May 11, 2009 - Weis Markets, Inc. (WMK-NYSE) engages in the retail sale of food items. Its retail stores offer groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, prescriptions, deli/bakery products, prepared foods, fuel, and general merchandise items, such as health and beauty care, and household products.

Here's what caught my eye: Earnings took a real hit from 2006 to 2007, going from $2.07 to $1.69. Then went to $1.74. This year, analysts see $2.35, then $2.38 next year. That's a good recovery. Also, there's a dividend of $1.16 a share for a yield of 3.3%. Revenues, in the same time period, consisently moved higher, from $2.2445 billion in 2006 to $2.4224 billion in 2008. This year, expect $2.475 billion, then $2.550 billion in 2010.

With increased pricing, same store sales rose 6% in the third quarter of last year. Then in the 4th, moderated to 2%. No doubt the weaker economy is to blame as shoppers alter all habits, including the food they buy. To adjust for the new reality, Weis lowered prices at the beginning of 2009 on almost 2500 items, mostly staples, and promised consumers to hold them until April 1. Then management extended its pledge into the summer months and added more products to the original list.

At the same time, management reined in operating expenses. The benefits are showing in the bottom line where analysts predict a 35% rise in 2009 results. Wider margins are the largest part of the increase. There's also relief from commodity costs. Consumers are buying more of the private label branded foods which are lower-priced but carry higher profit margins for Weis.

The company has no debt, making for a strong balance sheet. There's $80 million in cash, and the current ratio (current assets divided by current liabilities) is 2 to 1.

More numbers: Market Cap is $975 million. Forward P/E is 15.2. Price to Book is 1.47. Operating margin for the last 12 months was 3.36%. Profit margin was 2.24%. Cash per share is $2.95. Book Value is $24.52. Beta is .84. There are 26.95 million shares. Insiders own 59.1% of the stock. The annual dividend is $1.16 giving a yield of 3.3%.

Weis should appeal to investors looking for a defensive stock. While the stock price took a major drop earlier this year (going to $22.70), it rebounded quickly. Its all-time high was $46.30, hit in 2006. There isn't any reason to believe there's a catalyst here for major price gains. But conservative investors should like its solid balance sheet and decent dividend. Analysts see sales growing at a rate of 3.5% a year over the next 5 years, and earnings to increase by 6.5% a year in the same time.

- Company Web site: www.weis.com

- Ted Allrich