Zacks Bull and Bear of the Day Highlights: Limited Brands, hhgregg, Toll Brothers, Deutsche Bank AG and Lennar
CHICAGO, Oct. 12, 2011 /PRNewswire/ -- Zacks Equity Research highlights Limited Brands, Inc. (NYSE: LTD) as the Bull of the Day and hhgregg, Inc. (NYSE: HGG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Toll Brothers Inc. (NYSE: TOL), Deutsche Bank AG (NYSE: DB) and Lennar Corp. (NYSE: LEN).
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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:
Limited Brands, Inc. (NYSE: LTD) second-quarter 2011 earnings of $0.48 per share beat the Zacks Consensus Estimate of $0.46, and rose 33% from the prior-year quarter on the back of cost containment, inventory management and merchandise initiatives. The better-than-expected results, prompted management to raise its fiscal 2011 earnings outlook to a range of $2.35 to $2.50 per share. We believe it would maintain its growth momentum as evident from its monthly sales results.
Limited Brands' comparable-store sales for September rose 11%. The company's Bath & Body Works segment is gaining traction, driven by a rise in store transactions, enhancement in the direct channel business and growth in new stores. Victoria's Secret Stores has been performing well, and the company is also revamping its La Senza brand.
Limited Brands is also keen to enhance its retail footprint across the globe by expanding aggressively in Canada and other international markets. We have a long-term Outperform recommendation on the stock. Our target price of $46.00, 18.3X 2011 EPS, reflects this view.
We have downgraded the hhgregg, Inc.'s (NYSE: HGG) recommendation to Underperform from Neutral on the heels of the hhgregg's first-quarter 2012 net loss of $0.02 per share which was below the Zacks Consensus Estimate of a break-even as well as the year-ago quarter earnings of $0.07. The loss reflected a 13.2% drop in comparable store sales with an increase in SG&A as a percentage of net sales.
Moreover, hhgregg's top-line inched down 1.0% to $431.5 million during the quarter. Going forward, we expect net sales and operating margin to remain muted owing to the seasonal shopping patterns, rising costs and competitive pressures. Moreover, weakness across the consumer electronics and appliances industry and alarming macroeconomic factors brings in serious concerns to the topline.
Our six-month target price of $10.00 per share equates to about 8.3x our earnings estimate for 2012. With no annual cash dividend, the target price implies an expected total return of negative 10.5% over that period.
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Toll Brothers Buys Distressed Loans
Toll Brothers Inc. (NYSE: TOL) recently announced that one of its fully owned subsidiaries, Gibraltar Capital and Asset Management, LLC has closed three private transactions with large financial institutions.
The transactions involved the purchase of 38 non-performing real estate loans with a combined outstanding balance of approximately $71.4 million with an average loan balance of $1.9 million. The assets encompassing six states include residential acquisition, development, and construction loans secured by properties in various stages of completion.
With this acquisition, Gibraltar now has completed loan transactions worth $2 billion. Earlier, it also acquired 83 loans valued at $200 million from Deutsche Bank AG (NYSE: DB).
Last year, the company entered into an agreement with Oaktree Capital Management LP and Milestone Asset Resolution Co. to purchase a portfolio of loans with a face value of $1.7 billion from the Federal Deposit Insurance Corp.
In the backdrop of a critical homebuilding industry, large homebuilders tend to engage in managing and trading distressed real estate assets to strengthen their financial positions. In this regard, Lennar Corp.'s (NYSE: LEN) formation of Rialto Investments is worth mentioning as it has been immensely successful since its inception early last year.
Similarly, Toll Brothers is highly confident about Gibraltar's growth prospects and intends to use its own expertise, relationships, network, brand name, nationwide presence and capital strength to pursue complex transactions in order to maximize the value of underperforming real estate assets.
During the third quarter of fiscal 2011, Toll Brothers reported an adjusted income of $3.9 million or 2 cents per share compared with $0.8 million in the year-ago quarter. Revenues declined 13% year over year to $394.3 million, due to a 14% decrease in home deliveries to 693 units.
The demand for luxury homes fell in the quarter on account of poor industry conditions and subdued confidence among luxury homebuyers. At quarter-end, the company's total selling communities amounted to 207 versus 190 selling communities at the end of the prior-year quarter.
The shares of Toll Brothers maintain a Zacks #3 Rank, which translates into 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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