The Zacks Analyst Blog Highlights: Fresh Market, Marks & Spencer Group, J. Sainsbury, Harris Teeter Supermarkets and First American Financial

News provided by

Dec 10, 2013, 09:30 ET

CHICAGO, Dec. 10, 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 The Fresh Market, Inc. (Nasdaq:TFM-Free Report), Marks & Spencer Group plc (OTC:MAKSY-Free Report), J. Sainsbury plc (OTC:JSAIY-Free Report), Harris Teeter Supermarkets Inc. (NYSE:HTSI-Free Report) and First American Financial Corp. (NYSE:FAF-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

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

Here are highlights from Monday's Analyst Blog:

Fresh Market: Strong Sell on Weak Q3

On Dec 7, Zacks Investment Research downgraded The Fresh Market, Inc. (Nasdaq:TFM-Free Report) to a Zacks Rank #5 (Strong Sell) as estimates dropped sharply after the specialty grocery retailer announced dismal third-quarter results on Nov 21. Moreover, the company lowered its earnings guidance for the fiscal year.

Why the Downgrade?

The Fresh Market's poor run in the second quarter of 2013 continued well into the third quarter. The company missed the Zacks Consensus Estimate for both earnings and revenues owing to difficult retail sales environment, largely the result of reduced consumer spending.

The Fresh Market's third-quarter earnings of 23 cents were flat year over year but missed the Zacks Consensus Estimate of 26 cents by 11.5% due to lower-than-expected sales.

Total revenue increased 13.4% year over year to $364.5 million but missed the Zacks Consensus Estimate of $375 million by 2.8%. The company stated that restricted consumer spending significantly impacted sales across its store base in the latter half of the quarter. Mixed response from the new markets added to the woes.

Comparable sales increased 3.1% in the third quarter, falling short of 3.4% in the second quarter owing to an unfavorable retail sales environment.

Though gross margin improved 40 basis points (bps) year over year, it declined 70 bps sequentially. Operating margin declined 40 bps to 5.2% in the quarter due to higher selling general and administrative, and depreciation costs. Operating margin also declined 210 bps sequentially.

Moreover, The Fresh Market lowered its earnings outlook for fiscal 2013. Earnings are now expected in the $1.42 to $1.47 range, lower than $1.50–$1.55 as the company expects the muted consumer spending trend to continue. The company also lowered the higher end of the comp sales growth range. Comps are expected to increase in the band of 3.0%–3.5% for 2013, compared with the 3.0%–4.5% range. The company expects operating margin to be flat year over year due to increased expenses associated with the accelerated store opening plans.

Estimates declined sharply in response to the poor third-quarter results and the dampened outlook for the next quarter. The Zacks Consensus Estimate declined almost 6% for fiscal 2014 and 5.4% for fiscal 2015. In fact, The Fresh Market has missed the Zacks Consensus Estimate for earnings in two out of the past four quarters, delivering an average negative earnings surprise of 3.81%.

Other Stocks to Consider

Other better-ranked companies in the retail/supermarket segment include Marks & Spencer Group plc (OTC:MAKSY-Free Report), J. Sainsbury plc (OTC:JSAIY-Free Report) and Harris Teeter Supermarkets Inc. (NYSE:HTSI-Free Report). While Marks & Spencer and J. Sainsbury carry a Zacks Rank #1 (Strong Buy), Harris Teeter carries a Zacks Rank #2 (Buy).

First American: Strong Buy

On Dec 7, Zacks Investment Research upgraded First American Financial Corp. (NYSE:FAF-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

First American has been experiencing rising earnings estimates on the back of improved core fundamentals in third-quarter 2013. Moreover, the company's strong underwriting capabilities and capital position have been impressive.

Additionally, this property-casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 8.7%. First American also outperformed the 6-month S&P 500, which posted an increase of 9.8% against the modest return of 20.1% clocked by the company.

On Oct 24, First American reported third-quarter operating earnings of 63 cents per share, which comfortably beat the Zacks Consensus Estimate by 2 cents but missed the year-ago quarter number by a penny.

Although higher expenses and unrealized losses marred the bottom line, the top line surged 7.7% over the prior-year quarter, driven by higher direct premiums, escrow fees and agent premiums across segments. Net investment income also improved within title insurance segment. Meanwhile, increased cash and assets also boosted the balance sheet position.

First American's growth strategy of enhancing core operating leverage is showing results. Moreover, the company's consistent capital deployment activities continue to boost investors' confidence in the stock.

Based on First American's capital strength and underwriting discipline, the Zacks Consensus Estimate for 2013 rose 4.3% to $1.69 per share in the last 60 days. The estimate for 2014 is pegged at $1.85, up 7.8% in the same period. Meanwhile, no downward revision in estimates was witnessed for both the years.

Meanwhile, the Most Accurate Estimate for First American's 2013 earnings stands at $1.74 a share, resulting in an Earnings ESP of 3.0%.

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

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on TFM - FREE

Get the full Report on MAKSY - FREE

Get the full Report on JSAIY - FREE

Get the full Report on HTSI - FREE

Get the full Report on FAF - FREE

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

SOURCE Zacks Investment Research, Inc.