The Zacks Analyst Blog Highlights: HSBC Holdings, UBS, JPMorgan Chase, Royal Bank of Scotland Group and DaVita Healthcare Partners

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Jul 02, 2014, 09:30 ET

CHICAGO, July 2, 2014 /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 HSBC Holdings plc (NYSE:HSBC-Free Report), UBS AG (NYSE:UBS-Free Report), JPMorgan Chase & Co. (NYSE:JPM-Free Report), Royal Bank of Scotland Group plc (NYSE:RBS-Free Report) and DaVita Healthcare Partners Inc. (NYSE:DVA-Free Report).

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

Here are highlights from Tuesday's Analyst Blog:

Supreme Court Dashes Madoff Victims' Hopes

Recently, victims of the fraudulent Ponzi scheme of Bernie Madoff suffered a big blow as the U.S. Supreme Court turned down the appeal seeking to recoup more money for them. Irving Picard, the trustee liquidating the Bernard L. Madoff Investment Securities LLC, had requested the apex court to hear his challenge to a ruling given by the Second Circuit Court of Appeals last year.

Rebuffing the petition, this latest Supreme Court decree defends an earlier verdict by a lower US court that rejected Mr Picard's appeal to prosecute the banks as accomplices in the fraud.

With the Supreme Court verdict, banks such as HSBC Holdings plc (NYSE:HSBC-Free Report), UBS AG (NYSE:UBS-Free Report) and UniCredit SpA breathed a sigh of relief, having been exonerated from over $10 billion legal claims stemming from the Bernard Madoff Ponzi scheme. Nevertheless, according to Picard's spokeswoman, with due respect to the apex court verdict, the trustee's $3.5 billion bankruptcy claim still remains alive against these international banks.

Notably, the trustee had also filed a suit against JPMorgan Chase & Co. (NYSE:JPM-Free Report) for helping the fraudster. However, JPMorgan's name was withdrawn from the case after it reached a $325 million settlement with Picard in Jan 2014.

Madoff''s fraudulent Ponzi scheme came to the limelight in the height of the 2008 financial crisis. Labeled as the largest financial fraud in the history of U.S., it robbed $17.0 billion out of the gullible investors. Madoff, the former chairman of Nasdaq stock exchange, pleaded guilty and was sentenced to 150 years in prison. He was responsible for ruining the hard-earned savings of countless customers who directly invested in Madoff Investment Securities, as well as those who invested in feeder funds that was later siphoned off to Madoff Investment Securities.

Mr Picard, who is playing the trustee on behalf of the Securities Investor Protection Corporation, has so far recovered $9.8 billion in lawsuits and settlements, and made four distributions totaling $5.2 billion to investors, as part of the liquidation process.

Currently, JPMorgan carries a Zacks Rank #4 (Sell), while both HSBC and UBS has a Zacks Rank #3 (Hold). One better-ranked major global bank is The Royal Bank of Scotland Group plc (NYSE:RBS-Free Report), sporting a Zacks Rank #1 (Strong Buy).

Why DaVita Is a Sell

On Jul 1, 2014, Zacks Investment Research downgraded DaVita Healthcare Partners Inc. (NYSE:DVA-Free Report) to a Zacks Rank #4 (Sell).

Why the Downgrade?

DaVita has witnessed sharp downward estimate revisions, since it lowered its operating income guidance and reported dismal first quarter results. Notably, this kidney care stock delivered negative earnings surprises in two out of the last four quarters with an average miss of 0.07%.

Moreover, DaVita has been overburdened with debts. Although its debts at the end of the first quarter represented slight decline from that at year-end 2013, a couple of announcements in the last month raise caution as these can push up debt levels further. On Jun 2, 2014, DaVita announced that it will enter into senior secured credit facilities worth $5.5 billion to refinance its existing credit facilities and repay existing debt.

Additionally, on Jun 10, the company issued $1.75 billion worth of debt to repay earlier debt. Although these debt issuances are aimed at reducing earlier debt, they tend to immediately increase interest expenses.

Another factor that caused the bearish sentiment on the stock was DaVita's lowered guidance for 2014. The company revised its operating income guidance for the HCP business, inducing to lower the upper end operating income outlook. The revised guidance now stands at $1.725 billion - $1.840 billion from $1.725 -$1.860 billion guided earlier.

Earlier, DaVita reported first-quarter earnings per share of 85 cents that lagged the Zacks Consensus Estimate by 2.30%. Results also declined year over year on disappointing performance by the HealthCare Partners (HCP) segment.

The Zacks Consensus Estimate for 2014 decreased 4.5% to $3.59 per share over the last 60 days. For 2015, most of the estimates were revised downward over the same period, sinking the Zacks Consensus Estimate by 3.2% to $3.89 per share.

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

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