DOREL INDUSTRIES (Toronto symbol DII.B; www.dorel.com) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.
In the three months ended December 31, 2013, Dorel’s sales rose 1.8%, to $633.5 million from $622.6 million a year earlier (all figures except share price and market cap in U.S. dollars). Higher sales at the recreational and home-furnishing segments offset lower demand for juvenile products.
Excluding one-time items, earnings per share fell 34.8%, to $0.60 from $0.92. The company’s bicycle sales rose in the latest quarter, but its competitors discounted their bikes heavily, forcing Dorel to sharply cut its prices—and its profit margins with them.
On the other hand, Dorel’s recent acquisition of 70% of Caloi is already adding to its profits.
Established in 1898, Caloi is one of the world’s oldest bike makers. It is also Latin America’s top selling bicycle brand and the leader in the Brazilian market. This purchase fits nicely with Dorel’s plan to focus on international expansion, as it can now use Caloi’s facilities to sell more of its other bikes and gear in South America.
Stock investing: 5 new acquisitions for Stantec in 2013
STANTEC INC. (Toronto symbol STN; www.stantec.com) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including transportation, construction, and oil and gas.
In the quarter ended December 31, 2013, revenue rose 15.7%, to $451.3 million from $390.1 million a year earlier. Acquisitions were one reason for the gain. Stantec is also working on many new projects, such as major pipelines and the huge Westside Subway Transit Corridor in southern California.
Earnings gained 14.8%, to $35.7 million, or $0.77 a share, from $31.1 million, or $0.68.
The company continues to grow by acquisition, with five purchases in 2013. In February 2014, it added California-based Processes Unlimited International, which has 450 employees in seven U.S. offices. Processes Unlimited offers engineering, project management and design services to customers in a wide range of markets.
Stantec has just raised its quarterly dividend by 12.1%, to $0.185 from $0.165. It now yields 1.1%.
The company cuts its costs by sharing administrative expenses, financing and employee benefits among its divisions.
In the latest edition of Stock Pickers Digest, we look at Dorel’s prospects for increasing its premium bicycle sales in a market with strong price competition. We also examine the risks of Stantec’s strategy of growing continuously by acquisition. We conclude with our clear buy-hold-sell-advice on these two stocks.
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As a major manufacturer of bicycles, Dorel stands to benefit from the ever-growing trend toward recreational activity and physical fitness. Have you bought stocks that you think will profit from the fitness trend? Have they done well for you?
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