Jarden Corp. (JAH) is a consumer products conglomerate that manufactures and distributes a wide range of products through its three operating divisions.
The company recently reported fourth-quarter and full-year results for 2008 to mixed reviews from analysts and investors.
Jarden reported a drop in sales for the quarter of 8% from $1.47 billion in the fourth quarter of 2007 to $1.35 billion. Analysts’ polled by Thomson Reuters had expected revenues of $1.3 billion.
The company reported a net loss of $170.4 million for the period. The loss was primarily the result of impairment charges of $383 million against intangibles and goodwill. The company’s adjusted profit of $62.7 million, or 83 cents per share, exceeded analysts’ consensus by 9 cents per share.
Debt an Issue
Analysts have been divided as some have given the company an outperform rating while others see the stock a sell, citing concerns regarding the company’s deteriorating net income and weak debt management. Jarden has a relatively high debt-to-equity ratio of 1.5 which is four times higher than the average for the industry.
Jarden’s current ratio of 2.0 and its quick ratio of -1.0 also leave the company exposed to the need to raise additional capital during a prolonged downturn in the economy.
Jarden’s three primary divisions consist of Outdoor Solutions, Consumer Solutions and Branded Consumables. Examples of the company’s product lines in the Outdoor division include Berkley, Coleman, Gulp, K2, Marker, Penn, Rawlings, Stearns and Trilene.
Consumer Solution products include Crock-pot, FoodSaver, Mr. Coffee, Oster, Rival and Sunbeam. Among the Branded Consumable products are Ball, Bicycle, Diamond, First Alert, Hoyle, Kerr and Pine Mountain.
The initial reaction of the market to the earnings announcement was to push the stock price to its high for 2009, trading at $13.80 the day after the release. The enthusiasm quickly diminished as the broader market sold off dramatically. JAH followed suit by dropping to just over $9 per share.
Bonds Up, Yields Down
While the stock price was impacted by broad based selling in the equity markets, Jarden bonds followed improved investor attitude towards the corporate bond market. Bonds which had traded in the low 60’s as recently as mid-December are now trading in the high 70s, reducing the yield on the bond from over 15.5% to 11.65%.
The company’s ability to produce earnings increases in a difficult environment speaks well for company management. While certainly being affected by the continuation of the flagging consumer sentiment, Jarden’s line of reasonably priced products and effective leadership should result in performance which exceeds the market.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
