Zacks Bull and Bear of the Day Highlights: AutoNation, ArcelorMittal , The New York Times, InterActive and News Corp
CHICAGO, Aug. 28, 2012 /PRNewswire/ -- Zacks Equity Research highlights AutoNation, Inc. (NYSE:AN) as the Bull of the Day and ArcelorMittal (NYSE:MT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The New York Times Company (NYSE:NYT), InterActiveCorp(Nasdaq:IACI) and News Corporation (Nasdaq:NWSA).
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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:
AutoNation, Inc. (NYSE:AN) is the largest automotive retailer in U.S. The company s optimal brand and market mix is pulling new vehicle sales higher as the market revives. In the second quarter of 2012, the company's profits surged 35% to $0.66 per share, beating the Zacks Consensus Estimate by $0.07. Revenues of $3.9 billion were also higher than the Zacks Consensus Estimate of $3.7 billion.
The company's effort to expand its dealer network by investing in existing stores and service centers will help it outgrow peers. Further, recovery in auto sales and introduction of new products will boost the company's earnings.
As such, we have upgraded our recommendation to Outperform from Neutral and set a target price of $48.00. This is 19.4X our 2012 EPS estimate.
We are maintaining our Underperform recommendation on ArcelorMittal (NYSE:MT) following our assessment of its second-quarter 2012 results. Earnings beat the Zacks Consensus Estimate while revenues fell year over year and missed the forecast. ArcelorMittal remains affected by the challenging economic conditions in Europe.
The company is also exposed to volatility in steel pricing and tough competition, and has significant debt which is almost equal to its market capitalization. Steel industry oversupply due to imports and Chinese production has pressured prices and might further lead to price declines. Moreover, weakness in end markets due to macroeconomic uncertainty is another area of concern.
Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our price target of $15 is based on 13.2x our fiscal 2012 earnings estimate.
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NY Times to Sell About Group
The New York Times Company (NYSE:NYT) recently declared a cash deal to sell-off About Group, which it acquired in 2005, to InterActiveCorp(Nasdaq:IACI) for a consideration of $300 million. The transaction is expected to be completed in the coming several weeks. The media conglomerate plans to put in the cash proceeds for general corporate purposes.
The About Group segment comprises the websites About.com, ConsumerSearch.com and Caloriecount.com, along with other related businesses.
Management believes that About Group's search engine provided light to the company's diversified media portfolio. However, in an effort to offset the declining revenue and shrinking market share, management decided to sell About Group, which is facing declining revenues the last two quarters.
About Group's revenue dropped 8.7% in the second quarter to $25.4 million due to fall witnessed in both cost-per-click and display advertising. During the first-quarter, the revenue declined 23.1%. Adjusted operating profit plunged 30.4% to $10.2 million in the second quarter, reflecting a decline in advertising revenue.
Moreover, declining print advertising revenue, in an uncertain economy, compelled The New York Times Company to divest About Group, which would allow the company to re-focus on its core newspapers and concentrate on its online activities.
In order to survive in the tight advertising market, The New York Times Company aims to streamline its cost structure, strengthen its balance sheet and restructure its portfolio. Moreover, the company is offloading assets that bear no direct relation with the core operations.
As a part of its ongoing strategy, the media giant divested its remaining stake (210 Class B units) in the Fenway Sports Group in May 2012. The company also completed the sale of Regional Media Group, which has been struggling with shrinking advertising revenue.
The New York Times Company, which faces stiff competition from News Corporation (Nasdaq:NWSA), carries a Zacks #2 Rank that translates into short-term Buy rating for the next 1-3 months. We maintain our long-term 'Outperform' recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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