For Immediate Release
Chicago, IL –August 31, 2010 – Zacks Equity Research highlights: Expeditors International (EXPD) as the Bull of the Day and Questar (STR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart (WMT), International Business Machines Corp. (IBM) and AT&T Inc. (T).
Here is a synopsis of all five stocks:
We are upgrading our recommendation to Outperform for Expeditors International (expd) following second-quarter results. The company's second quarter earnings surpassed the Zacks Consensus Estimate and the year-ago quarter level on strong airfreight and ocean shipping demand.
Yields declined despite an increase in air and ocean volumes, which led to contracting gross margins. However, as the freight is recovering, we expect yields to stabilize at lower and more normal levels. We also expect Expeditors to benefit from a slow and steady economic recovery.
The company's strong balance sheet with no debt is encouraging and provides flexibility for internal growth. Over the long term, the company is poised for growth as it plans to expand its presence and operations internationally and invests in new opportunities and services.
We are downgrading Questar (STR) shares to Underperform from Neutral, due to the weak natural gas fundamentals and the company's clouded post-split outlook. The continued glut in domestic gas supplies continues to weigh on the company, and storage levels remain above their five-year average.
This translates into a bearish near- to medium-term outlook for natural gas-weighted companies like Questar. The transfer of the low-cost and high-growth E&P assets (post-split) have also held back the stock.
These factors are reflected in our downgrade of the company's shares to Underperform from Neutral. Our $16 price objective reflects 2010 P/E multiple of 14.6x.
Latest Posts on the Zacks Analyst Blog:
Spending Rises Faster than Income
Private wages and salaries are the most important -- and highest quality -- form of personal income. Government wages have to be paid out of either taxes or government deficits.
Another important source of personal income is proprietors’ income. In other words, what the self-employed and small businesses were earning. That increased by $1.6 billion after falling $5.3 billion in June. However, more than all of that came from down on the farm, probably because the drought in Russia has pushed up prices for wheat.
Farm proprietors incomes rose by $5.5 billion in July after falling $0.2 billion in June. In contrast, non-farm proprietors' income fell by $4.0 billion on top of a $5.3 billion drop in June. Thus, what we normally think of as small business income is still hurting. Farm proprietors' income is tiny relative to non-farm at just $41.0 billion versus $1.0061 trillion. The July increase was 15.5%. That sort of increase is not likely to be repeated.
Rental income rose by $2.8 billion on top of a $1.7 billion increase in June. The strength in rental income is somewhat surprising given the very high vacancy rates that still prevail in most areas of the country for both residential and non-residential properties.
Capital income, or income from dividends and interest, fell by $3.4 billion after declining $1.4 billion in June. This is the dark side of the low-interest-rate environment we are in. This income is particularly important to retirees. They are finding that as their bonds and CD’s mature, they have to reinvest the proceeds at lower and lower rates. The decrease was all on the interest side, with dividend income rising by $1.4 billion while interest income fell by $4.8 billion.
The final big component of personal income is government transfer payments. Like government salaries, this source of income has to come from either taxes or increased deficits, so it is a less desirable source of personal income from the point of view of the economy as a whole.
However, it is still income that gets spent in the economy.Wal-Mart (WMT) really doesn’t care if the money spent in its stores is from the elderly using their Social Security checks or the dividends they get from their investments, or really if it is retirees shopping there or people still in their working years spending their wages there, or their unemployment benefits.
Over the long term, though, the economy cannot simply grow through ever-increasing amounts of money being handed out by the government. Those payments are very useful in the short run to help hold up overall consumer spending when the economy has turned soft, but in the long run, the economy needs income from wages and salaries, and from small businesses earning profits.
IBM Takes Over AT&T Unit
International Business Machines Corp. (IBM) completed the acquisition of AT&T Inc.'s (T) Sterling Commerce unit. As previously announced in May 2010, IBM signed a definitive agreement to buy Dublin, Ohio-based Sterling Commerce for $1.4 billion in cash. AT&T expects to record a gain of about $800.0 million in the third quarter 2010 as a result of the sale.
Organizations across the globe are looking for different ways to improve communication between business partners, customers and suppliers. The acquisition expands IBM’s ability to help clients improve their communication with customers, partners and suppliers through dynamic business networks, using either physical or cloud delivery models.
We believe Sterling Commerce is an important asset for IBM’s expanding middleware portfolio. The acquisition will enable IBM to deliver powerful new cross-channel solutions to its diversified client base that includes large companies from retail, manufacturing, communications, health care and banking industries.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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EXPEDITORS INTL (EXPD): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
QUESTAR (STR): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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