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For Immediate Release
Chicago, IL – October 16, 2012 – Zacks Equity Research highlights Pinnacle West Capital Corporation (PNW - Analyst Report) as the Bull of the Day and AmBev's as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Volkswagen AG (VLKAY), General Motors Company (GM - Analyst Report) and Ford Motor Co. (F - 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:
We have upgraded our recommendation on Pinnacle West Capital Corporation (PNW - Analyst Report) to Outperform from Neutral owing to the company's strong financial position, improvement in credit rating along with steady inorganic growth strategy. We remain confident about Arizona's fundamentals, which are allowing Pinnacle West to achieve higher levels as the economic environment improves.
The company expects annual customer growth of approximately 2% for 2012 through 2015 will benefit its results. In addition, favorable renewable energy prospects and the recent rate case approval will ensure increased returns.
Over the last five years, the company's shares have traded in the P/E multiple range of 11.4x to 17.9x on trailing 12-month earnings. Our target price of $63.00 is based on the P/E multiple of 18.4 on 2012 EPS.
Bear of the Day:
Anticipating negative impact on AmBev's future financial performance due to Brazilian government's decision to raise taxes on beer, we are maintaining our long-term Underperform recommendation on AmBev. To shield against the higher taxes, AmBev might inflate its prices in an effort to somewhat offset the negative impact, which may result in lower volumes.
Consequently, the net income may be pulled down. Moreover, the company reported a lower-than-expected second-quarter 2012 earnings of $0.29 per share, missing the Zacks Consensus Estimate of $0.35. Intense competition from global and regional players, coupled with seasonal nature of business, may undermine the company's future operating performance as well.
Our long-term Underperform recommendation on the stock indicates that it would perform below the broader market. Our target price of $36.00, 21.6x 2012 EPADR, reflects this view.
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Volkswagen Cuts Production Goal
In the wake of the economic uncertainties in Europe, Volkswagen AG (VLKAY) recently announced that it will halt the production of Passat cars for a week in Germany, according to Reuters. The move is a part of the company’s initiative to reduce its group output by 300,000 vehicles this year.
According to sources, the company has reduced the global production target for the group to 9.4 million vehicles from the previous estimate of 9.7 million. However, the target is well above the previous year’s output of 8.5 million vehicles. In addition, owing to the declining orders from the customers, the company also plans to close its production facility in Emden in northwestern Germany for a couple of days.
One of the company’s major competitors, General Motors Company (GM - Analyst Report), also remains challenged by the ongoing financial crisis in the euro zone. Its European operation Opel expects to incur an operating loss of €1 billion ($1.3 billion) in 2012 due to fewer-than-anticipated car sales.
Ford Motor Co. (F - Analyst Report), which also competes with Volkswagen, expects to lose between $500 million and $600 million in 2012 in the 19 European markets covered by the automaker, owing to the ongoing debt crisis in the region. Ford recorded a loss of $27 million in 2011.
Volkswagen, in the second quarter of 2012, registered a 20% increase in earnings per share to €12.05 ($15.2) from €10.04 per share in the corresponding quarter of 2011. Total revenues went up 19% year over year to €48.1 billion ($60.4 billion).
Headquartered in Wolfsburg, Germany, Volkswagen is the manufacturer and distributor of automobiles globally. The company operates in Europe, North America, South America, and the Asia-Pacific.
Currently, Volkswagen retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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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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.
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