Zacks Bull and Bear of the Day Highlights: Alliant Techsystems, Legg Mason, Microsoft, AutoZone and General Mills (GIS).
CHICAGO, Sept. 20, 2012 /PRNewswire/ -- Zacks Equity Research highlights Alliant Techsystems, Inc.'s (ATK) as the Bull of the Day and Legg Mason, Inc. (LM), Microsoft (MSFT), AutoZone (AZO) and General Mills (GIS).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=10494.
Here is a synopsis of all five stocks:
In the first quarter of fiscal 2013, Alliant Techsystems, Inc.'s (ATK) earnings and revenue beat the Zacks Consensus Estimate as well as year-ago numbers. The robust results were due to proper execution of the programs at the Defense Group and Sporting Group segments, increase in ammunition sales volume and steady order flow.
The company's strong financial position allows it to expand internally and through acquisitions. It has also increased shareholder value through payment of dividend and setting aside an amount for buybacks. We believe that Alliant s recently incorporated business segment realignment strategy enables it to improve its operating efficiency while benefiting margins.
However, the U.S. defense budget cutbacks could limit growth prospects of the company. We maintain our recommendation on the stock to Outperform. Our target price of $60.00 reflects a P/E multiple of 8.4 based on 2012 EPS.
We are downgrading our recommendation on Legg Mason, Inc. (LM) to Underperform from Neutral based on the company's ongoing managerial changes. However, the company's fiscal first-quarter 2013 earnings outpaced the Zacks Consensus Estimate, though a decrease in total revenues and client outflows were the dampeners.
In the near term, assets outflows are expected to remain a significant headwind. The performance of Legg Mason's funds has remained mixed since the peak of financial crisis and its shares did not rebound as compared with its competitors.
Our 6-month target price of $24.00 equates to about 17.4x the Zacks Consensus Estimate for fiscal 2013. Combined with the $0.44 per share annual dividend, this price target implies an expected negative return of 7.7% over that period, which is consistent with our Underperform recommendation on the shares.
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Housing, Japan Help Bolster Market
The surprise monetary easing by the Bank of Japan and positive-looking housing data on the home front provide a favorable backdrop for today's trading action. The Bank of Japan action is along the lines of what the Fed announced last week. But while the Fed's action is directed at the housing market, the Japanese action seems to be aimed at that country's exchange rate.
The August Housing Starts data came in a bit weaker than expected, down 1% to a seasonally adjusted annual rate of 750K vs. expectations of around 765K. The prior month's Starts tally was modestly revised down 733K from 746K, down 2.8%. Permits came in better than expected, down 1% to 803K, reversing the strong 6.7% gain to 811K in July.
The modest Starts disappointment notwithstanding, the level is not materially different from where it has been in recent months and generally consistent with the positive momentum on the housing front. Tuesday's strong gains in the homebuilder sentiment index pushed to its highest level since 2006, improving the odds that the sector's recovery was on track.
We should keep in mind, however, that the improvement is from a low base as the long-term historical average for Starts is around double the current level, while Starts at the 'bubbly' peak were north of the 2.2 million mark. We will probably never go back to that level, but we do need to see a sustainable recovery in this key sector of the economy. Sales and inventories have stabilized, but the concern is that the pricing recovery could get derailed due to the shadow inventory of foreclosure pipeline and the anemic labor market strength.
In corporate news, Microsoft (MSFT) announced a 15% increase in its quarterly dividend. On the earnings front,AutoZone (AZO) and General Mills (GIS) came out with better-than-expected bottom lines, but both missed revenue expectations.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=10494.
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