Sensormatic Back on its Feet

January 01, 1999  ·  Michael Fumento  ·  Broward Daily Business Review  ·  Fumento

Sensormatic shares rise on magazine column, analyst recommendation; Investors in the Boca-based supplier of retail security systems have gotten a kick out of good news

One of South Florida’s most trod-upon stocks, Sensormatic Electronics Inc. of Boca Raton, is back on its feet. After falling to a painfully low $3.13 on Oct. 8 last year, the share price has more than tripled.

These first few weeks of 1999 have been wonderful for the maker of electronic security systems for stores and other businesses. The company’s $1 billion in annual sales make it a world leader in its field. Sensormatic stock has climbed nearly 50 percent so far this year, to close at $9.94 on Tuesday.

The upward swing has had broad support, as more than 1 million shares have changed hands daily in six of the first 10 trading days this year. By comparison, Sensormatic volume broke the 1 million daily mark only six days in the entire quarter ended Dec. 31.

Institutional investors appear active, with three block trades totaling 490,000 shares over three consecutive days last week.

What’s pushing up the stock? Blockbuster earnings? Merger rumors? Insider trading?

No, no and no. The company won’t comment on stock price movements, but Sensormatic seems to have benefitted from an upgrade of its stock by Southeast Research Partners Inc. of Boca Raton on Dec. 31 and a positive commentary from the Jan. 25 issue of Forbesmagazine ("The Zapping of Sensormatic"), released on Jan. 11.

Southeast Research raised Sensormatic from a "hold" to a "buy" on Jan. 4, says research analyst Peter McMullin. While the company will likely report a 2-cent per-share profit for the second quarter ended Dec. 30, "we think sometime around the March quarter, you’ll see a sizable increase in earnings."

Southeast Research predicts Sensormatic will earn 16 cents a share for that quarter and report 40 cents a share for the year. The annual earnings figure will jump to 60 cents for the year ending June 30, 2000.

The company hasn’t had a profitable year since 1995. It lost 50 cents per share in the year ended June 30, 1998, 29 cents per share the year before that and $1.33 per share in 1996.

McMullin expects Sensormatic’s sales of antitheft tags and systems to Wal-Mart to rise as the retail industry in North America continues to experience a growth rate of more than 10 percent.

"As goes Wal-Mart, I’m sure that there will be other [retailers] to follow," he says.

The stock took off the same day the report was issued, and McMullin says the president of Sensormatic told him in a conversation Tuesday, "You can take a lot of credit for that."

Sensormatic also received a defense of its store security systems in a Forbes commentary from contributor XXXXX;