SMALL-STOCK OUTLOOK SUNBEAM-OSTER SYMBOL: SOC; NYSE, $23.50; 0.2% YIELD AN APPLIANCE MAKER REFINES THE RECIPE FOR 15% GROWTH
(MONEY Magazine) – Reading the recent history of Sunbeam-Oster you get the feeling someone put this $1.4 billion household appliance maker in one of its own blenders and pushed the puree button. In 1990, several high-powered private investors formed a limited partnership to take over the then bankrupt company. The group included Mutual Shares manager Michael Price and turnaround artist Paul Kazarian, who became chief executive. Less than a year later, Sunbeam began selling stock to the public (the partnership retains a 44% stake today). But in 1993, the board of directors ousted Kazarian, whose abrasive management style led to a near mutiny among top executives. In his place came Roger Schipke, a former GE executive with nearly 30 years' experience in the appliance business. "Now that the management is stable and the balance sheet is stable," says William Steele, an analyst at Dean Witter, "Sunbeam can finally pursue its growth strategy."
Based in Fort Lauderdale, Sunbeam makes dozens of products including kitchen appliances, outdoor furniture and barbecue grills, competing against such robust rivals as Black & Decker and Hamilton Beach/ Proctor-Silex. More than half of Sunbeam's products are the No. 1 or No. 2 sellers in their fields. Among the best known: Osterizer blenders and Charmglow gas grills.
The company gets its growth two ways: flooding retailers' shelves with new wares and acquiring small competitors. Last year it introduced 18 products, including a breadmaker and a can opener that disassembles for easy cleaning. "Increasingly, retailers prefer to deal with fewer suppliers," says Merrill Lynch analyst Deepak Raj, "and Sunbeam's broad line of quality products gives it a key advantage over competitors."
A new manufacturing and storage plant scheduled to open this year figures to help Sunbeam cut costs. The facility, in Hattiesburg, Miss., will replace five existing ones, increasing production capacity by 30% while using a third fewer workers.
Raj estimates that a 14% sales increase combined with modestly improving profit margins could lift Sunbeam's earnings 15% this year, followed by 18% annual gains for the next five years. And Dean Witter's Steele projects that the stock might rise 40% to $33 in the next 24 months.