Overall gross margin fell more than 200 basis points, due solely to the wholesale business. Wholesale margins fell 800 basis points because of sourcing problems and order fulfillment issues tied to a new IT system. All in all, the company missed its EPS target by a pretty meaningful amount and the market was merciless to the shares. 

Please continue to the full piece:
http://stocks.investopedia.com/stock-analysis/2011/The-Best-And-Worst-Of-Times-In-Shoes-DSW-TBL-PSS-BWS-FINL-FL-WWW0322.aspx

BB&T - Anything But Simple

BB&T (NYSE: BBT) delivered another complicated quarterly report for the fourth quarter of 2010. Although the company has clearly made a lot of progress with its credit quality and looks poised to really target growth again in 2011, it's not all positive. At some level, I am starting to wonder whether these murky reports (and the company's apparent unwillingness/inability to telegraph them better to analysts and investors) are a sign of a shift in the corporate culture - one that would not be positive for investors.

The Numbers
Looking at the numbers, operating revenue was down 3% yoy and down sequentially to about $2.3B - a slightly better result than analysts expected. Net interest income was up 2% sequentially, and although the net interest margin fell a bit (5 bp), the absolute level of 4.04% was really quite good. Fee income was down 5% sequentially, though, so BB&T has clearly been challenged to maintain this lucrative source of income - other banks have had this same problem and that makes U.S. Bancorp's (NYSE: USB) all the more impressive. Expenses were up 4% sequentially; normally this would concern me, but it is pretty clear that BBT management is ramping up ahead of some growth expectations in 2011.

Better, If Confusing, Credit
Credit was confusing, but better. The NPA ratio dropped 12bp sequentially to 2.64%, while the NPA/loan ratio dropped 24bp to 3.88%. Unlike U.S. Bancorp, Citigroup (NYSE: C), and many other banks, BBT did not release reserves this quarter. The company's NCOs for the quarter were $538M, while the provisioning was $643 million. The company ended the quarter with non-performing loan coverage of 119% which is quite high and healthy - and perhaps a sign that there could be reserve releases down the road.

One note on credit - the company continued its NPA disposal strategy this quarter and that almost certainly had to mess with the numbers. Given that losses have to be recognized upon sale, that probably inflated the loan loss recognition in this quarter and played a role in that reserve release discrepancy relative to other banks. During the quarter the company also sold over $6 billion in agency securities and $400 million in non-agency securities, swapping them for shorter-duration, floating-rate debt (a sign BBT expects rates to be moving up).

All in all, if you net out the gains from the security sales and the accelerated loan loss recognition, BBT appeared to beat estimates by $0.01.

Ramping Up For An Active 2011?
Looking out to 2011, BBT seems ready to get aggressive. The company is looking for a modest decline in NIM, but the company has been expanding its deposit base at an above-average rate (though not paying too much). The company is also seeing solid loan growth, though that isn't immediately apparent by just looking at the numbers, as the loan disposal strategy messes up the comparisons.

I'm clearly a little miffed at how the company has been presenting information to the Street, but I'm still pro-BBT and pro-management. I think BBT is a very well-run bank (maybe not better than U.S. Bancorp or M & T Bank (NYSE: MTB), but better than Wells Fargo (NYSE: WFC), Zions (Nasdaq: ZION) and quite a few others). I do believe that BBT will emerge from this mess as a winner and one of the leading large banks. Moreover, I'm happy that the company is not getting drawn into bidding wars - BBT was almost certainly interested in buying Sterling, but I'm glad they didn't outbid Comerica (NYSE: CMA) for it. After all, there are more fish in the sea and BBT can afford to be disciplined.

I still think these shares are quite undervalued. I use a return-to-equity model to value bank stocks, and I'm projecting that BBT will achieve a return on equity of 14% in five years' time. With that, I see these shares worth about $34.75. That is pretty significant undervaluation in the market; suggesting that the Street is underestimating the company's ROE recovery and/or assigning a level of risk (discount rate) that seems too high.

So, I would clearly BUY BBT shares today. That said, shop around. Citizens Republic (Nasdaq: CRBC) and Severn Bancorp (Nasdaq: SVBI) could be interesting to really aggressive investors, as could Citigroup (NYSE: C).  PNC (NYSE: PNC), Zions, Southside (Nasdaq: SBSI), Timberland (Nasdaq: TSBK), and Peoples Financial (Nasdaq: PFBX) all stand out as well, though many of these are illiquid and risky.

Buy BBT.
Disclosure: I own shares of BBT

Crocs Back From The Dead

There was no shortage of people lining up to cheer the demise of Crocs (Nasdaq:CROX) as the stock plunged from an improbable high near $70 to under $2 in only about one year. This maker of distinctive (some would say ugly) footwear defied gravity and the howls of value-oriented commentators on its way up and there was almost a sense of palpable glee when the bubble burst. 

Well, Crocs-haters may want to avert their eyes because Crocs is not dead. In fact, business seems to be pretty healthy, and that has fueled a rebound for the stock back into the teens. In fact, Crocs' stock has pretty much trounced the field for the past year. The past year has been a very strong one for footwear companies, but Crocs has more than doubled the one-year performance of the likes of Nike (NYSE:NKE), Timberland (NYSE:TBL), Skechers (NYSE:SKX) and K-Swiss (Nasdaq:KSWS).

Click below to continue to the full article.
http://stocks.investopedia.com/stock-analysis/2010/Crocs-Back-From-The-Dead-CROX-NKE-TBL-SKX-KSWS-DECK-UA1001.aspx