For Immediate Release
Chicago, IL –August 12, 2010 – Zacks Equity Research highlights: Wynn Resorts (WYNN) as the Bull of the Day and StanCorp Financial (SFG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Macy’s Inc. (M), Visa (V) and The Walt Disney Company (DIS).
Here is a synopsis of all five stocks:
We have an Outperform rating on Wynn Resorts (WYNN) as the company's second quarter 2010 earnings were well ahead of the Zacks Consensus Estimate. They were primarily driven by better-than-expected top-line growth and improvements in the bottom line.
The company set record results in the Macau market. Additionally, with the global economy showing a gradual recovery, the company is experiencing an increase in demand. Its Las Vegas business, which was the worst hit at the time of slowdown, is also rebounding.
We remain encouraged with the company's strong brand name, healthy balance sheet, relatively low capital requirements and ability to execute in a difficult operating environment.
We are downgrading StanCorp Financial (SFG) to Underperform from Neutral as we suspect organic growth will remain restricted in the near term, given the sluggish economic environment and challenging labor market conditions. Additionally, delinquencies on commercial mortgage loans are expected to remain modestly high in the foreseeable future.
Shares of StanCorp currently trade at 8.5x our earnings estimate for 2010, a 30% discount to the industry average of 12.2x. On a price-to-book basis, the shares trade at 1.0x, representing a 43% premium to the industry average of 0.7x. The valuation on a price-to-book basis looks fair, given a trailing 12-month ROE that is only 58% ahead of the industry average.
Our six-month target price of $36.00 equates to 7.8x our earnings estimate for 2010. Combined with the annual dividend of $0.80 per share, this target price implies a negative return of about 7.2% over that period. This is consistent with our Underperform recommendation on the shares.
Novatel has provided a tepid financial outlook. We do not find any immediate growth catalyst for the company, and believe Novatel will incur loss for full-year 2010.
Latest Posts on the Zacks Analyst Blog:
Macy’s Outperforms, Ups Outlook
Macy’s Inc. (M) has posted second-quarter 2010 results that topped Zacks' expectations. The quarterly earnings of 35 cents a share outperformed the Zacks Consensus Estimate of 28 cents, and rose 75% from 20 cents delivered in the prior-year quarter.
The company has been taking prudent steps to increase sales, profitability and cash flows, which include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy’s continues to focus on price optimization, inventory management and merchandise planning.
The Cincinnati, Ohio-based Macy’s said that total sales grew 7.2% to $5,537 million from $5,164 million in the prior-year quarter. Total revenue also comfortably surpassed the Zacks Consensus Revenue Estimate of $5,481 million. Comparable-store sales for the quarter jumped 4.9%.
Online sales, which include macys.com and bloomingdales.com, sustained their growth momentum and were up 28.1% in the quarter, favorably impacting comparable-store sales by 0.5%.
Deleveraging and Deficits
Even though the federal government is running very high budget deficits, the overall ratio fo debt-to-GDP is actually declining now for the first time since the country was sending Rosie the Riveter back to the kitchen.
The ratio of private debt-to-GDP has plunged from an all-time high of 282.9% in 2008 to "just 234.8%" in the first quarter. While the level of private debt-to-GDP is still very high, far exeeding where it was even in the depths of the Great Depression after GDP had evaporated -- and well above where it was in 1929 -- it is also deleveraging extremely rapidly.
Effectively what the country has been doing as a whole is paying down private debt and adding to public debt. The former is outpacing the later. Money spent paying down debt is money that is not being used to buy current production, which helps explain why consumer spending has been so weak.
The decline in the overall debt level is a good thing in the long term, but in the short term it is very painful. Constantly increasing the ratio of overall debt to income is essentially a case of living large on the credit card. We have been doing that since everyone liked Ike, but it really picked up steam starting with the Reagan Revolution.
While the credit card is not totally maxed out -- after all, the government can still borrow at historically low rates -- we have decided that it is time to pay more than the minimum on the balance. Over time that is the prudent thing to do, but it does not make sense to pay so much paying down the Visa (V) that you cannot afford bus fare to get to work.
Disney Tops Zacks Estimates
The Walt Disney Company (DIS) recently posted third-quarter 2010 results that topped Zacks Consensus expectations. The quarterly earnings of 67 cents a share comfortably surpassed the Zacks Consensus Estimate of 59 cents and jumped 29% from 52 cents delivered in the prior-year quarter.
Total revenues for the quarter rose 16% to $10,002 million from the year-ago quarter, and topped the Zacks Consensus Estimate of $9,334 million, whereas total operating income surged 37% to $2,537 million.
Recognition of deferred revenues at ESPN and strong theatrical releases, most notably Alice in Wonderland, Iron Man 2 and Toy Story 3 were the major factors driving growth.
Segment Breakdown
Media Networks revenues rose 19% to $4,729 million, driven by revenue increase across Cable Networks (up 28%) and Broadcasting (up 4%). Total operating income soared 43% to $1,885 million. Cable Networks’ operating income grew 50%, benefiting from the recognition of deferred revenue of net $344 million at ESPN, and increase in affiliate and advertising revenue, offset by a rise in programming and production costs.
Operating income at Broadcasting climbed 2%, reflecting an increase in advertising revenue at owned television stations and rise in revenue from ABC Studios productions, offset by increase in programming expenses at the ABC Television Network.
Parks and Resorts revenues grew 3% to $2,831 million. However, operating income dropped 8% to $477 million due to the rise in costs and fall in attendance at the theme parks, as well as higher fuel costs and decline in passenger cruise days at Disney Cruise Line.
Studio Entertainment revenues jumped 30% to $1,639 million, but posted a substantial increase in operating income to $123 million, compared to a loss of $12 million in the prior-year quarter, driven by the increase in worldwide theatrical distribution and lower marketing and distribution costs.
Consumer Products revenues soared 19% to $606 million and operating income surged 22% to $117 million, reflecting improvement at its retail business, growth at Publishing driven by Marvel titles, and a fall in costs at The Disney Stores North America.
Interactive Media revenues for the quarter jumped 74% to $197 million and posted an operating loss of $65 million, an improvement of 13% over the prior-year quarter, reflecting the rise in sales of video games, partly offset by increased marketing costs.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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DISNEY WALT (DIS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
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