For Immediate Release
Chicago, IL – February 16, 2012 – Zacks Equity Research highlights AMERCO, Inc. as the Bull of the Day and Arch Coal, Inc. as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Capital One Financial Corporation (COF - Free Report) , ING Groep NV (ING - Free Report) and HSBC Holdings Plc .
Full analysis of all these stocks is available at https://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
AMERCO, Inc. is the parent company of U-Haul International, the largest consumer truck rental company in the world. It is also the second largest self-storage company in North America.
The impact of the decline in housing and a decrease in apartment occupancy rates appears to have ended. We expect continued improvements in operating parameters. Our recommendation continues as Outperform, with a price target of $110 a share.
The stock has usually been valued on EBITDAL (EBITDA plus lease expense) per share, selling between two and three times EBITDAL. Based on our estimates for the next four quarters EBITDAL of $40 a share, we would expect a price range of $95 to $125.
Bear of the Day:
Arch Coal, Inc.'s fourth quarter operating earnings of $0.29 per share missed the Zacks Consensus Estimate. Full-year results also failed to meet expectations. Going forward, increased regulation and alternate energy sources, specifically natural gas, continue to be major risks for coal miners like Arch Coal.
We remain concerned about the recent difficulties faced at the company's Powder River Basin operations as well as the longwall outage at Mountain Laurel (Appalachia). We retain our Underperform recommendation on the company.
Arch Coal's current trailing 12-month earnings multiple is 13.4, compared to the 10.0 average for the peer group and 14.3 for the S&P 500. Presently, the stock is trading at a discount to the peer group, based on 2012 earnings estimates. The trailing 12-month EV/EBITDA multiple is above the industry average. Our target price is $13, valued at 7.1x 2012 EPS.
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Fed OK’s Capital-One-ING Direct Deal
It’s a ‘YES’ for Capital One Financial Corporation’s (COF - Free Report) plan to acquire ING Direct USA, the online banking unit of Amsterdam-based ING Groep NV (ING - Free Report) . On Tuesday, the Federal Reserve finally approved the deal. The consent removes the doubt that the acquisition would create the next ‘too-big-to fail’ banking institution.
In June 2011, COF had announced that it would acquire ING Direct in a stock-cum-cash transaction. As per the terms of the deal, the company would pay $6.2 billion in cash and $2.8 billion in stock to ING Groep. For this, the company will offer 55.9 million shares to ING Groep at $50.07 per share, making ING Groep the largest single shareholder in COF. Now, the company is expected to close the deal over the next few days.
This deal will enable COF to move to the fifth position from the present eighth, in terms of deposits in the U.S. Additionally, ING Direct, with about 7.7 million customers in its kitty, would further enhance the company’s market share in the online banking sector.
Reasons for the Delay in Approval
Following the announcement of the agreement in June 2011, serious concerns were raised by Congressman Barney Frank and the National Community Reinvestment Coalition (NCRC) against COF-ING Direct deal. According to them, the deal would limit the consumer access to banking and credit services as well as would heighten the risks to the financial system of a new ‘too-big-to-fail’ institution.
The COF-ING Direct deal became the first acquisition agreement that was reviewed by the Fed under the provisions of the Dodd-Frank Act. The Fed, under the Dodd-Frank Act, was required to weigh the systematic risks of the deal before giving it the regulatory nod.
Hence, the Fed held three public hearings on the proposed acquisition during September-October 2011. The Fed had also extended the period for public comment on the abovementioned agreement.
Reasons for the ‘YES’
The Fed thoroughly analyzed the COF-ING Direct deal and scrutinized whether the proposed agreement would benefit the public at large with better efficiency, increased competition as well as greater convenience. These benefits should outweigh the adverse affects that include unfair competition, unstable banking practices, conflicts of interest and risk to the stability of the U.S. financial system.
The Fed also took into consideration various factors including complexity and size of both the companies, their regulatory capital ratios before and after the completion of the agreement, asset quality and inter-relation between the companies and the economy as a whole. Furthermore, the Fed also considered the other pending COF agreement relating to the acquisition of HSBC Holdings Plc’s U.S. credit card unit.
The Fed stated that COF has a record of successfully integrating large companies with its business operations. Since 2005, the company has integrated three banks – Hibernia Corporation in 2005, North Fork Bancorporation in 2006, and Chevy Chase Bank in 2009.
Moreover, while building the case in its favor, COF guaranteed $180 billion in community loans and investments over the next 10 years. This includes $28.5 billion worth of home lending to borrowers, who are characterized as low-and moderate-income group. In addition to all these, the company announced its plans to hire workers in Delaware.
However, the approval came with a set of conditions. The Fed has asked COF to restructure its risk-management framework and lending, and debt-collection practices. The company has 90 days to fulfill these conditions.
Get the full analysis of all these stocks by going to https://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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