CHICAGO, May 15, 2012 /PRNewswire/ -- Zacks Equity Research highlights AGCO Corporation (NYSE:AGCO) as the Bull of the Day and AAR Corporation (NYSE:AIR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Viacom (Nasdaq:VIAB),News Corp. (Nasdaq:NWSA) and Time Warner (NYSE:TWX)
We reiterate our Outperform recommendation on AGCO Corporation (NYSE:AGCO) with a target price of $52. The company reported first quarter 2012 earnings of $1.21 per share, exceeding the Zacks Consensus Estimate of $0.86. Total revenues increased 26.5% to $2.27 billion, beating the Zacks Consensus Estimate of $2.08 billion.
The acquisition of GSI will help to place the company in a new market sector and extend its achievement in the agricultural industry. Moreover, it plans to invest in new products to expand its product line. In addition, its strategy of entering the emerging markets of Russia, CIS, China and Africa is slated to achieve significant growth.
Further, the demand for AGCO's products may increase as the U.S. Department of Agriculture expects worldwide corn production to rise 10% to 946 million tons in 2012. We set a 6-month target price of $52 per share, based on a P/E of 9.4x and our fiscal 2012 earnings estimate.
We had downgraded our recommendation on AAR Corporation (NYSE:AIR) from Neutral to Underperform. We have been witnessing an overcapacity in the aerospace market, aggravated by intense competition from the big and small industry players.
Risk of lower military operations, delayed aircraft delivery and unscheduled maintenance inspections raise costs. In addition, inadequate debt financing, unfavorable aircraft lease agreement and currency fluctuations constrain profitability considerably.
The company reported net income per diluted share of $0.50, beating the Zacks Consensus Estimate by a penny. However, our $15.00 target price, 8.2x 2012 EPS, reflects our downgrade in recommendation.
Following the second quarter earnings announcement on May 3, most of the analysts covering Viacom Inc. (Nasdaq:VIAB) have raised their estimates mainly based on the huge number of movies slated to release in 2012 coupled with improved advertising spending in the U.S. due to the upcoming presidential election to be held in 2012.
Second Quarter Highlights
Net income from continuing operations in the quarter was $588 million or $1.08 per share compared with $376 million or 63 cents per share in the comparable prior-year quarter. Adjusted EPS of 98 cents was also above the Zacks Consensus Estimate of 90 cents.
Total revenue in the reported quarter was $3,331 million, up 2% year over year and also beat the Zacks Consensus Estimate of $3,317 million. The year-over-year upside in revenue was mainly attributable to the strong performance of the Media Networks affiliated revenue segments. Quarterly operating income was $932 million, up 22.6% year over year.
Agreements of Analysts
Although most analysts are positive for 2012, out of the 24 analysts covering the stock in the last 7 days, none raised estimates for the third quarter of 2012 but eight analysts reduced the same. For the fourth quarter of 2012, seven analysts have raised the EPS estimate but only one analyst slashed the estimate over the last 7 days.
For fiscal 2012, out of the 28 analysts, eight analysts increased the estimates while none reduced the same. However, for 2013, out of the 27 analysts, four analysts revised the estimate upward while two moved in the opposite direction.
Currently, the Zacks Consensus EPS Estimate for the second quarter of 2012 is pegged at $1.03. The projected annual growth rate is 4.08%. Similarly, for the third quarter, the current Zacks Consensus EPS Estimate of $1.24 reflects a year-over-year gain of 16.86%.
Magnitude of Estimate Revisions
Over the last 7 days, the Zacks Consensus Estimate for the third quarter of 2012 dropped 4 cents from the earlier estimate of $1.07. However, for the fourth quarter of fiscal 2012, the Zacks Consensus Estimate was 2 cents above the earlier estimate of $1.22.
For fiscal 2012, the estimate went 2 cents above the previous estimate of $4.27 in the last 7 days, while in fiscal 2013, it was in line with the prior estimate of $4.99.
Over the last four quarters, Viacom has outdone the Zacks Consensus Estimate by an average of 7.22%. In the last quarter, the company produced an earnings surprise of 8 cents or 8.89%.
The current Zacks Consensus Estimate for the third and fourth quarters of 2012 reflect 0.00% earning surprise (indicating that the company should report in line with estimates in both quarters).
Fiscal 2012 should also show an earnings surprise of 0.00% but fiscal 2013 has a downside risk of 0.60%.
We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominately cable networks-based business model, strong affiliate fee revenue growth, global brands, strong share repurchase plan, multi-platform content and the fact that it is a player in one of the fastest-growing markets (traditional ad media).
However, stiff competition from other media companies like News Corp. (Nasdaq:NWSA) and Time Warner Inc. (NYSE:TWX) along with slow economic recovery may act as headwinds for the stock going forward. We, therefore, maintain our long-term Neutral recommendation on Viacom.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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