3Pea International, Inc. Announces the Launch of Its New PaySign(R) Payments Platform

3Pea International, Inc. (OBB:TPNL) , a payments solution company focused on prepaid debit card processing and program management, is pleased to announce the launch of its new PaySign(R) payments processing platform.

In response to the rapidly changing face of payment technologies and customer demands, the PaySign(R) platform was built on modern cross-platform architecture and designed to be highly flexible, scalable and customizable. The platform will allow 3Pea to significantly expand its operational capabilities, allowing 3Pea to enter new markets within the payments processing space. The PaySign(R) platform was designed to easily incorporate new payment technologies and applications as they evolve, keeping 3Pea at the forefront of payment innovation. The platform provides the flexibility and efficiencies that will allow 3Pea to significantly reduce the time and cost related to card program development and customization, resulting in increasing operating margins. The PaySign(R) platform is equipped to facilitate EMV (EuroPay, MasterCard, and Visa) smart card payment system (Chip and PIN) payments on a global basis.

In development for several years, the platform meets PCI-DSS 2.0 compliance standards and was part of the company’s most recent successful PCI-DSS audit. The audit certified 3Pea as a Level 1 Service Provider (Issuer), Gateway/Switch, Prepaid Services and Issuer Processing Provider, underscoring 3Pea’s continuing commitment to maintaining the highest level of data security standards and compliance.

The PaySign(R) Platform will be integral in the development, launch and support of the PaySign(R) brand of prepaid debit cards, a line of prepaid cards targeting the General Spend, Corporate, Government and International markets.

The user interface for the platform’s Card Management System (CMS) implements rapid rendering and modern web technologies that has solid cross-browser support, simplifying card program administration. Interactive Voice Response (IVR) and two-way SMS messaging supports cardholder inquires and card activation.

“We are extremely excited about the launch of our PaySign(R) platform and the growth opportunities it affords 3Pea as both a payments processor and prepaid debit card manager. We are confident in our ability to successfully enter key market verticals and broaden our prepaid debit card offerings,” commented Mark Newcomer, President and CEO of 3Pea International. “We feel that the successful development and launch of the PaySign(R) platform is a defining moment for 3Pea.”

About 3Pea International:

3Pea International, Inc. is a payment solutions company that focuses on providing prepaid debit program management and processing services. The company provides a card processing platform consisting of proprietary systems and innovative software applications based on the unique needs of our programs. Through this platform, the company provides a variety of services including transaction processing, card creation and fulfillment, cardholder enrollment, value loading, cardholder account management, reporting, integrated voice response, and customer service.

Forward-Looking Statements:

Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the companies, are forward-looking statements that involve risks and uncertainties. There is no assurance that such statements will prove to be accurate, and actual results and future events could differ materially. 3Pea undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events, or otherwise.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130521005693r1&sid=cmtx4&distro=nx

SOURCE: 3Pea International, Inc.

3Pea International 
Brian Polan, 702-749-7234

Special Disclosure

A Look at Two Semiconductors Plays

Semiconductor stocks are currently in a situation where they cause investors much head scratching and pondering before a play can be made. For instance, if you check the share prices of many small-caps in semiconductors, you will observe a downward trend that makes investors wary of taking uncalculated risks. However, their financials and core businesses seem to paint a different picture such that is difficult to determine if the stocks will act bearish or bullish.

Nonetheless, I believe that we have been in this situation before with semiconductors and this present lull can be likened to the quiet just before the storm breaks. Take Ambarella Inc (NASDAQ: AMBA) for instance. If you have been trading in semiconductors for up to a year you will most likely remember the unimpressive start that attended its IPO. You will most likely remember that Ambarella dropped from its $9 to $11 expectation to debut at $6 per share.

However, Ambarella had been very profitable in the first eight quarters preceding the IPO and thus, the unimpressive start looked somewhat ridiculous. Interestingly, investors that moved with Ambarella had reason to smile not long afterwards when the share price doubled to stabilize around the current $14 per share.

Ambarella has been dropping steadily in the last couple of days with its share price dropping from $14.28 on April 29 to close at $13.44 yesterday. On the surface, investors may be lured into thinking that Ambarella should be avoided now. However, when you consider the annual financials of Ambarella over the last five years, you will change your opinion on the stock.

Source FactSet Fundamentals.

Another semiconductor to consider is Electro Scientific Industries (NASDAQ: ESIO), a $302 million market cap company. Electro Scientific also seems to have been infected by falling share prices that seem to plague the semiconductor industry. For instance, shares of Electro Scientific opened at $10.24 on May 1 only to drop 5.01% to close at $10.24 on the same day.

However, the financials of Electro Scientific currently leaves less to be desired. I checked the five year trend of the company as presented in the table below and I do not think I want to be caught dead with Electro Scientific in my portfolio right now.

Source FactSet Fundamentals.

Nonetheless, in all fairness to Electro Scientific Industries, its pending acquisition of the semiconductor business of GSI Group, Inc., (NASDAQ: GSIG) may be the right stimulus it needs to move into a position with cleaner margins of profit. The acquisition, which is expected to close on May 10 will strengthen its semiconductor division and expand its revenue base with semi customers.

Record Earnings for First Business Financials Services Should Help Boost Price

Wisconsin-based bank holding company, First Business Financial Services (NASDAQ: FBIZ) reported record earnings during first quarter results. Topline revenue, which consisted of net interest income and non-interest income, reached $12.2 million for the period. This is an increase of 13% compared to the same period last year. Core earnings grew 21% to $5 million for the quarter, higher than the previous year’s $4.1 million. All in all, net income came in at record $3.2 million and an increase of 47% from the $2.2 million earned during the first quarter of 2012.

The robust growth is attributed to the bank’s continued success in its growing loan portfolio, as well as its growing deposits. Average loans and leases grew to a record $901.5 million, an increase of $15.5 million, or an annualized increase of 7%. Meanwhile, deposits also increased to $630.8 million, providing a good base of low-cost funding. Despite the increase in loans, non-performing assets declined to $12.6 million. This is equivalent to only 1% of the total assets. Thus, it is safe to assume that the bank is growing its portfolio but also enhancing its asset quality. In the long run, shareholders will be rewarded if this scenario continues.

Analysts expect FBIZ to earn $3.14 per share this year, a decline of 4.60% compared to the same period last year. This may seem ultra conservative considering the recent quarterly performance. In fact, its earnings per share have grown substantially by 37% a year over the last five years. In contrast, its bigger bank counterparts have better projections from analysts. Wells Fargo & Company (NYSE: WFC) is expected to earn $3.71 per share, an increase of 10% over the prior year. For the next five years, Wells Fargo is projected to grow its earnings by 8% a year. Meanwhile, TCF Financial Corp (NYSE: TCB) is forecast to register earnings per share of $0.87, an increase of 163% from the prior year. However, analysts expect growth to taper off over the next five years with projected annual growth of 6%.

Recently, research firm Raymond James (NYSE: RJF) increased the FBIZ target price from $29 to $32 per share. The target price implies an upside of 18% from current prices. The firm has an outperform rating on the stock. Other analysts have also an outperform rating on the stock. For instance, KBW (NYSE: KBW) analysts have a $30 price target on the stock. Overall, FBIZ has a consensus buy rating and target price of $31.

Share price performance has been flat with a growth of 1.38% for the year. This is below the performance of its peers. Wells Fargo has a year-to-date performance of 10.42%, while TCF Financial posted gains of 20% during the year. FBIZ currently trades at 8 times earnings, implying that investors discounted zero growth on the stock. Given the record levels of profitability, the market will definitely re-price the stock soon. 

MarineMax, Inc. Stock Continues Trading Up

MarineMax (NYSE: HZO) sells new and used recreational boats which includes pleasure boats such as sport boats, yachts, fishing boats. The company is the nation’s largest retailer and sells well-known brands such as Sea Ray, Boston Whaler, Meridian and many others. With 57 locations, the company is well positioned to continue serving their customers and pleasing shareholders.

The company announced quarterly reports that pleased shareholders by declaring an increase of 61% in revenue, which tallied in at $160 million compared to $99 million in the previous quarter.  Analysts were looking for $148.25 million in revenue, so the company came in way ahead of consensus. In addition, MarineMax also reported that their quarterly same store sales were up 12%. Shares of the company have been performing very favorably since the start of 2013. The company began the year trading just below $9 a share before hitting a 52-week high at the end of March.

Positive Message from Management

William H. McGill, Jr., Chairman, President, and Chief Executive Officer, stated, “Our team was able to generate double digit same-store sales growth, on top of strong growth in last year’s March quarter despite a generally colder March quarter this year. During the quarter, our southern markets produced strong results, which were partly offset by our northern markets, which experienced persistent unfavorable weather conditions. In our efforts to respond to these adverse weather conditions, we increased our promotional efforts, which increased marketing and sales costs at a higher rate than our resulting sales growth. The quarter was also affected by a large increase in our healthcare and other insurance costs resulting in lower earnings.”

Moving forward: Full Speed Ahead

Analysts are notably positive on the company and one equity research firm, SunTrust, has initiated the company with a buy rating and a price target of $17, representing further upside of 47% from current levels. The company has shown its commitment to grow by acquiring Parker Boat Company’s retail boat sales and service operations in Orlando and Daytona, Florida.  Parker Boat company has been in operation for over 85 years, and anyone that has ever been to Florida understands the importance of having a boating presence in that state.  The acquisition gives the company exclusive distribution for the Sea Ray product line all across Florida.

With 57 locations and growing, this relatively unknown company with a market cap of barely $250 million is in great condition to continue providing investors with positive returns through a solid business model, established target market, and the ability to continue acquiring lucrative companies that can add value to the bottom line. 

Rising Subscriber Base Should Move Netflix Higher

Netflix, Inc. (NASDAQ: NFLX) is an online video rental service provider of streaming videos and DVDs to U.S. customers. The share price of the company has grown more than 100% over its year ago price. The reasons behind the robust returns are substantial increase in revenues and stable fixed costs. 

Competition is intensifying in the online streaming space. Amazon.com Inc. (NASDAQ: AMZN), Blockbuster (PINK: BLOAQ), Hulu, and Comcast Corporation (NASDAQ: CMCSA) have entered this space and are garnering impressive shares. Also, Verizon (NYSE: V) and Redbox will be launching a streaming service in partnership. Due to increasing competition, Netflix’s content costs and subscriber base will have more pressure, which will have a negative influence on the company’s content cost and new subscribers. Considering the breadth and scope of the existing market, there is still ample room for Netflix to grow. The U.S. market has more than 90 million digital cable TV subscribers so there is a possibility for online streaming businesses to grow substantially there.  

Netflix added 5.5 million domestic streaming subscribers in 2012, compared to its estimation of 5 million. In Q1 2013, Netflix added another 2 million domestic streaming subscribers. The company is continuing to add more original and exclusive programming to its streaming library, which is helping it to get more customers. Netflix DVD subscriptions declining trend will continue due to the company’s decision of raising the price of hybrid plans and the launch of streaming-only service. In Q1 2013, Netflix reported that it earned $0.31 per share, while analysts expected $0.19 per share.

Increasing usage of unconventional methods for TV viewing is creating more opportunities for companies like Netflix to grow at a substantial rate. To increase the user experience and to improvise its existing interface, Netflix is introducing a profile feature that helps it to offer relevant and personalised recommendations for each individual.

In 2010, Netflix launched its streaming only service in international markets. Currently Netflix is present in Latin America, Europe, and Canada. The company’s international business is making losses and will continue to do so for two or more years. Once its international business consolidates and starts making profits, its growth rate will increase substantially. Netflix’s streaming content costs are fixed, which it pays over a period of time.

The bottom line is that Netflix has the potential to sustain its subscriber base and to increase its growth rate to earn more revenues in the online streaming business.

Patent Rich Aware Inc. a Good Acquisition Target

Aware Inc. (NASDAQ: AWRE) reported that revenues for the first quarter of the year amounted to $5.6 million, an increase of 15% compared to the same period last year. This translates to pre-patent related income of $2 million; significantly higher than the previous year’s operating income of $1 million. Overall, net income for the period came in at $1.9 million or equivalent to $0.08 diluted earnings per share. This is also higher than the previous year’s net income of $1.1 million.

The strong performance is attributed to the increased profitability of its biometrics and imaging business. It also noted that the controlled operating expenses contributed to the higher operating income. Moreover, the net income included a patent arrangement of $0.8 million. This income is related to the agreement the company entered into several years ago with an unaffiliated party. Under the agreement, Aware assigned patents in return for royalties on proceeds from its monetization efforts. Since the company could not predict how much money it will get from its patent, it reports a pre-patent operating income to put an emphasis on its recurring income.  Given that the major driver of its income came from patent, this should be included in the operating income.

Analysts do not have coverage on the stock. Its five year historical financial performance appears satisfactory. Revenues have been relatively flat for the last five years, though the company grew its net income significantly from $2.57 million to $72.31 million during the period. The reason is that it has earned significantly from the sale of some of its assets, which financed the purchase of its new assets and working capital.

For instance, it completed a sale of selected patents and patent applications to TQ Delta LLC for $16 million last year. These patents were related to DSL technologies. The move is part of the company’s patent management efforts to sell or license a portion of its patent portfolio. Based on the latest annual report, it spent around between $6 and $7 million on research and development. This implies that it still plans to monetize its patent moving forward. As mentioned above, this is the reason why income from the patent should not be considered as a one-off item.

At present, the stock is trading at extremely cheap levels of 1.38 times earnings. Adjusting for net cash, the company would have traded at only $34 million market cap. It looks like the price tag for this company is significantly lower than its trailing earnings of $74 million. In fact, an investor would have taken its patent for free at the current price levels. Other peer companies are trading at higher valuations. Danaher Corp. (NYSE: DHR) is trading at 17.30 times earnings and Microstrategy Inc. (NASDAQ: MSTR) is valued at 48 times earnings. However, Aware seems like a good acquisition target for a bigger company with interests in the digital and communications space. On a longer term, Aware Inc. investors will be paid handsomely. 

Is Revolution Lighting the Next Cree?

One of the new technologies receiving maximum attention is light emitting diode (LED) which is seen as the future of commercial and retail lighting. While Cree Inc. (NASDAQ: CREE) has taken a leadership position in this space with innovative products, it is not really difficult to see that it will be challenged by new market players. Revolution Lighting Technologies Inc. (NASDAQ: RVLT) is one such player which is much smaller in size but has shown great promise by its specific focus on commercial, industrial, and municipal segments, and moving away from consumer retail market.

Revolution Lighting Technologies makes and sells commercial grade LED replacement light bulbs and LED signage and lighting strips. Till last year, the company was called Nexxus Lighting Inc. but the previous avatar faced several issues in selling its products and eventually went off business in November. Then a couple of things happened which put it back on the path of high growth. First it acquired Seesmart Inc. for $20 million in December and then changed its name to reflect a new identity. There were concerns that the company paid too much for the Seesmart acquisition to get a grip in efficiently distributing its products. However, these concerns were proved without merit as Seesmart received an order for up to $10 million in January 2013. That’s half of the price RVLT paid to acquire Seesmart so the acquisition is already paying off smartly.

The future of LED lighting itself is quite bright. Regulatory framework in the United States (including the Energy Independence and Security Act of 2007) encourages energy efficient lighting but the real thrust is likely to come next year when policymakers are likely to present additional legislation that will pressure consumers to shift away from non-efficient lighting. While enforcement on retail consumers is difficult, the commercial market – which is the mainstay for Revolution Lighting – wouldn’t be difficult to crack. Over 40 percent of energy usage costs in commercial buildings are attributed to lighting, presenting a great opportunity for LED products to be at the forefront of the expected cost saving drive.

On the surface of it, the stock may appear to be overvalued as the latest developments are yet to reflect in financial numbers. But the key is to look beyond headline numbers which many smart investors seem to be doing. The stock was trading below the $1 mark until the start of the year, but has seen sharp appreciation after that. So far in 2013, it has moved up more than 480 percent as more investors show confidence in its business model. Revolution Lighting is still small and nowhere close to challenging Cree but the former is on the right track.

Leaner Medifast Well Positioned to Provide Nice Profits for Investors

Medifast (NYSE: MED), a company engaged in the production and distribution of weight management and disease management products, recently announced that it has paid off the remaining value of its long-term notes and now is completely free from debt. The loans were initially taken out to consolidate its debt related principally to the Owing Mills manufacturing facility and Ridgely Maryland distribution center. Overall, this is good news for shareholders of Medifast. A stronger financial position, combined with increased momentum in profitability will translate to continued growth for the company. This will also enhance its shareholder value over time.

Note that the company reported better than expected quarterly earnings last month. It reported fourth quarter earnings per share of $0.28, beating analysts’ estimates by $0.03 per share. For the last five years, sales have grown by 33.61 percent per year. Also, earnings per share has grown 35.70 percent a year. In terms of return on capital, the company has exhibited a solid at 24 percent. Analysts expect earnings per share to reach $1.77 this year, or an increase of 12.70 percent compared to the same period last year. Over the next five years, Medifast is forecast to grow its earnings by 15 percent a year. This is higher than the industry’s earnings growth of 12.87 percent a year. Management said that its renewed focus on operational efficiencies through its Take Shape for Life, Medifast Direct, Medifast Weight Control and Wholesale Physicians sales channels, will catapult the company into record levels profitability.

In contrast, Weight Watchers (NYSE: WTW) is forecast to earn $3.61 per share, or a decline of 13.20 percent compared to the same period last year. For the next five years, analysts expect the company to grow its earnings by 7 percent a year. Meanwhile, NutriSystem (NASDAQ: NTRI) is expected to grow its earnings per share by 13 percent a year; a reversal compared to the previous years’ decline of 10 percent.

At present, the stock trades at 20 times earnings and 3.60 times book value. This suggests the stock price has already discounted its future growth prospects. On a historical perspective, it traded between 10 times earnings and 38 times earnings. Its peers are trading lower. Weight Watchers is valued at 9.6 times earnings and carries a dividend yield of 1.70 percent. On the other hand, another peer USANA Health Science (NYSE: USNA) trades at 10.97 times. In terms of performance and share price declined by 11 percent for the year.

Most diet companies have shed share prices during the period on worries that sales of their products have peaked. However, investors should wait for a pullback, as well as solid earnings guidance from the company before making Medifast a part of their investment portfolio. 

No Quick Fix to Euro Crises

Anyone following the European turmoil saw two relatively strong economies report highly disturbing unemployment figures. Spain’s unemployment data for the first quarter of 2013 measured in at 27.2 percent, with the 16-29 age demographic having an unemployment rate of 53.2 percent. Analysts and economists believe that the solution to such high unemployment in Spain is to sustain growth over 1.25 percent. The problem with this is the Spanish economy is forecast to shrink by 1.5 percent in 2013 and an additional 1 percent in 2014. By the end of 2014, Spain can see an additional 1.2 million people unemployed, which would bring the total unemployed to 7.4 million.

Italy’s unemployment is close to a 20 year high although at a smaller rate compared to Spain (11.5 percent). The country is also expected to contract in 2013 as the economy is predicted to shrink 1.8 percent. The largest demographic of unemployed is the 15-24 age group which tallied in at 36.3 percent. By comparison the European nation with the lowest unemployment figures was Austria at 4.9 percent, followed by Germany and Luxembourg both at 5.3 percent.

Unemployment in both Italy and Spain has been fuelling the Euro crisis going back at least a year. A deepening unemployment and ongoing recession has forced the countries to pay a higher premium on their 10 year debts leading to a whole spiral of economic woes, as a higher jobless rate translates to an increase in government spending of unemployment benefits. 

Austerity isn’t working.

Italy’s new premier, Enrico Letta, is calling for an end to punishing austerity in favor of policies that will spur growth. “Austerity is suffocating not only Italy but also many Eurozone countries,” the premier added, calling for “urgent measures to give oxygen to the economy and give back hope to young people.” High levels of unemployment of these young people can “cut them off not only from the labor market but from society as a whole” according to EU’s employment and social affairs commissioner Laszlo Andor.

Both countries are not projected to show any positive growth until 2014, if not later. At the rate things are progressing, by 2020 government debt can be as high 120 percent of GDP. The two countries are very much politically, economically, and culturally tied to not only Europe, but with the ease of international business and globalization, to the world. Investors from Wall Street, to London, to Tokyo, and all over the world will continue paying close attention to developments from these countries. As it stands now, the situation is bad and will remain as such for the short term.

Ruby Tuesday, Inc. Surpasses Expectations

Ruby Tuesday (NYSE: RT) is an American based fast food retailer that specializes in offering casual American style food. Items on the menu include chicken, pasta, ribs, soups, steaks, and seafood.  The restaurant chain is most loved for their salad bar and hamburgers; specialties that have existed since the company’s creation. 

Quarterly Results 

The company released quarterly results that were at first glance, not particularly good. Profit fell by 52 percent while revenue was 2.8 percent lower than expected. Investors cheered over the company’s EPS guidance for 2013 of $0.28 to $0.32 per share, which was substantially higher than the previous forecast of $0.24 to $0.30. Same store sales and profit were disappointing, but the positive guidance was enough to send the stock up to a fresh 52-week high above $9.50, which is almost double the company’s 52-week low of $4.98.

Competition is Tight

The casual food industry is full of competition from many other restaurants that are just as popular and recognized as Ruby Tuesday.  Analysts were, however, positive on the company’s ability to stand out against their competitors through the menu and changes. The company can see significant upside in its sales and profitability metrics. As well, the company is in a strong position to reward shareholders with a share buyback that can total more than 25 percent of current market cap over the next two years. The company has already bought back 1.3 million shares during the quarter for $10.1 million.

Good Buy Moving Forward

As is the case with every company, external factors can hamper business. Economic uncertainty is the largest factor that can work against Ruby as consumers tend to spend less on dining options during times of economic uncertainties. Many analysts are remaining upbeat on the company’s longer term direction and strategies which includes revamped menu offerings as well as closing underperforming units.

The restaurant industry is a tough one to profit from and investors have many choices to invest in ranging from Ruby Tuesday with a market cap of just barely $500 million versus competitors such as McDonald’s Corporation (NYSE:  MCD) with a market cap above $100 billion. 

From a personal point of view, I prefer Ruby Tuesday over their competitors due to exciting menu offerings at competitive prices. I find the quality of the food to be of a higher quality, and as a general rule I will only invest in companies that I personally approve of.

Sonde Resources Corp. Could Hit it Big with Its North African Energy Deals

When it comes to oil and natural gas production, companies rise and fall based on their reserves. It costs a fortune to find track down new sources to drill. However, once a company finds resources, it can rely on a fairly steady income, especially considering the current world demand for energy.

Sonde Resources Corp. (NYSE: SOQ) may have discovered a great drilling opportunity in North Africa, on the borders of Libya and Tunisia. In this region, Sonde has discovered a large reserve of both oil and natural gas that is still largely untapped. Beyond these current discoveries, Sonde also has plans for three large exploratory wells that are expected to find even more oil and gas

What makes this African exploratory project especially lucrative for Sonde is that it is passing off the costs to another company; Viking Energy North Africa Ltd. Viking will pay for the new exploratory wells on Sonde’s land. In exchange, Viking will earn 67 percent of the drilling revenues while Sonde will keep a 33 percent carried interest in the resources. These wells are scheduled to be completed by 2015. At this point, Sonde would be essentially making expense-free income.

Beyond this African project, Sonde also owns a large amount of land in oil-rich Western Canada. It owns 150,000 acres of untracked land that could be worth about $10,000 an acre if Sonde finds oil in these regions. Sonde is already producing some oil is this area; about 2,000 barrels a day. This production is a nice backup to Sonde’s work in Africa.

One issue with this stock is that it does carry some political risk. Both Libya and Tunisia have had government turmoil over the past years and this could knock Sonde’s new production wells off track. Tunisia in particular has given Sonde some trouble as the government has still not approved its new exploratory wells. It would make sense for the Tunisian government to approve this deal as it would create jobs and make the country look better for foreign investors; however is this not a guarantee.

In addition, this company is still a little shaky financially. It’s currently running at a steep operating loss as it spends money finding new sources of oil and gas. In addition, most of Sonde’s value comes from its new projects going right sometime in the future. The good news is that this company has cash on hand and is debt-free, so it has time to wait for things to work out.

This micro-cap oil and gas producer is still off the radar of many investors and is currently trading around $1 a share. Some analysts believe that once this company adds its new African oil production to its current Canadian sources, it should be worth about $5 a share.

Micro-cap oil companies are always a risk because of the expenses and uncertainty of finding reliable sources of energy. However, Sonde seems to have strong potential in both its African and Canadian projects and the market still hasn’t priced in these gains. If either project succeeds, this stock has great growth potential.

Can Southwest Airlines Sustain Performance?

Southwest Airlines Co. (NYSE: LUV) is an airline company which focuses on providing low cost airline services to its passengers through its operational efficiency in various activities of airline service. Southwest is famous for its operational excellence, using unconventional methods in its operational activities to perform its tasks with more certainty, in shorter time, and with minimum expenditure. 

Operational Excellence

Most of the airline companies use hub and spoke types of models where passengers are often flown to a hub airport and catch a connecting flight to complete their journey. But Southwest runs flights with a high focus on point to point service where passengers are not required to catch other flights to reach their destinations. Using a point to point service model rather than hub and spoke allows Southwest to effectively utilise its aircraft, gates, and employees. Over 70 percent of Southwest’s passengers reach their destinations without stopping during their journey. Southwest uses single type of aircraft across its fleet to save on cost, training, and maintenance.

Traffic demand for the airline business is highly correlated with economic growth. The airline industry faced an enormous amount of uncertainty with a huge impact on profitability due to Europe’s sovereign debt crisis in 2012. Going forward how economic conditions will play a crucial role in deciding the profitability of the airline industry.

More than 30 percent of the costs of that airlines accrue are fuel expenses. Southwest uses hedging as a tool to protect itself from high fuel prices. It helped the company to save huge amount on fuel costs.

Growth and Opportunities

Southwest’s U.S. market share grew from 14.4 percent in 2008 to 18.7 percent in 2012 as a result of aggressive initiatives. As the demand for air travel is increasing, the preference for low cost carrier is gaining momentum; especially in developing countries. If it does expand to emerging countries, its low cost carrier model will help the company succeed.            

Southwest acquired AirTran in May 2011 and expects the AirTran integration to produce about $400 million net in synergies this year. Southwest faces competition from major carriers like American Airlines (OTCBB: AMR), Delta Airlines (NYSE: DAL), and United Continental (NYSE: UAL).        

Statistics show that low cost carriers have gained popularity over past decade going from 7.1 percent in 1999 to 28.1 percent in 2009.