Nautilus, Inc. (NLS), Safe Bulkers, Inc. (SB), Weatherford International Ltd (WFT): Three Stocks Enjoying Stubborn Buying

Buyers managed to hike this market into new multi-year highs, surpassing both the credit-crunch peak and Y2K peak relatively effort free. This unfamiliar territory will no doubt leave many scratching their heads as to “what happens next?” But not all market participants are staring at the vista before them. Some are looking for the next foothold to push higher.

The following three stocks have all shown strong buying activity, with lots of volume buying on up days, but more sedate trading volumes on down days.

Nautilus

Nautilus, Inc. (NYSE:NLS) is a provider of fitness products to consumers, with one of the grand-daddies of T.V. advertorial products: the Bowflex. The stock got its cardio workout when its first-quarter results handily beat earnings expectations, attracting significant amounts of buyers to push the stock above $8 a share, a price it has been able to maintain since its earnings release. Expectations for next quarter are little more subdued in their seasonally weak period, at $40.2 million, but this should still beat the prior quarter from last year, although the company downplayed this possibility. The company is not expecting increased revenue for the year, so it will look to find income in its successful path of improving margins.

First-quarter margins jumped to 51.8% from 46.6% the year before, a substantial improvement. This helped improve what was a soft quarter for retail, with revenues down for this segment. The outlook for retail remains “challenging.” However, Nautilus, Inc. (NYSE:NLS) had a strong Direct Sales period, with a 26% increase in year-over-year sales. One metric which of broader interest, was the greater number of U.S. credit approval rates: up 35% for the first quarter of 2013. This is a positive sign for a revival in consumer lending (as a whole for the economy), and a sign for the company in attracting more credit-worthy customers. Cash and cash equivalents got a decent $5 million boost over the quarter, to $28.7 million, with no debt. Inventory was also slashed to by $5 million, down to $13.7 million. The demand for fitness products would appear to be global: Acorn International, a direct distributor for a wide range of consumer products (in China), expected “fitness products and electronic learning products to continue to be major sales drivers in the year ahead”.

Safe Bulkers

Advances in the stock market typically lead the economy by around six months, but you will often see early signs of this in certain sectors, transports in particular. Although, reading the opening few paragraphs of Safe Bulkers, Inc. (NYSE:SB) earnings transcript would suggest things were considerably worse than they otherwise are! The company’s numbers have done the talking: an earnings beat hasn’t broken the falling trend in quarterly earnings, but projections for next quarter are comparable to the current, offering an opportunity for it to get a foothold out of its decline. Within the doom-and-gloom of financing troubles and poor scrap metal prices was positive growth data on the BRICs, at over 8% for India and China (as provided by the IMF). This is expected to boost investment activity in drybulk commodities; for example, the export value of “processed agricultural products” from India has tripled since 2009-2010, with the U.S. the main destination for export. Iron ore exports from Australia and Brazil are growing after a period of decline, while grain exports from Australia and Argentina were also strong, with record exports of grain from South America as a whole.

As is common among the shipping companies, price-to-earnings valuations are tight. The squeeze on net income was driven by a mix of higher expenses, depreciation and a jump of interest expense to $2.6 million from $1.8 million, although total debt declined to $515 million from $615 million. A $0.05 dividend will be the 20th consecutive dividend paid out by the company, this gives the stock a yield of 3.9%. The dividend was seen as the highlight of the earnings call, but really, it’s more about the increased shipping of goods which portends to bigger things for Safe Bulkers, Inc. (NYSE:SB). This is why buyers have jumped on board and haven’t abandoned ship.

Weatherford International

The odd one out of the three with last year’s heavy second-quarter loss, which has ultimately skewed the earnings for the trailing 12 months. The stock operates within the oil and natural gas sector, providing equipment and services to companies in the sector. Within the Energy sector, I have covered the likes of Chesapeake Energy Corporation (NYSE:CHK), and Atlas Pipeline, both having struggled to participate in the gains enjoyed the broader market. Weatherford International Ltd (NYSE:WFT) is itself in the process of emerging from a two-year downward trend, but buyers look ready to accept its weak earnings and await for the ship to slowly turn.

First quarter revenue of $3.8 billion was down 5%, sequentially, but up 7% on same period last year; although North America was down 4% year-on-year. Regionally, Latin America performed better than expected, with margins at the highest levels for the past four years. Middle East, North Africa and Asia-Pacific performance beat what was expected to be seasonal lows, while Europe, Russia, Caspian and SSA were as expected. Losses for legacy Iraq contracts went from $64 million in the fourth quarter to just $8 million in the first quarter of 2013, with no plans for further capital investment in the region. The company retired some $294 million in debt, but entered into a credit agreement to obtain some “short-term liquidity,” although the company expects to continue to retire its debt (which totals $8.9 billion). The company is on target to meet its expected $600 million free cash flow from operations in 2013.

Projections are for a better for the second quarter, with of $0.16-0.18 earnings per share, although this is still at the low end of its historical range. North Africa is unlikely to return to ‘norms” until 2014. Optimism can be taken from the improved performance of its rivals: Halliburton Company (NYSE:HAL) last beat EPS estimates by a dime, while Schlumberger added 2 cents to its estimates.

Summary

All three stocks made their volume move in recent weeks, and more importantly, held on to those gains. The fundamental story of each is different, but the net result for higher stock prices should not be too unreasonable.

The article 3 Stocks Enjoying Stubborn Buying originally appeared on Fool.com and is written by Declan Fallon.

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