Welcome to the July 2 Monday Business Briefing, your business intelligence digest from Insider Louisville. This week, we look at midyear stock performance of companies of local importance.
It appears that the current trade war is good for some vices (tobacco, gaming) — but bad for others (bourbon.)
While broader stock market indexes have recorded mixed results for the first six months of the year, some local companies, including Turning Point Brands and Churchill Downs, are having a banner year. However, the stock of one of Louisville’s best-known brands, Brown-Forman, is getting hit by concerns over escalating trade tensions.
Of 16 companies tracked by Insider, six performed significantly better than the Dow Jones industrial average and the S&P 500, while seven performed significantly worse. The companies are either based in Louisville or have a sizable local operations.
From a share price perspective, one company has emerged as a clear winner for the first half of the year: The tobacco company Turning Point Brands, with a gain of 54.1 percent so far.
The company had a decent year early on, announcing on April 30 that it had acquired business-to-business e-commerce marketing and distribution platform Vapor Supply, which services vapor stores, makes e-cigarette liquids and owns eight stores in Oklahoma.
TPB’s shares closed at $21.45 on May 9, up 3.6 percent for the year.
Then the company said net sales in the first quarter jumped 10.7 percent, while gross profit rose 15 percent and net income jumped 61.5 percent.
Earnings, SCOTUS lift Churchill Downs
Thanks to profits and help from the land’s highest court, Churchill Downs shares have gained more than 27 percent this year, despite a lackluster June that saw shares fall slightly.
The Louisville-based gaming company’s shares rose 8.4 percent after reporting that first-quarter revenue rose 13 percent and net income from continuing operations increased more than sixfold.
In the week after the U.S. Supreme Court legalized sports betting in mid-May, shares rose 11 percent. Two days after the ruling, Churchill Downs announced that it had reached agreements with partners to enter the online gaming and sports betting markets in New Jersey, Pennsylvania and Mississippi.
Roadhouse stock stampedes
The healthy economy and low unemployment rate also are prompting more consumers to eat steak, which has helped Texas Roadhouse shares stampede higher.
The company’s shares already had risen more than 10 percent for the year when, on April 30, it announced that despite rising labor costs, first-quarter revenue rose nearly 11 percent, while net income spiked 59 percent.
CEO Kent Taylor said in an earnings release that the restaurants are seeing more foot traffic: Comparable restaurant sales were up 4.9 percent compared to the first quarter of 2017.
And for the first four weeks of the second quarter, comparable restaurant sales were up 8.5 percent compared to a year earlier.
Higher labor costs also have been more than offset by a lower corporate tax rate.
Since mid-May, the restaurant chain’s shares have risen another 10.7 percent.
They closed at $65.51 on Friday, up 22 percent for the year so far.
Other local companies with a solid returns in the first six months of the year:
- Humana, up 19.5 percent
- Sypris Solutions, up 19.7 percent
- Republic Bancorp, up 15.2 percent
- Apellis Pharmaceuticals, up 7.1 percent.
Louisville-based Brown-Forman Corp. has had a rough year so far, primarily because of international trade tensions.
The distiller said last week that it will raise prices for the American whiskey it exports to Europe to offset tariffs imposed by the European Union.
The EU’s 25 percent tariffs on some U.S. exports, including American Whiskey, took effect June 22 and were imposed in retaliation for U.S. tariffs on European steel and aluminum.
Brown-Forman told Insider in an emailed statement that consumers in Europe can expect prices to increase about 10 percent on a 24-ounce bottle in areas where the company handles distribution of its products. In other markets, local distributors will determine how to handle the tariffs on the products they buy from Brown-Forman.
The distiller said that it would raise prices 10 percent — rather than 25 percent — “because of the complexity in the pricing in the multitier distilled spirits industry.”
The increases “will take effect over the next several months and be implemented at different times in various markets” because the increases will affect only products shipped to the EU after implementation of the tariffs, the company said.
The distiller had already warned that it might see an impact from the increasing trade tensions between the U.S. and Europe. Shares had fallen sharply early in June when the company said that its expenses had gone up, its profit had declined and results this year could be dragged down by a looming trade war. More than half the company’s sales are generated outside the U.S.
The president of the National Foreign Trade Council had told Insider last week that rising international trade tensions are putting in jeopardy an increasing number of U.S. jobs, including those of Kentucky farmers, autoworkers and bourbon makers.
And an article in The Atlantic suggests that the tariffs threaten “to hinder the bourbon industry’s growing export market” as higher prices may prompt European buyers to grab a bottle of Jameson — and steer clear of the Jack Daniel’s.
Investors certainly seem worried: Around Groundhog Day, when the Dow Jones plunged 1,841 points in two days, shares of Brown-Forman fell 6.7 percent. While shares recovered, hovered near $56 for much of the year, and rose near $60 in mid-May, they fell sharply in early June after the company posted fourth-quarter results, and further throughout the month as trade tensions remained high.
But that decline pales in comparison to the shellacking that CafePress shareholders have had to endure.
Through the first half of the year, the online retailer has continued to struggle with falling revenue and net losses, brought on by tough competition, an aging website and reduced web traffic.
While CEO Fred Durham has said that the company has taken steps to regain revenue, investors have remained skeptical: Shares have fallen fairly steadily throughout the year, closing, on June 29, at $1.17, down nearly 41 percent.
Other companies of local importance with double-digit stock price declines for the year:
- Papa Johns, down 11.2 percent
- Ford Motor Co., down 12 percent
- UPS, down 12.8 percent
After enormous gains last year, broader indexes, too, are struggling: While the S&P 500 this year is up 1.15 percent, the Dow is down nearly 2.3 percent.