For Immediate Release
Chicago, IL – November 19, 2010 – Zacks Equity Research highlights: Scripps Networks Interactive (SNI) as the Bull of the Day and Red Robin Gourmet Burgers (RRGB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Co. (F), Toyota Motor Corp. (TM) and Staples, Inc. (SPLS).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506.
Here is a synopsis of all five stocks:
Bull of the Day:
We upgrade our recommendation for Scripps Networks Interactive (SNI) to Outperform following its impressive third quarter of fiscal 2010 financial results, well above the Zacks Consensus Estimates. This was primarily attributable to significant growth in advertising and affiliate-fee revenue at the company's flagship Lifestyle Media business and higher total segment profit.
Importantly, the struggling online shopping business sites of the company also generated year-over-year growth. According to our view, both advertising revenue and affiliate fee revenue will remain healthy in the near-future due to an improving U.S. economy. Scripps Networks has successfully hiked fees it charges cable operators.
Acquisition of a majority stake in the Travel Channel and re-branding of FLN channel as Cooking Channel will help the company to maintain its future growth. Moreover, Scripps Networks is gradually diversifying in the emerging Asian markets.
Bear of the Day:
Red Robin Gourmet Burgers (RRGB) reported third quarter 2010 earnings below the Zacks Consensus Estimate, as it experienced a rise in cost, negatively impacting margins. The company expects negative same-store sales and cost inflation in the fourth quarter of 2010.
We thus remain apprehensive regarding the stock in the near term, given eroding margins and lagging same-store sales due to decline in traffic. Additionally, the company suspended its outlook for fiscal 2010 and provided a little insight for 2011, thus projecting low visibility on the stock.
Moreover, the stiff competition to lure budget constrained consumers, and the presence of nearly 50% of the restaurants in areas hit hard by the recent housing downturn, are causes of concern. They may dampen the company's growth potential. As a result, we are downgrading the stock from Neutral to Underperform.
We therefore downgrade our rating to Underperform. Our target price of $24 is based on a P/E of 11.4x our fiscal 2011 earnings estimate.
Latest Posts on the Zacks Analyst Blog:
Ford Cuts Mazda Stake to 3.5%
Ford Motor Co. (F) and its strategic partner, Japan's Mazda Motor Corp, declared that the former has reduced its stake in the latter from 11% to 3.5%. Ford would get ¥31 billion ($372 million) by selling its stake in the company.
With the stake sale, Ford would no longer be the largest shareholder of Mazda and Chase Manhattan Bank would take up as the top shareholder of the company with a 7% stake. Ford has already concluded talks with 10 potential buyers. The buyers included Tokyo-based trading conglomerate Itochu Corp., Sumitomo Mitsui Banking Corp. – Mazda's main lender, and other business partners such as trading house Sumitomo Corp.
The partnership between Ford and Mazda began in 1979. Through the partnership, Ford intended to develop small and fuel-efficient cars using Mazda's technology while Mazda depended on Ford for funds to support its research and development activities.
However, Ford's ties with Mazda had started to weaken from 2008 with its reduction of 33.4% stake in the latter to 13% and later to 11% in order to raise cash during the global economic crunch last year.
Consequently, Mazda sought Toyota Motor Corp.'s (TM) help in March this year to obtain key components of hybrid systems – batteries, motors, control units and other electronic parts – from the latter, through a hybrid technology tie-up.
In addition, the sale undoubtedly reveals Ford's intentions to focus on its own brands. Apart from the namesake brand, Ford is currently left with Lincoln and Mercury brands after shedding its luxury lineups – Jaguar, Land Rover, Aston Martin and Volvo. By the end of this year, the Mercury line-up will also be phased out at the cost of its Lincoln line-up. The company plans to launch as many as seven new Lincoln vehicles in the next four years, including a small car in 2014.
Staples Earnings Rise
Staples, Inc. (SPLS), the global leader in the supply of office products, recently posted third-quarter 2010 results. The quarterly earnings of 41 cents a share came a penny ahead of the Zacks Consensus Estimate and rose 5.1% from 39 cents earned in the prior-year quarter.
Despite a marginal increase in the top-line, Staples was able to deliver a mid single-digit growth in its bottom-line on the back of effective cost management. On a reported basis, including one-time items, earnings came in at 40 cents a share, up 8.1% from 37 cents posted in the year-ago quarter.
The Zacks Consensus Estimate slipped by a penny prior to the earnings announcement with 2 out of 17 analysts covering the stock raising their estimates and 2 analysts lowering their projections in the last 30 days.
Staples reported total sales of $6,537.7 million that rose marginally by 0.3% from the prior-year quarter, and came ahead of the Zacks Consensus Revenue Estimate of $6,536 million. The office products retailer forecasts sales to rise in the low single digits in the fourth quarter and fiscal year 2010, and to increase in the low to mid, single digits in fiscal 2011.
Gross profit for the quarter jumped 2.1% to $1,803.7 million, whereas gross profit margin expanded 50 basis points to 27.6%. Adjusted operating profit climbed 8.4% to $523.4 million, whereas operating margin increased 60 basis points to 8% driven by improved product margins, fall in delivery and distribution costs, and lower amortization.
Our View
Being a leading retailer of office products and services, Staples is better positioned than its competitors to benefit from the economic recovery, and is poised to sustain its growth momentum based on margin expansion, effective merchandising and growth prospects across its retail and delivery divisions.
However, we remain cautious about the macro-economic environment and sluggish job market. The recovery in the economy still lacks luster. As a result, consumers and small businesses still remain watchful on their spending. We observe that the demand for office products is closely tied to the health of the economy.
Currently, we have a Neutral rating on Staples. The company holds a Zacks #3 Rank, which translates into a short-term Hold recommendation, and correlates with our long-term view.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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FORD MOTOR CO (F): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
SCRIPPS NETWRKS (SNI): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
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