Zacks Analyst Blog Highlights: United Continental Holdings, Delta Air Lines, Southwest Airlines, AirTran Holdings and AMR

Mar 16, 2011, 09:31 ET from Zacks Investment Research, Inc.

CHICAGO, March 16, 2011 /PRNewswire/ -- Analyst Blog features: United Continental Holdings Inc. (NYSE: UAL), Delta Air Lines (NYSE: DAL), Southwest Airlines Co. (NYSE: LUV), AirTran Holdings (NYSE: AAI) and AMR Corporation (NYSE: AMR).


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Here are highlights from Tuesday's Analyst Blog:

NASDAQ to Big for NYSE Euronext?

To put forth a stronger bid for NYSE Euronext Inc. (NYSE: NYX), NASDAQ OMX Inc. (Nasdaq: NDAQ) is reportedly seeking lenders to fund the possible bid, which has been already offered more than $9 billion from Deutsche Boerse, last month.

According to the sources, Nasdaq has decided to make an offer of about $5 billion in debt from lenders led by Bank of America Corporation (NYSE: BAC) and $5 billion in asset sales. Nasdaq has also involved IntercontinentalExchange Inc. (NYSE: ICE), which is planning to take NYSE Euronext's European assets.

Recently, the stock exchange industry has picked up pace with the changing market needs to cut costs and offset lower profitability from equities and consequently become a hub for merger and acquisition (M&A) activities.

But the report of NYSE Euronext - Deutsche Boerse deal on February 15 has been ground-breaking for NASDAQ, who is now desperately trying to retain its market value and strength in the industry. NASDAQ is also weighing other options of acquisitions or itself be acquired.

NASDAQ fears that the culmination of NYSE Euronext-Deutsche Boerse deal will diminish the former's size and global footprint.  The prospective deal's combined exchanges and clearing houses would generate an annual €4.0 billion ($5.5 billion) in revenue, more than any other exchange group.

Additionally, the combination of NYSE Euronext-Deutsche Boerse is expected to achieve extra savings of at least €100 million ($135 million), besides the synergies of €300 million, through cross-selling of products. This would also out beat all the exchange operators with the largest derivative business, representing 37% of net revenue against NASDAQ's 17% of net revenue as reported in 2010.

Hence, NASDAQ would either make a rival bid for NYSE Euronext or agree to merge with another international exchange, such as the London Stock Exchange Group Plc (LSE), as it is not possible for NASDAQ or ICE to buy NYSE Euronext individually and a lot of hurdles await the possibility of making a deal happening even if the companies bid jointly for NYSE.

Nike: Earnings Preview

The global leader of sports equipment and apparel maker, Nike Inc. (NKE) is expected to report its third quarter 2011 earnings on Thursday, March 17, 2011. The Zacks Consensus Estimate for the third quarter is $1.11 per share.

Our Recommendation

Taking into account Nike's dominance in the athletic industry, we believe that the company has the ability to drive growth consistently. The company's long-term strategy of aggressively expanding operations in the emerging markets and focus on direct-to-consumer business and other brands add to our positive sentiment.

The unique amalgamation of solid balance sheet strength, free cash flow generation capability and an efficient managerial team will enhance Nike's top-line performance in the coming quarter.

Nike's exposure to international markets however makes the firm susceptible to currency fluctuations. The strong U.S. dollar may adversely affect the top- and bottom-line results. The weakening of foreign currencies against the U.S. dollar may require the company to either raise prices or contract profit margins in locations outside of the U.S. An increase in product price may have a direct impact on consumer demand.

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