For Immediate Release
Chicago, IL – November 28, 2011 – Zacks Equity Research highlights Salix Pharmaceuticals (SLXP - Analyst Report) as the Bull of the Day and Montpelier Re Holdings ( (MRH - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart ( (WMT - Analyst Report), Macy's ( (M - Analyst Report) and Best Buy ( (BBY - Analyst Report).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
Salix Pharmaceuticals (SLXP - Analyst Report) third quarter results exceeded expectations with higher revenues boosting performance. With the company raising its revenue guidance, we have raised our estimates as well. Salix is well-positioned for growth in the gastrointestinal market.
We believe lead product Xifaxan will continue to experience solid, above-market trend growth given its safety profile and lack of systemic absorption. We were pleased to see Xifaxan gain approval for the hepatic encephalopathy indication, as we believe that the main potential for Salix lies in gaining approval for additional indications for Xifaxan.
Meanwhile, we are pleased to see the company expanding its pipeline through in-licensing deals and acquisitions. We expect the company to continue pursuing suitable in-licensing opportunities in order to grow revenues. We believe the current price represents an attractive entry point for long-term investors and maintain our Outperform recommendation on the stock.
Bear of the Day:
We are downgrading Montpelier Re Holdings ( (MRH - Analyst Report) to Underperform from Neutral on the back of loss reported in the third quarter results. Montpelier Re Holdings' operating loss came in much wider than the Zacks Consensus Estimate, led by catastrophe losses, resulting from Hurricane Irene and the Texas wildfires, U.S. regional aggregate covers and July's Danish floods.
The loss ratio in the third quarter was 89% compared with 33.3% in the year-ago quarter. Results include $60 million of catastrophe losses partially offset by $18 million of favorable prior year loss reserve movements. The current pricing environment in the primary insurance market and the stressed economy are expected to restrict the top-line growth.
Our six-month target price is $16.00. This price target along with the annual dividend of $0.40 implies a negative return of 6.1% over that period. This is consistent with our Underperform rating.
Latest Posts on the Zacks Analyst Blog:
Italy’s Boot Overshadows Retail Kickoff
Investors will be unable to shake off Italy-related concerns even as the holiday shopping season gets underway today with enticing Black Friday deals. Trading volumes will likely remain thin today, given the abbreviated trading session and the absence of any major economic reports. Don't forget, however, that low trading volumes have a way of exaggerating volatility.
In its latest bond auction, Italy was forced to pay Euro-era record high interest rates to attract investors. The country was able to sell €8 billion in six-month treasury bills, but only after paying an average yield of 6.5%, sharply up from the roughly 3.5% yield it paid for the same maturities in October. Yields on two and five-year Italian government bonds jumped to 7.7% and 7.8%, while the 10-year bond moved further above the 7% level to a new high of 7.3%. For context, keep in mind that Uncle Sam is paying less than 2% on 10-year bonds.
The inverted Italian curve -- higher yields on shorter duration bonds compared to long-term instruments -- highlights the market's anxiety about the country's near-term financial profile. Despite these extremely high funding costs, Italy is still able to access the bond market to roll over its maturing debt. But escalating yields are adding to an already precarious fiscal situation by increasing the country's debt-service liabilities. Thursday's statement by German Chancellor Angela Merkel strongly rejecting the demand for issuance of common Euro-zone bonds was the trigger for the renewed pressures on Italian bonds.
In corporate news, focus will be on retailers like Wal-Mart ( (WMT - Analyst Report), Macy's ( (M - Analyst Report) and Best Buy ( (BBY - Analyst Report) due to Black Friday-related headlines.
Approximately 34% of consumers are expected to shop on Black Friday, up from last year's 31%, according to the International Council of Shopping Centers. The total number of people shopping over the long weekend is expected to be up 10% from last year, estimates the National Retail Federation. It is too early to handicap the holiday shopping season, but given the improving economic backdrop, some early optimism may not be altogether misplaced.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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