CHICAGO, Nov. 2, 2012 /PRNewswire/ -- Zacks Equity Research highlights CNO Financial Group (NYSE: CNO) as the Bull of the Day and Nabors Industries Ltd. (NYSE: NBR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo & Company (NYSE: WFC), JPMorgan Chase & Co. (NYSE: JPM) and Citigroup, Inc. (NYSE: C).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
CNO Financial Group's (NYSE: CNO) third quarter earnings surpassed the Zacks Consensus Estimate and the year-ago numbers on the back of continued favorable trends in annuity spreads, annuity persistency and improving benefit ratios, and better investment results in the corporate segment. Besides enhancing shareholder value, the company remains focused on investing in its core business.
The latest recapitalization plan should improve the capital structure and debt maturity profile. It is also expected to augment earnings per share and ROE. Improved credit ratings, strong investment portfolio and declining expenses are the other positives. Although underwriting and pricing remain primary concerns, increasing new business volume, along with cost containment measures are expected to support the bottom line in the long run.
We retain our Outperform recommendation. Our six-month target price of $11.00 equates to 14.5x our earnings estimate for 2012. Given the expected annual cash dividend of $0.08, this price target implies an expected total return of 15.4% over that period.
Based upon the number of near-term challenges, we are maintaining our Underperform recommendation on Nabors Industries Ltd. (NYSE: NBR) shares. The land-drilling contractor is facing headwinds in the pressure pumping market on the back of collapsing prices and lower utilization. The recent weakness in the North American onshore rig count has also been a negative.
As usual, we remain concerned about weak natural gas fundamentals, which are likely to limit the company's ability to generate positive earnings surprises. Nabors' fairly debt-heavy balance sheet also remains an issue.
Considering these factors, we see Nabors as a risky bet from which ordinary investors should exit or avoid. This is corroborated by our $12 price objective, which is based on a 2013 P/E multiple of 7.8X.
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Wells Fargo in Expansion Mode
While the sluggish macroeconomic environment has been negatively impacting the investment banking business, Wells Fargo & Company (NYSE: WFC) is all set to bolster in that area. The company aims to expand its investment banking and capital markets business under its Wells Fargo Securities division.
Situated in Charlotte, Wells Fargo Securities is a relatively small unit. However, according to industry estimates, it has tremendous growth potential. The unit is anticipated to account for roughly 10% of the company's total revenue, up from about 5% presently. Other banking giants, such as JPMorgan Chase & Co. (NYSE: JPM) and Citigroup, Inc. (NYSE: C), garner roughly 20%–25% of their revenue from investment banking.
Management at Wells Fargo believes in establishing the company's investment-banking business in a way, which is different from that of its peers. Management plans to concentrate more on customers and will steer clear of the riskier measures.
Further, the company aims to focus more on services like underwriting of stocks and bonds as well as advising on mergers. Processing futures and swaps trades for investor will also be an area of operation.
The bank is focused on strengthening the futures clearing and execution business, since it is building a swaps clearing business required by new regulations. In August this year, Wells Fargo acquired Merlin. This led to Wells Fargo venturing into the business of providing trading, reporting and added services to hedge funds.
However, some investors are wary of Wells Fargo's foray into investment banking might prove costly for the company in the current situation. Further, the sluggish macroeconomic environment might pose headwinds.
We believe the recent regulatory upheavals are compelling the company to turn to investment banking to stimulate growth.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we also have a long-term Neutral recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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