CS&L gains an index-best 30% in 2Q

Communications Sales & Leasing, which was created last year from a spinoff of Windstream's copper and fiber assets, outperformed the largest public companies in Arkansas in the second quarter with shares posting a return of almost 30 percent.

Eleven of the 18 public companies had positive returns for the quarter.

Even though Communications Sales & Leasing, also known as CS&L, cut its earnings expectations in May, it "has been a darling as yield-starved investors have been buying shares," said Bob Williams, senior vice president and managing director of Simmons First Investment Group Inc. in Little Rock.

"CS&L continues to expand its customer base away from former parent Windstream via acquisitions such as the recent purchase of Tower Cloud," Williams said.

Tower Cloud is a telecommunications service provider based in St. Petersburg, Fla.

CS&L also had the best return for the first six months of the year, rising 54.7 percent. Murphy Oil and Windstream had returns of more than 40 percent for the first half of the year.

Two El Dorado-based companies were strong performers in the second quarter.

Murphy Oil shares rose 26 percent for the quarter, and Murphy USA, which was a Murphy Oil spinoff in 2013, was up 20.7 percent for the second quarter.

"Emotions have fueled the volatility in the energy sector and some investors have fared better than others," Williams said. "During the quarter, Murphy [Oil] was a beneficiary of improved oil prices and particularly in terms of investor sentiment."

Although Murphy USA missed consensus revenue estimates by analysts in the first quarter, it beat analysts estimates for earnings, Williams said.

"The company managed to improve its profit margins on fuel sales despite dramatically lower oil prices compared to a year prior," Williams said. "As oil prices fell, customers spent more on fuel and merchandise."

Windstream also had a 20.7 percent improvement in its stock price in the second quarter.

Trucking firm P.A.M. Transportation Services Inc. had the worst performance of the second quarter, falling almost 50 percent.

P.A.M. managed to show growth in total operating revenue for the fourth quarter last year, but its stock price continued to languish, Williams said.

"Investors are clearly unimpressed with the direction of the company," Williams said.

Dillard's stock price fell almost 30 percent for the quarter.

"Dillard's and others in the retail sector continue to suffer from the ongoing shift in business mix from brick and mortar to e-commerce," Williams said.

Another trucking firm, ArcBest, struggled during most of the first quarter, Williams said.

"Investors were less than enamored with drops in revenue and tonnage moved," he said.

Expenses also were an issue, Williams said, as an increase in the daily shipment count required additional resources to maintain customer service.

Bank of the Ozarks lost more than 10 percent for the quarter.

Despite the decline, Matt Olney, a banking analyst in Little Rock for Stephens Inc., remained confident in Bank of the Ozarks.

"We believe [Bank of the Ozarks] remains in the middle innings of extraordinary loan growth [not including growth from acquired loans]," Olney wrote in a recent research report.

The bank's real estate specialties group focuses on making high quality, complex real estate loans, particularly construction loans, throughout the country. Excluding loans taken in bank acquisitions, Bank of the Ozarks added $1.1 billion in loans in the first quarter.

"We believe that scalable operating model will generate significant earnings growth for several years," Olney said.

Business on 07/01/2016

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