Zacks Bull and Bear of the Day Highlights: Boston Scientific, StanCorp Financial Group, Johnson & Johnson, Microsoft and Target

Aug 09, 2011, 13:33 ET from Zacks Investment Research, Inc.

CHICAGO, Aug. 9, 2011 /PRNewswire/ -- Zacks Equity Research highlights Boston Scientific (NYSE: BSX) as the Bull of the Day and StanCorp Financial Group (NYSE: SFG) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Johnson & Johnson (NYSE: JNJ), Microsoft (NASDAQ: MFST) and Target (NYSE: TGT).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.

Here is a synopsis of all five stocks:

Bull of the Day:

Boston Scientific (NYSE: BSX) reported second-quarter adjusted EPS of $0.12 on revenues which increased 2.4% to $1.975 billion. Both numbers beat the Zacks Consensus Estimates. Following the launch of its Ion stent in the US, Boston Scientific increased its market share in the US to 50%. Moreover, this launch also sets the stage for the launch of Promus Element in the US, much ahead of the original timeline of June 30, 2012.

Meanwhile, the company announced a restructuring program to increase productivity. Boston Scientific also announced a $1 billion share repurchase program and raised its earnings guidance. The company's focus on emerging markets is also likely to boost revenues further.

However, the competitive landscape continues to be tough in addition to slower procedural volume and challenges in the CRM market. Given these factors, we upgrade the stock to Outperform.

Bear of the Day:

We are downgrading the recommendation on StanCorp Financial Group (NYSE: SFG) to Underperform on the back of second quarter results. The quarter experienced a higher level of claims incidence in the Insurance Services segment, driving less favorable claims experience. The company reported second quarter operating earnings way behind the Zacks Consensus Estimate.

We expect delinquencies on commercial mortgage loans to remain modestly high in the foreseeable future. Moreover, we suspect organic growth will remain restricted in the near term, given the sluggish economic environment and challenging labor market conditions.

The quantitative Zacks Rank for StanCorp is currently #5, indicating downward pressure on the shares over the near term. Short interest is currently 7.9 days. Our current six-month target price implies a negative return of about 7.6% over that period.

Latest Posts on the Zacks Analyst Blog:

“Poor Standards”

On Friday night, Standard and Poor’s downgraded U.S. Government debt to AA+ from AAA. My initial reaction is “So what?”

This is just an opinion from a bunch of folks that have often been disastrously wrong in the past. They handed out AAA ratings like candy on Halloween for lousy mortgage-backed securities, and are thus one of the prime culprits for the financial meltdown (along with their competitors Moody’s and Fitch).

They had Enron rated AAA until just days before they wrote the eleventh chapter in their history. Not only that, but it is reported that they made a $2 trillion math mistake. In light of all that, perhaps a better name for the firm is "Poor Standards."

Does this mean that U.S. interest  rates are going to skyrocket? Probably not. They downgraded Japan a long time ago, and Japan has even lower long-term interest rates than we do.

A Political Decision

However, their reasoning in doing the downgrade has a bit of merit. S&P knows that as long as the federal debt is denominated in dollars (and last time I looked, we had not issued a lot of debt denominated in euros or yen or pesos), the only reason the U.S. could ever default is a political decision to do so. The government owns a printing press and can print all the dollars it wants. Those dollars can be used to pay off any amount of debt you can name.

Could this be inflationary? Of course, but that does not change the fact that they would still be dollars and would be a valid means of payment for the debt. While I think that Johnson & Johnson (NYSE: JNJ) and Microsoft (NASDAQ: MSFT) are fine companies, it is laughable to assert that they are better credit risks than the full faith and credit of the United States of America.

Target Sustains Healthy Sales

Target Corporation (NYSE: TGT), the operator of general merchandise and food discount stores in the United States, recently posted better-than-expected sales results for the four-week period ended July 30, 2011.

The rise in comparable-store sales was at the high end of management’s expectation, reflecting strong sales in grocery category coupled with sales growth in health and beauty products. Besides, management hinted that back-to-school sales remained robust.

The company’s comparable-store sales jumped 4.1% for July 2011, following an increase of 4.5% in June 2011, compared with a growth of 2% in July 2010. Year-to-date comparable-store sales moved up 2.9% versus an increase of 2.2% in the prior-year period.

Based in Minneapolis, Minnesota, Target announced that net retail sales for July rose 5.6% to $4,840 million from $4,585 million reported in the prior-year period. Year-to-date, sales climbed 3.9% to $31,475 million.

Targets strategic initiatives such as REDcard Rewards program and P-fresh in-store food and grocery sections should help drive comparable-store sales and operating margins in the long term. We believe that increased focus on consumables will boost sales in a sluggish retail environment.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

About the Bull and Bear of the Day

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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