Zacks Bull and Bear of the Day Highlights: Hubbell, Companhia Siderurgica Nacional, or CSN, FedEx Corporation, Boeing and United Parcel Service

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Jun 23, 2011, 09:30 ET

CHICAGO, June 23, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Hubbell, Inc. (NYSE: HUB.B) as the Bull of the Day and Companhia Siderurgica Nacional, or CSN (NYSE: SID), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on FedEx Corporation (NYSE: FDX), Boeing Co. (NYSE: BA) and United Parcel Service Inc. (NYSE: UPS).

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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:

Hubbell, Inc.'s (NYSE: HUB.B) first quarter results beat the Zacks Consensus Estimate. We were particularly encouraged by the strong growth in the industrial market, improving demand at utilities and pockets of recovery in the non-residential construction market.

While the stronger revenue growth, coupled with acquisitions and management's margin expansion strategies are currently being offset by commodity cost increases, the situation will improve as price hikes go into effect. Additionally, Hubbell's results bear a strong correlation to GDP growth, which remained positive in the first quarter of 2011.

We therefore have an Outperform recommendation on Hubbell shares. This is supported by the target price of $75 (15.8X our 2012 earnings estimate), which is a discount to the peer group.

Bear of the Day:

We believe Companhia Siderurgica Nacional, or CSN (NYSE: SID) has rising manufacturing costs, high cyclicality and growing competition in the industry. These remain major growth impediments for the company. In the first quarter of 2011, the company posted EPADR of $0.25, which was well below the Zacks Consensus of $0.40.

In the first quarter of 2011, cost of goods sold went up 25.4% year over year, leading to a 3% decline in gross margin. Also, CSN's debt levels are escalating, due primarily to funding the company's investment plans.

Thus, anticipating lack of positive catalysts in the near term, we maintain an Underperform recommendation on the ADR. Our target price of $11.00 is based on 7.8x P/E on the 2011 EPS estimate.

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FedEx Tops on Strong Volume

Before the opening bell, FedEx Corporation (NYSE: FDX), the world's second-largest package delivery company, reported fourth quarter 2011 adjusted earnings of $1.75 per share. The quarter's earnings outpaced the Zacks Consensus Estimate by 3 cents and increased 32% from $1.33 earned in the year-ago quarter.

Stronger results were aided by a higher fuel surcharge that offset the rising fuel prices. For fiscal 2011, FedEx reported adjusted earnings of $4.90 per share, up 30% from $3.76 in 2010.

Total revenue climbed 12% year over year to $10.55 billion in the reported quarter and surpassed the Zacks Consensus Estimate of $10.36 billion. The outperformance was attributable to improved ground and international express shipments as well as strong yield initiatives. Further, the Freight segment returned to profitability during the quarter. Fiscal 2011 revenue increased 13% year over year to $39.3 billion.

Operating income increased 28% year over year to $888 million, resulting in operating margin of 8.4% compared with 7.4% in the year-ago quarter. Operating expenses increased 11% year over year to $9.66 billion mainly due to high fuel cost, which was 44% higher than the year-ago quarter.

For fiscal 2011, operating income was $2.38 billion, up 19% year over year and operating expense increased 13% year over year to $36.9 billion.

Guidance

FedEx projects earnings in the range of $1.40 to $1.60 per share for the first quarter of 2012. The mid-point ($1.50) is higher the current Zacks Consensus Estimate of $1.42. FedEx also expects its fiscal 2012 earnings in the range of $6.35 to $6.85 per share. The mid-point ($6.60) is also above the current Zacks Consensus Estimate of $6.49.

FedEx expects capital spending of $4.2 billion for fiscal 2012.

Our Analysis

We believe improved economy, strong yields, restructuring of the Freight segment, increased pricing and volumes across all revenue segments will generate strong revenue and earnings in fiscal 2012.

However, FedEx invests significantly in more fuel-efficient aircraft, including Boeing Co.'s (NYSE: BA) 777s and 757s. Any delay in the delivery of aircraft could restrict its profitability ahead. Further, competitive threats from its primary competitor United Parcel Service Inc. (NYSE: UPS), unionized workforce and rising fuel price may limit the upside potential of the stock.

We are currently maintaining our long-term Neutral rating on FedEx. The stock also retains a Zacks #3 Rank (Hold) for the short term.

We are maintaining our long-term Neutral rating on the stock.

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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