Zacks Bull and Bear of the Day Highlights: Honeywell International, France Telecom, Salesforce.com, Google and Microsoft

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Dec 19, 2011, 09:30 ET

CHICAGO, Dec. 19, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Honeywell International (NYSE: HON) as the Bull of the Day and France Telecom (NYSE: FTE) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce.com (NYSE: CRM), Google Inc. (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT).

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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 upgraded our rating from Neutral to Outperform on Honeywell International (NYSE: HON) with a target price of $62.00. The company delivered impressive third-quarter 2011 results as its performance gained momentum in all business segments. The robust third-quarter performance and improving market condition led the company to increase its 2011 guidance.

Sales in all segments witnessed positive growth. The company's revenue increased in all regions, with strong growth in the emerging markets. Honeywell's short-cycle businesses, as well as its commercial aerospace spares and residential and commercial retrofit businesses, are performing impressively well and are expected to support the company's future growth outlook.

Our long-term Outperform recommendation on the stock indicates that it will outperform the broader U.S. equity market over the next six to twelve months. Our target price is $62.00 or 14.0x 2012 EPS, which is well within the historical range.

Bear of the Day:

We are downgrading our recommendation to Underperform on France Telecom - ADR (NYSE: FTE). The company reported lackluster results in the first nine months due to weak mobile device sales in France, higher VAT rates and challenging economic conditions in Egypt and Cote d'Ivoire.

Although Conquests 2015, exiting of minority holdings, expanding in emerging markets and cost-saving programs remain in place, we believe persistently weak economic conditions, labor concerns, lower mobile termination rates and unfavorable regulatory measures across its key European markets might restrict the upside potential of the stock.

France Telecom continues to invest in the deployment of mobile broadband and fiber optic network in France, 2G and 3G roaming facilities as well as expansion in emerging markets. We believe these investments might increase the company's cost of operation, resulting in lower profits.

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Salesforce.com Makes Acquisition

Cloud computing major Salesforce.com (NYSE: CRM) recently announced that it has entered into an agreement to acquire human resource software company Rypple, which specializes in performance management and goal-setting.

The deal is subject to some customary conditions and is expected to be completed by the first quarter. The company, however, revealed that the acquisition will have a negligible impact on its fiscal 2013 revenues.

The to-be-acquired company, Rypple, offers a cloud-based platform that provides feedback to the employees regarding their performance and also helps management in evaluating employee performance. The acquisition is also expected to facilitate recruitment, management and employee empowerment in the social world.

Rypple already possesses a mobile application that helps managers to provide real-time feedback to staff, which helps in imparting training, achieving goals and publicly recognize colleagues. Rypple has a strong clientele, which includes the likes of Facebook, Gilt Groupe and Spotify.

The completion of this acquisition will mark Salesforce's entry into the human resource management module of the social enterprise. The company has been consistently introducing new products to expand its customer base, thus driving further profitability.

This apart, another popular module recently launched by the company is the Salesforce Chatter, an enterprise social collaboration application based on the Salesforce 2 platform. We believe that free add-on offerings like Chatter will enable Salesforce to differentiate its core offerings, thus making them more attractive for customers.

The company's rapid customer growth is a reflection of an increased adoption rate and market acceptance of enterprise cloud computing. Add-ons such as Chatter should continue to enhance its competitive advantage and position it well for future growth.

Moreover, we also believe that the acquisition of Radian6 in May will help the company to tap the huge growth opportunity in media monitoring. However, continuous R&D investments remain a concern as it could rationalize margins to a certain extent.

We also remain apprehensive about the strong competition in CRM application and cloud-computing areas. Google Inc. (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT) are worth mentioning, as they have been fighting to win government clients at local, state and federal levels to use their online e-mail and other applications that fit into the cloud-computing space. But the acquisition of Radian6 as well as its strong product line up will help the company sustain profitability, going forward.

Currently, Salesforce.com has a Zacks #3 Rank, implying 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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