For Immediate Release
Chicago, IL – July 31, 2012 – Zacks Equity Research highlights Ferrellgas Partners L.P. (FGP - Analyst Report) as the Bull of the Day and GlaxoSmithKline, plc (GSK - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Equinix Inc. (EQIX - Analyst Report) , AT&T Inc. (T - Analyst Report) and Verizon Inc. (VZ - Analyst 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:
We have upgraded our recommendation on Ferrellgas Partners L.P. (FGP - Analyst Report) to Outperform from Neutral, taking into consideration its strong acquisition strategy, lower cost of operation, debt minimization efforts and financial flexibility. The partnership has also increased its unitholder value through payment of cash distribution.
In addition, a warmer-than-expected summer is likely to improve the partnership's sales volume, though we are skeptical about the seasonal variance in the demand for propane and a highly competitive propane distribution business environment. Over the long run, however, we expect the partnership to outperform its peers given its focus on unitholders and cost minimization efforts.
The trailing 12-month EV/EBITDA multiple of the partnership is 18.4x, which is higher than the industry average of 5.8x. Our $24 target price reflects a P/CF multiple of 25.36 based on 2012 EPU (earnings per unit).
Bear of the Day:
GlaxoSmithKline, plc's (GSK - Analyst Report) second quarter earnings of $0.79 per ADS were below the Zacks Consensus Estimate of $0.84. Earnings fell 2.5% year over year. Revenues fell 7.3% y/y to $10.2 billion, missing the Zacks Consensus Estimate of $10.4 billion.
Glaxo expects 2012 revenues to remain flat y/y (at CER). Earlier, Glaxo was expecting revenues to grow from 2011 levels. Guidance was lowered due to EU pricing pressure. A major part of Glaxo's revenues will be exposed to generic competition as multiple drugs are scheduled to lose exclusivity in the next few years. We expect the company's top line as well as gross margins to remain under pressure in the coming quarters.
In addition to generic competition, US health care reform and EU pricing pressure will continue to affect sales. Thus, we maintain our Underperform recommendation on Glaxo, which carries a Zacks #4 Rank (short-term Sell rating).
Latest Posts on the Zacks Analyst Blog:
Equinix Expands Brazil Footprint
Leading data center solutions provider Equinix Inc. (EQIX - Analyst Report) announced its intention to set up a new International Business Exchange data center (RJ2) in Rio de Janeiro, Brazil. The estimated cost would be roughly $20.0 million for the first phase of the facility.
The first phase is expected to be completed by 2013, after which the facility will accommodate 320 cabinets. The subsequent phases will allow the setting up of 850 additional cabinets.
The RJ2 data center will be developed under the supervision of ALOG Data Centers of Brazil, S.A. Equinix took over a 90.0% stake in ALOG in April 2011 for $127.0 million. The purpose of the acquisition was to enable Equinix to grab a bigger share of the growing data center market in Brazil and Lain America.
Apart from the new data center, Equinix also announced plans to proceed with the second phase of another data center (SP2) in Sao Paulo. Development costs are estimated to be $14.0 million, with the extension expected to be operational by the beginning of 2013. The facility will host 350 cabinets.
Equinix’s data center platform has been popular in the financial services, networking and content management industries. Equinix has taken advantage of the fact that many firms in these industries are setting up their bases in South America. Seeing the growth prospects in the region, particularly in Brazil, we believe Equinix will be able to meet the growing demand and secure a solid revenue stream.
Equinix boasts a presence across various geographical regions and is increasingly becoming popular among major players in the tech industry for data management. The company’s worldwide presence has resulted in high network density with a vertically focused approach, which will continue to support demand.
The company has delivered decent second quarter 2012 results with EPS exceeding the company’s expectation. Moreover, revenue improved substantially on a year-over-year basis on improved colocation, interconnection and managed infrastructure services. Guidance for the third quarter and fiscal 2012 was encouraging.
However, a heightened debt situation, competitive threats from the likes of AT&T Inc. (T - Analyst Report) and Verizon Inc. (VZ - Analyst Report) and European exposure keeps us on the sidelines.
Equinix carries a Zacks #3 Rank, implying a short-term Hold rating.
Get the full analysis of all these stocks by going to https://at.zacks.com/?id=2649.
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