Zacks Bull and Bear of the Day Highlights: SanDisk Corp., PetroChina Co. Ltd., Standard Motor Product Inc, Advance Auto Parts Inc. and O'Reilly Automotive Inc.
CHICAGO, Nov. 12, 2012 /PRNewswire/ -- Zacks Equity Research highlights SanDisk Corp. (NYSE: SNDK) as the Bull of the Day and PetroChina Co. Ltd.'s (NYSE: PTR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onStandard Motor Product Inc. (SMP), Advance Auto Parts Inc. (AAP) and O'Reilly Automotive Inc. (ORLY) .
Here is a synopsis of all five stocks:
SanDisk Corp. (SNDK) posted stellar third quarter results with both the bottom and top lines surpassing the Zacks Consensus Estimates. Though the results came below the year-ago levels, the sequential comps were better than expected. Revenues from OEMs and Retail have begun to recover.
Fourth quarter guidance was encouraging as well. Though lackluster PC sales, European issues, competition from Micron Technology Inc. and currency fluctuations could hurt the fundamentals a bit, we remain overtly positive on management's commentary of a turnaround story in the coming quarter and beyond, and strong secular demand for NAND flash.
We upgrade the stock to Outperform. We set a three-month target price of $52.00, representing a P/E multiple of approximately 28.7x our 2012 earnings per share estimate, which is on par with the industry average.
Following PetroChina Co. Ltd.'s (PTR) dismal third quarter showing, we are downgrading the Chinese energy giant to Underperform from Neutral. The Beijing-based integrated outfit recently posted weak quarterly results on the back of a challenging operating environment and persistent refining losses.
We also remain concerned by PetroChina's oil production growth prospects, considering its heavy exposure to significantly mature-producing areas. Other near-term headwinds include high-priced gas imports amid low domestic gas sale prices, policy uncertainty and an ambitious investment program.
Considering these factors, we see PetroChina as a risky bet that investors should exit. These factors are reflected in our downgrade of PetroChina ADRs to Underperform from Neutral. Our $123 price objective reflects a multiple of 5.5X the trailing twelve-month cash flow.
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Standard Motor Stays at Outperform
We are reiterating our Outperform recommendation on Standard Motor Product Inc. (SMP). The leading manufacturer and distributor of automotive replacement parts continue to benefit from strong brand recognition and a less cyclical auto and auto parts industry.
Standard Motor, in the third quarter of 2012, reported a 23.7% growth in adjusted earnings per share to 73 cents from 59 cents in the year-ago quarter, surpassing the Zacks Consensus Estimate by 9 cents. Profits surged 22.6% to $16.8 million from $13.7 million in the corresponding quarter last year.
Total revenues increased 16.8% year over year to $276 million, beating the Zacks Consensus Estimate of $258 million. The growth was attributable to the positive impact from the company's recent acquisitions and strong performance of its Temperature Control segment.
Standard Motor benefits from its strong brand recognition and wide customer base. The company distributes products under Standard, Blue Streak, BWD Automotive and Niehoff brand for its Engine Management division. Under Temperature Control division, it distributes products under Hayden and Four Seasons brand. It also distributes products under private brands like CARQUEST and NAPA Auto Parts for both the segments.
With greater focus on aftermarket, the company is not significantly exposed to the cyclical automotive industry. The company is expected to benefit from the rising demand of repair products due to the improved used vehicles market, increase in the number of automobiles on the road and rise in the average auto age to 10.8 years in the U.S.
In addition, the company will reap the benefits from the recent acquisition of BLD, Forecast Trading and Compressor Works. The acquisition will enhance its revenues and reduce the costs of products by further emphasizing on low cost regions.
However, Standard Motor faces challenges from concentrated customer base. The top five customers including Advance Auto Parts Inc. (AAP) and O'Reilly Automotive Inc. (ORLY) accounts for more than 10% of the company's sales. Any fluctuation may have an adverse effect on the company's results.
Our Outperform recommendation on the stock is backed by a Zacks #1 Rank, which translates into a short-term (1 to 3 months) Strong Buy rating.
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