CHICAGO, June 26, 2012 /PRNewswire/ -- Zacks Equity Research highlights Avis Budget Group, Inc. (Nasdaq:CAR) as the Bull of the Day and Expeditors International (Nasdaq:EXPD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Delta Air Lines Inc. (NYSE:DAL), Phillips 66 (NYSE:PSX) and ConocoPhillips (NYSE:COP).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Sustained focus on productivity and cost containment initiatives, along with better travel trends and lower fleet costs drove Avis Budget Group, Inc. (Nasdaq:CAR) to post better-than-expected first-quarter 2012 results. The quarterly earnings of $0.12 per share increased over 9% from the prior-year quarter, beating the Zacks Consensus Estimate of a loss of $0.07.
Buoyed by improved quarterly results, the company expects fiscal 2012 earnings in the range of $2.35 to $2.65 per share, an increase of 42% - 61% from the previous fiscal year. We believe Avis Budget's strong focus on cost reductions will help the company to achieve its goal of higher operating margins. Moreover, the new sales force in the European region is expected to further augment its fiscal 2012 revenue.
Avis Budget's continuous effort of introducing new ideas and investments in technology upgrades will likely boost the company's performance. Currently, we are maintaining a long-term Outperform recommendation on the stock. Our target price of $16.00, 6.5x 2012 EPS, reflects this view.
We downgrade our recommendation on Expeditors International (Nasdaq:EXPD) to Underperform, given a lackluster performance in its first quarter. The company's adjusted earnings missed the Zacks Consensus Estimate and deteriorated from the year-ago level.
A dull revenue performance in air and ocean freight segments was primarily responsible for the underperformance. Total revenue was also lower than expected, given an unfavorable demand trend.
We remain concerned about the macroeconomic environment that continues to affect global demand trends, thereby hurting Expeditors' performance. Hence our Underperform rating with a price target of $35, based on 19.6x our earnings estimate for 2012.
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Delta Acquires Conoco Refinery
The second largest U.S. airline, Delta Air Lines Inc. (NYSE:DAL), has become the first carrier to enter into the fuel business with its purchase of the Trainer refinery in suburban Philadelphia from Phillips 66 (NYSE:PSX), the downstream business spin-off of ConocoPhillips (NYSE:COP). The deal was announced at the end of April.
This strategic move will help Delta to reduce fuel costs by $300 million per year and ensure availability of jet fuel in the Northeast, which is currently experiencing a shortfall in fuel supplies. The facility can currently refine about 185,000 barrels per day. Delta intends to spend $100 million to upgrade the facility that would, in turn, boost jet fuel production of about 52,000 barrels per day. The transaction would further provide about 80% of the company's domestic jet fuel needs.
The Trainer refinery was shut down last year as it was struggling to generate profitable business given rising crude prices, which were weighing on its margins. Delta expects to restart the production in September.
Delta spent an average of $2.86 per gallon for jet fuel prices last year, up 37% from $2.09 in 2007, according to statistics from the Bureau of Transportation. Based on this data, the company's fuel expenses accounted for 36% of total operating expenses last year.
Besides, Delta Air Lines is making continued efforts to reduce its fuel costs through fare hikes, hedging strategies and capacity cuts. The company is successfully passing the increased fuel costs to customers in the form of fare hikes. Delta is planning cautiously on capacity cuts, which is expected to be down 1–3% year over year in the second quarter, with a 1–3% reduction in both domestic and international capacity. However, Pacific capacity is expected to grow 7–9% on the resumption of Detroit-Narita flights and the normalization of capacity for Japan.
Additionally, Delta Air Lines is involved in fuel hedging strategies, which provide a cushion to the rising fuel prices. Delta Air Lines is 70% hedged for the second quarter at a jet fuel price of $3.05–$3.40 per gallon and 40% hedged for the third quarter at a jet fuel price between $3.05 and $3.45 per gallon using collars and call spreads.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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