Sunday, August 15, 2010

Barron's Summary: Positive on Adidas, Coinstar, Johnson Controls

- Barron's cover is a positive article on Johnson Controls whose stock is trading at a modest valuation but which Barron's expects to outperform significantly in the coming years. Barron's mentions that the company expects core markets to grow at a compound annual rate of 5% in the next 5 yrs and its business units to grow at twice the growth rate of their underlying market. Barron's also notes long-term encouraging trends and a healthy financial flexibility and reminds that board will revisit its dividend policy in November which at a yield of 1.9% is not very attractive. Given the company's earning coverage, there is room for increases.
- Redbox has grown rapidly as more people are renting DVDs at the company's self-service kiosks in supermarkets, drugstores and restaurant outlets. The owner of the Redbox, Coinstar is poised to benefit from this growth story and Barron's notes that its shares currently trading at $46 could raise to $60. Citing a money manager, Barron's argues that redbox's advantage is its $1-a-night price which people favor given the weak economy. It currently operates 27K kiosks and plans to add 8K this year. Shares of Coinstar are inexpensive and strengthened by Redbook, which owns 25% of DVD rental market, its earnings are rising significantly.
- Positive feature on Adidas which currently trades at €43 but could raise up to €50 next year as its Reebok brand is improving revenues and profits in the US, which in return boosted Adidas' second quarter sales by 16%. Average selling price for Rebook increased 20% in H1 as Reebok embraced the toning-shoe trend

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