CHICAGO, Oct. 24, 2012 /PRNewswire/ -- Zacks Equity Research highlights Manulife Financial Corp. (NYSE: MFC) as the Bull of the Day and Sonoco Products Co (NYSE: SON) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Canadian Solar Inc. (Nasdaq: CSIQ), SunPower Corporation (Nasdaq: SPWR) and LDK Solar Company Ltd. (NYSE: LDK).
We are upgrading our recommendation on the shares of shares of Manulife Financial Corp. (NYSE: MFC) to Outperform from Neutral following the recent announcement by the company to expand into Korea, which marks an expansion in its key Asian market. The company has also set up a head office in Cambodia. We believe further penetration in Asian markets will fuel long-term earnings growth for the company.
Manulife has achieved a great deal in reducing its exposures to potential equity markets as well as interest rates risk. It has also reduced its exposure towards interest sensitive products.
Our six-month target price of $15.00 equates to about 39.5x our earnings estimate for 2012. We view the $0.52 per common share annual dividend as secure, implying an expected total return of about 25.0% over that period. This is consistent with our Outperform recommendation on the shares.
Sonoco Products Co's (NYSE: SON) second-quarter 2012 adjusted earnings per share decreased 3% to $0.58, but net sales increased 6.6% to $1.2 billion. While EPS was in line with the Zacks Consensus Estimate, revenue failed to top expectations. Sonoco has trimmed its 3Q12 EPS guidance citing operational problems in its North American papermaking operations.
Furthermore, Sonoco has experienced lower-than-expected volume in many of its consumer and industrial businesses. Volatile raw material prices and uncertainty among its customers, given the slow recovery in the U.S and ongoing European weakness, higher pension costs remain headwinds for the company in fiscal 2012.
Accordingly, we have downgraded our recommendation on Sonoco from Neutral to Underperform. Our target price is $28 or 12.8x our 2012 EPS estimate.
Canadian Solar Inc. (Nasdaq: CSIQ), a low cost, vertically-integrated solar module producer with predominantly China-based manufacturing assets, is scheduled to report its third-quarter 2012 financial results on Monday, November 19, 2012. The Zacks Consensus Estimate for the third quarter of 2012 is a loss of 63 cents per share (year-over-year improvement of 49.19%) on revenues of $377 million (year-over-year decrease of 24.60%).
Second Quarter 2012, a Synopsis
Canadian Solar Inc. reported higher losses for the second quarter of 2012. In the quarter, the company with a loss per share of $0.57 missed the Zacks Consensus Estimate of a loss of $0.30 per share. Results were also much lower when compared to earnings of $0.24 in the year-ago period. The shortfall was primarily due to the decline in average selling prices, partially offset by lower manufacturing costs, higher shipment volume and the positive effect of the warranty insurance adjustment.
Canadian Solar had revenues of $348.2 million, falling behind the Zacks Consensus Estimate of $393 million. Revenue was, however, up 6.9% from $325.8 million in the first quarter of 2012 and down 27.7% from $481.8 million in the second quarter of 2011.
Solar module shipments in the reported quarter totaled 412 megawatts (MW), compared with 343 MW for the first quarter 2012 and 287 MW for the second quarter of 2011. Total solar module shipments for the second quarter of 2012 included 8.7 MW used in the company's total solutions business. By geography, in the second quarter of 2012, sales to European markets represented 69.4% of net revenue, sales to North America represented 15.7% of net revenue, and sales to Asia and all other markets represented 14.9% of net revenue. In the above order, first quarter of 2012 revenue breakdown was 42.6%, 45.1% and 12.3%, respectively, and in the second quarter of 2011 the breakdown was 76.6%, 15.2% and 8.2%, respectively.
Gross profit in the second quarter of 2012 was $43.2 million, compared with $25.1 million in the first quarter of 2012 and $63.7 million in the second quarter of 2011. The sequential increase in gross profit was primarily due to the increase in revenue as a result of higher shipment volume, as well as an adjustment resulting from the recognition of the benefit from the company's purchased warranty insurance.
Analysts surveyed by Zacks expect Canadian Solar to post third-quarter 2012 loss of 63 cents a share. The current Zacks Consensus Estimate represents a year-over-year improvement of 49.19%. Analyst estimates for the quarter range from a loss of 92 cents to break-even.
The current Zacks Consensus Estimate has remained flat over the last 30 days; as none of the 4 analysts covering the stock revised their estimates, with the consensus trending towards the status quo.
Earnings Surprise History
With respect to earnings surprises, Canadian Solar has reported below the Zacks Consensus Estimate in three out of the last four quarters with an average of negative 120.59%. This suggests that Canadian Solar has underperformed average analyst expectations during this period.
Canadian Solar Neutral
Canadian Solar is a vertically-integrated manufacturer of silicon ingots, wafers, cells, solar modules and custom-designed solar power applications. The company sells its products to customers worldwide, spread across Germany, Spain, the U.S., France, the Czech Republic, Italy, South Korea, Canada and China.
Canadian Solar offers one of the broadest crystalline silicon solar module product lines in the industry, ranging from modules made of medium power, low-cost upgraded metallurgical-grade silicon, to high efficiency, high power output mono-crystalline modules, along with a range of specialty products.
Canadian Solar's standard solar modules are sold to distributors and system integrators, and specialty solar modules and products to various manufacturers, who integrate these solar modules into their own products or sell and market them as part of their own product portfolio.
Canadian Solar's China-based manufacturing assets have a distinct cost advantage over its peers. The company also pursues a balanced and diversified supply channel mix by entering into long-term supply contracts and toll manufacturing arrangements. In addition to in-house solar cell, wafer and ingot manufacturing, it is also ramping up its internal solar cell capacity to cut back its reliance on third party solar cells for the manufacture of solar modules.
The prospects for Canadian Solar look favorable based on a geographically-diverse customer base and improving operating efficiencies through its vertically-integrated manufacturing operation.
However, in the near term, fortunes will be impacted by the industry-wide oversupply, leading to sharply falling Average Selling Prices, tepid module demand in Europe and rising competition in the market. Given the industry-wide high inventory level, we do not foresee any short-term improvement in the margins of the company.
Like its peers SunPower Corporation (Nasdaq: SPWR) and LDK Solar Company Ltd. (NYSE: LDK), the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
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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