KB Homes Addiction to Land

KB Homes (KBH) is a land junkie. They have an insatiable or uncontrolled drive to acquire land regardless of its economic value. Today in the conference call Chief Executive Jeffrey Mezger commented on the SEC investigation in their land valuation practices. The earnings release also disclosed that they are still acquiring land. The outlook for housing and consumer spending continues to look grim. These guys are a one trick pony. Who has the strategic vision at KB Homes?

Disclosure: No position in any stocks mentioned in this post.

Darden Irresponsible Dividend

Darden Restaurants (DRI) announced Q4 results and disappointed investors. Management seems oblivious to declining metrics i.e. declining revenues and has gambled with a 28% increase in the dividend. The current portion of long term debt is almost equal to the current cash position. Car crash waiting to happen.

When the blame starts to be allocated remember this moment of incredibly poor judgement.

Disclosure: No position in any stocks mentioned in this post.

CarMax Caution Flag on Gross Profit %

CarMax (KMX) reported much improved Q1 earnings primarily due to improved results from its financing arm. They also improved revenues and feel they are making more money on each used car they sell. Here is the item to worry about:

Net sales and operating income are up some 23% but Gross Profit as a percentage of revenues has dropped almost half of one percent. This is a very telling sign. While the business cranked up marginally there was less value. Management did not address the issue in their earnings release. Investors need to watch this metric.

You cannot make it up on volume with declining margins.

Disclosure: No position in any stocks mentioned in this post.

Sprint Evo Collapsing Technology Metaphor

Sprint (S) is advertising the new 4G phone Evo manufactured by HTC. Subliminal message is: technologies tip over and are quickly replaced by another one. Not creating confidence in product durability. Does Sprint expect to survive? Poorly conceived marketing message equates to poor execution.

Diclosure: No positions in any stocks mentioned in this post.

Carnival Fuel Addiction Eats Profits

Carnival Cruise Line (CCL) reported improved expenses and then promptly lost everything to higher fuel prices. The fundamental nature of the cruise business is constant fuel costs.

They may be the biggest and the best from a consumer point of view. From an operating point of view they are OPEC’s best friend. Before we even get into how green this business really is, Carnival has to address the Achilles heel of oil dependency.

From the earnings release they are entirely silent on the issue. Is management awake on this one?

Disclosure: No position in any stocks mentioned in this post.

Budweiser This One Not For You

Budweiser (BUD) err I mean FIFA Cup organizers dropped charges against blond women in orange dresses who attended a World Cup Soccer match between Holland and Denmark. The attractive orange dresses bore a very small Bavaria tag at the side. Both sides have agreed not to talk about it in public.

The King of Beers did not do well with the social marketing aspects of the event and raises questions about Bud's marketing prowess. Are they too old school?

Disclosure: no positions in any stocks mentioned in this post.

Ralcorp Mumbo Jumbo Guidance

Ralcorp (RAH) updates guidance with a mumbo jumbo press release. EPS for Q3 are dropping from last years $1.31@ share to today’s reality of $1.00. Good thing they could keep it above the psychological dollar level. But check this wording out for the reasons:

“Principal factors contributing to this downward estimate can be attributed to cereal category dynamics including lower returns on promotional spending at Post Foods and the impact of branded competition on private label cereal results at Ralston Foods.”

Bolding and italics are mine.

The company failed to execute. The promotional spend failed to deliver. The impact of brand on private label is not completely clear. This sentence would not work with a flinty eyed board of directors. Why was it dished up to investors?

So the expectations guidance dropped the stock some 6% in one day when it was trading at the upper end of its 52 week range. Has management been speaking clearly?

Disclosure: No position in any stocks mentioned in this post.