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For Immediate Release
Chicago, IL – March 13, 2012 – Zacks Equity Research highlights Macy's, Inc. ( (M - Analyst Report) as the Bull of the Day and Ultra Petroleum Corp. ( (UPL - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase & Co. ( (JPM - Analyst Report), U.S. Bancorp ( (USB - Analyst Report) and BB&T Corporation ( (BBT - 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:
Macy's, Inc. ( (M - Analyst Report) has been taking prudent steps to increase sales, profitability and cash flows. These include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy's continues to focus on price optimization, inventory management and merchandise planning. These help the company to deliver better-than-expected fourth-quarter 2011 results.
The quarterly earnings of $1.70 per share beat the Zacks Consensus Estimate of $1.65, and rose 6.9% from the prior-year quarter. Macy's now expects fiscal 2012 earnings between $3.25 and $3.30 per share. The company hinted that it is seeking to expand both the Macy's and Bloomingdale's brands, as the year present enormous opportunity to enhance market share.
Macy's, which saw 4.6% increase in February comparable-store sales, now expects comps growth of approximately 3.5% for fiscal 2012. We maintain our long-term Outperform recommendation on the stock. Our target price of $42.00, 12.6X 2012 EPS, reflects this view.
Bear of the Day:
Concerned by the current weak sentiment for natural gas, we are downgrading Ultra Petroleum Corp. ( (UPL - Analyst Report) shares to Underperform from Neutral. The glut in domestic gas supplies continues to weigh on the fundamentals, and storage levels remain well above their benchmark levels. This translates into a bearish near-to-medium term outlook for natural gas-weighted companies like Ultra.
Taking a cautious view of prices, the company's capital program this year is cutting on dry natural gas development. Even then, we expect Ultra to perform below its peers and industry levels in the coming months. We believe there are other companies in the natural gas E&P group that seem to offer better exposure to the sector.
We expect the company to continue to struggle unless the outlook for natural gas prices improves. This is corroborated by our new Underperform recommendation. Our $22 price objective reflects a multiple of 4.5X trailing twelve-month cash flow.
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Chicago Bank Fails, Tally Hits 13
Last Friday, the Illinois Department of Financial and Professional Regulation shuttered Chicago-based New City Bank, taking the number of failed U.S. banks thus far in 2012 to 13. This follows 92 bank failures in 2011, 157 in 2010, 140 in 2009 and 25 in 2008.
While the financials of a few large banks continue to stabilize on the back of an economic recovery, the industry is still on shaky ground. The sector presents a picture similar to that of 2011, with nagging issues like depressed home prices along with still-high loan defaults and unemployment levels troubling such institutions.
The lingering economic uncertainty and its effects also weigh on many banks. The need to absorb bad loans offered during the credit explosion has made these banks susceptible to severe problems.
New City Bank had total assets of $71.2 million and total deposits of $72.4 million as of December 31, 2011.
This failure represents another blow to the deposit insurance fund (DIF), meant for protecting customer accounts.
The Federal Deposit Insurance Corporation (FDIC) insures deposits in 7,359 banks and savings associations in the country as well as promotes their safety and soundness. When a bank fails, the agency reimburses customer deposits of up to $250,000 per account.
Though the FDIC has managed to shore up its deposit insurance fund over the last few quarters, the ongoing bank failures have kept it under pressure. However, as of December 31, 2011, the fund was in surplus for the third straight quarter.
Also, the balance increased to $9.2 billion from $7.8 billion at the end of the prior quarter. The improvement in fund balance was aided by a moderate pace of bank failures and assessment revenue.
The failure of New City Bank is expected to deal a blow of about $17.4 million to the DIF.
The FDIC did not get an acquirer for New City Bank’s banking operations. As a result, it approved the payout of the insured deposits of the failed bank. Also, as a receiver, the FDIC will retain all the assets from New City Bank for later disposition.
The number of banks on FDIC’s list of problem institutions saw a sharp decline for the third straight quarter to 813 in the October-December period from 844 in the preceding sequential period. As of the end of 2010, there were 884 banks in the problem list.
Increasing loan losses on commercial real estate could trigger many more bank failures in the upcoming years. However, considering the moderate pace of bank failures, the number in 2012 is not expected to exceed the 2011 tally. From 2011 through 2015, bank failures are estimated to cost the FDIC about $19 billion.
With so many bank failures, consolidation has become the industry trend. For most of the failed banks, the FDIC enters into a purchase agreement with healthy institutions.
When Washington Mutual collapsed in 2008 (branded as the largest bank failure in the U.S. history), it was acquired by JPMorgan Chase & Co. ( (JPM - Analyst Report). The other major acquirers of failed institutions since 2008 include U.S. Bancorp ( (USB - Analyst Report) and BB&T Corporation ( (BBT - Analyst Report).
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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