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Zacks Bull and Bear of the Day Highlights: PS Business, Linear Technology, Timken, Caterpillar and Wal-Mart Stores

PSB LLTC TKR CAT WMT

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For Immediate Release

Chicago, IL – December 12, 2011 – Zacks Equity Research highlights PS Business Parks (PSB - Analyst Report) as the Bull of the Day and Linear Technology (LLTC - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Timken Co. (TKR - Snapshot Report), Caterpillar Inc. (CAT - Analyst Report) and Wal-Mart Stores Inc. (WMT - 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:

PS Business Parks (PSB - Analyst Report) reported strong third quarter 2011 results with healthy year-over-year increase in revenue and earnings. PS Business Parks owns and operates commercial real estate properties in diversified markets, which can be easily configured to suit a variety of uses to minimize downside risk and generate a steady source of revenue.

The company also has a strong balance sheet with adequate liquidity and minimal debt maturities. Over the last five years, PS Business Parks shares have traded in a range of 6.3X to 20.5X trailing 12-month FFO. The stock is also trading at a discount to the peer group, based on forward FFO estimates.

Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $66.00, 14.1X 2011 FFO/share, factors in this view.

Bear of the Day:

Linear Technology (LLTC - Analyst Report) is a leading OEM of analog and mixed signal semiconductors. September quarter results missed the Zacks Consensus, as weak demand, unfavorable mix and a higher tax rate impacted results. Extreme caution regarding customers also led to a weak guidance.

Therefore, despite the strong business model, excellent products and ability to generate strong operating cash flows, we advise investors to avoid the shares, since we believe there is uncertainty in near-term demand. The high debt burden also increases risks.

We think the loss of the iPad business will continue to tell on sentiments. We are therefore reiterating our Underperform recommendation on the shares, as indicated by our $26 target price (14.9X P/E).

Latest Posts on the Zacks Analyst Blog:

The Taming of Inflation in China

China’s National Bureau of Statistics recently stated that the country’s inflation rate has fallen from a 3-year high of 6.5% last July to 4.2% year-over-year in November, which represents its slowest rate of growth in over a year. Producer prices inched up just 2.7% year on year, the lowest in nearly 2 years. Food inflation, a politically sensitive topic, moderated on a sequential basis to 8.8% in November from 11.9% in October.

Clearly, the Chinese economy is cooling down as the outlook of its major trading partners remains grim. Curbs on real estate speculation, stringent bank lending and a slowdown in exports have deflated the hyper-growth that China historically enjoyed. The victory over inflation could not have come at a better time as there are clear indications of a slowdown.

The economy grew at only 9.1% year over year during the June to September period, which represents the slowest growth rate in the past couple of years. Then, in November, the Purchasing Managers’ Index (“PMI”, a gauge for manufacturing sentiment) touched 49, its nadir since 2009. In fact, it was the first time in nearly three years that this measure breached the critical 50 level downward. Latest statistics indicate that exports to the EU slipped 9% year over year while U.S.-bound exports dropped 5%, last October.

Just earlier this month, the government provided a clear signal of a shift to a more accommodating monetary policy when it cut the cash reserve ratio to infuse liquidity. We believe that having curbed inflation, the authorities will now be in a position to further ease monetary policy and proactively pursue growth. The challenge before policy-setters is to boost domestic demand and free up credit controls without unleashing inflation again.     

Despite enjoying high growth, China has at times been a difficult proposition for Western business interests. Two U.S. construction or engineering companies who have done booming business in building China are Timken Co. (TKR - Snapshot Report) and Caterpillar Inc. (CAT - Analyst Report). On the retail side, Wal-Mart Stores Inc. (WMT - Analyst Report) is a formidable competitor in China where foreign retailers have often complained about the lack of level playing field. 

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.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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