Zacks Bull and Bear of the Day Highlights: American Public Education, Koninklijke Philips Electronics, Advanced Micro Devices, Mosaic and Nokia
CHICAGO, Sept. 30, 2011 /PRNewswire/ -- Zacks Equity Research highlights American Public Education (Nasdaq: APEI) as the Bull of the Day and Koninklijke Philips Electronics (NYSE: PHG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Advanced Micro Devices (NYSE: AMD), Mosaic (NYSE: MOS) and Nokia (NYSE: NOK).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
American Public Education's (Nasdaq: APEI) focus on serving military and public service personnel, high student referral rates and accreditation enable it to consistently deliver impressive top and bottom lines, as reaffirmed by its second-quarter 2011 results. The company's sustained effort to expand educational programs helps it to boost enrollments.
Surprisingly, the company has predicted a 35% growth in new student enrollments for third-quarter 2011, despite the regulation proposed by the Department of Education. The company now is primarily focusing on increasing net registrations from civilian students, to safeguard itself from the adverse impact of a fall in military registrations due to increased military operations.
Further, American Public Education's debt-free balance sheet and healthy cash reserves augur well for future operating performance. Currently, we have a long-term Outperform recommendation on the stock. Our target price of $38.00, 19.1X 2011 EPS, reflects this view.
We are downgrading our recommendation on Koninklijke Philips Electronics (NYSE: PHG) to Underperform with a $16 target price. The company had a weak second quarter with revenues declining 3.4% primarily due to lower license revenues and a decline at the Lifestyle Entertainment segment.
Furthermore, the company posted a net loss of $1.9 billion during the recently concluded quarter due to a goodwill impairment charge of $2.0 billion. The net cash flow also declined significantly compared to the prior year, attributable to higher working capital outflow related to higher vendor payments.
Our long-term Underperform recommendation on the ADRs indicates that they will perform below the broader U.S. equity market over the next six to twelve months. Our target price is $16.00 or 14.5X 2011 EPS, which is well within the historical range.
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Positive Jobless Claims, GDP
We finally have some all-around favorable data for the market, with a positive revision for the second quarter GDP growth rate and an unusually strong Jobless Claims report. We even have something resembling positive news out of Europe, with the German parliament approving the expansion of the Euro-zone rescue fund.
We got a better-than-expected upward revision to the second quarter GDP growth rate -- from 1% to 1.3%. This is the third and last look at the second quarter GDP growth rate, which was revised down to 1% from 1.3% the last time around. Notwithstanding this back and forth in the headline growth rate, the report's internals have improved in each iteration.
The most reassuring part of the GDP report, if you can call anything positive in an economy that is growing at a 1.3% pace, is the trend in consumer spending. The growth rate in consumer spending was revised upwards to 0.7% from 0.4% the last time around. Please don't forget that consumption growth was originally reported at the almost flat 0.1% rate in the first look at the second quarter GDP.
Consumer spending accounts for more than two thirds of the economy. So a positive revision to this key element trumps all the other moving pieces. This shows that the economy had a lot more momentum on the consumption side than was originally estimated, which bodes well for the growth momentum in the current quarter.
We know that for consumer spending to pick up, the labor market has got to start showing some vigor. And we saw plenty of reasons to be hopeful on that count from this morning's weekly Jobless Claims numbers. Weekly Jobless Claims dropped significantly more than expected last week to get below the all-important 400K level for the first time in awhile. The 37K drop in claims last week takes the weekly claims level to 391K from 428K. To put it in context, the current weekly claims level is the lowest since early April.
We had started seeing a stalling in the improving trend in this key series over the last two months, after a steady downtrend in the second quarter. If today's number is a sign of things to come -- something that can never be taken for granted -- then it would indicate a material shift in the economic landscape. An improving labor market and positive evidence of resilient consumer spending will go some way reducing recessionary odds.
In corporate news, we have negative pre-announcement from Advanced Micro Devices (NYSE: AMD) and a positive earnings surprise from Mosaic (NYSE: MOS), the fertilizer company. And Nokia (NYSE: NOK) is reportedly planning further job cuts to steady its cost base in a fast-changing global handset market.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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