Zacks Analyst Blog Highlights: Gap, Goldcorp, First Solar, J.C. Penney Company and American International Group

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Feb 28, 2011, 09:30 ET

CHICAGO, Feb. 28, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Gap Inc. (NYSE: GPS), Goldcorp Inc. (NYSE: GG), First Solar Inc. (Nasdaq: FSLR), J.C. Penney Company Inc. (NYSE: JCP) and American International Group Inc. (NYSE: AIG).

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Here are highlights from Friday's Analyst Blog:

Gap Rises on Healthy Sales

Gap Inc.'s (NYSE: GPS) fourth-quarter 2010 earnings of 60 cents per share rose 17.6% from last year's 51 cents and beat the Zacks Consensus Estimate of 57 cents a share.

For the fiscal 2010, the company reported earnings growth of 19% to $1.88 per share from $1.58 per share reported in fiscal 2009. Earnings also beat the Zacks Consensus Estimate of $1.86 per share.

Quarter in Details

During the quarter, net sales grew 3.0% to $4,364 million from $4,236 million in the year-ago quarter. Same-store sales remained flat for the quarter, the net effect of growth in Banana Republic North America (+1%) and Old Navy North America(+1%), offset by a 2% decline in Gap North America and another 1% fall in International comparable store sales. Total revenue also beat the Zacks Consensus Estimate of $4,357 million.

Quarterly gross profit fell 0.2% year over year to $1,669 million, and gross margin contracted 130 basis points (bps) to 38.0%. Operating expenses, as a percentage of sales, declined 90 bps year over year to 24.7% on the back of strict cost containment measures. Accordingly, Gap's operating income rose marginally by 1.0% year over year to $593 million, while operating margin fell 30 bps to 13.6%.

Goldcorp Beats Estimates

Goldcorp Inc. (NYSE: GG) reported solid fourth-quarter 2010 results. Reported net earnings in the quarter were $331.8 million compared with $66.7 million in the fourth quarter of 2009. Adjusted net earnings were $417.1 million, or 57 cents per share compared with $182.7 million, or 25 cents per share in the fourth quarter of 2009. Results exceeded the Zacks Consensus Estimate of 49 cents.

The increase was driven by higher gold and silver prices and increased bullion production.

Net earnings in 2010 were a record $1.6 billion or $2.14 per share compared with $240.2 million or $0.33 per share in the prior year. Adjusted net earnings totaled $1.0 billion, or $1.37 per share compared with $588.2 million or 80 cents per share in 2009.

Revenue

In the fourth quarter of 2010, revenues increased 70% year over year to $1,319.4 million, on gold sales of 678,600 ounces. The increase was driven by strong performance at its Red Lake mine in northern Ontario and the first full quarter of commercial production at its Penasquito gold-silver mine in Mexico. In fiscal 2010, revenues jumped 40% year over year to $3.8 billion on gold sales of 2.4 million ounces.

In the fourth quarter of 2010, gold production was 689,600 ounces at a total cash cost of $164 per ounce versus production of 601,300 ounces in the fourth quarter of 2009. The increase was driven primarily by RedLake, Musselwhite and record production at both Marlin in Guatemala and Los Filos in Mexico.

First Solar Beats, Outlook Bright

First Solar Inc. (Nasdaq: FSLR) surpassed the Zacks Consensus earnings per share (EPS) estimate of $1.76 by 4 cents to reach $1.80 in the fourth quarter of fiscal 2010. It also exceeds the year-ago quarterly EPS of $1.65.

The upside came from higher module shipments and lower module cost per watt. This was partially offset by reduced module average selling prices and increased expenses. However the tables tumbled on comparing with the sequential quarterly number of $2.04. The downside came from lower net sales and increased expenses, partially offset by higher gross margins.

Operational Performance

First Solar's quarterly revenues were $609.8 million, down 4.9% from $641.3 million in the fourth quarter of 2009, falling behind the Zacks Consensus Estimate of $648 million. The downside came from decreased systems revenue and reduced module prices, partially offset by higher volume.

Also, compared to the third quarter of 2010, revenue decreased $188 million, primarily due to lower system sales and pricing. This was partially offset by an increase in volume.

First Solar in the reported quarter upped its module production to 395 megawatts, up 27% versus prior year and 13% quarter-over-quarter. The sequential increase was driven by a higher line throughput, improved conversion efficiency and six additional days of production due to adoption of a calendar year for financial reporting.

The annual capacity per line increased by 3 megawatts quarter-over-quarter to 62.6-megawatt per line. First Solar's conversion efficiency was 11.6%, which has been up by half a percentage point year-over-year. The company's manufacturing cost per watt was $0.75, which dropped $0.09 or 11% year-over-year and $0.02 compared to the sequential quarter.

J.C. Penney Tops Estimates

J.C. Penney Company Inc. (NYSE: JCP) delivered better-than-expected fourth-quarter 2010 results on the heels of improved merchandise assortments and a redefined jcp.com platform.

The quarterly earnings of $1.23 per share beat the Zacks Consensus Estimate of $1.07, and shot up 20.6% from $1.02 earned in the prior-year quarter. The Zacks Consensus Estimate rose by 11 cents prior to the earnings release with 8 out of 16 analysts covering the stock revising their estimates upwards and none lowering their projections in the last 30 days.

On a reported basis, including one-time items, earnings came in at $1.13, up 34.5% from 84 cents posted in the year-ago quarter.

The shares of J.C. Penney rose 2.6% or 95 cents to $37.50 in pre-market trading.

Behind the Headline

The quarterly sales of $5,703 million came ahead of the Zacks Consensus Estimate of $5,638 million, and rose 2.8% from the prior-year quarter. Management had expected sales growth between 1.5% and 2.5% for the quarter. Total sales were adversely affected by the discontinuation of the publishing of Big Book catalogs. Internet sales through jcp.com grew 6.7% to $495 million in the quarter.

Comparable-store sales jumped 4.5% during the quarter, as against management's target of 3% to 4% growth. J.C. Penney'saddition of 'Liz Claiborne', 'MNG by Mango' and 'Call it Spring' brands to its portfolio helped drive sales and improve traffic.

AIG Posts Feeble Fundamentals

American International Group Inc. (NYSE: AIG) reported fourth quarter operating loss of $2.21 billion or $16.20 per share, slightly below the Zacks Consensus Estimate of a loss of $16.98 per share but higher than the net loss of $1.34 billion or $9.88 per share in the year-ago quarter.

On a GAAP basis, AIG reported a net income of $11.18 billion or $16.60 per share as compared with a net loss of $8.87 billion or $65.51 per share in the year-ago quarter.

The reported quarter included deferred income tax valuation allowance charge, FRBNY total amortization and net realized capital losses on SunAmerica DAC, marginally offset by gain from divested businesses and discontinued operations along with non-qualifying derivative hedging and net realized capital gains.

Although results appeared sluggish due to AIG's ongoing business restructuring process, stability was retained in insurance operations that drove the book value per share during the quarter. AIG's ALICO, Nan Shan, American General Finance Inc. (AGF), AIG Star and AIG Edison are reported as discontinued operations post the sale of these units.

Further, divestiture of assets and focus on core life and property-casualty business has helped it become the top life insurer position in the US. However, growth prospects are expected to remain weak in the upcoming quarters based on intense competition and a dull economy. AIG incurred a tax expense of $4.8 billion in the quarter, primarily resulting from the gains related to ALICO, AIA and the sale of the Otemachi Building in Japan.

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