For Immediate Release
Chicago, IL –September 17, 2010 – Zacks Equity Research highlights: Acergy (ACGY) as the Bull of the Day and Safeway (SWY) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on WellPoint (WLP), Aetna (AET) and AK Steel Holding Corporation (AKS).
Here is a synopsis of all five stocks:
Bull of the Day:
Acergy (ACGY) second-quarter results, despite marginally missing estimates, reflected good project execution skills and solid activity levels. With a healthy backlog, significant cash balances and no near-term refinancing requirements, Acergy should weather the challenging business environment better than many of its peers.
Our continued Outperform recommendation on Acergy ADRs also reflects the company's high-quality client base, which mostly includes well-capitalized oil majors or national oil companies. We believe Acergy's impending merger with Subsea 7 will create a stronger, more diverse seabed-to-surface engineering and construction player, enabling it to provide a broader array of services.
As such, we view Acergy ADRs as an attractive investment and maintain its Outperform recommendation. Our $21 price objective represents a 2010 P/E multiple of 23.1X.
Bear of the Day:
American Poverty Rising
For the first time, the overall number of people with health insurance in the country declined. While a 0.6% decline is not huge, keep in mind that the population of the country is growing. The number of people with private health insurance coverage is falling even faster, down by 3.2% for the year. If not for the subsidy to help the uninsured keep their health care coverage through COBRA, the decline would have been much steeper.
With higher unemployment, the number of people who have health insurance through their jobs fell by 3.7%. Even with Medicaid, which has been growing rapidly, up 12.2% in a single year, the poor are much more likely than the middle class to be without health care coverage.
Since WWII health insurance coverage has, for the most part, been tied to employment. The Health Care Reform bill really didn't change that, but it will help those that fall between the cracks of the system. For the most part they will end up getting their health care coverage through the big insurance companies like WellPoint (WLP) and Aetna (AET) that now provide most of the private coverage. People will be required to have health insurance, and will be subsidized if they can't afford it.
Also, the health insurance companies will not be able to deny coverage to people based on pre-existing conditions, nor make up excuses to drop people from coverage as soon as they get sick. Still, government-provided health coverage is becoming a bigger and bigger part of the mix. The decline in employment-based coverage has been relentless, and it is down over 8 points since the statistics on coverage first started in 1987.
In total, 50.7 million people did not have health insurance in 2009, or 16.7% of the population, up from 46.3 million in 2008. That is despite an increase of 5.8 million people getting government coverage through Medicare, Medicaid or the Veterans Administration. Yes, if you don't have health coverage and go to the hospital emergency room, they have to treat you until you are stabilized. However, that will not stop the hospital from billing you for the services and forcing you into bankruptcy. That sword of Damocles is hanging over the head of one in six Americans. Fortunately, for most of them, help is on the way.
AK Steel Slashes 3Q Guidance
Shares of steel maker AK Steel Holding Corporation (AKS) slipped 5.71% or 83 cents and closed at $13.70 on September 15, 2010 after the company forecasted operating losses in the third quarter of 2010. AK Steel foresees operating losses of $20 per ton in the third quarter in contrast to its previous guidance of $15 per ton of operating profits. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 2 cents.
AK Steel attributed the estimated loss primarily to the cost related with the planned maintenance shutdown of the Ashland facility in Kentucky. The blast furnace in Kentucky was scheduled to be under maintenance in the first half of 2011. However, bad furnace conditions forced AK steel to prepone the maintenance. The company plans an 11 day production outage at the facility starting from September 20, 2010. Besides, AK Steel expects soaring iron-ore prices, the key raw material for steel production, to further increase to the company's operating losses in the third quarter.
Earlier, in its second quarter 2010 earnings release, AK Steel had forecasted a 65% year over year increase in iron prices in 2010. Although the company remains uncertain about the raw material prices, it expects increasing demand in China and other foreign markets to push iron prices to an exorbitant level. AK Steel stated that an every 5% increase in iron price above 65% would affect results by $11 million or $7 per ton.
Latest Posts on the Zacks Analyst Blog:
Sprint Inks Grid Net Deal
Sprint Nextel (S), the third-largest U.S. wireless carrier, has collaborated with smart grid software provider, Grid Net, to connect smart meters and smart grid routers using its 4G network.
Sprint is the first and only national wireless carrier to launch 4G network in the U.S. The company offers speedy data services to customers via 4G WiMax (a wireless broadband technology) network in collaboration with Clearwire Corp. (CLWR). WiMax provides an affordable and safe solution for the wireless connection of smart meters to the Smart Grid.
Grid Net currently has customers using WiMax in the Australian market. The deal with Sprint allows WiMax penetration in the U.S. market. It also makes Sprint the first national wireless carrier to embed WiMax connectivity into smart meters and routers and combine them on a 4G network.
The deployment of Sprint's 4G WiMax offers a major prospect in the wireless market and may boost the company's revenues. Currently, Sprint extends its 4G network in 49 cities with the Clearwire network. This reach keeps the company well ahead of its rivals such as Verizon Communications Inc. (VZ), which plans to launch 4G services in 25–30 markets in the fourth quarter of 2010.
Sprint is well positioned to leverage the growing wireless smartphone market in the U.S. with its rich portfolio of popular smartphone offerings and advanced devices in the pipeline.
However, we believe a lower margin-revenue mix, expenditures related to wide-scale 4G service deployments and weak wireless business may impact financials over the near term. Moreover, Sprint Nextel's prepaid business is expected to face further challenges from the aggressive rollout of competitive price plans in the balance of 2010.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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ACERGY SA (ACGY): Free Stock Analysis Report
AETNA INC-NEW (AET): Free Stock Analysis Report
AK STEEL HLDG (AKS): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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