Zacks Bull and Bear of the Day Highlights: Bayer, J. C. Penney Company, Nike Inc., Adidas and Brown Shoe Company Inc.
CHICAGO, Sept. 21, 2012 /PRNewswire/ -- Zacks Equity Research highlights Bayer (BAYRY) as the Bull of the Day and J. C. Penney Company (JCP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nike Inc. (NKE), Adidas AG-ADR (ADDYY) and Brown Shoe Company Inc. (BWS).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=10499.
Here is a synopsis of all five stocks:
Encouraged by strong second quarter 2012 results, upbeat guidance and a series of positive subsequent developments, we are upgrading Bayer AG ADRs (BAYRY) to Outperform. Bayer performed impressively in the second quarter of 2012 driven by increased revenues. Management also raised guidance for 2012 revenues as well as earnings.
Subsequently, Bayer has witnessed a series of positive developments, including progress regarding oncology candidate regorafenib and label expansion efforts for Xarelto. Moreover, the decision of Bayer's HealthCare unit to buy Teva's animal health business in the US is also a positive move.
Consequently, we believe that the current price represents an attractive entry point for long-term investors. Over the last five years, Bayer has traded in a range of 9.1x to 28.3x trailing 12-month earnings. Our target price of $103.00 is based on approximately 15.1x our 2012 EPADS estimate of $6.81.
J. C. Penney Company (JCP) posted a second-quarter 2012 loss of $0.37 per share that fared worse than the earnings of $0.19 in the year-ago quarter and the Zacks Consensus Estimate of loss of $0.24. Following disappointing quarterly results, the company hinted that it will not achieve its earlier guidance of $2.16 per share for fiscal 2012. Total revenue also fell 22.6%, whereas comp sales slid 21.7%.
We observe that despite a well-diversified supplier base, the company has been struggling against other retail chains. In order to uplift itself and to become America's favorite store, J. C. Penney announced slew of measures, which include new pricing strategy, fresh logo, strategic merchandise initiatives, cost reduction and enhancement of customers shopping experience.
However, the dismal results dashed those hopes at least for the near term. Moreover, an erratic consumer behavior and a sluggish economic recovery still remain matters of concern. Consequently, we downgrade our recommendation on the stock to Underperform.
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Nike Boosts Shareholder Return
In a bid to enhance shareholders' value, Nike Inc. (NKE) recently announced that its Board of Directors has agreed to enhance its share repurchase program. Under the new authorization, the company will repurchase $8 billion worth of its Class B common stock over a period of four years. As of August 31, 2012, Nike had nearly 361 million shares of Class B common stock.
Currently, the company is on the verge of completing its ongoing $5 billion share repurchase program, which was authorized in September 2008. The company's decision to increase its share repurchases authorization clearly suggests its ability to generate liquidity and its potential to improve in the long run.
Nike has always been improvising its shareholders' wealth through share repurchase and dividend policies. It has repurchased approximately 167 million shares and returned more than $10 billion to its shareholders over the past ten years.
Nike, which competes with Adidas AG-ADR (ADDYY) and Brown Shoe Company Inc. (BWS), has been actively managing its cash flows by generating healthy free cash, making prudent capital investments and enhancing shareholders' return. The company repurchased shares worth of $245 million in the fourth quarter of fiscal 2012 and ended with cash and cash equivalents of $2,317 million.
Further, Nike is going to report its first quarter fiscal 2013 results on September 27, 2012. The current Zacks Consensus Estimated earnings and sales for the quarter stand at $1.12 per share and $6,425 million, respectively.
Nike is the industry leader in the U.S. footwear and athletic apparel industry. In an attempt to expand its global reach and market share, it is aggressively expanding its operations in the emerging markets while focusing on direct-to-consumer business and other brands, which augur well for future operating performance. In fiscal year 2012, Nike showed significant strength by innovating its products and services that helped boost its top lines. Moreover, the company's near-to-debt free balance sheet offers financial flexibility driving future growth. Currently, Nike maintains a Zacks #2 Rank, which translates into a short-term Buy rating.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=10499.
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