The Zacks Analyst Blog Highlights: Google, J.P. Morgan, J.B. Hunt Transport, Mattel and Valmont Industries

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Oct 17, 2011, 09:30 ET

CHICAGO, Oct. 17, 2011 /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 Google (Nasdaq: GOOG), J.P. Morgan (NYSE: JPM), J.B. Hunt Transport, Mattel (Nasdaq: MAT) and Valmont Industries Inc. (NYSE: VMI).

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Here are highlights from Friday's Analyst Blog:

Positive Retail Sales Surprise

Favorable data on consumer spending and reassuring noise from Europe will likely put stocks in a positive mood today. We got better-than-expected Retail Sales data this morning, which provides reassuring evidence of resilience in consumer spending. Lingering positivity from last night's blowout results from Google (Nasdaq: GOOG) will likely rub off on the technology sector, offsetting worries about banks highlighted by J.P. Morgan's (NYSE: JPM) results.

But let's talk about Europe first, as they seem to be making all the right noises about addressing the common currency's problems. The finance officials of the G-20 countries meeting in Paris are discussing the outlines of a credible-looking plan. The plan includes requiring banks to raise additional capital, deeper 'haircuts' for holders of Greek bonds (aka orderly Greek default) and increased lending capacity for the IMF and the Euro-zone rescue fund.

The plan may get finalized in the coming days to be considered by the G-20 summit meeting on November 3. A plan along these lines would have the potential to tackle the European problem in a durable and comprehensive fashion. It is perhaps premature to be optimistic at this stage, but at least they are discussing the appropriate measures to address the problem.

On the domestic front, we got a favorable reading on consumer spending. September Retail Sales increased a better-than-expected 1.1%, after a 0.3% increase in August. The August growth rate is a positive revision from the originally reported 'unchanged' reading. Since the headline monthly retail sales number includes the sale of automobiles, gasoline and building materials, which fluctuate from month to month, excluding these items gives us a better measure of the underlying trend in retail sales. The so-called 'core' retail sales also increased a better-than-expected 0.6%, after a 0.4% increase in August. This is the best retail sales reading since March this year.

This report is admittedly not a perfect proxy for consumer spending since it only includes sales of 'goods' at retail establishments and leaves out the much bigger consumer outlays on services. But it nevertheless provides valuable clues to trends in consumer spending, which is the backbone of the U.S. economy. This shows that the U.S. economy ended the third quarter on a fairly positive note, particularly on the consumer spending front. I would expect this report to give another nudge to the recent emerging trend to positive revisions to third quarter GDP growth estimates.

On the earnings front, we have Google's blowout results from after the close on Thursday, with the search giant handily beating expectations. J.B. Hunt Transport (Nasdaq: JBHT), the trucking operator, came out with a modest EPS beat on in-line revenue numbers after-market on Thursday. This morning, we have in-line earnings from Mattel (Nasdaq: MAT), the toy maker, on modestly better-than-expected top-line results.

It is still early going on the earnings front. The next two weeks should give us a very good idea of where we stand with the outlook for corporate profitability front. If only the Europeans can come out with something along the lines of what is being contemplated in the G-20 meeting, we will have the building blocks of a solid market rally.

Valmont Posts Positive Q3

The third-quarter 2011 net earnings of Valmont Industries Inc. (NYSE: VMI), a leading producer of engineered products, increased 62% to $1.59 per share from last years' $0.98.

Quarterly revenues, however, jumped 27.4% year over year to $672.2 million. The third- quarter results were driven by a significant growth in Irrigation Segment sales, increased revenue in every segment and strong market fundamentals.

Outlook

Management reaffirmed its earnings guidance to be in the range of $5.70 to $5.90 per share. However, due to the deteriorating economic outlook in general over the past few months, particularly in Europe, management now expects results to be in the mid-to-lower end of that range.

Going forward, the outlook remains positive. Demand for Utility Support Structures is rising. Recent order activity and growing backlog support its expectations for a strong fourth quarter and 2012.

In the irrigation business, a growing global demand for feed-grains to sustain dietary improvement and historically high farm income levels support a positive outlook.

Outlook for the Engineered Infrastructure Products Segment is mixed. In North America and Europe, Valmont reduced government spending and uncertain economic conditions. However, in the Asia-Pacific region, management expects its operations to benefit from economic growth and new infrastructure investment, albeit at slower growth rates than in recent history.

Coatings segment results will be mostly driven by economic conditions in North America and industrial demand in the Asia-Pacific region.

Zacks Recommendation

Currently, Valmont has a short-term (1 to 3 months) Zacks #1 Strong Buy rating and a long-term (6 months) Outperform recommendation.

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