The Zacks Analyst Blog Highlights: Dell, Heinz, Babcock & Wilcox, Alliant Energy and Altra Holdings

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Mar 18, 2013, 09:30 ET

CHICAGO, March 18, 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 Dell (Nasdaq:DELL), Heinz (NYSE:HNZ), The Babcock & Wilcox Company (NYSE:BWC), Alliant Energy Corporation (NYSE:LNT) and Altra Holdings Inc. (Nasdaq:AIMC).

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Here are highlights from Friday's Analyst Blog:

Debt Before Dishonor…

Long bond investors -- domestic and foreign -- are already effectively demanding higher interest rates to compensate them for declining principal values. More importantly, they are declining purchasing power of the U.S. dollar, as inflation erodes it. For foreign investors, the pain of a declining dollar must be offset by a higher interest rate, or capital flows into the U.S. to fund its borrowing will diminish, as they already have to some extent.

Another factor is causing rates to rise: the U.S. economy is finally recovering more strongly, and corporate profits are rising beyond mere post-recession bounce-back. This is spurring interest in equities, and the stock market indices are rising to new record levels, drawing in more domestic and foreign investors.

Simultaneously, commodity and oil and gas prices have backed off highs of last year, and look set to remain tolerable, making consumer confidence rise and moderating costs for business. The energy and pipeline sectors are booming.

As business and equity investment have become more attractive, and credit demand has risen, bonds have become less attractive. Adding to this, house prices finally appear to have bottomed out and are rising again, and new construction is going on. Thus, real estate is once again more attractive; another asset class that is more alluring than bonds.

With both economic growth and inflation now significant, and credit growth rising, it is almost impossible to keep interest rates at a low level. While there remain millions of people who have been unemployed for years, the actual output gap in the economy is nearly closed; that is, output has now recovered to beyond the peak level of late 2007, early 2008.

Foreclosed properties, while still in considerable inventory, are being sold off at a lower, slower pace by banks, bought up by bargain-hunting investors, and rented out.

Private equity firms are finding plenty of attractive acquisition candidates, as evidenced by the recent Dell (Nasdaq:DELL) and Heinz (NYSE:HNZ) deals. Merger and acquisition activity has rebounded, although initial public offerings remain subdued. Motor vehicle sales and aircraft and rail equipment orders are robust.

Babcock & Wilcox in Supply Pact

Engineering firm The Babcock & Wilcox Company (NYSE:BWC) – through its affiliate Babcock & Wilcox Power Generation Group Inc. – has won a contract to deliver, erect and commission a dry flue gas desulfurization system. The contract was awarded by Interstate Power and Light Company – subsidiary of Alliant Energy Corporation (NYSE:LNT) for its 270 megawatt coal-fired Lansing Generating Station in Lansing, Iowa.

Per the deal, Babcock & Wilcox will deliver and erect a circulating dry scrubber (CDS) system for the reduction of sulfur dioxide emission. The supply pact also includes new bags for the plant's existing pulse jet fabric filter.

The CDS technology (also known as Circulating Fluid Bed Flue Gas Desulfurization), will help in reducing emissions from several units. The technology involves low capital and operating expenses, and does not produce waste water.

This environmental equipment will be put up by Babcock & Wilcox Construction Co., which is another affiliate of Babcock & Wilcox.

Construction work on the project is expected to commence in 2014 and be over in 2015. Commissioning and start-up is also slated for 2015.

Earlier this month, Babcock & Wilcox Power Generation Group Inc. also entered into an agreement with FutureGen Industrial Alliance to begin work on the U.S. Department of Energy's FutureGen 2.0 carbon capture and storage (CCS) project. The agreement is for the initial engineering and preparation of the full front-end engineering and design work of the CCS project.

Babcock & Wilcox currently carries a Zacks Rank #1 (Strong Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.

In addition to B&W, there are other engineering firms in the energy sector like Altra Holdings Inc. (Nasdaq:AIMC), which also sports a Zacks Rank #1 (Strong Buy).

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