Tecumseh Products Company (TECUA)

Bitter battle for control of company pits relatively new CEO against entrenched Herrick family interests. CEO recapitalization plan voted down by shareholders. Looks like a mess, and with Herricks in control likely to be used as a personal piggybank until it ends up in bankruptcy court.

Isn't summer coming?

This stock is over-shorted and undervalued. A short squeeze is likely. A 25% pop in the next 3 months or less is a possibility.

You've come in a great time to make some money off this stock.

Take a look at the quarterly filings.

1a) Decrease in Sales
2a) Sold off a failing expansion to get rid of debt and increase cash on hand
3a) Increase in profit because of no debt with interest, interest of cash on hand,
4a) Increase in prices and
5A) Completing sales from 2007 leads to a higher income.

Can you now see why the average investor sees this as overall good news for the company? This why the stock has continued to rise.

Now here is the underlying meaning of these results.

1b) Decrease in Sales - The real value of the company should decrease. They cannot make real profit unless sales increases.
2b) Sold off failing expansion - They have failed at growing beyond something that they already are. A company which has the potential to grow beyond what they already are is a important trait in a great company (e.g. AAPL)
3b) Increase in profit because of no debt with interest, interest of cash on hand - It seems like TECUA is making more money, but really they are just getting extra money from cutting their failures.
4b) Increase in prices - During a possible recession to cover their asses - that sounds good for their future.
5b) These are sales made in 2007 that haven't been completed yet. Those won't last forever. Sure there will be new ones put on the backlog, but when sales continue to decrease there will be less and less. It all stats with sales.

I simply used the screener to identify 1-star companies with the highest 52-week gain. The 1-star rating should mean they are bad companies and the 52-week gain should mean they are overpriced. We’ll see how it works!

This thing makes Bear Stearns look like Google. -EPS and near its 52 week high. HMMMM.... I think I will short this thing in real money. I see lots of red on their balance sheet.

sales plummeting

stock soaring - why?

It is paying down debt I guess

52 week high on a one star caps stock. Also given an underperform by TMFEldrehad, and I am trying to pick my CAPs score up.

I just agree with my fellow fools and do not se any fundamentals or anything for that matter that would support the current price; it has had a magical runup, if this goes anywhere either then down it would at very least defy the laws of physics....

Clearly a company on poor footing. With its next earnings announcement expected in mid-May, don't expect it to outperform for much longer than that.

based upon the current market

Going for the "hot one star" stocks here.

Down Down Down we go.Not much to like here.

Tecua insiders have consistently been selling their shares over the past year. In fact some of them have very little ownership left. Tecua is closing factories and plants, laying off people left and right and continue to downsize all their operations.

It's been a long time since this company actually made some money. At anything over $20 selling this stock is like taking money to the bank.

shortguru

Let's see the one analyst that follows them predicts a loss of 94 cents on decreasing revenues next year. Less of a loss than this year, but not exactly good results. Revenue has decreased last three years ... US economy might be entering a recession ... large number of insider sales ... other than a high book value can see no reason to own shares.

Top Ten Things you don't want to see when reading through company reports (in no particular order):

1) Management hasn't told me when or how they're going to turn an operating profit or see positive cash flow.

2) They openly state that they expect not to be in compliance with debt covenants returning on March 31 '08

3) They are searchiong for somebody that will issue them debt, including in Brazil.

4) They're raiding the pension plan for cash

5) A former/current creditor holds warrants worth 7% of outstanding company stock

6) The brazilian plant is already in bankruptcy

7) They're manufacturing footprint is mostly overseas now, and as the dollar weakens that will drive effective costs up.

8) Most of their debt is in foreign currency, so as dollar falls interest rate goes up (Granted their interest payments will be lower in Q4, but they still aren't generating cash from the business)

9) Mngmnt explicitly states that it will be a long time until they generate positive cash flow

10) Tecumseh Products Company, is CLOSING the Tecumseh plant

TECUA has it all!!!! They might pull it out. They might find the liquidity they need before March. But I wouldn't bet on it. With rising exchange rates and copper prices, they're gonna keep taking it in the teeth. They're only real hope is to get bought out.

Tecumseh Products Company has been selling off its non-core businesses in an attempt to become solely a compressor company.

They disclosed several risks that do not appear priced into the stock.

80% of their manufacturing takes place outside of the united states

41.7% Brazil

27% France

12% India

They have stated that their results are senitive to movements in the exchange rates of those countries. They have entered into currency forward contracts. Those only serve to mitigate currency losses and not prevent the harm they cause to the business structure.

All three of those country's currencies have had extremely strong movement against the dollar and even if the exchange does not hurt the company's bottom line, the erosion in competitiveness might.

"Due to the high material content of copper (and, to a lesser extent, aluminum) in compressor products, our results of operations are very sensitive to the prices of these commodities. Overall, commodity prices increased very rapidly during 2005, 2006 and into 2007. Due to competitive markets, we are typically not able to quickly recover these cost increases through price increases and other cost savings."

Copper has retreated a little since this comment was made, but long term commodity prices are not likely to see a substantial decline.

Also

"Interest expense amounted to $25.5 million in the first nine months of 2007 compared to $16.8 million in the first nine months of 2006."

25m in interest ? This ship is sinking and when they run out of cash from the sale of the other businesses, the party is officially over.

The only thing supporting the stock price is the book value. They are liquidating assets to cover their debt load but this still doesn't make them profitable. What they haven't done is to announce a major reorganization. Without this they are going to go in to slow burn mode regardless.

I also question the valuation of their physical assets, they could well be high.

In summary, I would guess about $11-$14 by next spring.