The Zacks Analyst Blog Highlights: Intel, Yahoo, Rite Aid, Walgreen and CVS Caremark

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Apr 16, 2014, 09:30 ET

CHICAGO, April 16, 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 Intel (Nasdaq:INTC-Free Report), Yahoo (Nasdaq:YHOO-Free Report), Rite Aid Corporation (NYSE:RAD-Free Report), Walgreen Co. (NYSE:WAG-Free Report) andCVS Caremark Corp. (NYSE:CVS-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:

Intel Modestly Mixed, Alibaba Boosts Yahoo

It's another after-the-bell two-fer on Tuesday: semiconductor giant Intel (Nasdaq:INTC-Free Report) and Internet staple Yahoo (Nasdaq:YHOO-Free Report) both reported quarterly earnings, both companies were mixed on the top- and bottom-lines. Yet while Intel has seen a modest bump in after-market trading, Yahoo shares broke out to the upside in a big way.

Intel posted earnings of 38 cents per share (a one-cent beat, directly in line with the Zacks ESP) on revenues of $12.76 billion, which was light of the Zacks Consensus Estimate of $12.82 billion. As Intel continues the long process of switching over from PC-based products to mobile-based ones, analysts were prepared to see a bit of a swoon in Q1, and they got it: gross margins down 2.3% quarter over quarter to 59.7%, with EPS down 5% year over year.

Yahoo reported 30 cents per share (including the all-important TAC costs) -- also a one-penny beat over the consensus -- on revenues of $1.07 billion -- just a smidge light of the $1.075 we expected. But it wasn't until details about Alibaba's business came out that YHOO shares spiked.

Yahoo's current issues are far more mercurial than Intel's; while display advertising again posted weak numbers, price-per-click gained 8% year over year. Still not great, and the concern may be that Yahoo has yet to gain the sort of traction analysts had been anticipating for the last year or so. It can be a frustrating stock to hang onto for investors anticipating breakout numbers that still have yet to be realized.

But who's going to sell Yahoo now? The company is sitting on 10% of what's expected to be one of the very biggest IPOs of 2014, China's e-commerce giant Alibaba. And the Alibaba-specific business continues to wow analysts with terrific numbers. So there's not only a back-stop to any of Yahoo's disappointing near-term execution; in fact, the good news from Alibaba sent YHOO shares up as much as 9% in after-hours trading.

Intel expects 61% gross margins for full-year 2014 on flat revenues year over year. Turning a big ship like Intel around requires steadiness and patience; as long as nothing tips over the side, it looks like investors are willing to hang. INTC stock is up 25% since this time last year and mostly up both before and after the earnings post today.

Both Intel and Yahoo currently register a Zacks Rank #3 (Hold), and are obviously both major plays in technology. Basically, it depends on your tastes as an investor: are you looking for proof of a steadily improving present or hopes of hitting it big in one fell swoop sometime in the future? Estimate revisions have not played much of a part in either company's story for the past several quarters, so even the analysts are waiting to see what's going to happen. Stay tuned.

Rite Aid Upped to Strong Buy

On Apr 11, Zacks Investment Research upgraded Rite Aid Corporation (NYSE:RAD-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Rite Aid has been witnessing rising earnings estimates on the back of better-than-expected fourth-quarter fiscal 2014 results and it provided an impressive guidance for fiscal 2015. Moreover, this well-known drugstore chain retailer has beaten the Zacks Consensus Estimate by an average of 225% in the trailing four quarters. The long-term expected earnings growth rate for this stock is 17.5%.

Rite Aid reported fourth-quarter adjusted earnings of 10 cents per share, registering year-over-year growth of 42.9% and handily beating the Zacks Consensus Estimate of 4 cents. The improved bottom-line results were primarily attributable to strong revenues and Rite Aid's key turnaround initiatives.

Rite Aid's fourth-quarter revenues rose 2.2% year over year to $6,597.5 million and surpassed the Zacks Consensus Estimate of $6,551.0 million. Top-line growth was driven by 21% rise in comparable-store sales (comps), which benefited from rise in pharmacy sales, slightly offset by weak front-end sales.

Following the superb quarterly performance, Rite Aid now expects sales for fiscal 2015 to range between $26.0 billion and $26.5 billion, with comps growth in the band of 2.5% to 4.5%. Furthermore, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the fiscal 2015 are anticipated to be in the range of $1.325–$1.40 billion.

Rite Aid, which trails only Walgreen Co. (NYSE:WAG-Free Report) and CVS Caremark Corp. (NYSE:CVS-Free Report) in size, expects its net income for fiscal 2015 to be between $313.0 million and $423.0 million or 31–42 cents per share.

The Zacks Consensus Estimate for fiscal 2015 increased 9.4% to 35 cents per share as most of the estimates were revised upward over the last 7 days. For fiscal 2016, half of the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 4.7% to 45 cents per share.

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

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