The Zacks Analyst Blog Highlights: Ruby Tuesday, Darden Restaurants, Brinker International, General Motors and Ace
CHICAGO, Nov. 27, 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 Ruby Tuesday Inc. (NYSE: RT), Darden Restaurants Inc. (NYSE: DRI), Brinker International Inc. (NYSE: EAT), General Motors Co. (NYSE: GM) and Ace Ltd. (NYSE: ACE).
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Here are highlights from Monday's Analyst Blog:
Ruby Tuesday Hires CEO from Darden
Ruby Tuesday Inc.'s (NYSE: RT) search for a competent chief executive officer (CEO) has finally come to an end. Recently, the company revealed that it has appointed JJ Buettgen for the position of CEO and president, effective December 1, 2012. Moreover, Mathew Drapkin, previously the Lead Director, has now been assigned as Chairman of the Board.
The management churn came in the wake of the founder, chairman, president and CEO Sandy Beall's resignation in June this year. Since then, Knoxville, Tennessee-based Ruby Tuesday was on an extensive lookout for a suitable replacement. During this session of leadership changes, Beall continued to assume all three aforesaid positions to ensure a smooth transition.
Sandy Beall is retiring after running the Tennessee-based company for 40 years. Under his leadership, the company achieved new heights in terms of overall performance and profitability, implementation of strategies, and organic as well as inorganic expansion. He opened the first Ruby Tuesday outlet in Knoxville, Tennessee in the year 1972.
The newly appointed CEO has donned many important roles in his illustrious career. Before signing in for Ruby Tuesday, Buettgen held the posts of senior vice president and chief marketing officer at Darden Restaurants Inc. (NYSE: DRI) – a renowned full-service restaurant operating company with a multi-brand portfolio of more than 2,000 casual dining eateries and combined revenues of more than $2,000 million.
Prior to that, Buettgen worked as senior vice president of business development for Darden and as president for Smokey Bones Barbeque & Grill. Buettgen was also associated with the companies like Disneyland Resorts and Brinker International Inc. (NYSE: EAT), among others in his 20-year career.
With his vast know-how in the restaurant and consumer industries, Buettgen can easily be tagged as a veteran in these sectors. Furthermore, with his affluent knowledge in business development and brand building, we expect him to provide meaningful support to Ruby Tuesday.
While we prefer the company's future strategies including improving margins by lowering costs, driving same-restaurant sales through several value offerings, focusing on low capital growth opportunities and returning excess cash to shareholders, its failure to meet the Zacks Consensus Estimates in the first quarter of 2013 concerns us a bit. In addition, the company's sales growth has also been sluggish and needs further impetus to surge ahead.
Hence, the new role for Buettgen invests him with additional responsibility in a sluggish business environment. Ruby Tuesday currently retains a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. We are also maintaining our long-term 'Neutral' recommendation on the stock.
GM to Acquire Ally's non-US Assets
General Motors Co. (NYSE: GM) set to expand its geographical presence in a strategic deal with Ally Financial Inc., whereby the former will buy all of the latter's auto-finance business operations in Latin America and Europe along with a 40% stake in China.
The hefty deal is valued at $4.2 billion, a premium of $550 million to the tangible book value of $3.7 billion. Subject to regulatory approval and other customary conditions, the deal is expected to culminate in phases in 2013.
Ally Financial has been facing the brunt of the economic turmoil, as a result of which it is 74% owned by the US government and is indebted to it by $17.2 billion. Hence, the company had disclosed its intention of divesting two-third of its business in May this year in order to shore up its repayment process. However, the decision to abandon its China operations has been taken later.
Additionally, Ally Financial has agreed to sell its Canadian unit to Royal Bank of Canada for $4.1 billion in cash. It also inked a deal with Ace Ltd. (NYSE: ACE) to sell its Mexican insurance business for $865 million. Nevertheless, all the deals have been valued at a substantial premium, which again justifies the company's divestments.
On the other hand, the current deal suits General Motors' plan of international expansion. Currently, North America has been the company's primary revenue generating zone, while the new locations added by this purchase will cover 80% of the company's revenue from global markets. The addition of Ally Financial's assets will not only help General Motor to diversify into international markets, but will also boost its competitive and operating leverage, thereby helping the company regain its historical superior position. The acquisition will also improve General Motors' own financing arm, balancing it well with external bank partners.
The new acquisitions are also part of General Motors' long-term growth strategy of focusing on emerging markets, particularly Brazil, China and India, to recoup its global sales by increasing its capacity investment to meet growing demand. Now that the worse is behind, based on stable macroeconomic conditions and pent-up demand in the automotive sector, General Motors expects to launch 23 new vehicles in Europe along with more products in its global markets.
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