Zacks Bull and Bear of the Day Highlights: IntercontinentalExchange, Southwest Airlines, Micron Technology, Oracle and SanDisk
CHICAGO, April 2, 2012 /PRNewswire/ -- Zacks Equity Research highlights IntercontinentalExchange Inc. (NYSE: ICE) as the Bull of the Day and Southwest Airlines (NYSE: LUV) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron Technology (Nasdaq: MU),Oracle Corporation (Nasdaq: ORCL) and SanDisk Corp. (Nasdaq: SNDK).
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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 IntercontinentalExchange Inc. (NYSE: ICE) based on its high earnings visibility, strong product portfolio, consistent cash generation, disciplined investment and limited balance sheet risk, which enables it to be one of the most dynamic companies in the industry.
The company's fourth quarter earnings surpassed the Zacks Consensus Estimate, reflecting momentous performance in its core business, higher volumes and strong expense management that drove the top- and bottom-line along with the margins and cash flow. The company is growing through strategic acquisitions, product novelty and expansion into the globally emerging markets.
In the long run, these factors are expected to consistently deliver strong shareholder value, although some caution is maintained based on the impact of regulations and uncertain industry trends. Our six-month target price of $166.00 equates to about 20.6x our earnings estimate for 2012.
We are downgrading our recommendation on Southwest Airlines (NYSE: LUV) to Underperform as the company is not expected to report profits in the first quarter this year. The company reported lower year-over-year earnings in the fourth quarter but outpaced the Zacks Consensus Estimate.
Although Southwest is poised to benefit from fleet rightsizing, its Evolve retrofit program, steady capacity growth, All-New Rapid Rewards, AirTran merger synergies and several ancillary revenues, fuel prices continue to drag down the profits. The entire airline industry is currently struggling with higher fuel prices and a slow-moving U.S. economy.
Additionally, high maintenance costs associated with fleet modernization, new advertising rules, risks pertaining to the AirTran integration, heavy investments and reliance on a single fleet keep us cautious on the stock. Hence, we rate the stock Underperform with a target price of $7.50, based on 11x our earnings estimate for 2012.
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Micron Settles Oracle Lawsuit
Semiconductor major Micron Technology (Nasdaq: MU) has recently confirmed that it has settled a lawsuit with software giant Oracle Corporation (Nasdaq: ORCL).
As per the lawsuit, Oracle accused Micron of artificially increasing the DRAM prices and violating the state's antitrust and unfair competition laws based on the conduct of the company, extending from August 1, 1998, til June 15, 2002.
The IT major claimed several damages and has also agreed upon the restitution of attorneys' fees, costs and injunctive relief. As per the settlement, both the parties have agreed upon withdrawing the litigations against one another.
This settlement is expected to affect Micron's second quarter 2012 results, and may result in lower revenues and an increase in the net loss attributable to Micron shareholders of $58.0 million as compared to the figure reported in March 22, 2012.
The legal settlement is expected to keep Micron's reputation unscathed, although may result in some monetary loss to the company. This may in turn add to the disappointing second quarter result and may widen the loss per share compared with our estimates. The quarter's revenue also came in below the year-ago level. The quarter even saw a decline in ASP.
The cost-cutting measure could mitigate the adverse effect of ASP decline to some extent, going forward. Additionally, the drop in demand for laptops and desktop PCs may affect the demand for DRAM and RAM to a certain extent.
On the other hand, we believe that it won't be easy for Micron to capture market share from SanDisk Corp. (Nasdaq: SNDK), as SanDisk is a key player in the NAND space. However, the renewal in operation in Thailand may help the company going forward.
Micron Technology 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.
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