For Immediate Release
Chicago, IL – December 19, 2012 – Zacks Equity Research highlights Hanesbrands (HBI - Analyst Report) as the Bull of the Day and Central Garden & Pet (CENT - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Walgreen Co. , Express Scripts (ESRX - Analyst Report) and CVS Caremark (CVS - 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:
Hanesbrands (HBI - Analyst Report) posted solid third quarter 2012 results with earnings of $1.11 per share, which outpaced the prior-year earnings by 31% and the Zacks Consensus Estimate by 5.7%. The upswing was driven by strong sales growth in both Innerwear and Outerwear segments.
Overall, we are impressed with the company's strong portfolio of brands and its continuous innovations. Efficiency in initiatives has led to substantial cost savings, and the company is also taking efforts to optimize its inventories, reduce long-term debt and de-leverage its balance sheet.
Despite currency and cotton cost headwinds, Hanesbrands anticipates its earnings to improve in fiscal 2012 and 2013. Based on our 2012 earnings estimate of $2.58, the stock is trading at 13.8x, which is a 15.9% discount to the industry average of 16.4x. Our target price of $43.00 is based on approximately 16.7x our 2012 earnings estimate.
Bear of the Day:
Central Garden & Pet's (CENT - Analyst Report) dismal fourth-quarter 2012 results compelled us to adopt a bearish stance on the stock. The company posted a quarterly loss of $0.21 per share that remained flat with the prior-year quarter loss but was wider than the Zacks Consensus Estimate of a loss of $0.20. The company hinted that increased promotional and innovation expenses and lower revenues from the decor business negatively impacted the results.
Central Garden has missed the Zacks Consensus Estimate by an average of 8.5% in the trailing four quarters. For fiscal 2013 and 2014, the Zacks Consensus Estimates dropped by 6 cents and 12 cents to $0.80 and $1.01 per share in the last 7 days, respectively.
Management now anticipates that sales and earnings for the first quarter of fiscal 2013 will be lower than the comparable prior-year period due to the adverse impact of Hurricane Sandy that to a great extent adversely impacted the Pet segment. Consequently, we downgrade our recommendation to Underperform.
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Earnings Preview: Walgreens
Walgreen Co. is slated to release its first quarter 2013 earnings results on Friday, December 21, 2012, before the market opens. The Zacks Consensus Estimate currently stands at 67 cents per share for the quarter. This represents year-over-year growth of 6.3%.
With respect to earnings surprises, Walgreens edged past the Zacks Consensus Estimate in one of the trailing four quarters and reported in-line earnings result in one of the quarters. The average surprise over the last four quarters remained negative at 2.53%.
Walgreens has already reported sales for the first quarter of 2013. Total sales in the first quarter came in at $17.34 billion, down 4.5% year over year and trailing the Zacks Consensus Estimate of $17.63 billion, missing the top-line Zacks Consensus Estimate for the third time in a row.
Previous Quarter Synopsis
Walgreens reported a 4.5% year over year decline in adjusted earnings per share in the fourth quarter of fiscal 2012 to 63 cents. However, it was well ahead of the Zacks Consensus Estimate of 55 cents.
Total sales decreased 4.9% year over year to $17.1 billion in the fourth quarter. The decline was primarily attributed to the generic wave in the pharmaceutical industry. Front-end comparable store sales (those open for more than a year) dropped 1.3% while prescription sales (63.3% of total revenues) dipped 8.1% in the quarter.
Agreement of Analysts
Estimate revision trends reflect a bearish sentiment towards the company’s earnings for the first quarter of fiscal 2013. Over the last 30 days, 6 out of the 14 estimates were revised downwards with no upward revision for the quarter.
Walgreens’ dismal performance in recent months coupled with concerns regarding the company’s performance in the coming quarters underlines the absence of any positive movement, depicting a lack of driving events. While the reconciliation with Express Scripts (ESRX - Analyst Report) is comforting, Walgreens’ ability to win back customers remains a looming concern.
Magnitude of Estimate Revisions
The magnitude of the estimate revisions for Walgreens depicts a slightly negative bias for the upcoming quarter. The Zacks Consensus Estimate dropped three cents over the last 30 days and a penny in the last 7 days to 67 cents for the first quarter.
While fiscal 2012 was a challenging year for Walgreens, we look forward to fiscal 2013 as near-term headwinds wane. Despite a lukewarm start to fiscal 2013, the company has a broad-based platform to drive growth going forward. Moreover, the company has left no stone unturned to bolster sales, ranging from a customer loyalty program to stimulate consumer demand to resorting to inorganic means.
In a small way, the stock inched towards a 52-week high of $37.35 on December 17, 2012. We currently have a long-term ‘Neutral’ recommendation on the stock which carries a short-term Zacks #3 Rank (Hold). Its peer CVS Caremark (CVS - Analyst Report) carries a Zacks #2 Rank (Buy).
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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