The Zacks Analyst Blog Highlights:Computer Sciences, Equifax, Accenture, Hewlett-Packard and Banner
CHICAGO, Dec. 5, 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 Computer Sciences Corporation (NYSE: CSC), Equifax Inc. (NYSE: EFX), Accenture plc (NYSE: ACN), Hewlett-Packard Company (NYSE: HPQ) and Banner Corporation (Nasdaq: BANR).
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Here are highlights from Tuesday's Analyst Blog:
CSC to Sell Credit Service Business
Computer Sciences Corporation (NYSE: CSC) is streamlining its business operations. In order to focus on its core offerings, CSC has agreed to sell its credit service business to Equifax Inc. (NYSE: EFX) for $1 billion. The business will generate $230 million in revenue and 40 cents in earnings this fiscal year.
After deducting tax, CSC said it expects to have a total inflow of $750 million to $800 million. From this, the company plans to use $300 million to $400 million for share buyback, around $300 million to $400 million in its pension plans and the rest for general corporate purposes.
Previously, CSC had signed a business agreement with Equifax, under which it exchanged credit reports. At the same time, Equifax acquired an option to acquire its credit rating business by August 1, 2013.
At times, companies do divest certain business units as a strategy to use the capital in other lucrative businesses. These divestments do not always need the shareholders approval and can be carried out with the consent of the company's management.
We believe that investors would find the deal to be beneficial. The market capitalization of the company increased to almost $200 million, as the news of the cash inflow of $1 billion issued by the company yesterday exceeded expectation. Prudent usage of this cash will help the company to bolster its business.
This is a very effective move by CSC, as the company is partially affected by the reduction in government orders coupled with reduced business in the financial segment. Also, demand for technology software and services are picking up in emerging economies.
Despite considerable exposure to Europe, strained federal budgets and stiff competition from Accenture plc (NYSE: ACN) and Hewlett-Packard Company (NYSE: HPQ), CSC retains a Zacks Rank #1 (Strong Buy).
Banner Corp.: A Strong Buy
Rising earnings estimates on the back of strong third quarter 2012 results – including a 68.1% earnings surprise – helped Banner Corporation (Nasdaq: BANR) achieve a Zacks #1 Rank (Strong Buy) on December 1. Moreover, this commercial and retail banking service provider has delivered positive earnings surprises in eight straight quarters with an average beat of 122.4%.
With a solid year-to-date return of 73.0%, long-term expected earnings growth rate of 7.7% and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.
The Rank Driver
Better-than-expected third quarter earnings, and factors such as strong credit quality and capital ratios are the primary rank drivers for this stock.
Banner Corporation reported its third quarter results on October 24 with earnings per share of 79 cents, substantially beating the Zacks Consensus Estimate of 47 cents by 68.1% and year-ago earnings of 24 cents by 229.2%. Strong results for the quarter were primarily aided by higher net interest and other operating income, lower other operating expenses and reduced provision for loan losses.
Net interest income, which increased 3.7% to $39.7 million from $38.3 million in the year-ago quarter, was a positive for the quarter. Moreover, Net interest margin expanded 12 basis points (bps) on a year-over-year basis to 4.22%.
Moreover, other operating income jumped 13.6% to $11.7 million year over year from $10.3 million. Total other expense decreased 18.5% from the year-ago period to $33.4 million. Provision for loan losses plummeted 40.0% from the year-ago quarter to $3.0 million.
Banner's credit quality continued to improve in the third quarter of 2012 as well. Nonperforming assets were 1.38% of total assets, down 215 bps from 3.53% as of September 30, 2011. Net charge-offs for the quarter were $4.4 million compared with $10.9 million in the year-ago quarter.
As of September 30, 2012, Banner Corporation's total risk-based capital ratio was 19.01%, Tier 1 risk-based capital ratio was 17.75% and Tier 1 leverage ratio was 14.29%.
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