It’s been a busy week for Profit Catalyst Alert. Despite our first earnings announcement being one week away, we’ve had an abundance of news and some adjustments to the portfolio.

I recommended selling Akamai Technologies (NSDQ: AKAM), a stock I recommended just last June. The company was already in the penalty box after reporting a poor quarter in July. As with all portfolio holdings, I continued analyzing industry trends to determine the risk of holding the stock.

Some reports I read describing migration away from Akamai’s platform combined with a company press release that I thought might be laying the groundwork for another problem quarter led to me to sell the stock.

Selling a stock less than six months from purchase for little gain is not an ideal trade. However, I am never “married” to a trade and have been at this long enough to know how critical it is to always incorporate fresh data into my analysis.

For those of you still holding Akamai, please note it reports earnings next Tuesday.

We added Systemax (NYSE: SYX), a smaller cap name, to the portfolio. Systemax is a distributor of hardware and durable goods to industrial and government customers. Believe it or not, a significant moat exists around serving these customers.

The company is transforming itself with the sale of its electronics business which will allow it to focus on the more profitable business of distributing products to government and industrial agencies.

Next week we have the following earnings on tap:

Monday, October 23: VFC 8:30 AM (EST
Tuesday, October 24: AKAM 4:30 PM (EST)
Thursday, October 26: PF 9:30 AM (EST)
Thursday, October 26: COLM 5:00 PM (EST)
Friday, October 27: SAIA 10:00 AM (EST)

Details regarding all conference calls are at the bottom of this note. In addition to the call-in numbers included below, almost every company will stream its call live from the investor relations part of its website.

Around the Portfolio:

ANI Pharmaceuticals (NSDQ: ANIP) rocketed up 10% on Friday after a story hit Bloomberg that the company is considering a sale. After drawing takeover interest, the company began working with a financial adviser to weigh options for the business, which has attracted interest from private equity firms and other pharmaceutical companies. Sale considerations are at a preliminary stage, and a formal sale process may begin in the next few weeks, the report notes.

While my recommendation of ANI is not dependent on the prospect of a takeover, the stock is cheap considering it trades with a P/E of 13 on 2018 earnings, a period in which earnings are expected to grow almost 20%.

Most importantly ANI has made huge strides in manufacturing corticotropin, a drug currently made only by Mallinckrodt, despite the fact that it is off patent. It is a notoriously difficult drug to produce. I have often cited its unique positioning with this compound as my reason for recommending the stock.

Ichor Systems (NSDQ: ICHR) enjoyed a tremendous move last week. The stock increased 23% on the announcement of a new contract along with favorable analysts’ comments.

The company announced that it entered into a substantial agreement to produce liquid delivery systems for one of its “key customers.” The agreement provides for design and manufacturing of Ichor’s proprietary Liquid Delivery Systems to be integrated with semiconductor process equipment for one of its key customers.

“These systems incorporate our unique design which reduces the footprint required on our customer’s equipment and significantly reduces the cost,” said Phil Barros, Chief Technology Officer for Ichor. “We are excited to enter into this relationship and look forward to expanding into other applications with this customer as well as other customers who have expressed interest in our technology.”

The news helped nudge Deutsche Bank analyst Sidney Ho who raised his price target for Ichor Holdings to $32 from $26 and reiterated a Buy rating on the shares. The analyst increased his estimates to reflect the company’s new liquid delivery module contract, as well as a stronger capital spending environment in the second half of 2017 and 2018. 

Put position stocks Post Holdings (NYSE: POST), and Pinnacle Foods (NYSE: PF) barely budged last week despite some bearish notes from customer Kroger’s (NYSE: KR) Investor Day.

The group as a whole likely gained a bit of support because Kroger did not further lower earnings estimates for the year (as it did in early September when it released second-quarter earnings). 

However, the company’s game plan for improving sales per store is to increase fresh produce, prepared foods and natural and organic products.

Increased variety of these products needs to come at the expense of someone else’s shelf space. Management diplomatically referred to this as “space optimization”, a process it will revisit with even more gusto.

This is bad news for Post and Pinnacle as their processed, packaged foods will lose more shelf space in grocery to make way for more desirable products.

SAIA Inc. (NSDQ: SAIA), a position where we hold call options, traded lower last week. Intermodal shipper J. B. Hunt Transportation (NSDQ: JBHT) reported a mixed quarter last week which weighed on most names in the group.

I recommend holding on to these calls for two reasons:

J. B. Hunt’s business is quite different from SAIA’s. The majority of J. B. Hunt’s revenue and profits are derived from intermodal shipping, which means containers transferred from rail or ship to long-haul trucks.

SAIA’s business is built around less-than-truckload (LTL in industry lingo). This business is enjoying higher demand and less expense pressure than J. B. Hunt. I like SAIA’s exposure to more “last mile” delivery, where demand is strongest.

2. Despite the negative reaction in most trucker stocks, J. B. Hunt’s numbers were not horrible. The company beat revenue expectations and noted higher costs due to the hurricane’s, an annoying but not permanent, issue with its operating model.

The SAIA calls so not expire until December 15, 2017. The company reports third-quarter earnings on October 27. I expect the stock to move higher on these earnings. The details are included above.

Smart Sand (NSDQ: SND) was initiated with a Buy and a $9 target at Deutsche Bank by analyst David Havens. The stock is followed by few analysts, so additional coverage is welcome, although I think his target is way too low. The stock continues to creep higher.

CONFERENCE CALLS

Monday, October 23: VFC 8:30 AM (EST)

Directions: The conference call will be broadcast live on the Internet, accessible at ir.vfc.com.

What to Listen For:
On its second quarter call, VFC management kept revenue estimates for the year but said it expected a shift in orders from September to October. This means revenue in the September quarter is expected to drop 2.5% but jump more than 8% in the December quarter. Most of these orders come in during October. How much are sales up versus last October?
Profit margins have improved in prior quarters, but sales and marketing expense is rising rapidly- is the company including promotional dollars in its marketing line?
The North Face, which makes up most of the Outdoor/Action sales, is being displaced by Patagonia as the must-have winter brand. How did Outdoor/Action sales perform and what is the expectation for the December quarter?
VFC announced a pricey acquisition of Dickie’s workwear in August. Does the company still expect that purchase to contribute $200 million in revenue?

Thursday, October 26: PF 9:30 AM (EST)
Directions: Investors and analysts may access the call by dialing (866) 814-1918 within the United States or Canada and (703) 639-1362 internationally and referencing the conference call name: Pinnacle Foods Q3 Earnings Call.
What to Listen For:
Has the impact of “SKU rationalization” subsided? This industry term simply means grocery stores cutting the number of packaged items (SKUs) that they carry on the shelf. Based on commentary from Kroger, this does not seem to be ending anytime soon.

Thursday, October 26: COLM 5:00 PM (EST)
Directions: To listen to the conference call, please dial 877-407-9205. The call will also be webcast live on the Investor Relations section of the Company’s website at http://investor.columbia.com.
What to Listen For:
Like VFC, Columbia has pushed out expectations for sales growth from the September quarter to the December quarter. What is the early read on winter sales? Look for tell-tale negative words like customers being “conservative” or remarks regarding more “structural change” for retailers. These are codes for weaker demand from wholesale customers.
Sales and marketing expenses have been increasing faster than sales- when will the company get some leverage from this expense and what are they spending it on?
Columbia lost one of its seasoned execs in the prAna yoga clothing team. Last quarter management guided that all of prAna’s growth would be pushed into the December quarter. Were prAna sales down in the September quarter?

Friday, October 27: SAIA 10:00 AM (EST)
Directions: To participate in the call, please dial 1-800-239-9838 or 323-794-2551 referencing conference ID #9666253.
What to Listen For:
What was the average agreed-upon pricing with contractual customers? This metric increased by 8.2% in the second quarter. While it fluctuates each quarter, mid-high single digits is a good omen for future earnings.
The company has been expanding its Northeast offerings. A Maryland location to serve the markets of Baltimore and Washington, D.C., is scheduled for early fourth quarter opening. What is the status of this opening and how is revenue progressing for that terminal?