Smooth Sailing after Acquisition for MAM

Maine & Maritimes Corporation (MAM, Free Analysis), an electric utility company based in Maine, saw its shares jump more than 30% after entering into a merger agreement with BHE Holdings Inc. Under the agreement, all outstanding shares of MAM stock will be purchased for $45 per share in cash, which represents a 40% premium over Thursday’s closing price.

The transaction is already approved by the board of directors and is expected to closer later this year, subject to approval by MAM’s shareholders and government regulators. These regulatory approvals are expected to take six to eight months, while MAM shareholders will receive proxy materials soliciting their approval for the transaction soon.

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PAB Bankshares Jumps after Securities Offering

In an unusual move on Wall Street, PAB Bankshares, Inc. (PABK, Free Analysis) moved more than 25% higher days after announcing that it would offer $85 million in common stock. While the terms of the offering were not set, the offering is expected to dilute existing shareholders given the firm’s current market capitalization of around just $20.55 million.

The bank holding company anticipates using the net proceeds from the offering to improve its regulatory capital position as well as general corporate purposes. Interestingly, the move follows the sale of five branches to Heritage Financial Group in late February, designed to deleverage its balance sheet and focus their resources on resolving problem assets.

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Lifetime Brands Surges Higher on Upgrade

Lifetime Brands, Inc. (LCUT, Free Analysis), a provider of branded food preparation and home décor products, saw its shares jump more than 10% after Barrington upgraded the company following its fourth quarter earnings. The analyst also set a $14 per share price target on the stock, which is significantly higher than its $10.61 share price now.

During the fourth quarter, the decor company reported earnings of 41 cents per share, versus a 35 cents consensus, and revenues of $128.1 million, versus a $130 million consensus. In 2010, the company projected challenging economic conditions with modest, if any, organic growth in market size, but expects to gain market share and achieve some sales growth in call categories.

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SandRidge Energy Call Options Power Up

SandRidge Energy Inc. (SD, Free Analysis), a natural gas and oil exploration company, saw call option volume that was more than three times higher than its 10-day average. A total of 16,086 contracts traded, primarily in the Apr 9 and Jun 12 expiration dates. Traders appear to be positioning themselves for a natural gas correction and the completion of its Century Plant.

Last quarter, the natural gas firm reported fourth quarter earnings of 14 cents, versus a 21 cents consensus, on revenues of $163.1 million, versus a $207.71 million consensus. The lackluster results led to a downgrade to a Hold from a Buy at Stifel Nicolaus, but many investors believe that the Century Plant’s upstart this summer will enable it to rapidly expand.

Also see: Free Introduction to Options Video Tutorial

SuperValu Options Jump on Takeover Rumors

SuperValu Inc. (SVU, Free Analysis), a grocery chain operating under a number of names in the United States, saw its options activity explode higher after rumors surfaced that it could be a leveraged buyout target. Meanwhile, a company spokesman that said it does not comment on rumor or speculation, during the morning hours.

The grocery chain’s call option volume was already more than 40x its 10-day average during the morning hours, with some 26,000 contracts trading hands. Mar 17.50 and Apr 20 calls were among the most actively traded, given the short-term nature of the bets made. While the underlying stock lost some of its momentum, shares remain 5% higher on heavy volume.

Also see: Options Trading 101 Free eBook (PDF)

Automatic Data Processing Calls See Action

Automatic Data Processing (ADP, Free Analysis), a provider of business outsourcing solutions, saw unusually high call option volume that appeared to be tied to shares of stock. Approximately 5,000 Mar 43 calls traded at $0.95 per contract, 5,000 Apr 45 calls traded at $0.45 per contract, and 5,500 Apr 44 puts traded at $1.05 per contract.

The move comes after a March 7th story on Barrons.com indicating that shares appear to be cheap as it weathers the tough times. The article highlighted its robust cash flow, virtually no debt, and continually rising dividend as key catalysts. Meanwhile, its 20% market share of the payroll processing industry in the U.S. means it could benefit from an economic recovery.

Analyst: FRX May be 15-20% Undervalued

Forest Laboratories, Inc. (FRX, Free Analysis), a branded and generic ethical drug manufacturer, has seen its shares steadily rise over the past few days, but one analyst still believes the stock is undervalued. After attending a conference, Cowen believes that its DAXUS drug is likely to receive approval in 2011 and believes that the stock is 15-20% undervalued.

Despite the bullish sentiment, some analysts are quick to point out that the company will lose $2.3 billion of its $4.2 billion in early sales when its patent for Lexapro expires. As a result, management has been quickly trying to bring other drugs to market with mixed success. However, it is worth noting that the stock generates significant cash flow and is 35% cash.

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Human Genome Set to Exceed Expectations

Human Genome Sciences (HGSI, Free Analysis), a commercially focused biopharmaceutical company, may be trading near its 52-week high, but at least two analysts see better times ahead. RBC Capital believes that expectations are low into the upcoming BLISS-76 data and sees potential for an upside surprise, while Piper Jaffray initiated coverage at an Overweight.

Developed in partnership with GlaxoSmithKline, Benlysta is an investigational human monoclonal antibody drug that acts as an inhibitor for the biological activity of B-lymphocyte stimulator. In lupus, rheumatoid arthritis and certain other autoimmune diseases, elevated levels of BLyS are believed to contribute to the production of antibodies.

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Analyst Bullish on China ACM Future

China Advanced Construction Materials Inc. (CADC, Free Analysis), a producer of ready mix concrete materials in China, saw its shares move sharply higher after Roth Capital initiated coverage. The analyst believes that the company will benefit from the 20%+ annual growth rate of the construction industry in China and set an $8 price target on the stock.

Earlier this month, the construction company announced that it has been awarded a new contract totaling $1.55 million for its ready-mix concrete services for one section of the PanJin to YingKou high-speed railway in the Liaoning Province. The project will require about 200,000 cubic meters of concrete and should be completed in less than two years.

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A Cargo Stock Carrying a Cheap Valuation

Air T, Inc. (AIRT, Free Analysis) has more than doubled from its lows over the past 52 weeks, but the stock still appears cheap to many investors. Trading at just 7.5x its trailing 12-months of earnings, investors may be surprised to learn that the company has a 17.9% five year earnings growth rate and even pays a 2.7% dividend yield.

While its third quarter earnings showed a drop in revenues and backlogs, the air and ground cargo transportation firm continues to conserve cash, control costs and tighten their credit policies in order to drive profitability. Meanwhile, investors are hoping that this sleeping giant will awaken once more when the economy posts a more robust recovery.

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Fact: Profitable Airlines DO Exist!

AirTran Holdings, Inc. (AAI, Free Analysis) is a rare breed of airline that is actually profitable and growing by focusing on specific niche markets. Trading with a price-earnings multiple of just 5.7x its trailing 12-month period, the company has posted five-year earnings growth of 64% and five-year revenue growth of 17.6%.

While it has been facing some issues from a stronger post-bankrupt Delta Airlines, the regional airline reported that its February traffic was up 5.4% while its ASMs were up 4.2%. Investors are hoping that efforts to expand in its medium-sized markets elsewhere will help continue to support its growth, but the stock has remained relatively range-bound recently.

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Tidewater Could See Calmer Seas Ahead

Tidewater Inc. (TDW, Free Analysis) has seen its shares trade within a relatively tight range over the past 52 weeks, but this cheap stock could move sharply higher when offshore drilling returns. Lower oil prices have kept offshore drilling activity relatively low, but a rebound in the world’s largest economies could drive demand higher and lead to increased activity.

The offshore supply vessel and marine support services provider trades at under 8x its trailing 12-month earnings, despite five-year earnings growth rates of over 60%, while also paying a dividend yield of over 2%. However, investors may want to hold off on the stock until the industry begins to improve, as it continues to be on a downtrend.

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OccuLogix Investors Focus on a Key Partnership

OccuLogix, Inc. (TEAR, Free Analysis), an in-vitro diagnostic company focused on commercializing its tear testing platform, moved sharply higher after announcing that TLCVision will incorporate its TearLab Osmolarity System in eight of its U.S. refractive surgery centers to study Dry Eye Disease symptoms as they relate to LASIK surgery.

Shares moved up more than 20% on the news amid speculation that the new agreement will both validate the diagnostic company’s products and bring substantial revenues through the door. The news also comes after a positive peer-reviewed article published in Contact Lens & Anterior Eye magazine, which highlighted TearLab’s ability to accurately measure subtle changes.

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Solid Earnings Fuel Clean Energy Shares Higher

Clean Energy Fuels Corp. (CLNE, Free Analysis), a provider of natural gas as an alternative fuel to vehicle fleets in the U.S. and Canada, saw its shares jump more than 15% after announcing better-than-expected results for its fourth quarter. During the period, the firm earned 2 cents per share, with analysts projecting a 4 cents per share loss.

The results come despite an acceleration in station construction and deal flow in 2009 at a time when its customers were focused on cutting costs. The natural gas company attributed the results to cost-cutting measures that it undertook, as well as growth in all of their sectors. Meanwhile, the company is confident that the trends will remain in 2010.

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NutriSystem Recovers from an Unhealthy Forecast

NutriSystem Inc. (NTRI, Free Analysis), a provider of weight management systems, saw its shares jump more than 10%, recovering modestly from its sharp fall earlier this month following its earnings report. It appears to many analysts that many of the investors that wanted to sell are now out of the stock and the bulls may be back in control for the time being.

Earlier this month, the weight management company reported fourth quarter earnings of 18 cents versus 13 cent estimates, but cautioned that people continue to diet on their own due to the difficult economy. Meanwhile, several analysts also downgraded the stock, including Thomas Weisel, which lowered its target from $24 to $15 per share.

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DaVita Sell-Off Creates Buying Opportunity

DaVita Inc. (DVA, Free Analysis), a provider of dialysis services in the United States, saw its shares jump nearly 2% after a key analyst called the sell-off a buying opportunity. Jefferies believes that the reduction in the VA’s reimbursement for dialysis was already factored into its FY10 guidance and thinks that the weakness was unjustified.

Meanwhile, Fortune Magazine also recognized the dialysis company as one of its “Most Admired Companies in 2010” for the fifth consecutive year. The company’s health care medical facilities ranged first overall and was specifically recognized in the magazine’s categories of innovation, use of corporate assets, financial soundness, and long-term investment.

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RadioShack Could Make Attractive LBO Target

RadioShack Corporation (RSH, Free Analysis), a large retailer of consumer electronics, saw its shares drop marginally despite rumors that it could be an attractive leveraged buyout target. Shares surged earlier this week amid renewed takeover talk, while at least one analyst hinted that a leveraged buyout could make sense for the retailer.

Deutsche Bank believes that a leverage buyer of the electronics chain could make near 20% returns over five years paying a 20% premium to the current share price, under certain assumed circumstances. However, the analyst maintains its Buy rating on the stock despite the possibility that many investors still see as relatively remote.

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Analyst: Infinera Could Rise More than 50%

Infinera Corp. (INFN, Free Analysis), which develops solutions for optical communications networks, saw its shares drop despite extremely bullish comments out of one analyst. After meeting with management, PacCrest believes that the company is tracking to the high end of its guidance and said the stock could increase 55% down the road.

The comments come after the same analyst noted in February that the capital expenditure recovery in NA is positive for Infinera and that potential upside could be around 91% versus a 12% downside. Throughout the entire time, the analyst maintained its Outperform rating on the stock, as investors also seemed relatively bullish until recently.

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James River Coal Jumps on Industry Takeover

James River Coal Company (JRCC, Free Analysis), a coal producer based in Kentucky and Indiana, saw its shares jump more than 7% after India’s Essar Group sought to acquire U.S. Trinity Coal for $550-600 million. FBR Capital views a non-U.S. strategic player entering the U.S. market, as well as the implied valuation range, as positives for the sector.

Other companies in the sector also moved higher on the news like Patriot Coal Corporation (PCX, Free Analysis) and Massey Energy Company (MEE, Free Analysis). It is uncertain how long the uptrend will remain in play, but many investors are now bullish on the sector given the recent takeover and speculation of further M&A in the industry.

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Brocade is Sharply Undervalued, Says Analyst

Brocade Communications Systems, Inc. (BRCD, Free Analysis), a supplier of data center networking solution that help enterprises connect and manage their information, could be substantially undervalued on a sum-of-parts basis, according to one analyst. In February, shares fell sharply on weak guidance, as several analysts downgraded the firm.

Oppenheimer’s sum-of-parts analysis indicates that the data center company’s storage business alone is worth more than the company’s current market capitalization. As a result, the analyst maintains an Outperform rating on the stock. Other analysts disagree, such as RBC Capital that downgraded shares, but still maintain a price target of $8-8.50.

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DragonWave Jumps on Positive Analyst Comments

DragonWave, Inc. (DRWI, Free Analysis), a broadband wireless backhaul equipment maker, saw its shares jump nearly 5% after at least one analyst expressed confidence in the stock. Morgan Joseph continues to believe that the company is poised to benefit from Clearwire’s (CLWR, Free Analysis) WiMAX network build-out and maintains a Buy rating.

In Febraury, the wireless equipment maker also announced that it signed an OEM agreement with a global mobile equipment manufacturer. The company’s microwave radio system is expected to be included in the end-to-end mobile backhaul solutions in North America and Japan, which has helped lead to increased confidence in the technology.

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In an unprecedented twist on the typical activist investor story, Nicusa Capital is demanding that Metropolitan Health Networks (MDF, Free Analysis) reinstate Mr. Michael Earley as CEO. The 5.6% shareholder, reportedly in agreement with other large holders, is pleased with the company’s recent financial performance and credits it to the departing executive.

“I was shocked by the board’s decision to fire Michael Earley,” said Nicusa Managing Member Paul Johnson in a February 9, 2010 letter. “I regard Mr. Earley as a talented CEO with strong management and strategic skills, and an understanding of the changes underway in the health-care industry. I have little confidence that the board will be able to find a more qualified candidate to run the company and believe the process will be disruptive to the organization.”

In its February regulatory filing with the SEC, Nicusa demanded that the departing CEO be reinstated, the board reduce its size and compensation, additional measures be taken to distribute excess cash to shareholders, and any consideration of strategic alternatives be immediately ceased. So far, only one or two of these demands have been met in modest terms.

Metropolitan agreed to increase its stock buyback program by 5 million shares to 20 million shares in total in order to help return excess cash to shareholders. Since the program’s inception in Q4 of 2009, the company has repurchased 12 million shares of common stock and nearly 700,000 options at an average cost of $1.85 per share.

Meanwhile, the company has continued to report solid operating results each quarter. Revenues increased 11.7% to $354.4 million in 2009, while net income increased to $0.32 per share compared to $0.21 per share during 2008. At the same time, total customer months increased by 7.2% year-over-year and the share count was reduced by 11.4 million shares since Q3 2008.

In the meantime, shareholders are awaiting Metropolitan Health Networks’ annual meeting in mid-July to discover the new talent that it plans to bring onboard. Mr. Earley’s contract as CEO has been extended accordingly, but many shareholders appear to remain upset by the departure of the executive, and continue to fight for him to be reinstated.

Commercial Mortgage-backed Securities – or CMBS for short – represent one gauge of the commercial real estate market that is often watched on Wall Street. Unfortunately, the indicator shows increasing problems in the sector that some believe could lead to another crisis over the coming year or two, if lending conditions don’t improve in the U.S.

In January 2010, the overall delinquent unpaid balances of CMBS went up 326% from a year ago, according to Realpoint Research. The group estimates that delinquencies will hit 8.6% by June 2010 and that balloon default risk is growing rapidly from highly seasoned CMBS transactions as loans are unable to pay off as scheduled.

The Wrong Place at the Wrong Time…

Maguire Properties, Inc. (MPG, Free Analysis), which owns commercial real estate in Los Angeles and Southern California, could see some of the largest headwinds. The state of California faces a near 13% delinquency on its CMBS, with particular concentration in Los Angeles, Riverside-San Bernardino, and Orange County.

Management implemented a plan in Q2 of 2009 to stop funding cash shortfalls at seven of its properties resulting in a default on several of its loans. While the company is seeking a resolution for these problems, it faces higher vacancy rates and lower rents as well as increased competition from recently-completed sublease space that is currently available.

Kilroy Realty Corporation (KRC, Free Analysis), which also operates commercial real estate projects in Southern California, could face similar headwinds in 2010 and beyond. California’s continuing budget deficit also poses a problem for these REITs, as uncertainty leads to fewer businesses willing to commit to long-term leases.

The office and industrial real estate investment trust saw its rental income drop in both segments during its most recent quarterly report, as it was also forced to raise capital through a debt offering of 4.25% exchangeable senior notes that are due in 2014. Upon exchange, these shareholders will be able to sell through a new issue at $27.61 per share.

While both of these companies may have not directly participated in the CMBS market, the geographical market in which they operate is quickly deteriorating as a result. Defaults in surrounding commercial properties lower valuation, while the trends leading to the CMBS defaults is likely also affecting all players in the geographical market segment.

Zanett Signs $12 Million in Contracts in 2010

Zanett, Inc. (ZANE, Free Analysis), a leading business process outsourcing and information technology consulting firm, announced that it signed over $12 million in new business in January and February 2010. The contracts relate to 42 different customers, with the largest customer placing an order for $4 million.

Management attributes the success to corporations spending less money on new hires and more on capital expenditures related to information technology. Meanwhile, healthcare remains the largest segment of contracts signed, as the company recently developed a CODS software package to support evidence-based order sets at the point of care.

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Coldwater is in Fashion for 2010

Coldwater Creek Inc. (CWTR, Free Analysis), a specialty retailer of women’s apparel and accessories, announced fourth quarter loss of 11 cents per share, versus a consensus of 9 cents per share, on revenues of $318.4 million, versus a $311.98 million expectation. However, it sees 2010 earnings of 8-12 cents versus a consensus of a 27 cent loss.

Piper Jaffray noted today that it believes the retailer’s merchandising initiatives are taking hold and that shares are poised to move higher following its fourth quarter results. Shareholders seem to agree as shares jumped more than 20% on the higher-than-expected guidance for the full year. The analyst maintains an Overweight rating on the stock.

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MedCareers Surges on Acquisition Announcement

MedCareers Group, Inc. (MCGI, Free Analysis), an upcoming leader in the healthcare career arena, announced that it acquired the domain name www.workabroad.com. The web site is currently a portal for a variety of job related postings that focus on international opportunities for job seekers who live outside of the United States.

The move follows the recent launch of www.medcareers.com, which is a domestically-focused web portal. Combined, the web portals will help expand the company’s footprint in the growing market for medical professionals around the world.

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