Spotlight on Public Companies
An improving national economy and a host of industry factors are helping to buoy the fortunes of Louisiana’s public companies, according to business students at Tulane University. From oil industry businesses to financial services firms to a wholesaler of baby clothes, many area companies are worthy of investors’ consideration, the researchers say.
Tulane business students annually produce research reports on about 40 Gulf South companies whose stocks trade in the public marketplace. Their research includes both company-specific and industry analysis, as well as site visits to meet with management of the subject companies. They compile their findings in the Burkenroad Reports, published annually by the university’s A.B. Freeman School of Business.
Stocks in the Burkenroad program also form the core of the Hancock Horizon Burkenroad Small-Cap Mutual Fund, which is managed by Hancock Bank and has about $380 million in assets.
The following are brief profiles of five Louisiana companies studied during the past year by the Burkenroad team.
Industry: Property and casualty insurance
Top executive: C. Allen Bradley Jr., chairman, CEO
Market capitalization: $689.4 million
Stock symbol/exchange: AMSF/NASDAQ
Stock price: 52-week range: $22.00-38.43; July 14 close: $37.35
Dividend/yield: $0.32 / 1.0%
Business: An insurance holding company that markets and underwrites workers compensation insurance for small to mid-size employers, the company specializes in products for the construction, trucking, manufacturing, agriculture, oil and gas, logging and maritime industries. The company was incorporated in 1985.
Analysis: Because it operates in a niche market, covering mainly hazardous occupations, Amerisafe is less likely to face the increased competition that is popping up in larger segments of the insurance industry, the Burkenroad student analysts said. They also noted that the company is debt-free and enjoys a strong cash position, factors that can help smooth out the bumps should the economy take a rough turn.
“The fourth quarter of 2012 was one of the company’s best ever, and management foresees the potential for sustainable growth for the next two years,” the Burkenroad analysts reported.
Amerisafe’s strong fundamentals prompted Zacks Investment Research in June to rate the company a “strong buy,” noting that its “strong underwriting capabilities as well as improved capital position and coverage ratios have been impressive.”
Industry: Electric utility
Top executives: Bruce A. Williamson, CEO
Market capitalization: $2.9 billion
Stock symbol/exchange: CNL/NYSE
Stock price: 52-week range: $38.46-49.52; July 14 close: $47.75
Dividend/yield: $1.45 / 3.1%
Business: Engaged in the generation, transmission, distribution and sale of electricity to some 283,000 customers, primarily in Louisiana, the company owns and operates steam generating stations, gas turbines and other infrastructure that enables a generating capacity of 2,436 megawatts of electricity. Cleco was founded in 1934.
Analysis: Noting that expansion of the company’s customer base is important to revenue growth, the Burkenroad student analysts pointed to a 10-year agreement signed last year between Cleco and the Dixie Electric Membership Cooperation, which will add 100,000 customers to Cleco’s service area beginning in 2014 and increase the total power load by 20 percent.
The company enjoys “ample liquidity” and has rewarded investors with dividend growth in recent years, the analysts reported. They added that the current business environment and Cleco’s “strong cash position” could make the company a candidate for a leveraged buyout.
The Burkenroad team projects growth in the company’s stock price, in part based on potential for new power purchase agreements in Louisiana, Mississippi and Arkansas.
Crown Crafts Inc.
Industry: Baby supplies and accessories
Top executi ve: E. Randall Chestnut, chairman, CEO
Market capitalization: $62.4 million
Stock symbol/exchange: CRWS/NASDAQ
Stock price: 52-week range: $4.80-6.60; July 14 close: $6.32
Dividend/yie ld: $0.32 / 5.2 %
Business: A provider of infant and toddler products for consumers, the company markets a wide array of clothing, nursery accessories and room décor to mass merchants, specialty stores, grocery and drug stores and distributors. Crown Crafts, Inc. was founded in 1957.
Analysis: Crown Crafts has managed to grow profits even as revenue declined in recent years, which the company in its year-end report attributed to a “realignment” of its costs, the redesign of products to favor lower-cost raw materials and the discontinuance of an unprofitable private label infant bedding line.
The Burkenroad team noted that the company has faced challenges in the form of a declining U.S. birth rate and difficult national economy, but as the recession ebbs, birth rates are projected to begin trending upward, they said. “This is positive news for Crown Crafts and the juvenile products industry as a whole,” according to the Burkenroad Reports.
The company is also working to increase its flexibility with regard to pricing. Almost 70 percent of Crown Crafts’ sales are to Walmart, Target and Toys “R” Us, which gives those companies “an upper hand in the relationship with Crown Crafts,” the analysts noted. But they added that Crown Crafts has begun expanding its distribution base to include dollar stores, food and drug chains and international markets.
MidSouth Bancorp Inc.
Industry: Regional banking
Top executive: C. Rusty Cloutier, CEO, president
Market capitalization: $180 million
Stock symbol/exchange: MSL/NYSE
Stock pric e: 52-week r ange: $12.75-17.44; July 14 close: $15.97
Dividend/yield: $0.32 / 2.1%
Business: Providing banking services to commercial and retail customers in Louisiana, and central and east Texas, the company’s subsidiary, MidSouth Bank, provides commercial and residential real estate loans, commercial, industrial and consumer loans. As of May, the company had 60 banking centers in Louisiana and Texas. MidSouth Bancorp was founded in 1984.
Analysis: The company has grown in part through acquisitions of banks and branches in recent years. In late 2012, it purchased Peoples State Bank, bringing 15 new branches in central and northern Louisiana and northeastern Texas under its wing. As it builds on its geographic diversification, MidSouth plans to continue focusing on high-growth areas that are fueled by the oil and gas industry, according to Burkenroad Reports.
The student analysts noted that the bank’s most profitable loans are to small- and mid-size companies in the oil and gas industry. MidSouth’s participation in the Small Business Lending Fund is a low-cost source of capital that allows the bank to make more loans to profitable small businesses, they said.
The analysts said the outlook for MidSouth is good, in part because its loan portfolio is weighted toward oil and gas clients, where both demand and recent commodity prices have been relatively stable.
Hornbeck Offshore Services Inc.
Industry: Oil and gas services
Top executive: Todd M. Hornbeck, chairman, CEO, president
Market capitalization : $2.0 billion
Stock symbol/exchange: HOS/NYSE
Stock price: 52-week range: $31.96-58.18; July 14 close: $56.81
Business: Providing advanced marine transportation services to the offshore oil and gas industry, Hornbeck Offshore Services operates fleets of vessels that support the deepwater production industry in the Gulf of Mexico, Latin America and the Middle East. The company also operates a fleet of ocean-going tugs and tank barges that transport petroleum products in the northeastern United States and the Gulf of Mexico. The company was founded in 1997.
Analysis: The Burkenroad team sees this growing company as well-positioned for expansion based on continued demand from its client base and the number of new vessels scheduled for delivery. Hornbeck this year announced an expansion of its most advanced offshore supply vessel fleet, which is one of the youngest fleets among its peers in the deepwater exploration and production market.
Drilling activity in the Gulf of Mexico continues to increase, driving up demand and enabling Hornbeck to charge higher rates for the use of its equipment, the analysts said. “Management is doing an excellent job of positioning Hornbeck to capitalize on increased demand,” the Burkenroad team reported.
In addition, Hornbeck’s customers in Mexico and Brazil are expanding their activities, which should produce higher demand in that region as well, the analysts said.