Zacks Analyst Blog Highlights: The Hershey Company, Hanesbrands, Genworth Financial Incorporation, MetLife, and Prudential Financial

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Feb 03, 2011, 09:30 ET

CHICAGO, Feb. 3, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: The Hershey Company (NYSE: HSY), Hanesbrands Inc. (NYSE: HBI), Genworth Financial Incorporation (NYSE: GNW), MetLife, Inc. (NYSE: MET) and Prudential Financial, Inc. (NYSE: PRU).

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Here are highlights from Wednesday's Analyst Blog:

Hershey Reports In-Line

The Hershey Company (NYSE: HSY) has posted fourth-quarter and full fiscal 2010 financial results. The adjusted quarterly earnings of 61 cents a share remained in line with the Zacks Consensus Estimate, but was down 3.2% from 63 cents earned in the prior-year quarter.

On a reported basis, earnings for the quarter came in at 59 cents, up 7.3% from 55 cents delivered in the year-ago quarter.

For the full year, the company reported adjusted earnings of $2.55 a share which was up 17.5% versus 2009. Full year earnings were also in line with Zacks Consensus Estimate.

A Look at the Top Line

Despite economic woes, Hershey sustained its top-line momentum with consumers preferring moderately priced candies compared to premium ones. Net sales of $1,482.8.1 million rose 5.4% from the prior-year quarter, buoyed by volume, along with fast-paced growth in emerging markets. Foreign currency translation favorably impacted sales by 0.6%.

Quarterly sales were well ahead of the Zacks Consensus Revenue Estimate of $1,473 million.

Annual revenues were up 7.0% to $5,671.0 million, year-over-year and were well ahead of the Zacks Consensus Estimate of $5,664 million.

Management ramped up its advertising spending for the quarter and fiscal 2010. For the fourth quarter, advertising expense increased 85% while for full year expense increased 62%.

Dividend Increase

On January 31, 2011, the Board of Directors increased the quarterly dividend by 7.8% to $0.345 per share on the Common Stock. In addition, the Board also declared a dividend of $0.3125 on the Class B Common Stock, reflecting an increase of $0.0225 per share. The dividends are payable on March 15, 2011 to shareholders on record as of February 25, 2011.

Hanesbrands Reports Strong Top Line

Hanesbrands Inc. (NYSE: HBI) reported fourth quarter and fiscal 2010 results. The company reported earnings of 29 cents a share compared to a loss of $0.01 per share in the prior year quarter. However, earnings were below the Zacks Consensus Estimate of 31 cents. Profits were primarily impacted by debt-refinancing expenses, higher cotton costs and promotional expenses.

For fiscal 2010, the company reported earnings of $2.16 per share compared to 54 cents in fiscal 2009. However, earnings were well below the Zacks Consensus Estimate of $2.66.

For fiscal 2011, the company earnings are expected to be in the range of $2.60 to $2.80 per share. The Zacks Consensus Estimate for 2011 is $3.03 per share.

Revenues and Operating Profits

Total revenue for the quarter jumped 16.3% to $1,149 million from $988 million in the year-ago period, attributed to promotional initiatives, increase in shelf space, growth in retail sales and inventory restocking. Further, the company's acquisition of Gear for Sports also contributed positively to the top line by 0.4%. Revenues were well ahead of the Zacks Consensus Estimate of $1,009 million.

Annual revenues grew 11.2% year-over year to $4.33 billion, which was below the Zacks Consensus estimate of $484 billion.

For fiscal 2011, the company expects continued double-digit growth in revenues in the range of $4.85 billion to $5.0 billion. Further, the company expects to implement price increases during 2011 primarily due to higher cotton costs. Price increases will vary from flat to low-single digits up to more than 30% for cotton-intensive categories.

Hanesbrands delivered operating margin expansion of 70 basis points (bps) to 7.1% in the quarter and 230 bps expansion to 9.3% for the year.

Genworth Suffers on Mortgage Loss

Genworth Financial Incorporation (NYSE: GNW) reported fourth-quarter 2010 operating loss of 28 cents, lagging the Zacks Consensus earnings estimate of 16 cents. Results were considerably lower than operating profit of 19 cents reported in fourth-quarter 2009. Operating loss was $135 million compared with operating income of $94 million in the year-ago period.

A substantially higher year-over-year loss at the U.S. Mortgage Insurance segment partially offset by better results at Retirement & Protection and at International resulted in the company's soft performance.

Net loss available to common shareholders was $161 million or 33 cents per share in the reported quarter compared with net income of $40 million or 8 cents available to common shareholders in the year-ago period. Net income in the reported quarter included investment losses of $26 million compared with an investment loss of $54 million in the prior-year period.

Full year 2010 operating income of 26 cents, lagged the Zacks Consensus Estimate earnings of 68 cents. Results compare unfavorably with 44 cents in 2009. Operating income was $126 million compared with $198 million in 2009.

Net income available to common shareholders in 2010 was $142 million or 29 cents per share, reversing the net loss of $460 million or $1.02 per share available to common shareholders in the year-ago period. Net income in the reported quarter included investment losses of $90 million and tax benefit of $106 million related to separation from the company's former parent.

Operational Performance

Genworth's total revenue improved 5.3% in the quarter to $2.59 billion from $2.46 billion in the prior-year quarter. Results surpassed the Zacks Consensus Estimate of $2.57 billion. An improvement in investment income as well as insurance and investment product fees largely drove the overall revenue climb.

2010 revenue was $10.09 billion, increased 11% from 2009. Results were slightly below the Zacks Consensus Estimate of $10.17 billion.

Premium revenue at Genworth declined 3.7% year over year to $1.47 billion in the quarter. 2010 premium revenue declined 2.7% year over year.

Net investment income increased 10% year over year to $863 million. For full year it increased 7.7% year over year to $3.3 billion.

Segment Update

Retirement and Protection: Net operating income increased to $138 million in the quarter from $129 million in fourth-quarter 2009. Earnings improvement at Wealth Management and Retirement Income largely contributed to the growth.

2010 operating income improved 14% year over year to $485 million.

International: Net operating income improved to $117 million in the quarter from $101 million in fourth-quarter 2009. Improved profit from Mortgage Insurance business in Canada and Australia coupled with solid results from Lifestyle Protection business drove the overall improvement.

Operating income was $434 million in 2010, up 13% from 2009.

U.S. Mortgage Insurance: Operating loss widened to $352 million compared with a loss of $74 million in the prior-year quarter. Higher reserves, higher paid claims, a decline in loan modifications and continued aging trends in the delinquency inventory affected results negatively.

Operating loss widened to $580 million from a loss of $459 million in 2009.

Our Take

We expect the elevated unemployment rate to continue pressuring the mortgage insurance business. Though the business is showing signs of improvement, the line is still experiencing losses. Additionally, the improvements in its other business lines are expected to be slow given the economy's sluggish recovery.

We maintain our Underperform recommendation on Genworth. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the shares over the near term.

Based in Richmond, Virginia, Genworth Financial offers a variety of products to customers in areas such as life insurance and lifestyle protection, long-term care insurance, annuities, asset management and mortgage insurance through financial intermediaries, advisors, independent distributors and sales specialists. The company competes with MetLife, Inc. (NYSE: MET) and Prudential Financial, Inc. (NYSE: PRU).

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