Zacks Bull and Bear of the Day Highlights: Monsanto, US Cellular, General Mills, Kellogg Company and Seneca Foods
CHICAGO, July 20, 2011 /PRNewswire/ -- Zacks Equity Research highlights Monsanto (NYSE: MON) as the Bull of the Day and US Cellular (NYSE: USM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis General Mills Inc. (NYSE: GIS), Kellogg Company (NYSE: K) and Seneca Foods Corp. (Nasdaq: SENEA).
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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 recently upgraded our recommendation on Monsanto (NYSE: MON) from Neutral to Outperform based on the company's growth strategy and competitive pricing policy. The company posted encouraging results for the third quarter with an EPS of $1.26, beating the Zacks Consensus Estimate of $1.11.
Monsanto's continued product development, consolidation of business segments, cost optimization and yield increase tactics are expected to fetch higher revenue and market leadership going forward. The company's capabilities in biotechnology and breeding research also appear encouraging.
Moreover, the third party contracts and hedging mechanism of the company help to combat the risks arising out of seed cost and weather fluctuations. Our price target of $89.00 equates to 31.0x of 2011 earnings estimate.
We are downgrading our recommendation on US Cellular (NYSE: USM) to Underperform as the company faces many challenges. Most of the regional markets are extremely competitive and this has become more evident following the consolidations among several large carriers.
The integration of Dobson Cellular/Cingular/AT&T Wireless, Sprint/Nextel merger, consolidation of Verizon Wireless/Alltel in January 2009 and AT&T s acquisition of Centennial Communications have resulted in Tier-1 carrier expansion into sparser geographical markets. As a result, U.S. Cellular continues to be susceptible to aggressive pricing by larger rivals.
Moreover, the company's high-margin roaming revenues remain under pressure, which is particularly troublesome given its strong reliance on roaming fees. Our price target is $42.00, based on 28.4x our 2011 earnings estimate.
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Ethanol Surplus, General Mills Starves
General Mills Inc. (NYSE: GIS) has held the government's three decade old subsidy program for ethanol production responsible for creating shortage in its raw materials supply and, in turn, inflation in corn prices. The retail giant had recently announced that it will raise prices to combat the cost push inflation of corn.
General Mills also predicted that the price hike will hurt earnings in the current quarter and the fiscal year as well. The owner of Cheerios cereal, Progresso soup and Häagen-Dazs ice-cream has also revealed that it had to pay twice as much as last year for wheat and that cost of corn and oats have escalated by 30 to 40 percent. Though General Mills has absorbed much of these increases, it could not help passing some of it to consumers.
The US government had provided subsidies to US ethanol producers since the Carter administration back in the early 1980's. This gave way to ethanol producer's dominance over the corn market, diverting almost 40% of American corn supply towards ethanol production as reported by the NY Times. This shrunk corn's supply for other uses.
According to the Center for Agricultural and Rural Development at Iowa State University, half of the rise in corn prices from 2004 to 2009 was driven by an increase in ethanol production. Increased corn prices and its extension to livestock dependent on corn contributed to the rise in agricultural commodity prices globally.
The 'ethanol mandate' under the renewable fuels standard in 2005 was designed to force blenders to mix up to 10% ethanol with petrol to make automotive fuel. The relevance of the subsidy is being questioned as ethanol production is hitting record levels in the US this year with a surplus lying for export.
General Mills also said that volatility in food markets and shift in consumer dietary habits are pushing up prices in food markets. The company faces stiff competition from Kellogg Company (NYSE: K) and Seneca Foods Corp. (Nasdaq: SENEA). It currently holds a Zacks #3 Rank. On a long-term basis, we retain a Neutral rating on the stock, with 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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