For Immediate Release
Chicago, IL – September 7, 2010 – Zacks Equity Research highlights O'Reilly Automotive (ORLY) as the Bull of the Day and J.C. Penney Co. (JCP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on McDonald (MCD), Abercrombie & Fitch (ANF) and Petrobras (PBR).
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:
O'Reilly Automotive (ORLY) continues to benefit from its dual market strategy and strong distribution network. In the second quarter of 2010, the company beat the Zacks Consensus Estimate by $0.07 per share. ALIGN="left"> The CSK acquisition is expected to boost the company's earnings and savings in 2010, and will help the company outgrow its competitors. Moreover, the company's aggressive store opening strategy is well supported by its improving cash flow. ALIGN="left"> The current P/E, which is close to the mean of the historical range, is trading at a 29% discount to the peer group for 2010. Our long-term Outperform recommendation on the stock indicates that it would perform better than the market. Our $59 target price, 20.6X our 2010 EPS, reflects this view.
We believe that J.C. Penney Co. (JCP) will remain under pressure in the near term. Despite the introduction of new product lines, sales performance has not been impressive.
J.C. Penney hinted that the discontinuation of the publishing of Big Book catalogs in November 2009 has been adversely impacting the sales. We expect a negative sentiment among investors, following the sales results for the second-quarter 2010 that breached its own guidance.
Moreover, the company's sales of home products have remained sluggish for the last few years. This may weigh upon the company's overall results. However, the Sephora concept inspires confidence but a consistent improvement in the stock has yet to be witnessed.
Latest Posts on the Zacks Analyst Blog:
August Employment Report – In-Depth
Looking at the big picture, men have fared far worse than women in this downturn. There are two possible reasons for this. The first is that the industries that have been particularly hard-hit in this downturn tend to be far more male-dominated than the industries that have made it though this recession more or less unscathed. The most glaring example of this would be the construction industry versus the health care industry (more on the industry breakdowns below).
The second explanation is that on average, women tend to still be paid far less than men do, and employers might be more prone to let their relatively high-priced male employees go first before their cheaper female employees. The industry effect is probably the bigger reason, but the two are not mutually exclusive and both might be playing a role.
Teens, regardless of gender, have had a very hard time of it in this recession. Just go to a McDonald's (MCD) and you will see this for yourself. Normally the blemishes you see on the cashier's face is acne, not wrinkles and age spots, as is the case now.
In August, the teen unemployment rate rose to 26.3% from 26.1% in July and 25.7% a year ago. The increase, though, was all due to a big jump in the participation rate, which rose to 35.2% from 34.6% in July, but well below the 37.5% rate of a year ago. The percentage of teens that actually have a job was just 25.9%, up from 25.6% in July but down from 27.8% a year ago.
While for the most part the earnings from teen jobs tend to go towards clothes from Abercrombie & Fitch (ANF) and other teen clothing stores, for many it is a significant part of paying for college. Also, when teens work, they learn important job skills, such as the importance of actually showing up, and doing so on time. The extremely low levels of teens working is not a good sign for the future.
Not surprisingly, Whites have lower unemployment rates that do Blacks or Hispanics. The rate for Whites rose to 8.7% in August from 8.6% in July, but down from 8.9% a year ago. However, the increase in the white unemployment rate this month was entirely due to an increase in the participation rate to 65.2% from 62.1% in July, but down from 66.0% a year ago. The employment rate for Whites has held steady at 59.5% for three straight months now, but that is down from 60.1% a year ago.
The unemployment rate for Blacks rose to 16.3%, a big jump from the 15.6% rate in July and up from 15.2% last year. Here again, it is mostly a story of changes in the participation rate. For the month, the participation rate for Blacks rose to 62.2% from 61.5% in July, and is at the same level it was at a year ago. The employment rate for Blacks actually ticked up to 52.0% from 51.9% in July, but is still well below the 52.7% rate of last year.
For Hispanics, the unemployment rate in August improved to 12.0% from 12.1% in July and down from 13.0% last year. The monthly improvement is mostly a mirage, though, as the participation rate fell to 67.2% from 67.4% in August and 67.6% last year. The employment rate actually fell to 59.1% from 59.2%. However, part of the year-over-year drop in the unemployment rate is for real, as last year’s employment rate was 58.8%.
Petrobras Inks Oil-for-Shares Deal
Brazil's state-run oil company, Petrobras (PBR) and the Brazilian government agreed to an oil-for-shares swap deal. As per the deal, Petrobras agreed to pay the Government $42.5 billion in new stock for the right to develop 5 billion barrels of offshore oil reserves.
Management said that the company’s proved reserves base will be increased by nearly 35% from the current level of approximately 14 billion barrels of oil equivalent. The transaction has set the stage for Petrobras’ multi-billion dollar public issue scheduled later this month.
The value of the oil rights may clear some of the uncertainties surrounding the company's public offer. Notably, shareholders of the company had approved the sale of up to $85 billion in new shares earlier this year.
Petrobras will require huge capital expenditure to develop the deep pre-salt layers as part of the company’s strategic initiative to ramp up production to 3.9 million barrels of oil equivalent per day (MMBOE/d) in 2014 and 5.4 MMBOE/d in 2020.
We continue to have a positive medium-to long-term outlook on Petrobras due to its encouraging portfolio of investments, particularly in Brazil’s pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. The company is the operator in most of these exploration areas and holds interests ranging from 20% to 100% in them.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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ABERCROMBIE (ANF): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
O REILLY AUTO (ORLY): Free Stock Analysis Report
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
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