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Monday, July 24, 2006

Consumer Cycling

By William Trent, CFA of Stock Market Beat
Summary: The housing market is slowing for sure, and the low-end retail woes are spreading to high-end retailers like Best Buy (Plasma TV spending fears.) Some of the high-end toys like boats and snowmobiles are having a tough go, but it seems we’re still willing to pay up for a good night’s sleep.
Watch List Companies

Heineken (HINKY) raised its profit guidance for this year, to slightly above 10%, vs. previous expectations mid-single digits. The successful U.S. launch of Heineken Premium Light was a strong growth driver. The interest in Premium Light is also benefiting Heineken’s entire U.S. beer line. First-half volumes in the Americas grew 13.4% on a comparable basis. The company said the premium beer market is growing more quickly than the overall beer market, which is dominated by Anheuser-Busch (BUD) and Molson Coors (TAP). Anheuser-Busch is also a Watch List company.
Tempur-Pedic earned $26.1 million, or 30 cents per share, compared with $24.9 million, or 24 cents per share, for the same quarter in 2005. Revenue grew to $219 million from $192.6 million in the year-ago period. The results came in slightly ahead of Wall Street predictions of 29 cents per share on $217.2 million in sales. The company now expects full-year 2006 earnings per share between $1.26 and $1.31, versus its previous estimate of $1.24 to $1.29. Full-year 2006 net revenue is expected to total between $940 million and $970 million. Analysts, on average, expect 2006 earnings of $1.16 per share on $930.1 million in revenue.
Other News

Mattel (MAT) posted an upside surprise due to stronger than expected Barbie sales (take that, Bratz!) as well as promotional tie-ins with Cars and Superman. The company reported second-quarter net income of $37.4 million, or 10 cents per share, compared with a year-earlier loss of $94 million, or 23 cents per share. Excluding items, earnings rose to 8 cents per share from 5 cents. Analysts on average had been expecting 4 cents, according to Reuters Estimates. Revenue rose 8 percent to $957.7 million, surpassing analysts’ expectations of $922.95 million.

Harley Davidson’s (HDI) quarterly earnings rose 2.5 percent and it was on track to meet its 2006 shipments. Harley said its second-quarter net profit rose 2.5 percent to $243.4 million, or 91 cents a share, from $237.4 million, or 84 cents a share during the period last year, meeting the average estimate. Revenue rose 3.3 percent to $1.38 billion., sending shares higher in premarket trading. The 2006 outlook bucked a trend of disappointing results and scaled-back expectations from U.S. recreational vehicle makers, which have been laboring under rising interest rates and energy prices, and a slowing housing market.

Previously, several U.S. companies selling pricey toys for adults — including boatmaker Brunswick Corp. (BC), snowmobile manufacturer Polaris Industries Inc. (PII), and RV maker Fleetwood Enterprises (FLE), — reported lower quarterly earnings, saying economic headwinds were keeping consumers out of showrooms.

Coca-Cola Co. (KO) posted better-than-expected earnings boosted by its PowerAde sports drink and Dasani bottled water brands. Second-quarter profits were $1.84 billion, or 78 cents a share, up from $1.72 billion, or 72 cents a share, a year earlier. Excluding a gain from the sale of shares in the initial public offering of its Turkish bottler, Coke reported earnings of 74 cents, 2 cents ahead of Wall Street expectations, according to Reuters Estimates. In the past year, Coke launched a flurry of brands such as coffee-infused soda Coke Blak and energy drink Vault and extended flavors of existing brands like Dasani flavored water, to cash in on the growth in the energy drinks (led by Watch List member Hansens Natural [HANS]) and water segments.

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