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Stock Screen: Upcoming Stock Splits - April 11, 2012
Investors looking for positive indicators of a stock’s future performance often consider a stock split a good sign. As a technical matter, a stock split changes nothing about a company’s performance or value. True, per share numbers must be adjusted, but the underlying revenues and profits aren’t altered—just the per share statistics. Still, companies often split their shares when their stocks have appreciated to the point where investors may question an investment because of limited capital. So, by splitting the shares, the stock becomes more appealing to a broader group of investors and, it is believed, that pent up demand for what is already a dear stock, based on a relatively high price, will help spur the price higher after the split.
Of course, stock prices don’t always continue to ascend after a stock split. And, there are times when companies with low share prices use reverse stock splits to boost share prices above exchange minimums so that they may remain listed. So, a stock split is not the sole criteria by which a company should be judged. That said, it is an interesting indicator that more research about a company could be worthwhile.
Every week on the back page of the Ratings & Reports section of The Value Line Investment Survey is a list of upcoming stock splits. Some upcoming stock splits to consider are
HEICO (HEI) engages in the design, manufacture, and sale of aerospace, defense, and electronics-related products and services. It operates in two segments. The Flight Group designs and manufactures jet engine and aircraft component replacement parts. The Electronic Technologies Group produces various electronic, microwave, and electro-optical products. HEICO sells products to the commercial aviation, defense, space, and medical electronics markets.
HEICO continues to be active on the acquisition trail. Since the close of fiscal 2010 (ended October 31), it acquired four companies. This was a primary driver of the approximate 30% growth in the top- and bottom-lines during fiscal 2011. The new units ought to continue supporting gains in the current fiscal year, as well. The latest acquisition, completed in November, was a specialist in the manufacture of electronic-interconnect products capable of operating in adverse environments. Two other recent additions were Blue Aerospace, a supplier and integrator of military products and services, and France-based 3D Plus, a leading designer of electronic products used in satellites and medical equipment.
Considering that current management has made over 40 business purchases since coming onboard in 1990, we think more purchases are in HEICO’s future. What’s more, organic growth might well continue at the Electronic Technology group and the Flight Support division. The former group is continuing to experience strong demand for its sophisticated medical and defense products, while Flight Support is benefiting from strong aerospace and overhaul repair service demand. The ex date for the company’s 5 for 4 stock split is April 25th.
ONEOK (OKE) is a diversified energy company that purchases, transports, and distributes natural gas. ONEOK has over 2 million distribution customers in Oklahoma, Kansas, and Texas. It sold its production segment in September of 2005. It also divested gathering and processing, natural gas liquids, and pipelines and storage assets to ONEOK Partners in April of 2006. The Spring Creek power plant was sold in October of 2006. It currently has a 42.8% interest in ONEOK Partners.
We look for ONEOK to post a solid operating performance over the next few quarters. The company’s interest in ONEOK Partners might well continue to lead the way. The partnership’s natural gas liquids unit should continue to register favorable pricing differentials and better margins, and we look for greater volumes at the gathering and processing line. What’s more, we expect healthy gains at the natural gas distribution business. That said, weakness might well continue at the energy services line, which is operating in an unattractive environment. We look for higher profits at ONEOK Partners to more than counteract weakness at the energy services business.
Also, capital spending should come in around $2.3 billion this year. The lion’s share of this figure will likely be invested in ONEOK partners. Its projects include pipelines, processing plants, and natural gas liquids fractionation and storage facilities. The company continues to develop a hefty backlog of natural gas and NGL-related infrastructure projects. The ex date for the company’s 2 for 1 stock split is June 4th.
Ascena (ASNA) shares had a 2 for 1 split on April 4th. The company operates 825 apparel stores in 47 states where it oversees stores under the Dress Barn and Dress Barn Woman names. These retail concepts offer women’s career and casual fashions at value prices to customers age 35 and above. Ascena acquired Maurices, a small-town teen and young adult apparel retailer, in January of 2005. The company bought Tween Brands in November of 2009.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.