Zacks Bull and Bear of the Day Highlights: Cardinal Health, Amerisafe, Accenture plc, Macy's and J. C. Penney

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Sep 29, 2011, 09:30 ET

CHICAGO, Sept. 29, 2011 /PRNewswire/ -- Zacks Equity Research highlights Cardinal Health, Inc. (NYSE: CAH) as the Bull of the Day and Amerisafe, Inc. (Nasdaq: AMSF) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Accenture plc (NYSE: ACN), Macy's Inc. (NYSE: M) and J. C. Penney Company Inc. (NYSE: JCP).

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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:

Bull of the Day:

We upgrade our rating on Cardinal Health, Inc. (NYSE: CAH) to Outperform. Earnings for the fourth quarter narrowly beat the Zacks Consensus Estimate. Cardinal's size and diversity partly insulate it from economic cycles. Its generics business continues to grow at a healthy pace.

Moreover, Cardinal's Pharmaceutical and Medical segments have revamped operations. The company continues to nurture its specialty platforms and engage in periodic tuck-in acquisitions. Although client and supplier concentration and reliance on group purchasing organizations remain areas of concern, the same is partly mitigated through long-term contracts.

While margins are thin in the bulk Pharma business, the business mix is evolving in favor of the non-bulk segment. Robust cash flow, high cash balance and revolving credit facility bestow liquidity for share repurchase and acquisitions.

Bear of the Day:

Amerisafe, Inc.'s (Nasdaq: AMSF) second-quarter earnings lagged the Zacks Consensus Estimate substantially, due to high underwriting loss and reduced investment income coupled with higher expenses, which significantly deteriorated the combined ratio, operating cash flow and ROE.

The top-line growth was only cushioned by higher premiums written and earned as other revenue sources failed to showcase growth. Though the pricing environment has witnessed some improvement, the company is expected to face uncertainty for the next few quarters as the market weakness continues to hurt payrolls.

Our six-month target price of $18.00 per share equates to about 14.6x our earnings estimate for 2011. With no dividend supplement, this target price implies a total expected negative return of 7.8% over that period, which is consistent with our Underperform recommendation.

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Accenture Beats, Guides Favorably

Accenture plc (NYSE: ACN) reported fourth quarter fiscal 2011 earnings per share (EPS) of 91 cents, beating the Zacks Consensus Estimate of 89 cents. Earnings increased 37.1% from the year-ago quarter aided by higher revenues and margins, lower share count and tax rate as well as favorable foreign-exchange rates. Shares jumped 3.82% in after-hour trade.

Revenues

Accenture reported fourth quarter net revenue of $6.69 billion, up 23.4% from $5.42 billion reported in the year-ago quarter. Net revenue was above the company's guided range of $6.40 billion to $6.60 billion. The results included an 8.0% positive impact from foreign currency. The meaningful growth in net revenue may be attributed to the significant increase in revenues across Accenture's operating segments and healthy demand for its offerings across the industries served.

Guidance

For the first quarter of fiscal 2012, Accenture expects net revenue in the range of $6.8 billion to $7.0 billion. This figure was arrived at after considering a 3% positive foreign-exchange impact. The Zacks Consensus Estimate for earnings is 92 cents.

For full fiscal 2012, net revenue growth is projected in the range of 7.0% to 10.0%. Expectations for new bookings are in the range of $28.0 billion to $31.0 billion. The company expects its operating margin in the range of 13.7% to 13.9% and the annual tax rate between 27.0% and 28.0%. Diluted EPS expectation is between $3.80 and $3.88. The earnings guidance is above the Zacks Consensus Estimate of $3.39.

Accenture also forecasts operating cash flow in the range of $3.6–$3.9 billion; property and equipment additions of roughly $490.0 million; and free cash flow in the range of $3.1 billion to $3.4 billion.

Recommendation

We find Accenture's fourth quarter results encouraging, as the bottom line modestly beat the Zacks Consensus Estimate. Based on improving business momentum and market share gains, Accenture provided upbeat revenue and earnings guidance for fiscal 2012. Moreover, we are encouraged by the steady flow of new business and believe that the trend will continue.

Apart from this, we remain optimistic about Accenture's deal wins from various industry verticals. We also think Accenture's recent acquisitions enrich its product portfolio.

Macy's Anticipates Good Holiday Season

Macy's Inc. (NYSE: M), one of the leading department store retailers in the United States, recently announced its plan to hire approximately 78,000 temporary staff workers for the upcoming holiday season, during which the company expects incremental sales.

The recent announcement marks an increase of 4% from 75,000 temporary staff hired last year. The new workforce will supplement the operations at its stores, distribution and call centers, and online fulfillment centers.

Macy's, which engages approximately 170,000 associates on a year-round basis, added that it has begun the hiring process for sales support positions. Further, it will start accepting applications for other seasonal positions at Macy's and Bloomingdale's in the coming week.

Macy's, which competes with J. C. Penney Company Inc. (NYSE: JCP), currently operates approximately 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

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

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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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