Zacks Bull and Bear of the Day Highlights: Gap, HSBC Holdings, ToyotaMotor, General Motors and Ford Motor
CHICAGO, Dec. 27, 2012 /PRNewswire/ -- Zacks Equity Research highlights Gap Inc. (NYSE: GPS) as the Bull of the Day and HSBC Holdings (NYSE: HBC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Toyota Motor Corp. (NYSE: TM), General Motors Company (NYSE: GM) and Ford Motor Co. (NYSE: F).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Gap Inc.'s (NYSE: GPS) third-quarter 2012 earnings of $0.63 per share came in line with the Zacks Consensus Estimate, and surged 66% from the year-ago quarter on the back of increased sales along with improved margins and a lower share count. During the quarter, Gap's net sales increased 8.0% year over year to $3,864 million.
The solid quarterly performance prompted management to raise its fiscal 2012 earnings guidance range to $2.20-$2.25 per share from $1.95-$2.00 forecasted earlier. We believe that Gap's determined endeavors to keep itself on the growth trajectory have paid off amid a sluggish economic environment.
Moreover, the company is undertaking an international expansion strategy. The company, to counter the domestic market saturation, is aiming total sales of approximately 30% from its overseas operations and online business by 2013. Currently, we are maintaining our long-term Outperform recommendation on the stock.
We are downgrading our long-term recommendation on HSBC Holdings (NYSE: HBC) ADRs to Underperform to reflect the penalty to be paid to settle money-laundering charges and its credit ratings downgrade by Fitch. Moreover, the company's third quarter net income was significantly down from the year-ago period and included additional provision for various investigations faced by it.
Quarterly core results were adversely impacted by higher operating expenses. There are also concerns related to the impact of the Euro-zone crisis, weak revenue growth in its mature markets and regulatory restrictions.
Our six-month target price of $48.00 per ADR equates to about 11.1x the Zacks Consensus Estimate for 2012. This target price implies an expected negative total return of 10.0% over that period. This is consistent with our long-term Underperform recommendation on the ADRs.
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Toyota Penalized for Recall Again
The Transportation Department of U.S. again slapped a fine of $17.35 million on Toyota Motor Corp. (NYSE: TM) due to its late response regarding a defect in its vehicles to safety regulators as well as a late recall of those vehicles. According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner.
In May this year, National Highway Traffic Safety Administration (NHTSA) notified Toyota about "floor mat pedal entrapments" in some of its Lexus hybrid models. Manufacturers are legally obligated to notify the U.S. safety regulators within five business days once they come to know of a safety defect.
However, the automaker responded a month later stating that it is aware of 63 incidents related to the defect in the vehicles. Consequently, it announced a recall of 154,036 units of Lexus RX 350 and RX 450h luxury hybrid sports utility vehicles in June in order to fix the problem of loose floor mat that could force down the accelerator pedal.
The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to late recall of millions of defective vehicles. The past string of recalls has already tarnished Toyota's reputation, resulting in declining sales and lower vehicle resale value.
Since November 2009, the automaker has recalled about 20 million vehicles globally, surpassing all other automakers. The company also lost its No.1 position to General Motors Company (NYSE: GM) and Ford Motor Co. (NYSE: F) in terms of sales volumes in the U.S. due to the loss of reputation as well as negative impact from natural disasters in Japan and Thailand in 2011.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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