CHICAGO, May 20, 2011 /PRNewswire/ -- Zacks Equity Research highlights: CRA International (Nasdaq: CRAI) as the Bull of the Day and Regis Corp. (NYSE: RGS), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart (NYSE: WMT), Family Dollar (NYSE: FDO) and Kroger (NYSE: KR).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
CRA International's (Nasdaq: CRAI) first quarter 2011 earnings beat the Zacks Consensus Estimate, primarily owing to an uptick in utilization rate backed by successful restructuring actions. The company also continues to enhance its margin through its cost-saving initiatives.
In spite of clients' cautious aggregate spending, business conditions have started to improve with a healthy new business lead flow, an improved conversion rate, and an active pipeline of both litigation and management consulting businesses. Going forward, we believe the company's growth initiatives, healthy cash balance, new business wins, and international expansion will help generate positive results in the long term.
Hence, we upgrade the stock from Neutral to Outperform. Our six-month target price of $30.00 per share equates to about 20x our earnings estimate for 2011. With no dividend to supplement, this target price implies an expected return of 19.6% over that period.
Regis Corp.'s (NYSE: RGS) third quarter 2011 earnings missed the Zacks Consensus Estimate due to sluggish same-store sales and lower margin. The economic downturn has severely impacted the company's earnings in the last few quarters, and Regis now expects same-store sales to be in the range of -1% to +1% for 2012, reflecting persistent economic challenges.
Slower traffic due to economic concerns remains a drag on same-store sales. Moreover, Regis outlook remains below consensus, as consumer-visit pattern is not rebounding quickly. Consumers across the globe are cutting back on expenditures, which is resulting in a slowdown in spending and longer recesses between salon visits.
The company also faces lingering risk from fashion changes. Hence, we maintain our Underperform rating on the stock.
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Initial Jobless Claims Fall Again
Initial Claims for Unemployment Insurance fell by 29,000 last week to 409,000. However, last week was revised up by 4,000, so one could see it as a 25,000 decrease. This was better than the expected level of 420,000.
The trend in initial claims has been downward overall, although there have been some bumps along the way. Last month, they started to shoot back up again. That is a very worrisome trend, but this is the second week in a row of big declines (last week was down 44,000), so perhaps it was a blip, not a trend.
This week repaired some more of the damage. We will need a few more weeks of declines to really be sure the trend is still in the right direction. Let us hope the decline continues next week.
There have been several indicators lately that the recovery is losing steam, and while the direction this week was right, the level is not that encouraging. This is the sixth straight week we have been above the 400,000 level. Being below it as we were in March probably signaled the start of much more robust job growth. Now it looks like we are back to the "trading range" that initial claims were in for almost all of 2010. Initial claims had been generally trending down since they hit a secondary peak of 504,000 (after revisions) on August 14, 2010.
Track the 4-Week Moving Average
Since claims can be volatile from week to week, it is better to track the four-week moving average to get a better sense of the trend. Unfortunately, soothing it out this way does not make the picture that much more appealing. It rose by 1,250 to 439,000.
The four-week average staying above the psychologically important 400,000 level, is a very bad sign. However, it should start to decline in the next two weeks. As far as the domestic economy is concerned, robust job creation has been the last big part of the puzzle to fall into place.
It looks like the combined pressures from government budget cuts, the disaster in Japan and the increased oil prices are taking their toll. Things had been starting to look better on the jobs front, but the last few weeks numbers are a bit of a wet towel. Still, relative to a year ago, the four-week average is down by 23,250 or 5.0%.
The economy is growing, but is only starting to add a significant number of jobs and to put a dent in the huge army of the unemployed. The recent trend in initial claims suggests that that progress is rapidly slowing. The April employment report was encouraging, but we still have a very long way to go.
We added a total of 244,000 jobs according to the establishment survey, as the private sector total of 268,000 was offset by the loss of 24,000 jobs in state and local government. The unemployment rate rose to 9.0% from 8.8%, as the separate household survey was significantly weaker than the establishment survey. It was not due to more discouraged workers getting back into the labor force.
Extended unemployment benefits are, dollar of dollar, one of the most effective forms of economic stimulus there is. It is a pretty good bet that the people losing their extended benefits have depleted their savings and run up all the debt they can in trying to make ends meet. The maximum unemployment benefit works out to be just $20,800 per year, or less than the poverty line for a family of four. You think any of those people have been able to sock any of that away?
The people who get extended benefits tend to spend the money quickly on basic needs. This, in turn, keeps customers coming in the door at Wal-Mart (NYSE: WMT) and Family Dollar (NYSE: FDO). It means that, at the margin, some people are able to continue to pay their mortgages and thus helps keep the foreclosure crisis from getting even worse than it already is.
However, by the time they are well into extended benefits, they might also be spending food stamps as well as the unemployment check at Kroger's (NYSE: KR). These customers keep the people at Wal-Mart, Family Dollar and Kroger's -- and of course their competitors -- employed. It also keeps the people who make and transport those goods employed as well, although in that case much of the stimulus is lost overseas if the goods are imported.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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