Zacks Bull and Bear of the Day Highlights: CB Richard Ellis, RLI, Wells Fargo & Company, Northern Trust and Visa
CHICAGO, Jan. 20, 2011 /PRNewswire/ -- Zacks Equity Research highlights: CB Richard Ellis Group (NYSE: CBG) as the Bull of the Day and RLI Corporation (NYSE: RLI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo & Company (NYSE: WFC), Northern Trust Corporation (Nasdaq: NTRS) and Visa Inc. (NYSE: V).
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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:
We are changing our long-term recommendation for CB Richard Ellis Group (NYSE: CBG) from Neutral to Outperform as we anticipate it will perform well above the broader market. In the last 30 days, the magnitude of fiscal earnings estimates have increased, driven by hard-to-replicate intellectual capital and technology resources that develop and deliver superior analytical, research and client service tools.
CB Richard Ellis is the largest commercial real estate services firm, and operates as a single-source provider of real estate solutions with an extensive knowledge of domestic and international real estate markets. CB Richard Ellis is the global market leader in commercial real estate brokerage and advisory services for property leasing and sales, forecasting, valuations, origination and servicing of commercial mortgage loans, as well as project and real estate investment management.
Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $27.00, 27.3X 2011 EPS, reflects this view.
We are downgrading RLI Corporation (NYSE: RLI) to Underperform based on higher expenses and lackluster performance of the Casualty segment, though third quarter earnings outperformed the Zacks Consensus Estimate. The Casualty segment was under pressure, owing to difficult economic conditions, especially in construction and transportation-related coverages.
We expect the company's underwriting discipline to bode well as the market stabilizes in a restrictive premium growth environment. RLI also scores strongly with rating agencies. Continued dividend increases and share repurchases further reflect a solid capital position.
Our six-month target price of $47.00 equates to 10.2x our earnings estimate for 2010. Combined with the annual dividend of $1.16 per share, this target price implies a negative return of about 8.8% over that period. This is consistent with our long-term Underperform recommendation on the shares.
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Wells Fargo a Penny Short
Wells Fargo & Company's (NYSE: WFC) fourth quarter 2010 operating earnings came in at 61 cents per share, almost in line with the Zacks Consensus Estimate of 62 cents and slightly above the prior quarter's 60 cents though significantly higher than the year-ago quarter's earnings of 8 cents per share.
Quarterly results reflect a better-than-expected increase in revenues. Also, the company experienced a decent reserve release of $850 million as a result of improved portfolio performance. Yet an increase in expenses played the spoil sport and therefore the results did not impress.
However, for full year 2010, the company reported earnings of $2.21 per share, 3 cents below the Zacks Consensus Estimate of $2.24 but substantially above the prior year's earnings of $1.75 per share.
Fourth quarter net income applicable to common stock came in at $3.41 billion compared with $3.34 billion in the prior quarter and $2.82 billion in the prior-year quarter. Full-year net income reported was $12.4 billion, up from $12.3 billion in the prior year.
During the quarter, Wells Fargo earned $21.5 billion, up 2.9% sequentially and above the Zacks Consensus Estimate of $21.1 billion, helped by a broad-based revenue growth. Sequential growth was recorded in asset management, auto dealer services, brokerage, capital finance, commercial banking, commercial mortgage originations, commercial real estate, debit card, equipment finance, global remittance, insurance, international, investment banking, mortgage banking, real estate brokerage, shareowner services, SBA lending and wealth management.
Segment wise, Wholesale Banking results were strong and were up 11% from the prior quarter while Community banking results were almost flat compared with the prior quarter. Earnings from the Wealth, Brokerage and Retirement segment were however, down 23% sequentially.
Northern Trust Lags Estimates
Northern Trust Corporation's (Nasdaq: NTRS) fourth quarter earnings of 64 cents per share were below the Zacks Consensus Estimate of 71 cents per share. The decrease was attributable to low interest rate environment, which in turn, was negatively affected by net interest income and trust fees.
In the fourth quarter of 2010, earnings per share benefited from the reduction of an indemnification liability related to Visa Inc. (NYSE: V). The related pre-tax expense reduction summed up to $20.3 million ($12.9 million after tax, or $.05 per common share).
Last year, the company reported a profit of 82 cents per share and 64 cents in the prior quarter. Net income reported was $157.1 million compared with net income of $200.3 million in the prior-year quarter and $155.6 million in the prior quarter.
For fiscal 2010, the company reported earnings of $2.74 per share and were below the Zacks Consensus Estimate of $2.79 per share. Net income reported was $669.5 million compared with a net income of $864.2 million in the prior year.
Performance in Detail
Net interest income totaled $232.3 million in the quarter, down 5% year over year. Net Interest margin (NIM) was 1.30%, down from 1.43% in the prior-year quarter. The decline in NIM and the resulting impact on net interest income resulted from a significant drop in interest rates.
Further, the lingering low interest rate environment has resulted in condensed yields on the securities portfolio since maturing investments have been replaced by lower yielding assets. In addition, loan demand continued to weaken, limiting balance sheet growth.
For full year 2010, net interest income was $957.8 million, down 8% year over year.
In the fourth quarter of 2010, non-interest income declined 5% year over year to $674.1 million due to decrease in trust, investment and other servicing fees and treasury management fees. These decreases were partially offset by an increase in foreign exchange trading income, security commissions and trading income and other operating income. For fiscal 2010, non-interest income inched down 2% year over year to $2,729.0 million.
Total revenue reported was $906.4 million in the quarter, well below the Zacks Consensus Estimate of $923.0 million due to lower interest and non-interest income. For fiscal 2010, total revenue was $3,686.8 million, down from the Zacks Consensus Estimate of $3,708.0 million.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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