Zacks Bull and Bear of the Day Highlights: Cerner, China Life Insurance, Sara Lee, Kraft Foods and Tyson Foods
CHICAGO, May 2, 2012 /PRNewswire/ -- Zacks Equity Research highlights Cerner Corporation (Nasdaq: CERN) as the Bull of the Day and China Life Insurance Co., Ltd. (NYSE: LFC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sara Lee Corp. (NYSE: SLE),Kraft Foods Inc. (NYSE: KFT) and Tyson Foods Inc. (NYSE: TSN).
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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 reiterate our Outperform rating for Cerner Corporation (Nasdaq: CERN). Its first quarter earnings of $0.51 a share beat the Zacks Consensus Estimate. Cerner remains the trend setter among pure-play, publicly-traded healthcare IT (HCIT) vendors.
We believe Cerner is one of the better placed clinical technology vendors to benefit from high HCIT spending over the next few years. The company is diversified not only on a global basis but serves both hospitals and ambulatory outfits. Its integrated solutions have captured market share.
Long-term investors may consider Cerner, which serves a sizeable installed hospital base that requires composite clinically-focused applications complying with meaningful use requirements, reimbursement problems and complex coding challenges.
We are downgrading our recommendation on China Life Insurance Co., Ltd. (NYSE: LFC) to Underperform from Neutral due to the lack of any significant growth catalyst amid the prevailing interest rate, market and currency risks. China Life's full year 2011 earnings declined steeply from the prior year, due to low premium income and increased impairment losses.
Operating cash flow also declined substantially due to increased claim expenses and adverse changes in the fair values of securities. Despite a strong brand name, significant competition on the domestic front limits earnings growth.
Our six-month target price of $36.00 equates to 25.9x our earnings estimate for 2012. Combined with the $0.81 per ADR annual dividend, this target price implies an expected total return of a negative 8.7% over that period. This is consistent with our Underperform recommendation on the ADRs.
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Earnings Preview: Sara Lee
Sara Lee Corp. (NYSE: SLE), one of the world's leaders in manufacturing and marketing of a range of branded packaged meat, bakery and beverage products, is scheduled to report its third quarter 2012 financial results on Thursday, May 3, 2012, before the market opens.
The current Zacks Consensus Estimate for the quarter is pegged at 25 cents a share. The Zacks Consensus Estimate projects revenues to be $1,944 million for the quarter.
Second Quarter 2012 Recap
Sara Lee, which faces stiff competition from Kraft Foods Inc. (NYSE: KFT) and Tyson Foods Inc. (NYSE: TSN), posted earnings of 27 cents per share that climbed 28.6% from 21 cents in the year-ago period. Earnings also exceeded the Zacks Consensus Estimate of 25 cents by 8%.
Net sales for the quarter climbed 5.8% to $2,044 million compared with $1,932 million in the prior-year period. Revenues lagged the Zacks Consensus Estimate of $2,153 million.
(Read our full coverage on this earnings report: Mixed 2Q for Sara Lee).
Agreement of Estimate Revisions
Over the past 30 days, one of the ten analysts covering Sara Lee has revised estimate upwards for the current quarter. For fiscal 2012, two out of the ten analysts have revised their estimates, of which one increased and the other decreased.
Sara Lee is on track to split the company into two publicly traded firms: an international coffee and tea business and a North American retail, foodservice and specialty meats business. The spin-off, which is expected to be completed by June this year, is part of Sara Lee's plan to trim its portfolio in order to provide the best foundation for a strong and focused business.
Magnitude of Estimate Revisions
Over the past 30 days, the Zacks Consensus Estimate has increased from 24 cents to 25 cents per share for the current quarter. For fiscal 2012, the estimate increased by a penny to 93 cents over the same period.
The overall positive revisions by analysts indicate faith in the pending spin-off, which will allow the company to focus on its most profitable food and beverage businesses.
Earnings Surprise History
With respect to earnings surprises, Sara Lee has topped the Zacks Consensus Estimate in two of the preceding four quarters. Over the last four quarters, its earnings surprise ranged from a negative 4.00% to a positive 8.00%, with the average earnings surprise being a positive 3.29%.
Recommendation
We are encouraged by Sara Lee's focus on leveraging its consumer brands to generate sales growth. The company intends to bring in changes in the organizational structure and product portfolio, thereby improving operational efficiency.
However, commodity-price inflation and stiff competition in the branded food industry leave us concerned.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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