The Old and New Five Star

Five Star Senior Living (FVE) and its landlord Senior Housing Properties Trust (SNH) have previously announced a restructuring of their commercial arrangements whereby SNH will cancel the five master leases that cover 181 senior living and skilled nursing facilities currently operated by FVE.  Under the new arrangement, FVE will manage those properties for SNH for a fee equal to 5% of gross property revenues and reimbursement of direct property operating costs. FVE will also have the opportunity to earn an annual incentive fee equal to 15% of the excess over targeted EBITDA for the properties up to a maximum of 1.5% of gross property revenues.

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A Solid First Half for Housing and the Builders

A typical analysis from policy makers, like the Federal Reserve, points out that activity in the housing market has declined so far this year; but that assertion focuses primarily on housing starts.   A more complete picture from the national data shows that the housing market bounced back strongly in the 2019 first quarter from a steep 2018 fourth quarter slide.  The housing market was also able to hold on to those gains in the 2019 second quarter.

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An Update on Bed Bath & Beyond

Bed Bath and Beyond, Inc. (BBBY) reported a fiscal 2019 first quarter loss of $2.91 per share, which included approximately $3.03 per share of unusual charges and expenses. Excluding these unusual items, adjusted EPS was $0.12 per share, at the high end of management’s guidance range of $0.07-$0.12, but lower than last year’s adjusted EPS of $0.38.

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Bed Bath & Beyond’s Next Generation Lab Store

On Saturday, July 13, I visited the Bed Bath & Beyond (BB&B) store on Route 10 in East Hanover, NJ and also the Cost Plus World Market and buy buy Baby stores about two miles east on Route 10 in Livingston NJ.  Here are my photographs and observations on the East Hanover Bed Bath & Beyond store:

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Notes and Analysis from Merck’s Investor Day

On June 20, Merck held an investor day, its first in five years, to highlight its goals and objectives and provide a broad perspective on its five-year performance outlook.  Although its blockbuster cancer treatment, KEYTRUDA (pembrolizumab), has been a spectacular success, investors have been concerned about whether the company has growth potential from other medicines in its pipeline, especially looking out to 2023 when the Januvia/Janumet franchise faces a steep slide in sales following patent expirations.  During the presentation, management expressed confidence about the company’s growth prospects through 2023 and over the longer term.

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Bluegreen’s Share Price Plunges on Bass Pro Contract Cancellation

Shares of Bluegreen Vacations Corporation (BXG) received a double whammy in May from the parent company BBX Capital’s (BBX) decision to back out of its offer to buyback BXG’s public float – equal to 10% of outstanding shares – and by Bass Pro Shop’s decision to cancel its marketing arrangement with BXG.  Since the May 22 close of trading, the day before BBX announced that it would not proceed with its plan to take BXG private, the stock has lost nearly 50% of its value.

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A Solid 2019 First Quarter for New Home Sales

As anticipated, the market for new single-family houses rebounded from a steep 2018 fourth quarter slide to post modest gains in the 2019 first quarter against fairly strong 2018 first quarter levels.  The primary driver of the housing rebound has been the decline in mortgage rates from the recent peak of 4.94% during the first week of November to 4.10% during the week of May 6, according to Freddie Mac.  With unemployment low and consumer confidence high, many potential buyers do not want to lose the opportunity of homeownership (or trading up to a larger home).  If economic conditions remain positive, the new homes market should see at least modest gains in 2019, especially as year-over-year comparisons become more favorable as the year progresses.

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Impairments Spark a Sell-Off, But Position BZH for an Earnings Rebound

Beazer Homes (BZH) reported a fiscal 2019 second quarter loss of $3.28 per share, compared with earnings of $0.36 per share in the comparable prior year quarter.  The loss included a large impairment charge and a much smaller gain on debt extinguishment totaling roughly $3.08 per share.  Excluding those items, fiscal second quarter earnings would have been about $0.20 per share.

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The Outlook Begins to Improve (Gradually) for BHGE

The net income and EPS figures for the 2019 first quarter for Baker Hughes, a GE company, are confusing as presented.  The company reported net income (before income or loss allocated to the non-controlling interest, which is GE) of $71 million, compared with a loss of $19 million in 18Q1.

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Peabody Energy: Maintaining Guidance Despite Disappointing in Q1

Peabody reported a sharp decline in its 2019 first quarter revenues and profitability (even though its earnings per share rose).  The declines were due to lower volumes, lower prices and higher costs in its seaborne metallurgical (SMC) and Powder River Basin coal businesses.  Management’s guidance had anticipated a decline, but it turned out to be worse than anticipated.

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