Zacks Bull and Bear of the Day Highlights: CBRE Group, AAR, Target, Wal-Mart Stores and Costco Wholesale

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Apr 27, 2012, 09:30 ET

CHICAGO, April 27, 2012 /PRNewswire/ -- Zacks Equity Research highlights CBRE Group, Inc. (NYSE: CBG) as the Bull of the Day and AAR Corporation (NYSE: AIR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Target Corporation (NYSE: TGT),Wal-Mart Stores Inc. (NYSE: WMT) and Costco Wholesale Corporation (Nasdaq: COST).

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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 have changed our long-term recommendation for CBRE Group, Inc. (NYSE: CBG) from Neutral to Outperform as we anticipate the stock to perform well above the broader market. CBRE Group reported relatively strong first quarter 2012 results, with recurring earnings beating the Zacks Consensus Estimate by $0.01.

CBRE Group is the largest commercial real estate services firm, with leading full-service operations in major metropolitan areas throughout the world. The company operates as a single-source provider of real estate solutions with a broad range of real estate product and services and an extensive knowledge of domestic and international real estate markets.

Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $22.00, 17.5X 2012 EPS, reflects this view.

Bear of the Day:

We have downgraded our recommendation on AAR Corporation (NYSE: AIR) from Neutral to Underperform. We have been witnessing an overcapacity in the aerospace market, aggravated by intense competition from the big and small industry players.

Risk of lower military operations, delayed aircraft delivery and unscheduled maintenance inspections raise costs. In addition, inadequate debt financing, unfavorable aircraft lease agreement and currency fluctuations constrain profitability considerably.

The company reported net income per diluted share of $0.50, beating the Zacks Consensus Estimate by a penny. However, our $15.00 target price, 8.2x 2012 EPS, reflects our downgrade in recommendation.

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Target Continues Remodeling Program

Target Corporation (NYSE: TGT) plans to sustain its remodeling program at existing general merchandise locations this year by adding an expanded food layout along with a deeper assortment of dry dairy and frozen items, improved store layout and enhancement of in-store shopping experience across departments, such as apparel, home, beauty, shoes and baby.

During fiscal 2011, Target remodeled 400 locations, bringing the total count to 900 stores. In 2012, the company plans to complete about 230 more general merchandise remodels in the U.S. that will result in more than 1,100 remodeled stores by the end of the year.

Target recently initiated remodeling program across 90 general merchandise stores located in the markets of Des Moines, Iowa; El Paso, Texas and Dayton, Ohio, which is slated to be completed on June 24, 2012. Currently, about 1,000 stores having a dedicated floor space of approximately 10,000 square feet are offering expanded grocery items.

Target is persistently trying every means to keep afloat in this sluggish economic environment. The company's P-fresh remodel program, 5% REDcard Rewards program, City Target stores, The Shops at Target initiatives and its foray into the foreign market are its arsenal to safeguard itself from any unprecedented events.

Target's efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy, and new merchandise assortments, should drive comparable-store sales and operating margins in the long term. We expect the company to gain market share, and believe that more focus on consumable items should boost sales and earnings in a sluggish consumer environment.

The company's long-term objective is to attain $100 billion or more in sales and $8.00 or more in earnings per share by 2017.

The economy has not yet recovered fully. It is evident that the company's customers remain sensitive to macroeconomic factors, including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may affect their discretionary spending, and in turn curtail the company's growth and profitability.

Moreover, a greater concentration of the company's revenue generating capabilities in limited regions of the United States poses a competitive threat to Target, compared with Wal-Mart Stores Inc. (NYSE: WMT) and Costco Wholesale Corporation (Nasdaq: COST), which are geographically diverse and more resourceful.

Consequently, Target is focusing more on store renovations and improving store sales productivity. Further, with the ever-changing consumer preferences, the company feels the need to adapt to the demands of time and consider consumer-oriented strategies.

Currently, we maintain our long-term Neutral recommendation on the stock. Moreover, Target retains a Zacks #3 Rank that translates into a short-term Hold rating.

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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