The Zacks Analyst Blog Highlights:General Motors, ANN, BlackRock, Aaron's and American Apparel
CHICAGO, March 25, 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 General Motors Company (NYSE:GM-Free Report), ANN Inc. (NYSE:ANN-Free Report), BlackRock Inc. (NYSE:BLK-Free Report), Aaron's Inc. (NYSE:AAN-Free Report) and American Apparel, Inc. (AMEX:APP-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Feds Probe GM Bankruptcy
General Motors Company (NYSE:GM-Free Report) received another blow with the federal authorities now investigating whether the pre-bankruptcy General Motors committed bankruptcy fraud by not revealing the ignition switch defect that recently led to the recall of 1.6 million vehicles, according to The New York Times. They are investigating whether the company was aware of the problem during the bankruptcy filing in 2009 but failed to notify the authorities to prevent liability claims.
Although the new General Motors, formed after bankruptcy, is not responsible for the liabilities of the old General Motors, pressure is mounting on the company to compensate the victims. The company is also facing a lawsuit claiming that the new GM should be held liable for the old GM's actions as it was also responsible for hiding the ignition switch flaw. The National Highway Traffic Safety Administration (NHTSA) is also facing an internal audit by the U.S. Transportation Department for not investigating the matter earlier despite being aware of so many incidents of failure in airbag deployment.
The chronology of events filed by General Motors with the NHTSA indicates that the faulty ignition switches were identified way back in 2001 during the pre-production test of the Saturn Ion vehicles. However, the company assumed that a change in design had resolved the problem.
Saturn Ions, along with many other GM vehicles, were found to have faulty ignition switches which may lead to abrupt engine shutdown, leading to near-fatal crashes. It was found that a heavy key ring or uneven roads could cause the ignition switch to shift from the run position, thereby turning off the engine and preventing deployment of front air bags in the event of a crash.
On Feb 13, the automaker announced the recall of 778,562 Chevrolet Cobalt and Pontiac G5 compact cars of model years 2005–2007 in North America to fix faulty ignition switches. Later, on Feb 25, General Motors announced a recall of 2003–2007 Saturn Ions, 2006–2007 Chevrolet HHRs and 2006–2007 Pontiac Solstice and Saturn Sky models adding up to 842,000, for the same problem.
General Motors is facing multiple investigations for the delay. Two congressional committees and the Justice Department will examine the reason behind the delayed recall. Additionally, the NHTSA has started an investigation into the matter. Moreover, General Motors has hired a team to probe into the ignition switch recall.
General Motors currently holds a Zacks Rank #5 (Strong Sell).
ANN Soars on Golden Gate Stake Buy
Shares of ANN Inc. (NYSE:ANN-Free Report) gained momentum and soared to a record 52-week high of $43.61 on Friday, March 21, after Golden Gate Capital Corp. revealed that it has bought a 9.5% stake in this women's apparel and accessories retailer. Eventually, the stock closed trade at $42.05, up 13% from the previous day's session.
As per Bloomberg, the move has made Golden Gate the largest shareholder of ANN, followed by BlackRock Inc. (NYSE:BLK-Free Report) that has a 9.3% stake in the company. The private equity firm, Golden Gate believes that the owner of Ann Taylor and LOFT clothing brands is highly undervalued in spite of the company being managed efficiently.
For the past one year, various private equity firms have acquired stakes in retail companies amid the recovering U.S. economy and improving job environment. Last month, Vintage Capital, a private equity firm, made an offer of $30.50 per share or $2.3 billion to acquire the leading rent-to-own retailer, Aaron's Inc. (NYSE:AAN-Free Report). Last year, the Los Angeles based teen apparel retailer, Hot Topic Inc. was taken over by NY-based private equity firm, Sycamore Partners for a total sum of approximately $600 million.
In its letter to ANN's management, Golden Gate revealed its intention of working with the retailer to enhance shareholders' value. ANN, which had posted record earnings for two consecutive years and the four straight year of improving comparable-store sales, welcomed the move.
Last week, ANN, which competes with American Apparel, Inc. (AMEX:APP-Free Report), came out with its fourth-quarter fiscal 2013 results, wherein earnings of 10 cents per share increased twofold from the year-ago quarter and surpassed the Zacks Consensus Estimate of 7 cents. The stock has gained 28.7% since the company's preliminary earnings announcement on Feb 6.
Buoyed by better-than-expected fourth-quarter results, this Zacks Rank #3 (Hold) stock provided an impressive guidance for fiscal 2014. It anticipates net sales of $2.6 billion, with comps rising in the low single digits range. Moreover, gross margin is expected to be around 54%. Further, the company projects to spend $120 million as capital expenditure.
Management believes that the company is well positioned for sustained growth in the future, given that both of its brands will begin the spring season with solid product offerings. ANN also plans to further its international operations as it intends to enhance its brands in Canada and introduce its first LOFT store in Mexico at the end of 2014. These initiatives, along with its integrated stores and e-Commerce structure, are expected to push ANN to a new height in the omni-channel world.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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