Heard Off the Street: Area stocks underperform other indexes so far in 2012

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A Europe-inspired rally gave most Western Pennsylvania stocks a lift Friday, but they still managed to underperform broader market indexes during the first half of 2012.

The Post-Gazette/Bloomberg Index of 60 regional stocks advanced 3 percent in the first six months of the year, despite losing ground in the second quarter. The regional index's performance reflects an 8.2 percent first quarter gain and a second quarter slide of 4.9 percent.

Among the stocks in the regional index, 32 registered gains in the first half while 28 lost ground.

The regional index's 3 percent gain performance compares with an 8.3 percent first half gain by the S&P 500 and a 5.4 percent advance by the Dow Jones industrial average.

Johnstown banker AmeriServ Financial [ticker: ASRV] turned in the best performance among local issues, buoyed by stronger earnings and a share buyback plan that boosted per share earnings in the first quarter. AmeriServ shares finished Friday at $2.82 and rose 44.6 percent during the first half.

Federated Investors [FII] rose 44.2 percent in the first half even though the Downtown investment manager's franchise money market funds business faces the prospect of tougher regulations from the Securities and Exchange Commission.

Federated turned in stronger-than-expected first quarter results as fee waivers associated with its money market business came in below forecast. Federated and other money fund operators waived more than $5 billion in fees last year so that investors could break even or earn small returns in an environment of record low interest rates.

Federated shares finished Friday at $21.85.

GNC Holdings [GNC], the region's top performing stock last year, continued its winning ways in the first half, gaining 35.4 percent. Shares of the vitamin and supplement retailer closed Friday at $39.20. GNC shares jumped 81 percent last year after the company went public in April.

Earnings improvement also helped Michael Baker [BKR] turn in the fifth-best performance. Shares of the Moon engineering firm gained 34.1 percent in the first quarter, closing Friday at $26.29.

Dick's Sporting Goods [DKS] turned in the sixth-best performance after surviving a mild winter that put a dent in winter gear sales. The Findlay retail announced in March it will begin paying a quarterly dividend of 12.5 cents per share. Dick's shares closed Friday at $48 and are up 30.2 percent for the year.

Metals and coal stocks dominate the list of the region's worst performing stocks in the first half, but the biggest loser was Education Management [EDMC]. The operator of the Art Institutes, Argosy University and other for-profit shares is being sued by the U.S. Department of Justice and others over recruiting practices critics say violate federal regulations. The company denies that.

The issue looms large because federal student aid programs provide about 90 percent of Education Management's annual revenue. The Downtown company is also being hurt by declining enrollment and weaker earnings.

Education Management shares closed Friday at $6.95. They are off 75.2 percent this year.

Shares of Consol Energy [CNX] coal and natural gas producer have been battered by the warm winter, which reduced demand for coal, and by a sharp drop in natural gas prices. Coal producers are curbing production in order to bring supply more in line with demand.

On Friday, Consol said it will idle a West Virginia mine and lay off 318 because of slack demand. The announcement comes after the Cecil energy producer extended summer vacations at two of its West Virginia mines, which it said will prevent about 300,000 tons from making it to market.

Consol shares have rallied recently but remained down 17.6 percent during the first half, finishing Friday at $30.24.

Coal's blues have also bruised shares of mining equipment maker Joy Global [JOY]. They are off 24.3 percent this clear, closing Friday at $56.73.

Steel makers are slumping as the industry is buffeted by falling prices, higher imports and concerns about a weakening economy. Shares of U.S. Steel [X], AK Steel [AKS] and Allegheny Technologies [ATI] all hit 52-week lows last month.

Allegheny Technologies shares rallied Friday to close at $31.90, leaving them down 33.3 percent for the first half.

But shares of U.S. Steel and AK Steel failed to profit from the broad rally Friday after Standard & Poor's lowered AK Steel's credit rating and revised U.S. Steel's credit outlook to negative from stable. S&P said both producers face challenges from deteriorating prices, excess capacity and weakness in Europe and China.

U.S. Steel shares closed at $20.59 Friday, leaving them down 22.2 percent for the first half. Shares of AK Steel, which is based in West Chester, Ohio, but has major operations in Butler, slid 28.9 percent in the first half. They finished Friday at $5.87.

bizopinion

Len Boselovic: lboselovic@post-gazette.com or 412-263-1941. First Published July 1, 2012 12:00 AM


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