Bear Quarter Ends With Bullish March

Margot Crabtree, Trade Trends, Inc.

The Federal Reserve’s effort to staunch the economy’s bleeding and the government’s moves to stimulate banks and consumers seemed to have no effect as indicators kept going down and unemployment numbers mounted. However, as our quarter ended March 31, 2009, the month confounded market-watchers by ending in a three-week upswing. Citigroup announced on March 10 that its first two months of the year were operated at a profit, and markets kept a sustained if volatile rally that persisted for three weeks as the trading session ended. Despite the upswing, the period marked six straight negative quarters, the first time that’s happened since 1969 and 1970. The Dow industrials clocked their worst year’s start since 1939. Although March 2009 closed as the best March since 2002, few on Wall Street are declaring a bottom, and many investors are keeping their hands in their pockets. "There was no light at the end of the tunnel in January and February. Now there’s some," said Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, NY. "It’s very, very faint."

The Construction Index experienced scant positive news in the quarter, except for a report late in March that new home sales in March rose unexpectedly. Even so, the Standard & Poor’s/Case-Shiller index of home prices in 20 major cities dropped a record 19 percent from this January to last. The Construction Index shed 376.96 points, or 19.92 percent, and ended at 1515.39. Declining issues outran advancing issues by a 25-to-4 count.

Shaw Group reported a loss in its first quarter based on a stronger yen, but the company’s adjusted profit increased. For the three months ended Nov. 30, Shaw lost $39.9 million, or $0.48 per share, compared to net income of $2.2 million, or $0.03 per share in the year-ago period. Excluding Shaw’s stake in nuclear plant constructor Westinghouse, the majority of which is owned by Japan’s Toshiba Corp., Shaw’s results bested analysts’ expectations and its sales were in line with expectations. "A severe late-summer/early-fall pullback in engineering and construction stocks was followed by a year-end rally fueled by enthusiasm regarding stimulus-related spending, though low commodity prices and frozen credit markets post risk to the bookings outlook," said J.P. Morgan analyst Scott Levine about the industry, mentioning Shaw as a company that could benefit from stimulus spending. Citigroup analyst Brian Chin raised his rating on Shaw Group to "Hold/Speculative" from "Sell/Speculative." Shaw increased 6.94 points, or 33.90 percent, and was the top dollar gainer this quarter. Shaw ended at 27.41.

Vulcan Materials tumbled 25.29 points, or 36.35 percent, after reporting an 83-percent drop in fourth quarter profit, citing weak volume. For the quarter ended in December, Vulcan reported net income of $14.8 million, or $0.13 per share, versus net income of $84.6 million, or $0.82 per share in the year-ago quarter. Sales were down to $799.2 million from $856.9 million. Analysts surveyed by Thomson Reuters expected $0.29 per share and sales of $831.5 million. Vulcan closed at 44.29, and was the top dollar loser.

Although D.R. Horton shares stumbled in March following a Credit Suisse downgrade, the company still ended the quarter on an upswing after reporting a narrowed loss in its fiscal first quarter. In the quarter ended Dec. 31, DHI lost $62.6 million, or $0.20 per share, compared to a loss of $128.8 million, or $0.41 per share in the comparable year-ago quarter. Analysts polled by Thomson Reuters expected D.R. Horton to lose $0.52 per share in the quarter. However, Credit Suisse analyst Daniel Oppenheim cut DHI’s rating to "underperform" from "neutral." D.R. Horton ended the quarter at 9.70, and was the top percentage gainer, adding 2.63 points, or 37.20 percent.

Manitowoc swung to a loss for its fourth quarter and withdrew its guidance for 2009, sending shares downward 5.39 points, or 62.24 percent for the trading session. Although sales increased 16 percent, to $1.22 billion, Manitowoc lost $36.5 million, or $0.28 per share, versus net income of $99.2 million, or $0.76 per share in the same quarter a year ago. At the end of March, Manitowoc said it no longer expects to meet its previously announced earnings and sales for 2009 and did not offer new guidance. MTW ended at 3.27, and was the top percentage loser.