The Zacks Analyst Blog Highlights:AT&T, Apple, Verizon Communications, PulteGroup and Lennar

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Dec 31, 2012, 09:30 ET

CHICAGO, Dec. 31, 2012 /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 AT&T Inc. (NYSE:T), Apple (Nasdaq:AAPL), Verizon Communications (NYSE:VZ), PulteGroup Inc. (NYSE:PHM) and Lennar Corporation (NYSE:LEN).

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Here are highlights from Friday's Analyst Blog:

AT&T Expands Mobile Internet
AT&T Inc. (NYSE:T) is expanding its mobile Internet coverage for customers in South Florida. The company is experiencing strong momentum in its wireless business driven by demand for data services. We expect the company's expansion plans in this space to strengthen its foothold in data services as well as generate incremental revenues.

The expansion will involve capacity enhancement in cell sites in order to improve mobile data traffic and voice connectivity. The company boasts the best Internet speeds in the industry as it is the only U.S. carrier that provides 4G networks through both Long Term Evolution (LTE) and High-Speed Packet Access Plus (HSPA+) technologies.

AT&T initially rolled out LTE networks late last summer that went on to become the benchmark of mobile technology and the life-blood for operators across the world. AT&T's 4G LTE service is currently available in 103 markets with more than 150 million users in the U.S.

The telecom giant aims to reach about 250 million people by 2013-end and 300 million by the end of 2014. To support its 4G LTE services, the company offers several 4G LTE smartphones and tablets, which include HTC One X, Samsung Smart PC, Nokia Lumia 900, LG Optimus G and ASUS Vivo Tablet. In addition, during the third quarter, AT&T was the highest selling iPhone 5 carrier-partner for Apple (Nasdaq:AAPL).

We expect AT&T to continue this trend as it is aggressively expanding its 4G LTE coverage. Additionally, the company's new Mobile Share plans, which allow connecting more than one device to its data plan, will further boost sales of the new iPad as it will cost only $10 per month to connect the new mini iPad to its new data sharing plan. However, we believe that persistent access line losses, competitive pressure from peers like Verizon Communications (NYSE:VZ) and heavy iPhone subsidies might drag near-term margins and earnings.

AT&T Inc. has a Zacks #3 Rank, implying a short-term (1–3 months) Hold rating on the stock. For the long-term, we have a Neutral recommendation on the stock.

PulteGroup on a Tight Rope
We have maintained our Neutral recommendation on PulteGroup Inc. (NYSE:PHM) appraisal of the third quarter results.

PulteGroup's third quarter 2012 adjusted earnings of 27 cents per share beat the Zacks Consensus Estimate by 35%. Earnings were significantly better than the adjusted earnings of $11 cents in the prior-year quarter, driven by improved home demand and pricing, gross margin expansion and solid overhead leverage. Pulte's homebuilding revenues rose 12.7%, driven by an increase in new home orders and average selling prices.

New home orders were up 27% year over year based on the improvement in new home demand. The average selling price rose 5% as Pulte raised prices in almost 70% of its markets in the quarter. The company is seeing a definite improvement in demand in the homebuilding sector and believes its cost reduction and operating efficiency improvement plans will lead to profitability for the remainder of 2012.

With a gradual recovery in the overall economy, the homebuilding industry is finally seeing signs of stabilization in 2012. The overall U.S. housing market has seen a meaningful increase in the volume of new home sales for the first nine months of 2012 with industry-wide sales tracking roughly 25% above prior-year levels. We believe that the housing market is starting to benefit from an increase in employment rates, higher consumer confidence and several years of pent-up demand. Houses are more affordable now as mortgage loans come with record low interest rates, while renting has become more expensive. Homebuilders like Pulte with significant land positions, broad geographic and product diversity, and better capital positions are expected to benefit the most as market conditions recover.

The company is continuously evaluating its assets and prioritizing markets and projects in order to allocate capital appropriately and to invest selectively in high return projects. The company is divesting lower margin projects and exiting non-performing communities and lower margin land lots, which no longer fit into their operating strategy, thus freeing up cash to invest in other potential opportunities, which could generate higher returns. Pulte is also utilizing its existing land assets more efficiently and lowering its unsold inventory levels more aggressively, which in turn are benefiting the working capital and margins. Moreover, while the company monetizes non-profitable existing assets, it is disciplined in adding new land positions. The company is also shifting its focus toward steeply priced Pulte branded move-up homes, which will likely improve the overall average selling prices.

In addition to allocating capital more efficiently, Pulte is taking other actions to improve its operating and financial performance. These initiatives include improvement of overhead leverage and implementing new pricing strategies. These initiatives will better place the company when the housing conditions improve in the long term.

Though the housing market is showing signs of stabilization in 2012, management believes that the process is erratic and not yet adequately broad-based. A speedy housing recovery is unlikely and the timing of the markets to fully recover and return to a more historically typical operating environment is uncertain.

Pulte carries a Zacks #2 Rank (short-term Buy rating). Peer company, Lennar Corporation (NYSE:LEN) also carries the same rank, thus highlighting the positive momentum in the housing industry.

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