For Immediate Release
Chicago, IL – March 14, 2012 – Zacks Equity Research highlights: Genuine Parts Co. (GPC - Free Report) as the Bull of the Day and AGL Resources Inc. as the Bear of the Day. In addition, Zacks Equity Research provides analysis on RadioShack Corp. , Verizon (VZ - Free Report) and Sprint Nextel Corp. (S - Free Report) .
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:
Genuine Parts Co. (GPC - Free Report) saw a 15% increase in profit to $0.86 per share in the fourth quarter of 2011, surpassing the Zacks Consensus Estimate by $0.03. Meanwhile, total sales increased 7% to $3.0 billion, which was in line with the Zacks Consensus Estimate. For full year 2011, the company reported a 19% increase in profit to $565 million or $3.59 per share, beating the Zacks Consensus Estimate by $0.02.
Genuine Parts is a leading distributor of automotive and industrial replacement parts, office products and electrical/electronic materials in the U.S., Canada and Mexico. The company has undertaken various initiatives to boost sales and earnings, such as product line expansion, penetration into new markets and acquisitions.
Therefore, we are maintaining our Outperform recommendation on the stock with a target price of $77.00. This target price, 19.5x our 2012 EPS estimate, reflects our Outperform recommendation.
Bear of the Day:
We are initiating coverage on AGL Resources Inc. with an Underperform recommendation and a target price of $39. We expect shareholder sentiment towards the company to remain lukewarm, considering its investment in higher-risk unregulated operations, ongoing regulatory uncertainties and the challenging economic environment.
AGL had warned that its earnings will suffer in 2011 due to lower results at the wholesale segment. Additionally, the inclusion of the shipping operations (post Nicor acquisition) has left AGL with a weak business, thereby heightening its risk profile.
Considering these factors, we see little reason for investors to own the stock and, therefore, we initiate the company with an Underperform recommendation. Our $39 price objective reflects a 2012 P/E multiple of 12.5x.
Latest Posts on the Zacks Analyst Blog:
RadioShack to Underperform
RadioShack Corp. difficulties persist as the company continues with its disappointing performance. Precipitous decline of the signature and consumer electronics retail businesses, adverse product-mix toward low-margin devices, and a volatile macro-economic scenario in the U.S. are taking a toll on the company’s financials.
Weaker-than-expected growth of the mobile platform and growing marketing expenses are other near-term concerns. The company provided a tepid outlook for fiscal 2012.
In the previous quarter, the U.S. RadioShack company-operated store segment, which is the prime contributor of total revenue, was down 1.4% year over year. We believe RadioShack lost its market leadership as a high-margin device retailer and is eventually turning out to be a low-cost low-margin device supplier. We do not find any immediate growth catalyst and therefore downgrade our recommendation to Underperform on RadioShack.
RadioShack is facing a weak bottom line due to costs associated with transition from an adverse product mix toward low-margin smartphones, the T-Mobile to Verizon (VZ - Free Report) partnership, and underperformance of its businesses with Sprint Nextel Corp. (S - Free Report) . Although management remains confident of achieving future business from Verizon, it believes that Verizon business needs more consumer awareness and the company will spend increasing amount for marketing. We expect the wireless division revenue to remain almost same in 2012.
The prolonged macro-economic fluctuations in the U.S. may turn out to be the biggest threat for the consumer electronics retail industry. RadioShack expects its net income to decline further in 2012. In November 2011, management announced a $200 million share repurchase authorization that the company had intended to complete within 12 months. However, after repurchasing 930,000 shares for $11.9 million in the previous quarter, RadioShack suspended it share buy-back program.
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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