The CEO mantra is “enhancing shareholder value,” but sometimes it seems that outside analysts wield more power, or at least immediate results, in this arena than management.
Consider the stock of Metal Management Inc., which jumped 17 percent–up $4.25 to $29.25–last week after Salomon Brothers Inc. analyst Michelle Applebaum reiterated her “strong buy” for the Chicago-based conglomerate of scrap-metal operations. Applebaum said the company’s earnings could increase six-fold by 1998.
Or look at Culligan Water Technologies Inc., whose stock last week rose $3.06 to a new high of $50.62 after an analyst at CS First Boston raised his target price for the stock to $60 from $50. In fact, the opening price was up $2 from the previous day’s close, prompting the New York Stock Exchange to delay opening of trading while it made sure there was nothing untoward going on at the Northbrook-based company. (There wasn’t).
But sometimes a company can get lost in a gusher of optimism. Consider Amoco Corp., conspicuously unmentioned as analysts stumble over each other to raise third-quarter earnings estimates of oil companies. Exxon Corp., Texaco Inc. and Chevron Corp. got star billing from major investment houses.
Turns out that non-mention of Amoco doesn’t translate into predictions of poor performance. Instead, it can be described variously as proof that analysts were more accurate to begin with when it came to Amoco, or that the company is doing better than expected, just not as much better than the competition.
Smith Barney Inc., for example, raised its third-quarter forecasts for oil companies by 5 percent on average. Amoco’s forecast is up a measly 2.5 percent. “We’re at $1.23; previously we were at $1.20,” said Mike Gallant of the firm’s oil sector.
Last week, Amoco invited oil analysts to Chicago for an update on the company’s financial outlook. Concensus: Nothing new. “They restated their performance goals, which they had done in December,” said Gallant, who was at the session. “It came across the tape as though these were new goals, but there was nothing that was all that new.”
Amoco says: We don’t comment on investor comments.
Call me: Speaking of Amoco, former employees
of the company’s research center in Naperville are getting antsy. Amoco hired teams from the University of Alabama-Birmingham and Johns Hopkins University in Baltimore to investigate 13 cases of brain tumors, five of them malignant, that have occurred among employees of the center since 1982. The first part of that two-year study is tracking down everybody who ever worked at the center–8,000 people.
But several former employees, most of them still in the Chicago area, have called the Tribune to say nobody has come looking for them yet.
One caller, from California, says he has been diagnosed with meningioma, a non-malignant brain tumor. Two of the 13 cases Amoco has identified are meningiomas.
Finding everybody will take time, Amoco says (noting that the two university teams, not company personnel, will handle this and all other aspects of the investigation.
The as-yet-unfound former employees have a variety of takes on the situation, ranging from “they don’t want to find me” (the man with the tumor) to “I don’t want them to find me” (a woman who’s convinced her pension will be in jeopardy if she talks to the medical investigators.)
We’ll keep you posted.
Hey, good lookin’: Nothing like losing flab and firming the bod to grab some attention. Barron’s says Sunbeam Corp. is itching for a big acquisition, and Whirlpool Corp. is on the short list.
Last week, Benton Harbor, Mich.-based Whirlpool announced it will trim 4,700 jobs, sell its financing unit and consolidate European and Asian operations.
The upside of such a deal: Whirlpool is a healthy company with a terrific brand name. Downside: Those very attributes would make any deal costly.
Besides, Whirlpool insists it went on its diet to feel good about itself (read: boost profits and stock price), not to attract a dance partner.
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E-mail Sallie L. Gaines at SGaines@Tribune.com.
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