The Zacks Analyst Blog Highlights:Supervalu, MoneyGram International, Fleetcor Tech, American Express and Portfolio Recovery Associates

Oct 17, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 17, 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 Supervalu Inc. (NYSE: SVU-Free Report), MoneyGram International Inc. (Nasdaq: MGI-Free Report), Fleetcor Tech Inc. (NYSE: FLT-Free Report), American Express Co. (NYSE: AXP-Free Report) and Portfolio Recovery Associates Inc. (Nasdaq: PRAA-Free Report).


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Here are highlights from Wednesday's Analyst Blog:

Is Supervalu (SVU) Poised to Beat?

Supervalu Inc. (NYSE: SVU-Free Report) is scheduled to report second quarter fiscal 2014 earnings after the market closes on Oct 17, 2013. Last quarter, Supervalu posted a positive surprise of 250.0%.

Why a Likely Positive Surprise?

Our proven model shows that Supervalu is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: TheEarnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +10.0%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #1 (Strong Buy): Supervalu carries a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement. 

The combination of Supervalu's Zacks Rank #1 (Strong Buy) and a positive ESP of +10.0% makes us confident of an earnings beat on Oct 17.

What is Driving the Better-than-Expected Earnings?

Supervalu's turnaround initiatives have helped reverse four successive years of negative identical store sales and re-positioned the company for growth. These are expected to drive fiscal second quarter 2014 results as well.  

The company is in the process of revamping its stores. The company continues to focus on the 'fresh from farm' department in Save-A-Lot stores as the category has reported decent sales in the past. The fresh saw cut meat program organized in all the Save-a-Lot stores also helped the company post better comps during the first quarter of fiscal 2014. We expect this program to boost second quarter sales too.

The company adopted a fair price plus promotion strategy in fiscal 2013, which aims to lower the pricing of its products and is expected to help the company gain market share in the longer term.

As part of the broad-based strategic alternatives, Supervalu sold its Albertson's, Jewel-Osco, Acme, Shaw's and Star Market chains in order to reduce loss in the coming quarters as well as streamline its operations in order to focus on Save-A-Lot discount stores and its smaller regional chains. The sale of non-performing assets is expected to unlock the value of the company's stock and increase focus on its core distribution business.

The company has also emphasized on cost reduction initiatives that are expected to lower administrative and operational expense by $250 million through fiscal 2014. In Mar 2013, the company reduced 1100 positions in order to right-size the organization. In Sep 2012, Supervalu closed 60 of its underperforming stores, which is expected to generate $80 million-$90 million in savings over three years.

Moneygram Strengthens in Mexico

Fortifying its money transfer network in Mexico, MoneyGram International Inc. (Nasdaq: MGI-Free Report) inked a strategic alliance with the renowned drugstore chain −Farmacias Guadalajara. The association will add 1,000 Mexican locations to the company's over 327,000 global agent network across 200 countries.

Per the agreement, MoneyGram will be offering its basic money transfer services to the customers of Farmacias Guadalajara. This will enable MoneyGram to transfer money easily from Mexico to countries across the globe, and thus progressively cover more of the market share. The idea is to add value to the business by giving MoneyGram customers access to convenient and varied money transfer options.

Growth prospects for MoneyGram are also validated by the World Bank, who estimated Mexico's remittance market to be worth $22.5 billion annually from the US alone. This makes Mexico the third largest nation in the list of worldwide countries that receive the largest amount of inbound transfers.Hence, we believe that the rising number of immigrants in the country amplify money remittance provisions, thereby opening up ample avenues of growth for MoneyGram in future as well.

We expect such alliances to boost MoneyGram's leading global market position, and also accelerate the company's organic growth by boosting its money transfer business. Simultaneously, these efforts will also enhance demand for global remittances and boost its brand value.

Meanwhile, MoneyGram is scheduled to release its third-quarter 2013 results before the closing bell on Oct 24. The Zacks Consensus Estimate for the third quarter is pegged at 31 cents per share, up 21.2% from the prior-year quarter.

MoneyGram currently carries a Zacks Rank #3 (Hold), indicating no clear directional pressure on the stock in the near term. Other outperformers in the financial sector include Fleetcor Tech Inc. (NYSE: FLT-Free Report), American Express Co. (NYSE: AXP-Free Report) and Portfolio Recovery Associates Inc. (Nasdaq: PRAA-Free Report). All these stocks carry a Zacks Rank #2 (Buy).

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