FINANCE: INVESTING GUIDE
TravelCenters lone public firm to report valuation increase
Values decline for most companies with market caps over $10M
By SCOTT SUTTELL
4:30 am, May 18, 2009
Think of it as the ninth-inning home run that means your team loses 11-1 rather than getting shut out.
You have to make it all the way down to the 45th largest public company in Northeast Ohio — TravelCenters of America LLC — to find one that posted an increase in its market capitalization for the recession-plagued, 12-month period from April 30, 2008, to April 20, 2009. Indeed, of the 53 companies in the region that have market caps above $10 million, TravelCenters was the only one to see its valuation rise in the last year.
But it's not like executives at the Westlake-based operator of travel centers for truckers and leisure travelers have any big reason to celebrate. The market cap increase was miniscule, 1.3%, to $39.6 million from $39.1 million a year ago. And in April 2007, TravelCenters' market cap hovered around the $390 million mark, or 10 times today's level.
Misery loves company, the saying goes, and no one is alone this year.
There were only three public companies in Northeast Ohio that held their market cap losses to single-digit percentages: Paintmaking giant Sherwin-Williams Co., down just 0.8% to a market cap of $6.493 billion; Consumers Bancorp Inc. of Minerva, off 2%, though its market cap is just $24.4 million; and wheelchair and home health care equipment maker Invacare Corp., down 8.7% to $524.1 million.
Cleveland-based Sherwin-Williams has benefited — keep in mind this is all relative — from troubles faced by a major competitor, Akzo Nobel, and drops in the price of materials that go into paints and coatings, according to a report last fall from FTN Midwest analyst Chuck Cerankosky.
Despite posting a sharp drop in fourth-quarter earnings and forecasting a weak first quarter, Sherwin-Williams in February raised its quarterly dividend by one-half cent a share, to 35.5 cents.
Health care is one of the stronger sectors in a weak U.S. economy, and Invacare, based in Elyria, is holding up well.
The company said its first-quarter net income rose 8.5%, to $2.4 million, or 8 cents a share, from $2.2 million, or 7 cents a share, in the first quarter of 2008. Sales at Invacare slipped just 4%, to $398 million from $416.3 million.
Offering further proof of the resilience of the health care sector, and its importance to the region, Steris Corp. of Mentor also was one of the best market cap performers of the past 12 months. The maker of medical sterilization equipment fell in market cap by just 13%, to $1.45 billion.
That's about it for the even modestly upbeat view on these numbers.
Down they went
Forty-nine of the 53 Northeast Ohio public companies with market caps above $10 million saw those values fall more than 10% in the last year. (One company, Diebold Inc., wasn't tracked in the 2008 Investing Guide, though its return to shareholders in the last 12 months was down more than 30%.) And that's only the half of it. Twenty-two of those companies lost more than 50% of their market value, and three others lost 48% or 49%.
The worst of the worst was Developers Diversified Realty Corp., which saw market cap plunge 93.6% to $332.6 million on April 20 from $5.23 billion a year ago. (Read those numbers again whenever you get the urge to dwell on what a bad year it was for your portfolio.) The Beachwood-based shopping center real estate investment trust now is the 26th largest public company in Northeast Ohio; a year ago it was ninth.
Things are looking up a bit of late, though, for Developers Diversified. The REIT sold nearly one-third of itself for $112.5 million to Germany's Otto family. Since the deal was announced Feb. 23, Developers Diversified stock is up more than 65%.
In a reflection of tough times in the real estate business, one of the 12-month period's other huge losers was Forest City Enterprises Inc. (And we're not even talking about the whole convention center/medical mart deal.)
The giant development company saw market cap fall nearly 82%, to $694.4 million, as the credit crunch made financing extremely difficult for large-scale deals of the type it typically engineers.
President and CEO Charles Ratner in a March conference call pulled no punches, telling analysts, “When the financial system is under stress and the economy is under stress, real estate is under a lot of stress.”
Banks, as you'd expect in this time of financial crisis, also took hefty haircuts, with big market cap declines at PVF Capital Corp. (77%), United Community Financial Corp. (76%), KeyCorp (61%) and LNB Bancorp (48%).
There are exceptions to every rule, of course, and two big exceptions in this region were TFS Financial Corp., with market cap down just 11%, and FirstMerit Corp., off just 12%. TFS Financial, the holding company of Third Federal Savings and Loan Association of Cleveland, benefited from careful lending practices that limited its exposure to problem loans, and FirstMerit is widely regarded as being among the best-managed regional banks in the Midwest.
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