The Zacks Analyst Blog Highlights: Boeing, Goldman Sachs Group, JPMorgan Chase, Molson Coors Brewing and Morgan Stanley

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Aug 08, 2013, 09:30 ET

CHICAGO, Aug. 8, 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 Boeing Company (NYSE:BA-Free Report), The Goldman Sachs Group, Inc. (NYSE:GS-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report), Molson Coors Brewing Company (NYSE:TAP-Free Report) and Morgan Stanley (NYSE:MS-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Boeing Continues to Outperform

On Aug 6, 2013, we maintained our long-term recommendation on The Boeing Company (NYSE:BA-Free Report) at Outperform.

Why the Reiteration?

Boeing, the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and one of the largest aerospace and defense contractors, recently reported stellar second quarter 2013 results, buoyed by solid performance across the company's businesses.

Boeing's adjusted second quarter 2013 earnings came in at $1.67 per share, beating the Zacks Consensus Estimate of $1.58 by 5.7% as well as the year-ago profit of $1.48 by 12.8%. The company's strong numbers came from solid operating performance fueled by higher aircraft deliveries and lower 787 Dreamliner production costs.

Boeing is also one of the major players in the defense business, which accounts for approximately half of its top line. Boeing's defense business stands out among its peers by virtue of its broadly diversified programs, strong order bookings and order backlog. At the end of the second quarter, backlog increased to a record $410.0 billion from $392.0 billion a year ago. Reported backlog included $40 billion of net orders during the quarter.

Although the company is faced with a number of technical glitches at its commercial aircraft business, its revenue and margins continue to remain solid driven by its broadly diversified programs, strong order bookings and order backlog.

If we set apart the second quarter earnings beat, the company also raised its top-line expectation for the year. Despite reporting flat revenues at $8.2 billion at Boeing Defense, Space & Security unit owing to the sequester, operating margin expanded 40 basis points to 9.5%.

Again, looking at its accounts, Boeing's strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. Its diversified revenue stream provides a steady earnings stream leading to strong cash flows. After maintaining a stable payout for three years during the economic downturn, this aerospace behemoth boosted the dividend at the end of 2011 and made another significant increase at 2012 end. As Boeing speeds up its deliveries for this year and beyond, it could utilize the cash to continuously boost the dividend.

Shares of Boeing are going for about 16.5x the estimate for 2013, which is a premium to its peer group average of 16.37x. Though it looks a bit pricey, the investors may be willing to pay more given its solid fundamentals and its long-term expected earnings growth of 10.4%.

Will Aluminum Storage Backfire on Banks?

Within a week, a second major lawsuit has been filed related to the hoarding of aluminum and the artificial rise in the metal's price. The Goldman Sachs Group, Inc. (NYSE:GS-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report), Switzerland-based Glencore Xstrata plc along with The London Metal Exchange (LME) – a subsidiary of Hong Kong Exchanges and Clearing Limited – were the accused companies.

The class-action lawsuit has been filed in the U.S. District Court in the Northern District of Florida. The main plaintiffs were Tallahassee, Florida-based aluminum user Master Screens Inc. and an individual, Daniel Price Bart.

The plaintiffs imputed the above-mentioned companies for indulging in anti-competitive and monopolistic actions in the warehousing business. The suit also accused these companies of hoarding aluminum at warehouses in the Detroit region in order to take advantage of inflating prices. Further, the lawsuit alleged that warehouse owners artificially increased waiting times to facilitate lease payment and raise metal prices.

Last week, a lawsuit with similar charges was filed against Goldman and LME in the U.S. District Court for the Eastern District of Michigan by Michigan-based aluminum extrusion company, Superior Extrusion Inc. The suit accused Goldman and LME of hoarding approximately 1.5 million tons of aluminum at warehouses in Detroit in order to take advantage of inflating prices.

These lawsuits come amid the Commodities Futures and Trading Commission initiating an inquiry on the role of banks in the metals warehousing operation. Notably, in July, the Federal Reserve stated that it was reviewing its 2003 decision of allowing banks to pursue trading in the physical commodity market.

Moreover, rising aluminum prices have hit various industries, including the beverage sector. Customers have to pay more for canned drinks each time the cost of the metal creeps up. Molson Coors Brewing Company (NYSE:TAP-Free Report) said that the inflated price of the metal was costing consumers around $3 billion annually.

Further, in the wake of heightened regulatory and political scrutiny of banks' ownership in the physical commodity business, JPMorgan announced its plan to exit such operations last month. JPMorgan follows Morgan Stanley (NYSE:MS-Free Report) and Goldman, which have been trying to sell their physical commodity business for more than a year now.

Regulators are concerned about the risks arising from banks' ownership of warehouses and plants. They believe that banks' holdings of these assets tend to concentrate market power and increase bank profits, consequently adversely affecting consumers.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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