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Analysts examine Mississippi

Taking stock in 2000

In 2000, financial investors with an eye on Mississippi public companies plan to closely monitor MCI WorldCom/Sprint and Friede Goldman/Halter Marine merger activity, expect bank stock prices to increase, and are tentative about agricultural and industrial companies.

“It looks like the environment for the economy as a whole will continue to be one that favors the digital side of the economy more than the industrial, commodity and agricultural side of the economy,” said Ashby Foote III, president of Vector Money Management in Jackson. “Rising interest rates, a Federal Reserve that seems very concerned with a preemptive fight against inflation are factors that will continue to make it a difficult pricing environment to grow earnings for companies like Mississippi Chemical and Delta & Pine Land. It’s been about 18 months since they’ve really had the wind at their backs. That’s not to take anything away from the capabilities they’ve got. It looks like it’s going to continue to be a challenging monetary environment for other companies that have exposure to commodities.”

Delta & Pine Land filed suit last week against Monsanto in the wake of a failed merger. D&PL is seeking $2 billion in damages. The suit was filed in Bolivar County Circuit Court.

Mississippi Chemical, leading producer of nitrogen, phosphate and potash fertilizers, operates production plants in Mississippi, New Mexico, Trinidad and Tobago through its 50%-owned joint venture, Farmland MissChem. From Dec. 10 to Jan. 14, the Yazoo City-based company’s stock rose almost 49%, from $5 to $7.44.

“You can’t really tell by looking at one month’s stock performance,” Foote said. “You need to look at a broader scope.”

J. Harmon Bays, a financial advisor with Legg Mason Wood Walker Inc. in Jackson, said he is expecting another banner year for Mississippi public companies and the state’s economy.

“MCI WorldCom should close its purchase of Sprint in the coming months,” he said. “This deal will enable WorldCom to firmly establish itself as the No. 2 long distance carrier in the country, in addition to controlling a substantial amount of the traffic that flows over the Internet.”

If the MCI WorldCom/Sprint merger is completed, it will make them one of the powerhouse telecommunications companies in the world, Foote said.

“It’s an extraordinary opportunity,” he said. “The long distance stocks are down because of price wars going on in the long distance sector, but investors think Wall Street has overreacted to that and are not really taking into account the opportunity on the data side and with the merger with Sprint, the opportunity on the wireless side that they can take advantage of.”

Paul R. Matlock, vice president of investments and senior portfolio manager at Paine Webber in Jackson, said the MCI WorldCom/Sprint merger and the America Online/Time Warner merger are being viewed as “long-term positive” for WorldCom.

“The Sprint acquisition would fill the much-needed wireless void for WorldCom and the America Online/Time Warner merger would likely speed the digitalization of traditional media,” Matlock said. “WorldCom, as a major Internet access provider, should be a beneficiary since such a merger would increase the data traffic going across the Internet backbone.”

While WorldCom’s stock was flat in 1999 due to concerns over slowing revenue growth, an annual growth rate of its data services is expected to be about 35%, he said.

“We expect the stock to rebound from current levels,” he said. “WorldCom’s growth has increasingly come from its data services.”

Bays predicted a much better year for publicly-traded bank stocks such as Trustmark, BancorpSouth and Hancock Bank.

“These companies should benefit from the continued consolidation taking place in their industry, and a robust Mississippi economy,” Bays said.

Friede Goldman Halter, designer and manufacturer of equipment for the oil and gas industry, announced last week that it expects a fourth-quarter loss due to sluggish market conditions, merger-related expenses and the impact of a contract dispute with Ocean Rig ASA of Norway. John Dane, president, COO and vice chairman, has resigned, with J.L. Holloway assuming the additional title of president. The company’s stock dropped 28% from Dec. 10 to Jan. 14, from $7.31 to $5.25 per share.

“It’s really been frustrating because the price of oil has gone up dramatically, and normally, you would expect that to be good for their business,” Foote said. “The long slide we saw in oil prices really seemed to upset the long-term planning of the energy companies, and that has not boded well for their contracts since a lot of their contracts are due to long-term drilling plans. I hope that they get Halter and Friede consolidated. Friede’s experience in successful operation and execution of their facilities will result in higher profit growth in years ahead. It certainly has been frustrating for shareholders of their stocks in the past year.”

Other Mississippi public companies include Cal-Maine Foods, Callon Petroleum, ChemFirst, EastGroup, First M&F Corp., Hancock Fabrics, Isle of Capri Casinos, KLLM, Lamar Capital, Parkway Properties, Peoples Holding and Sanderson Farms.

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com or mbj@msbusiness.com.


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