The Zacks Analyst Blog Highlights: Macy's, J. C. Penney Company, Morgan Stanley, Bank of America and TOTAL S.A.

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Nov 09, 2011, 09:30 ET

CHICAGO, Nov. 9, 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 Macy's, Inc. (NYSE: M), J. C. Penney Company Inc. (NYSE: JCP), Morgan Stanley (NYSE: MS), Bank of America Corp. (NYSE: BAC) and TOTAL S.A. (NYSE: TOT).

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Here are highlights from Tuesday's Analyst Blog:

Earnings Preview: Macy's

Macy's, Inc. (NYSE: M), one of the leading department store retailers in the United States, is scheduled to report its third-quarter 2011 financial results before the bell on Wednesday, November 9, 2011. The current Zacks Consensus Estimate for the quarter is 16 cents a share. The Zacks Consensus estimates revenue at $5,882 million for the third quarter.

Third-Quarter 2011 Consensus

The analysts polled by Zacks, expect Macy's to post third-quarter 2011 earnings of 16 cents a share. The current Zacks Consensus Estimate compares with 8 cents a share earned in the year-ago quarter. The estimates in the current Zacks Consensus for the quarter range from a low of 13 cents to a high of 18 cents.

Zacks Agreement & Magnitude

Of the 15 analysts following the stock, only 1 analyst revised the estimate downwards in the last 30 days, having no material impact on the Zacks Consensus Estimate of 16 cents. In the last 7 days too, only one analyst lowered the estimate keeping the Zacks Consensus Estimate unchanged.

Positive Earnings Surprise History

With respect to earnings surprises, Macy's has topped the Zacks Consensus Estimate over the last four quarters in the range of 5.3% to 166.7%. The average remained at positive 63.9%. This suggests that Macy's has beaten the Zacks Consensus Estimate by an average of 63.9% in the trailing four quarters.

Macy's department stores sell a wide range of merchandise. Its products include men's, women's, and children's apparel and accessories, cosmetics, home furnishings and other consumer goods.

Last week Macy's posted lower-than-expected sales results for the four-week period ended October 29, 2011, as it witnessed modest growth in October due to the shift of Macy's Shop For A Cause charity shopping event in August this year from October in the prior year. The company also registered soft sales for winter related merchandise, which includes coats, hats and sweaters as October experienced an unusually warm weather.

Macy's comparable-store sales for October 2011 rose 2.2% compared with an increase of 4.9% in September 2011 and a jump 2.5% in October 2010.

Macy's stated that comparable-store sales for the third quarter of 2011 climbed 4%, which met the lower end of the previous guidance range of 4% to 4.5%. Net sales for the quarter rose 4.1% to $5,853 million from $5,623 million in the year-ago quarter. Online sales surged 39.8%. For the fourth quarter, management reiterated comps to increase between 4% and 4.5%.

Going by the pulse of the economy, we believe that consumers will remain cautious on their spending this holiday season, and thereby we could see more competitive pricing and new products to attract shoppers. We believe that retailing companies will leave no stone unturned to win the hearts of bargain hunters and it definitely remains a wait-and-watch story as to who emerges successful in wooing consumers in this distressed economy.

In an attempt to increase sales, profitability and cash flows, the company has been taking steps such as integration of operations, consolidation of divisions, customer-centric localization initiatives, as well as developing the e-commerce business and online order fulfillment centers. Moreover, Macy's continues to focus on price optimization, inventory management and merchandise planning to drive traffic.

Macy's, which competes with J. C. Penney Company Inc. (NYSE: JCP), currently operates approximately 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

Currently, we have a long-term Outperform rating on the stock. Moreover, Macy's holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating, and correlates with our long-term view.

Morgan Stanley Indicted Over Mortgage Bonds

A group of investors have accused Morgan Stanley (NYSE: MS) of selling flawed mortgage bonds by misleading investors, the company said on Monday. The aggregate outstanding balance of the bonds underwritten by Morgan Stanley was more than $6 billion.

Morgan Stanley allegedly underwrote a large number of residential mortgage-backed securities issued by trusts based on fake information. Also, the company failed to properly service mortgage loans owned by the investors.

A lawsuit against the company over its involvement in such a deal is quite likely from Gibbs & Bruns, a law firm representing the investors. The same law firm led the $8.5 billion charge against Bank of America Corp. (NYSE: BAC) in a similar case.

In October 2010, the law firm accused BofA on about $47 billion worth of mortgage bonds created by the former Countrywide Financial Corp. Such hefty payment, which represents the highest by a financial services company till date, has dented BofA's financials and reputation to a large extent.

The acquisition of Countrywide substantially increased BofA's mortgage exposure. As a result, following the collapse of the housing market, mortgage repurchases claim risk for the company has heightened.

This is not the only accusation against Morgan Stanley in the recent months. The company is involved in six class-action lawsuits and several other legal matters.

Recently, lawsuits against big banks have been hitting the headlines. This could be another major threat to the financial service sector. At such a crucial moment, when the world economy is palpably seesawing, if the big banks are forced to cough up billions, it'll be a long time before they can hold their heads up once again. The already jeopardized economic recovery will then be out of the question as banks are the lifeblood of the economy.

Morgan Stanley's third-quarter earnings from continuing operations came in way ahead of the Zacks Consensus Estimate. With this the company returned to its profit trend after incurring a loss in the prior quarter. A significant benefit from the widening of debt-related credit spreads and Debt Valuation Adjustment primarily made it possible for the company to report impressive results.

Morgan Stanley currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

TOTAL Strikes Oil Off Nigeria

Integrated oil and gas company TOTAL S.A. (NYSE: TOT) announced that its Nigerian subsidiary Total E&P Nigeria Ltd. (TEPNG) has made a second oil discovery at its Oil Mining Lease ("OML") 102. The new find is located 65 kilometers (40.4 miles) off the southeastern coast of the country, about 15 kilometers (9.3 miles) southeast of the Ofon field.

The Etisong North-1 well was spud at a total depth of 2,387 meters (7,831.4 ft) including water depth of 80 meters (262.5 ft). One of the three reservoirs, which were drilled, encountered 8,500 barrels per day of 40° API oil. OML 102 is operated jointly by TEPNG, with a 40% interest, and its partner Nigerian National Petroleum Company ("NNPC"), which holds the remaining 60%.

Total's offshore production in Nigeria comes from OML 130, in which the Akpo field is located, and from OMLs 99, 100 and 102, which are operated by the Group as part of a joint venture with NNPC. The main fields in these leases are Amenam-Kpono and Ofon. TOTAL is expected to begin operation in Ofon 2 within the next few months.

TOTAL has been operating in Nigeria for nearly 50 years. TOTAL's Nigerian exposure accounted for 300,000 barrels of oil equivalent per day in 2010. The new find will boost this level further in the coming years.

Maximum volume of TOTAL's oil production comes from the African nations. In the recently concluded third quarter, TOTAL's hydrocarbon production averaged 2,319 thousand barrels of oil equivalent (kboe) per day, out of which 623 kboe/d or 26.9% came from its African production hubs.

We believe TOTAL's exposure in the Pazflor field offshore Angola and the finding in the Bilondo Marine wells offshore the Republic of Congo also hold significant promise for the company.

TOTAL S.A. currently retains a Zacks # 3 Rank, which translates into a short-term Hold rating. France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.

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