The announcement sent STEI’s stock surging from 9.75 at close on May 28 to opening the following morning at 13.07. The transaction stands to expand SCI’s portfolio by adding 214 funeral service locations and 140 cemeteries spanning over 24 states.
Stewart Enterprises has shown reliable growth over the years with an average increase of 3% year-over-year in gross income since 2008. Excluding negative growth in 2009, average gross income comes in at 7.75%. While revenues increased, STEI also managed to reduce expenses steadily, cutting away almost $1.5 million year-over-year. The company has met earnings estimates for the past four consecutive quarters with projections of bringing in $538 million in revenue for 2013, compared to $516 million in 2012.
The combination of STEI’s resources to Service Corp’s $2.41 billion annual revenues could solidify a profitable position over an observable change in shifting US demographics. SCI aims to see a 13% market share in the fragmented industry. The acquisition has received approval from the board of directors of both companies but awaits shareholder vote for Stewart Enterprises. The deal is expected to close later this year or in early 2014.
Everyday I watch over 2,000 trades and place roughly 3-5 positions daily based on the trading activity of the big Institutional traders. I did not place a trade in STEI, but after the announcement of its acquisition by SCI for $13.25, I looked to see if I missed anything. Amazingly enough, traders came in and bought Upside Calls. Lets check out their trades and profits:
On 5.24 a trader bought 500 STEI June 10 Calls for $.15 Risk: $7500 Today’s these Calls are worth $3.10, good for over $147,500 in Profits
On 5.24 a trader bought 900 STEI Aug 10 Calls for $.75 Risk: $67,500 Today’s these Calls are worth $3.15, good for over $216,00 in Profits
On 5.24 a trader bought 450 STEI Nov 10 Calls for $.95 Risk: $33,750 Today’s these Calls are worth $3.25, good for over $103,500 in Profits
Paper bought 5,000 MBB Sep 105 Puts for $0.65 (500 times usual volume) with stock at $106.61
Paper bought 12,000 XLV Jul 52 Calls for $0.21 (2.5 times usual volume) with stock at $49.76
Paper bought 500 KORS May 31st 67.5 Calls for $1.10 (2.2 times usual volume) with stock at $61.94