The Zacks Analyst Blog Highlights: Illinois Tool Works, Cooper Industries, General Electric, Manitowoc and UnitedHealth Group
CHICAGO, Nov. 2, 2012 /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 Illinois Tool Works Inc. (NYSE: ITW), Cooper Industries plc (NYSE: CBE), General Electric Co. (NYSE: GE), Manitowoc Co. Inc. (NYSE: MTW) and UnitedHealth Group Inc. (NYSE: UNH).
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Here are highlights from Thursday's Analyst Blog:
ITW Divests Decorative Surfaces
On October 31, Industrial tool-maker Illinois Tool Works Inc. (NYSE: ITW) announced completion of the divestment of 51% stake in its Decorative Surfaces division to a fund managed by Clayton, Dubilier & Rice, LLC (CD&R). The transaction was earlier announced on August 16, 2012. The stock gained momentum and ended 1.75% higher than the previous day's closing price.
The transaction involved Wilsonart and related international businesses which, following the divestment, will form a new company named Wilsonart International Holdings, LLC. As agreed upon, Illinois Tools will be getting roughly $1.05 billion in cash and a 49% stake in Wilsonart International Holdings. Cash proceeds from sales will be utilized majorly for repurchasing common shares of the company.
The divestment will help Illinois Tool allocate free resources to its core businesses and also earn from its stake in the laminate business. Starting the fourth quarter 2012, the company's equity interest (49%) in the decorative surfaces business will be reported using equity method of accounting.
Decorative Surfaces division produces decorative surfacing material for furniture, office and retail space, countertops, flooring and other applications. It mainly serves the commercial construction (55%), renovation construction (30%) and residential construction (14%) end markets. The division reported revenues of $1.1 billion in 2011.
The Zacks Consensus Estimate for the fourth quarter 2012 stand at 92 cents, up 2.0% year over year. Estimates for 2012 and 2013 are at $4.10 and $4.41, representing year-over-year growth of 0.5% and 7.5%, respectively.
Illinois Tool Works is one of the leading manufacturers of industrial products and equipment operating through 800 business units in 57 countries. We currently maintain a Neutral recommendation on the company. The stock also bears a Zacks #3 Rank, implying a short-term Hold rating. Its prime competitor Cooper Industries plc (NYSE: CBE), General Electric Co. (NYSE: GE), and Manitowoc Co. Inc. (NYSE: MTW) also bear Zacks #3 (Hold) Rank.
UNH Partly Completes Amil's Buy
After receiving approval from ANS – the Brazilian Healthcare Regulatory Agency – and purchasing approximately 60% of Brazil-based Amil Participações S.A.'s outstanding shares from controlling shareholders and management, UnitedHealth Group Inc. (NYSE: UNH) completed first lap of the latter's buyout. UnitedHealth had announced the purchase of Amil earlier in October this year.
UnitedHealth expects to complete the second part of the transaction, which involves buying approximately 30% of the Amil's shares from public shareholders, by the first half of 2013.
The acquisition is a strategic step by the company to expand its international business. The purchase will cost approximately $4.9 billion in cash.
Amil Participações S.A. is the biggest Latin America healthcare company of Brazil, serving more than 5 million people via its vast delivery network of 22 hospitals and approximately 50 clinics. Its care network includes 44,000 doctors, 3,300 hospitals, nearly 11,000 outpatient clinics and 12,000 ancillary service facilities.
Although the acquisition will slightly be accretive to UnitedHealth's 2013 earnings, it will increase the company's financial leverage ratio to around 36%. However, this ratio will eventually trend downwards.
Upon the closure of the buyout, Amil's founder, Dr. Edson Bueno, will remain its chairman and CEO. He will also take place in UnitedHealth Group's Board of Directors.
In addition to this, the veterans in Amil's leadership team will retain their positions. Further, Amil's CEO will invest nearly $470 million in shares of UnitedHealth Group and will hold the shares for five years.
This big acquisition marks a strategic move by UnitedHealth, indicating aggressive international expansion at a time when growth in the domestic markets is facing pressures from the new regulations.
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