Zacks Bull and Bear of the Day Highlights: Textron, Humana, Beam, Diageo and Brown-Forman
CHICAGO, Aug. 23, 2012 /PRNewswire/ -- Zacks Equity Research highlights Textron Inc (NYSE:TXT) as the Bull of the Day and Humana (NYSE:HUM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onBeam Inc. (NYSE:BEAM), Diageo plc (NYSE:DEO) and Brown-Forman Corporation (NYSE:BF.B).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Textron Inc (NYSE:TXT) was upgraded from Neutral to Outperform following a solid earnings report and positive earnings surprise. The beat was due to strong performance by the Bell division of the company and other operational improvements. The company is also lowering its risk profile through liquidation of non-captive finance receivables to focus more on its core manufacturing business.
Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components, and industrial tools. It is also a provider of solutions and services for aircraft, fastening systems, and industrial products and components.
Textron reported strong second quarter 2012 earnings of $0.58 per share versus $0.29 per share in the year ago quarter. The quarterly result also comfortably surpassed the Zacks Consensus Estimate of $0.44. Higher numbers for the company were due to strong performance at Bell, continued improvement at Cessna, complemented by good performance in the Industrial business.
We believe TXT can expand its multiple from here and thus upgraded our recommendation from Neutral to Outperform, indicating that the stock will perform better than the market. Our target price is $33.00 or 15.7x 2012 EPS, reflects this view.
Humana (NYSE:HUM) was recently downgraded from Neutral to Underperform. The downgrade comes as the company sharpens its focus on Medicare Advantage plans that increases its revenue dependency on one segment, rising expenditure, overhang of litigation charges and increasing competition in the industry.
Humana is one of the largest health care plan providers in the United States. Humana provides health insurance benefits under Health Maintenance Organization (HMO), Private Fee-For-Service (PFFS), and Preferred Provider Organization (PPO) plans.
Humana reported second quarter 2012 operating earnings per share of $2.34, beating the Zacks Consensus Estimate of $2.23 but falling short of the year-ago earnings of $2.59 per share. Our six month target price of $62.00 equates to an 8.7x multiple of our earnings estimate for 2012.
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Beam Plans to Redeem Preferred Stock
Headquartered in Deerfield,Beam Inc. (NYSE:BEAM) recently announced its plan to redeem $2.67 Convertible Preferred Stock of the holders of record as of November 15, 2012, on November 20, 2012. The $2.67 Convertible Preferred Stock was originally issued in 1979 and approximately 97% or more of the holders have converted their Preferred Stock into common stock.
The outstanding convertible preferred stock, as of November 15, 2012, will be redeemed at an aggregate price of $31.02 per share, including $0.52 per share as dividend.
Beam declared that after the redemption of shares, all the rights of the holders of preferred stock will cease to exist and no more dividend payment will accrue on such stock. The holders can only ask for the tender price of the redeemed shares.
Beam noticed that out of 5.5 million shares originally issued, only 145,948 shares are outstanding and it would be logical to eradicate these second-class shares. The company expects that this plan will have no impact on earnings.
Beam further anticipates that the remaining holders of the $2.67 Convertible Preferred Stock will wish to convert their preferred stock into common stock seeing the financial benefits of conversion. As a result, the company announced that the shares can be converted till November 15, 2012 at a conversion ratio of 8.411 shares of Beam common stock for every one share of $2.67 Convertible Preferred Stock.
The holders who convert their stock will receive Beam common stock with a market value of $491.29, assuming the market price at $58.41 per share on the date of conversion. The company will pay cash to compensate for a fractional share.
Beam, the Deerfield, Illinois-based spirits giant, engages in producing and selling branded distilled spirits products worldwide. Globally, the company generated 2011 sales of about $2.8 billion on volume of 34 million 9-liter cases.
Beam, which competes with Diageo plc (NYSE:DEO) and Brown-Forman Corporation (NYSE:BF.B), carries a Zacks #2 Rank, implying a short-term Buy rating on the stock. However, the company retains a long-term 'Neutral' recommendation.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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