Zacks Bull and Bear of the Day Highlights: Macy's, RadioShack, Caterpillar, Komatsu and Volvo AB
CHICAGO, March 22, 2012 /PRNewswire/ -- Zacks Equity Research highlights Macy's, Inc. (NYSE: M) as the Bull of the Day and RadioShack Corp. (NYSE: RSH) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar Inc. (NYSE: CAT),Komatsu Ltd. (OTC: KMTUY) and Volvo AB (OTC: VOLVY).
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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:
Macy's, Inc. (NYSE: M) has been taking prudent steps to increase sales, profitability and cash flows. These include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy's continues to focus on price optimization, inventory management and merchandise planning. These help the company to deliver better-than-expected fourth-quarter 2011 results.
The quarterly earnings of $1.70 per share beat the Zacks Consensus Estimate of $1.65, and rose 6.9% from the prior-year quarter. Macy's now expects fiscal 2012 earnings between $3.25 and $3.30 per share. The company hinted that it is seeking to expand both the Macy's and Bloomingdale's brands, as the year present enormous opportunity to enhance market share.
Macy's, which saw 4.6% increase in February comparable-store sales, now expects comps growth of approximately 3.5% for fiscal 2012. We maintain our long-term Outperform recommendation on the stock. Our target price of $42.00, 12.6X 2012 EPS, reflects this view.
Difficulties for RadioShack Corp. (NYSE: RSH) persists as the company continues with its disappointing performance. A precipitous decline of the signature and consumer electronics retail businesses, adverse product-mix toward low-margin devices, and a volatile macro-economic scenario in the U.S. are taking a toll on the company's financials.
Weaker-than-expected growth of the mobile platform and growing marketing expenses are other near-term concerns. The company provided a tepid outlook for fiscal 2012. In the previous quarter, the U.S. RadioShack company-operated store segment, which is the prime contributor of total revenue, was down 1.4% year over year.
We believe RadioShack lost its market leadership as a high-margin device retailer and is eventually turning out to be a low-cost low-margin device supplier. We do not find any immediate growth catalyst, and therefore downgrade our recommendation to Underperform.
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Caterpillar Sales Dip Further
Caterpillar Inc. (NYSE: CAT) recorded machines sales growth of 21% for the three months ending February 29, 2012, keeping up its 22-month run of positive sales growth. However, the sales growth has dipped further from the lowest growth rate of 30% last year and from the 27% clip recorded in January 2012. Engine sales increased 13% across the globe.
Caterpillar's growth rate had hit rock bottom in 2011 in November last year recording a growth rate of 30%. Caterpillar suffered the same fate in December as well. Even though Caterpillar has seen sales ramping in the last 22 months, the rate of increase has of late been tempered by tougher year-on-year comparisons and weakening economic conditions, especially in Europe. Sales growth is now less than one-third of the highest level of 66% in 2011.
Fourth Quarter and Fiscal 2011 Recap, Guidance
During the recently reported fourth quarter, Caterpillar's revenues surged 35% to a record $17.2 billion, driven by higher sales volume, especially for new equipment. Excluding the impact of the acquisition of Bucyrus International, revenues went up 24% to $15.9 billion, comparing favorably the Zacks Consensus Estimate of $15.6 billion.
For fiscal 2011, total revenue increased 35% to $57.6 billion, excluding the impact of Bucyrus. Including the impact, Caterpillar saw all-time record sales of $60.1 billion, up 41% from 2010, driven by increased sales volume (particularly new equipment) on higher end-user demand. Revenues sailed past the Zacks Consensus Estimate of $58.1 billion.
For 2012, the company expects to record sales in a range of $68.0 billion to $72.0 billion for 2012, which includes accretions from Bucyrus and Motoren-Werke Mannheim Holding GmbH. EPS is forecast at $9.25 per share on the back of strong revenues.
Our Take
In addition to the European debt crisis, signs of a slowdown in China have triggered concerns. Earlier this month, China cut its 2012 growth target to an eight-year low of 7.5%. A slowing Chinese economy will have a negative impact on infrastructure and construction spending.
On a positive note, despite an economic slowdown in China, Caterpillar's sales in that country were higher in the fourth quarter of 2011 compared with the fourth quarter of 2010 as dealer deliveries to end users, even though at low levels, were better than the industry overall.
Furthermore machine production was sufficient to allow dealers to build inventory for the upcoming 2012 selling season. Caterpillar and its dealers have purposely built additional new machine inventory in China to continue to improve its competitive position during the critical selling season that typically follows the Chinese New Year.
Despite the lingering doubts overhanging the economy at large and Caterpillar's recent loss of sales momentum, we believe the top line would continue to grow on the back of continuing demand for construction and mining equipment, in the long term, triggered by industrialization and urbanization. Besides, the Bucyrus acquisition will bring in more synergies. The shares of Caterpillar presently retain a Zacks #2 Rank (short-term Buy recommendation).
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base.
Caterpillar operates two divisions – Machinery and Power Systems (M&PS) and Financial Products. Caterpillar competes with the likes of Komatsu Ltd. (OTC: KMTUY) and Volvo AB (OTC: VOLVY).
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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