The Zacks Analyst Blog Highlights: Covidien, Central Garden & Pet, Wal-Mart Stores, Home Depot and Jarden
CHICAGO, April 25, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Covidien plc (NYSE: COV), Central Garden & Pet Company (Nasdaq: CENT), Wal-Mart Stores Inc. (NYSE: WMT), The Home Depot, Inc. (NYSE: HD) and Jarden Corp. (NYSE: JAH).
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Here are highlights from Wednesday's Analyst Blog:
Covidien Likely to Beat Estimates?
We expect major healthcare company, Covidien plc (NYSE: COV) to beat expectations when it reports second-quarter fiscal 2013 results on Apr 26.
Why a Likely Positive Surprise? Our proven model shows that Covidien is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +0.91%. This is a very meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Covidien has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Covidien's Zacks Rank #3 (Hold) and +0.91% ESP makes us very confident in looking for a positive earnings beat on Apr 26.
What is Driving the Better Than Expected Earnings?
A host of factors such as solid top-line growth on the back of acquisitions (focused on emerging markets) and new offerings along with a share repurchase program are expected to lead to a positive earnings surprise in the upcoming quarter.
The positive trend is seen in the trailing four-quarter average surprise of 2.16%, which was greatly helped by the 3.77% surprise in the last-reported quarter. This was mainly due to an efficient management team capable of delivering solid results despite a difficult Medtech space.
Central Garden Upgraded to Neutral
upgraded consumer goods company, Central Garden & Pet Company (Nasdaq: CENT) to Neutral based on improved prospects owing to its strategic initiatives. Central Garden, which focuses on lawn & garden and pet products, carries a Zacks Rank #3 (Hold).
Why the Upgrade?
Central Garden & Pet's primary focus is on streamlining its cost structure, increasing operating efficiencies in order to improve its margins and concentrating on revenue growth through marketing and brand-building initiatives. The company's long-term target is to attain growth of at least 10% in the top line, and achieve operating margins in the range of 10% – 15%. The company also targets $40 million in cumulative cost savings as it exits fiscal 2013.
Alongside, being the leading producer of garden and pet supplies products in the U.S. and with a diversified portfolio of brands, Central Garden & Pet developed a healthy commercial relationship with giant retailers, such as Wal-Mart Stores Inc. (NYSE: WMT) and The Home Depot, Inc. (NYSE: HD). This provides a significant upside potential for the company.
However, the discretionary spending environment continues to remain sluggish amid high unemployment levels and tight credit markets. This is a looming concern for the company as a significant portion of its product portfolio consists of premium offerings.
Other Stock to Consider
Besides Central Garden, the other stock in the consumer goods sector worth considering includes Jarden Corp. (NYSE: JAH), which holds a Zacks Rank #1 (Strong Buy) and is expected to continue with its upbeat performance.
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