The Zacks Analyst Blog Highlights: Travelers Cos., Verizon Communications, Vodafone Group, Comcast and AT&T

Feb 21, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 21, 2013 /PRNewswire/ -- 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 Travelers Companies Inc. (NYSE: TRV), Verizon Communications (NYSE: VZ), Vodafone Group Plc (Nasdaq: VOD), Comcast Corporation (Nasdaq: CMCSA) and AT&T Inc. (NYSE: T).


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Here are highlights from Wednesday's Analyst Blog:

Travelers Upgraded to Outperform

We are upgrading The Travelers Companies Inc. (NYSE: TRV) to Outperform from Neutral based on its prudent underwriting practices and favorable prior-year reserve development that managed to arrest the higher catastrophe losses arising due to Hurricane Sandy. This property and casualty insurer carries a Zacks Rank #2 (Buy).

Why the Upgrade?

Fourth-quarter earnings came in at 72 cents per share, much ahead of the Zacks Consensus Estimate of 4 cents. Revenues increased 2% from the year-ago period to $6.5 billion, easily surpassing the Zacks Consensus Estimate of $6.3 billion. Over the past four quarters, Travelers has delivered an average surprise of 140.7%.

Following the release of the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone up 2.9% to $7.04 per share. Moreover, the Zacks Consensus Estimate for 2014 has also increased 5.3% to $7.40 per share.

What is the cause for the strong positive bias on the company? As the second-largest writer of auto and homeowners' insurance through independent agents and the second-largest writer of commercial U.S. property-casualty insurance with a wide array of product offerings, we believe Travelers will continue to benefit from its strong market position and reap economies of scale.

Over the past 8 years, the company has continuously registered better returns on equity (ROE) than its peers. It currently stands at 9.8% with an operating ROE of 11.0%. Travelers is also striving for a ROE in the band of 14%–16% over the long term.

In 2012, it returned $2.1 billion in capital to its shareholders, including $700 million in dividends. Its current dividend yield is 2.30%. Its dividend yield averaged 2.58% over the last five years, much ahead of the industry yield of 0.96%. In addition, it still has $2.159 billion remaining under its authorization.



Verizon Closes 3 Spectrum Sales


Verizon Wireless – a venture between Verizon Communications (NYSE: VZ) and Vodafone Group Plc (Nasdaq: VOD) – announced the sale of three separate 700MHz spectrum blocks to small rural telecommunication firms.

Verizon sold its Texas RSA 6-Jack 700 MHz lower B-block license to Muenster based Nortex Communications. The deal covers a four-county region to the northwest of Dallas. Panhandle Telecommunication Systems Inc. – that is headquartered in Guymon, Okla – purchased the Texas RSA 2-Hansford 700 MHz lower B-block license – spanning 12 counties in the northwest part of Texas. A partitioned A-Block license extending over a five-county area in the Houston market was sold to Colorado Valley Communications.

Back in August 2012, Verizon struck a deal with the Federal Communications Commission (FCC) to sell its 700 MHz Lower A and B Block spectrum in order to receive the approval for a $3.9 billion purchase of Advanced Wireless Services (AWS) spectrum from SpectrumCo – a joint venture between Comcast Corporation (Nasdaq: CMCSA), Time Warner Cable and Bright House Networks.

Since then, the country's largest carrier – Verizon – has been on the lookout for prospective buyers to part with the spectrum that it was not using to gather funds for buying a big belt of the AWS spectrum. Subsequently, Verizon Wireless entered into sales agreements with seven companies that included one national company, five rural or regional carriers and one minority-owned firm. With the completion of three sales, four are still pending to be closed in the coming days.

In late January, Verizon inked a deal with AT&T Inc. (NYSE: T) to sell its 39 lower 700 megahertz (MHz) licenses to AT&T, covering 42 million people in 18 states including major territories such as Chicago, Los Angeles and Miami. In exchange, Verizon will receive $1.9 billion and AWS spectrum licenses in five markets. The deal – pending approvals from the FCC and the Department of Justice – will likely be closed in the latter half of 2013.

We believe the sale of lower spectrum assets and the consequent purchase of new AWS spectrum will work in favor of Verizon. The company with the help of AWS spectrum holdings will be able to double its capacity, provide services at a much higher speed and expedite the Long Term Evolution (LTE) rollout, thereby driving data revenues and boosting its competitive position.

We currently, have a Zacks Rank #3 (Hold) on Verizon.


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