Zacks Bull and Bear of the Day Highlights: CIGNA, StanCorp Financial, Ford Motor, General Motors and Toyota Motor
CHICAGO, June 10, 2011 /PRNewswire/ -- Zacks Equity Research highlights: CIGNA Corp. (NYSE: CI) as the Bull of the Day and StanCorp Financial (NYSE: SFG), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford Motor Co. (NYSE: F), General Motors Co. (NYSE: GM) and Toyota Motor Corp. (NYSE: TM)
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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 upgrading our recommendation on the shares of CIGNA Corp. (NYSE: CI) to Outperform from Neutral on the back of improving enrollment expectations, expanding international business. Its first quarter core earning was fairly ahead of Zacks Consensus Estimates well as year ago earnings.
Better-than-expected results stemmed from strong earnings from across the board. EPS was also higher due to lower number of shares in the quarter compared with last year's quarter. We believe the recent acquisition of Vanberda International will improve the company's already thriving international operations, which is a key to future growth. Moreover, CIGNA has lower exposure to reform risks than other insurers and thus have an edge with respect to health care reform.
A strong balance sheet and adequate liquidity will further lead to continued share buybacks contributing to the bottom line. Also, membership enrollment has shown an increase. Our six-month target price of $58.00 equates to about 11.5x our earnings estimate for 2011.
When StanCorp Financial (NYSE: SFG) reported its first-quarter 2011 earnings, the company experienced a higher level of claims incidence in group long-term disability business, resulting in a soft performance. We expect delinquencies on commercial mortgage loans to remain modestly high in the foreseeable future.
StanCorp is facing a slowdown in the top-line growth, constrained by economic and competitive forces. Premiums remain pressured due to a group insurance market that continues to reflect a price-competitive sales environment and declines in wage growth and employment levels.
Our six-month target price of $37.00 equates to 8.4x our earnings estimate for 2011. Combined with the annual dividend of $0.86 per share, this target price implies a negative return of about 7.0% over that period. This is consistent with our Underperform recommendation on the shares.
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Ford Steers Toward Asia
Ford Motor Co. (NYSE: F) revealed that it expects global sales to expand by 50% to 8 million vehicles by 2015 given the potential growth in Asia, mainly China and India; and rising demand for small cars. The automaker anticipates small cars to account for 55% of the total sales by 2020 compared with 48% presently. One third of the small car sales is expected to come from Asia.
In order to support the increasing sales, Ford aims to triple its dealership to 340 in India and double in China (adding 100 dealerships this year) to 680 by 2016. In China, the company aims to grow its market coverage to 50% in 2015 from 22% presently.
Expansions in China
Ford plans to triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015. In order to develop these new models, Ford will build new plants raising its capital spending to about $6 billion annually by mid-decade from $3.9 billion in 2010 and the projected $5.5 billion in 2011.
Ford has been gearing to catch-up with its rivals in the world largest auto market. The automaker has been lagging behind the big players in the China, including General Motors Co. (NYSE: GM), Toyota Motor Corp. (NYSE: TM), Volkswagen AG, Hyundai Motor Co. and their respective joint ventures.
The company plans to expand its production capacity in China to 1.1 million vehicles by 2012. It will spend $1.6 billion to build 4 plants in the country by 2012. In contrast to this, GM, which already produces more than 2.8 million vehicles per year, has targeted to grow its production capacity to 3.7 million vehicles by 2015.
The Bottom Line
We are not surprised about Ford's highly optimistic expansion plan given the fact that it had already turned in $9.28 billion in profits in the past 2 years after incurring losses of $30.1 billion from 2006 to 2008.
The Zacks #3 Rank (Hold) company posted a roaring 48% rise in profit to $2.61 billion in the first quarter of 2011 from $1.76 billion in the same quarter of 2010. On earnings per share basis, profits rose 35% to 62 cents per share from 46 cents per share a year ago, thereby topping the Zacks Consensus Estimate by 12 cents per share.
However, Ford still looks up to U.S. and Europe for the lion's share of its sales and profits. Therefore, its effort to take the helm towards Asian countries, especially China, for its earnings growth needs to add a new dimension in its business strategy, which may not materialize easily.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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