The Zacks Analyst Blog Highlights: SLM, Nelnet, Jacobs Engineering Group, Fluor and Foster Wheeler AG

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Jul 14, 2011, 09:30 ET

CHICAGO, July 14, 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: SLM Corp. (NYSE: SLM), Nelnet Inc. (NYSE: NNI), Jacobs Engineering Group Inc. (NYSE: JEC), Fluor Corporation (NYSE: FLR) and Foster Wheeler AG (Nasdaq: FWLT).

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Here are highlights from Wednesday's Analyst Blog:

We have recently downgraded our recommendation on shares of SLM Corp. (NYSE: SLM) (better known as Sallie Mae) to Neutral.

We believe that the company's leading position in the student lending market, expense curtailment initiatives and the acquisition of federal student loan assets bode well. Dividend reinstatement and share buyback efforts also inspire investors' confidence in the stock.

However, the positives have already been factored in the current price.

First Quarter Earnings

Sallie Mae reported first-quarter 2011 core earnings of $260 million or 48 cents per share, beating the Zacks Consensus Estimate of 41 cents. The result compares favorably with prior-year quarter's core earnings of $215 million or 40 cents per share.

The results were primarily driven by a decline in loan loss provisions and improved net interest income. Concurrent with the earnings release, Sallie Mae declared a quarterly dividend of 10 cents per share on its common stock, the first time since early 2007. In addition, the company announced a share repurchase authorization of up to $300 million of outstanding common stock.

Outlook

Management at Sallie Mae expects to generate core earnings of $1.70 per share in 2011, a full-year private credit provision of $1 billion, operating expenses of $1.2 billion, and private loan volume of $2.5 billion. Reducing operating expenses is the company's primary concern and by the end of fourth quarter 2011, management expects to achieve a run rate of $250 million.

Going Forward...

Pausing new federal student loan origination to comply with the legislation would affect revenue generation at student lenders like Sallie Mae and Nelnet Inc. (NYSE: NNI). But we think that Sallie Mae's diversifying efforts coupled with an economic recovery, though at a sluggish pace, would bolster its earnings by expanding its private education loan business and reducing its loan loss provision expenses.

Additionally, Sallie Mae shares currently have a Zacks #3 Rank, which translates into a short-term 'Hold' recommendation.

Jacobs Wins Two Major Contracts

Jacobs Engineering Group Inc. (NYSE: JEC) has been awarded two significant contracts, one from the North West Redwater Partnership, and the other from EDF's NNB Generation Company Ltd. The values of both the contracts have not yet been disclosed.

Jacobs will be providing detailed engineering, procurement and construction services to North West Redwater Partnership for the development of a new oil refinery in Alberta, Canada. Under this contract, Jacobs will be supporting the critical phases of project development of the North West Redwater Refinery through sustaining operations.

The refinery is expected to utilize carbon capture technology, ceasing the natural gas usage, thereby sustaining and promoting oil sands development under the Bitumen Royalty in Kind (BRIK) policy partnership between North West Redwater and the Province of Alberta .

Project development and coordination of overall project delivery will be led by the integrated team of individuals from both North West Redwater and Jacobs.

On the other hand, Jacob's will be providing consultancy professional services to NNB Generation Company Ltd (NNB GenCo) on its new UK nuclear build program. NNB GenCo is the prospective licensee for future nuclear plants, expected to be owned and operated by EDF Energy within UK.

According to the two-year agreement, Jacobs will be providing technical support to the Design Authority department. The department, on behalf of NNB GenCo, owns and protects the integrity of design and safety case of the UK EPR, a pressurized water reactor. The department is responsible for meeting the regulatory requirements, minimizing safety, environmental, regulatory and commercial risk.

Jacobs Engineering Group Inc. is one of the world's largest engineering and construction companies providing services to a variety of industrial, commercial and government clients across a global network. The company directly competes with its peers, such as Fluor Corporation (NYSE: FLR), Foster Wheeler AG (Nasdaq: FWLT).

We currently maintain a long-term Neutral recommendation on the stock. Jacobs has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

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