Zacks Bull and Bear of the Day Highlights: Simon Property Group, Baker Hughes, Gap, Ross Stores and Abercrombie & Fitch
CHICAGO, Jan. 23, 2013 /PRNewswire/ -- Zacks Equity Research highlights Simon Property Group (NYSE: SPG) as the Bull of the Day and Baker Hughes Inc. (NYSE: BHI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Gap Inc. (NYSE: GPS), Ross Stores, Inc. (Nasdaq: ROST) and Abercrombie & Fitch Company (NYSE: ANF).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Simon Property Group (NYSE: SPG) is scheduled to release its fourth quarter 2012 earnings on February 4, before the market opens. The company's third quarter 2012 results surpassed the Zacks Consensus Estimate, thanks to an increase in average rent and occupancy.
Simon Property boasts a strong portfolio of assets and enjoys competitive advantage through product and geographical diversification. The recent acquisitions and partnerships further strengthen the company's presence in the core U.S. markets. Additionally, the company has a strong balance sheet with adequate liquidity.
The company does have a significant development pipeline, which increases operational risks in the current credit-constrained market. Nevertheless, we maintain our long-term Outperform recommendation on the stock, driven by its strong fundamentals.
We are downgrading our recommendation on Baker Hughes Inc. (NYSE: BHI) to Underperform from Neutral ahead of its fourth quarter results. The company's third-quarter 2012 results suffered from the discrepancies in the North American Pressure Pumping business. Moreover, weak activity in several important markets of Baker Hughes resulted in an unfavorable mix.
The company expects its North American revenue as well as profitability to be below expectations during the fourth quarter due to a slowdown in drilling activity in North America and lingering weakness in its pressure pumping business. Baker also expects its overseas operations to be hurt by a weak rig count in Brazil and Columbia, as well as delays in the North Sea and Iraq operations.
Given these headwinds, we expect the shares of Baker Hughes to be under pressure in the near future Our $40 price objective is based on the 2013 P/E multiple of 12.7x. Our target multiples are well within the historical trading range for the stock.
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Gap Strategies Paying Off
With its relentless endeavors on turnaround strategies, Gap Inc. (NYSE: GPS) is once again coming back on the growth track. We believe that the company's efforts have paid off well, which is evident from its improving comps and sales performance in the recent months.
During the period Feb to Dec 2012, Gap registered improvements in comparable sales in each month, except April. In the same period, comps growth touched a low of negative 2% and a high of positive 10%, thereby recording an average growth of approximately 4.4%. In the first eleven months of fiscal 2012, comps increased 4% in February, 8% in March, 2% in May, 10% in July, 9% in August, 6% in September, 4% in October, 3% in November and 5% in December, while it remained flat in June and declined 2% in April.
Monthly sales data for Gap also showed a decent performance. Between Feb and Dec 2012, the company registered a minimum year-over-year flat sales growth and a maximum growth of 12%, reflecting an average growth of approximately 6% for the period. The company recorded sales growth of 6% in February, 10% in March, flat in April, 4% in May, 2.2% in June, 12% in July, 9.1% in August, 7.4% in September, 8% in October, 3.4% in November and 5% in December.
However, one of the company's peers, Ross Stores, Inc.'s (Nasdaq: ROST) comps and net sales growth for the eleven-month period were higher. The company registered average comps and net sales increase of 7% and 11%, respectively for the period.
Turnaround Strategies Taken to Boost Top Line
As part of its strategy, the company is planning to deliberately reduce its Gap North America store count to 950 by the end of fiscal 2013. Contrary to this, the company is aggressively expanding its international business through both company-operated and franchise stores, which its peers like Abercrombie & Fitch Company (NYSE: ANF) are following. Gap intends to generate 30% of total sales from overseas operations and online business by 2013.
To achieve this, Gap has opened stores in China, Italy and Australia, and has launched the e-commerce business in more than 90 markets. We expect that the moves will further strengthen its top and bottom lines. Further, we believe that the company's recent acquisition of INTERMIX Holdco Inc. will not only help Gap in expanding its brand offerings, but will also regain its fashion leadership status.
Gap currently holds a Zacks Rank #2 (Buy).
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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