FOCUS ON THE 15: Key 15’s Q-C companies provide perspective

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By Jim Victor | Saturday, August 23, 2008 9:52 PM CDT | () comments

Summer’s final weeks usually are marked by lower stock market transaction volumes. Last week was one of those, and saw our Quad-City Times Key 15 advance 1.49 to 1,250.09.

But while summer slowness prevails, some important insights can emerge. Our look at Key 15 companies provides one of the best. A bank officer recently asked me about the area’s 15 companies, hoping to use them as a barometer for banking conditions. I was happy and honored to answer the question. Summarizing the effect of business conditions on those companies, I offered that 11 were seeing growing revenues by their latest quarterly reports and four were “enduring” conditions that were keeping them from growing. While there’s nothing official about the “11 growing, four enduring” summary, it’s an important look at area business and an exercise that each of us ought to engage in a little more often. Many business observers can find something wrong each day. Perhaps more should check the score. Better perspective can result.

Another unique perspective came from Quad-City International Airport data. Despite the severe July wind storms that left the airport without power for several days, passenger enplanements were the second-best in history. July’s 44,779 enplanements were just 708 short of the prior July’s record. For the first seven months, we’re still 1 percent above the same months of 2007. I believe business travel and vacation travel are growing, though slowly — perhaps an important insight into the durability of the economy.

Individual companies offer us their own window on the world. Heinz, with soups and sauces turned out in its Muscatine, Iowa, kitchens, exceeded analyst estimates with profits climbing 14.2 percent, from 63 cents per share last year to 72 cents. Sales climbed similarly, up 14.7 percent, from $2.25 billion to $2.28 billion. Insight into U.S. business was provided by Heinz, which noted that North American sales gained 12 percent, with the actual volume of products sold up 4.7 percent. A wider window on the world of Heinz comes from looking at European sales, up 20 percent, and the Asia Pacific region sales, up 23 percent. Sales to emerging markets leaped 36 percent. Clearly, Heinz is among those 11 seeing growth, though not without challenges: Heinz says sales, including both volume increases and price increases, had to rise enough to offset recently rising raw material and energy costs. Heinz shares posted a new 52-week high early in the week and a full week gain of .05 to finish at 52.09.

Monsanto (b), meanwhile, pruned its business holdings again. Monsanto sold its Posilac cow hormone business to Eli Lilly and Company, the pharmaceutical firm, for $300 million. That’s a small part of Monsanto. But it’s been a controversial part, as debate continues on the benefits versus risks from growth hormones. Monsanto continues to focus on its core seed and seed trait businesses, along with its market-leading Roundup herbicide business, with production in Muscatine. Monsanto shares were up 5.61 to 118.07.

YRC Worldwide continues to grow worldwide with its latest acquisition in China. On Tuesday, the company closed its acquisition of Shanghai Jiayu Logistics, one of the largest trucking firms in China, with more than 1,800 employees, 3,000 vehicles, 200 locations and more than 30,000 customers. YRC bought 65 percent of Jiayu for $44.7 million with plans to acquire the remaining 35 percent in 2010 for an amount not to exceed $39 million, based on 2008-2009 business performance. YRC shares retreated 1.94 to 18.07.

The final week of August may again bring light business volume. But it also brings a heavy volume of economic reports. Pay special attention to Wednesday’s durable goods order report since Quad-City manufacturers turn out many durable goods. Watch Friday’s latest on personal income and personal spending, where we’ve seen 4 percent to 5 percent year-over-year increases in earlier months. Summer slowness indeed brings important insights.

Jim Victor is senior vice president-wealth management and financial advisor for Smith Barney, Davenport. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world.’

The information contained herein has been obtained by the writer from sources believed to be reliable, but he does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. a) The firm is a market maker in the publicly traded equity securities of this company. b) Within the past 3 years, Citigroup or its affiliates has acted as manager or co-manager of a public offering of securities of this company.