Zacks Bull and Bear of the Day Highlights: IntercontinentalExchange, XL Group Plc, Bank of America, Apollo Global Management LLC and Toronto Dominion Bank
CHICAGO, March 26, 2012 /PRNewswire/ -- Zacks Equity Research highlights IntercontinentalExchange Inc. (NYSE: ICE) as the Bull of the Day and XL Group Plc (NYSE: XL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America Corporation (NYSE: BAC),Apollo Global Management LLC (NYSE: APO) and Toronto Dominion Bank (NYSE: TD).
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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 have downgraded our recommendation on XL Group Plc (NYSE: XL) to Underperform from Neutral based on the weak fourth quarter performance. The company posted a loss, comparing unfavorably with the Zacks Consensus Estimate. XL delivered lower numbers largely due to higher catastrophe losses, lower levels of positive prior-year loss development and higher tax expenses.
A soft property and casualty environment will continue to restrict top-line growth. Moreover, the current interest rate environment and exposure to the credit market will hurt investment income to some extent.
Our six-month price target of $20.00 per share equates to about 10.8x our earnings estimate for 2012. Combined with the $0.44 per share annual dividend, this target price implies an expected total negative return of 7.1% over that period. This is consistent with our Underperform recommendation on the stock.
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BofA Continues to Shrink
Although Bank of America Corporation (NYSE: BAC) strived and passed requirements of Federal Reserve's stringent capital criteria, BofA is still banking on its plan to shrink balance sheet in order to streamline its operations, focus on its core businesses and improve top-line growth. Earlier this week, BofA has come up with the divestiture of its consumer credit card operations in Ireland to Apollo Global Management LLC's (NYSE: APO) fund affiliate, Apollo European Principal Finance Fund I (Apollo EPF).
BofA's Irish card unit includes more than 200,000 customer accounts with a balance of more than €650 million ($860 million) in receivables. The unit will continue to be managed in Ireland by its existing 250 staff. However, the financial terms of the agreement were undisclosed and the deal is still subjected to regulatory approvals.
New York-based Apollo is an alternative investment management firm, which also acquired BofA's Spanish consumer credit card operations in August 2011. Following the closure of the Irish deal, Apollo EPF will have approximately €1.3 billion ($1.72 billion) of credit card receivables acquired from BofA in total. In addition to this, Apollo EPF will also have consumer loan servicing platforms both in Ireland and Spain with a combined staff of about 550 people.
Over the last several quarters, BofA has been striving hard to soar up its capital levels through the sale of its non-core assets and businesses. Further, the company has also begun trimming its workforce to bring down its operating expenses by $5 billion through the end of 2014.
Apart from selling its consumer credit card portfolios in Spain and Ireland, last year BofA also divested $8.6 billion Canadian credit card portfolio as well as certain other assets and liabilities to Toronto Dominion Bank (NYSE: TD). Furthermore, the company has plans to sell its card business in U.K.
Conclusion
We believe that BofA should carry on with its plans to streamline its operations through sale of its non-core assets and operations. The company should not get complacent with its capital enhancing initiatives and must continually strive for improvement of its balance sheet and capital ratios.
Currently, BofA retains its Zacks #3 Rank, which translates into a short-term 'Hold' rating. Also, considering the fundamentals, we are maintaining our long-term "Neutral" recommendation on the shares.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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