The Zacks Analyst Blog Highlights: Abercrombie & Fitch, Nokia, Microsoft, Apple and Google

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Aug 30, 2013, 09:30 ET

CHICAGO, Aug. 30, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Abercrombie & Fitch Co. (NYSE:ANF-Free Report), Nokia Corporation (NYSE:NOK-Free Report), Microsoft Corp. (Nasdaq:MSFT-Free Report), Apple Inc. (Nasdaq:AAPL-Free Report) and Google Inc. (Nasdaq:GOOG-Free Report).

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Here are highlights from Thursday's Analyst Blog:

A&F Downgraded to Underperform

On Aug 28, we downgraded our recommendation on specialty retailer Abercrombie & Fitch Co. (NYSE:ANF-Free Report) to Underperform based on the company's dismal second-quarter fiscal 2013 results.

Why the Downgrade?

Estimates for Abercrombie have been declining ever since it reported second-quarter results on Aug 22. Abercrombie's revenues as well as earnings per share of $945.7 million and 16 cents missed the Zacks Consensus Estimates of $998 million and 28 cents, respectively.

Following the results, the Zacks Consensus Estimates for fiscal 2013 and 2014 fell 30.8% and 18.7% to $2.22 and $3.22, respectively. With the Zacks Consensus Estimates for both 2013 and 2014 going down, the company now has a Zacks Rank #5 (Strong Sell).

Causes of Concern

Negative comparable store sales remain a major concern for Abercrombie. The company's comps performance depicts a downward trend, with disappointing results for the trailing 6 quarters. Moreover, Abercrombie is expecting comps to fall marginally in fiscal 2013.

Based on assumption of lower comps in the third quarter, Abercrombie projected third-quarter 2013 earnings guidance range to be 40-45 cents per share. Given the aforementioned facts, we remain apprehensive about the company's future comps performance.

Moreover, there are challenges on the macroeconomic front. The apparel retail industry is consumer-driven and hence, very sensitive to the health of the economy. Spending on apparel and accessories is heavily dependent on the personal disposable income of consumers. The current macroeconomic challenges, such as high household debt and unemployment may restrain consumers' spending on these items.

Given the second-quarter performance and Abercrombie's conservative outlook, we do not see any significant catalyst that could drive the shares in the near term. With the company failing to provide any guidance beyond the third quarter due to lower traffic, the Zacks Consensus Estimate for the third quarter has fallen 55.7% to 47 cents.

Nokia to Offer New Feature Phone

In order to enhance its feature phone range, Finnish handset manufacturer, Nokia Corporation (NYSE:NOK-Free Report) has launched a high-end feature phone, Nokia 515. It is priced at $150 and is available in both single and dual-SIM modes.

Nokia 515 comes with a 5 MP camera and LED flash while its screen is protected by a scratch-resistant gorilla glass. The handset flaunts an aluminum coated chassis of 11 mm thickness. It also features 256MB internal storage, 32GB microSD support, Bluetooth 3.0, HD Voice and USB tethering. Next month, Nokia expects to ship the device to Russia, Germany, Switzerland and Poland.

In the recently concluded second quarter of fiscal 2013, Nokia sold 53.7 million feature phones (including 4.3 million Asha full-touch phones). According to Gartner Research firm, Nokia came a close second to Samsung in the feature phone market despite its declining smartphone business. The company had 14% of the feature phone market share at the end of the last quarter.

Despite launching Microsoft Corp.'s (Nasdaq:MSFT-Free Report) Windows-based Lumia flagship phones, Nokia is still struggling in the smartphone business. In the second quarter of fiscal 2013, the company sold nearly 7.4 million Lumia smartphones as compared to Samsung's 71 million and Apple Inc.'s (Nasdaq:AAPL-Free Report) 31 million smartphones. Moreover, Microsoft's Windows operating system holds 3.3% market share as compared to 79% and 14.2% owned by Google Inc.'s (Nasdaq:GOOG-Free Report) Android and Apple's iOS mobile platform, respectively.

The feature phone business is doing quite well in emerging nations like India, with the Asha series being a huge hit. So, the launch of Nokia 515 will certainly boost Nokia's feature phone business. However, Nokia 515 is priced quite high, which might hamper sales.

Nokia currently carries a Zacks Rank #3 (Hold).

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