Zacks Bull and Bear of the Day Highlights: Alkermes, Avnet, Apple, Magellan Midstream Partners and Occidental Petroleum
CHICAGO, Oct. 26, 2012 /PRNewswire/ -- Zacks Equity Research highlights Alkermes Plc (Nasdaq: ALKS) as the Bull of the Day and Avnet, Inc. (NYSE: AVT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple, Inc. (Nasdaq: AAPL), Magellan Midstream Partners L.P. (NYSE: MMP) and Occidental Petroleum Corporation (NYSE: OXY).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We are upgrading Alkermes Plc (Nasdaq: ALKS) to Outperform following the upwardly revised adjusted earnings guidance provided by the company for fiscal 2013. The guidance was boosted following the successful completion of the refinancing of Alkermes' previously outstanding senior secured bank debt.
Alkermes has been performing well since the purchase of Elan's EDT unit last year, thanks to the expanded portfolio. Moreover, the US approval of type II diabetes drug, Bydureon, is a major positive for Alkermes as the drug offers significant commercial potential. We are also pleased by the pipeline progress at Alkermes.
We believe that there is significant scope for stock price appreciation from current levels. Our price target of $24.00 is based on 6.1x our fiscal 2013 revenue estimate.
We are downgrading our recommendation on Avnet, Inc. (NYSE: AVT) from Neutral to Underperform. Earnings estimates for the company have declined significantly, as the weakened economy and currency fluctuation continues to hurt its businesses.
Moreover, the competitive strides in the industry may have a detrimental impact on the company. However, Avnet's diversified product ranges and notable acquisition strategy should have a positive impact on its businesses.
Mounting competition in the industry and negative foreign currency are also likely to be causes of concern moving forward. We have set a target price of $25.00 based on a P/E multiple of 8.9x to our 2013 EPS estimate.
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Apple Bitten Again
For the second straight fiscal 4th quarter earnings report -- and 3rd quarter of out the last 5 -- Apple, Inc. (Nasdaq: AAPL), the world's largest company, has come up short of expectations. Earnings per share of $8.67 missed the Zacks Consensus Estimate of $8.85 by 2.1%. Revenues came in at $36 billion, slightly above the $35.8 billion expected.
iPhones were the main positive for Apple's Q4: the company sold 26.9 million iPhones, easily beating the estimated 25.3 million. This figure was obviously boosted by the launch in late September of the iPhone 5, but is impressive nevertheless considering the iPhone 5 was only on the market for about a week and a half before the quarter ended.
iPads, Macs and iPods all disappointed sales expectations, with the iPad showing notable weakness: Apple sold "just" 14 million iPad tablets in the quarter; it was expected to have sold 15.8 million. Macs and iPods did not miss by much, but still contributed to the weaker quarter.
Analysts had been all over the place in predicting Apple's EPS numbers. Originally a consensus of $8.41 at the start of the quarter gave way to a big updraft to $8.95 roughly a month later. Just in the past 7 days we'd seen 3 upward estimate revisions for AAPL and 8 downward revisions. Stronger negative sentiment over the past 30 days can also be seen in Zacks consensus estimates for Q1-13 and fiscal 2013.
Obviously, no company is perfect, and no stock keeps going up to infinity. That said, Apple shares have come down around $100 since September, and with a less-than-thrilling earnings report, might we expect shares to come down more in the near term?
After-hours trading was halted for a time, but has since traded down another percentage point or so. This comes after a slight sell-off ahead of earnings, down 1.18% ($7.29) before the bell. Perhaps the call from Tim Cook & Co. can provide some positive sentiment going forward, but the fact remains Apple's had a bite taken out of it for the second quarter in a row.
Magellan Midstream Hike Payout
Petroleum storage and transportation firm Magellan Midstream Partners L.P. (NYSE: MMP) – a master limited partnership – increased its quarterly common stock distribution by 3% to 48.5 cents per unit ($1.94 per unit annualized). The new distribution will be paid on November 14, 2012 to shareholders of record as of November 6, 2012.
Magellan Midstream's latest payout hike marks the 42nd distribution increase from the time of its initial public offering (IPO) in 2001.
The strength of Magellan Midstream's business model reflects the partnership's commitment towards returning value to shareholders with its strong cash generation capabilities. Prior to this revision, the company had increased its quarterly distribution by 12% in July 2012.
Earlier this month, Magellan Midstream completed the split of its limited partner units in the ratio 2:1. The partnership's board of directors had given consent for the stock split in late August. Magellan Midstream started trading on post-split basis from October 16 onward.
We believe that the increase in distribution will boost investor confidence in the stock, thereby driving unit value.
Tulsa, Oklahoma-based Magellan Midstream owns and operates a diversified portfolio of energy infrastructure assets. The partnership conducts its operations in three segments: Petroleum Products Pipeline System, Petroleum Products Terminals and Ammonia Pipeline System.
Magellan Midstream, which recently announced plans to set up a 400-mile long oil transport pipeline joint venture with Los Angeles-based energy firm Occidental Petroleum Corporation (NYSE: OXY) – currently, retains a Zacks #2 Rank, which translates into a short-term Buy rating. We also maintain our long-term Outperform recommendation on the stock.
We like Magellan Midstream's low risk, stable business model and a proven track record of distribution growth. The partnership's high-quality and diversified midstream assets are also projected to generate stable and recurring revenues by way of long-term fee-based contracts.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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