Zacks Bull and Bear of the Day Highlights: Myriad Genetics, PetMed Express, McCormick & Co., General Mills and Constellation Brands
CHICAGO, July 1, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Myriad Genetics (Nasdaq: MYGN) as the Bull of the Day and PetMed Express (Nasdaq: PETS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on McCormick & Co. Inc. (NYSE: MKC), General Mills Inc. (NYSE: GIS) and Constellation Brands Inc. (NYSE: STZ).
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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:
Myriad Genetics (Nasdaq: MYGN) flagship product, Bracanalysis, has been recording robust growth over the past few quarters. Moreover, the company is undertaking strategies to expand the scope of the test. A strong cash balance enables the company to buyback shares, expand into new markets and introduce more products.
Moreover, the acquisition of RMB will help diversify Myriad's diagnostics portfolio and further strengthen its position in the companion diagnostics space. The company's strategy of expanding into Europe is also encouraging.
Although the economic environment has improved, any hiccup in the recovery process will be a dampener for the stock. Based on the strong growth potential of Myriad, we upgrade the stock to Outperform.
PetMed Express (Nasdaq: PETS) reported a disappointing quarter with EPS of $0.19, missing the Zacks Consensus Estimate of $0.22 and the year-ago quarter's $0.27. While new order sales declined on fewer new customers, revenues increased 1.2% to $50.9 million.
Both gross and operating margins declined due to higher product and advertising costs. This is a big blow for the company as it depends heavily on advertising to expand its customer base. Moreover, economic uncertainty is taking a toll on the company, forcing consumers to switch to cheaper alternatives.
We do not expect the situation to improve significantly in the near future. We maintain our Underperform recommendation on the stock.
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McCormick Beats by a Penny
McCormick & Co. Inc. (NYSE: MKC) posted results for the second quarter of 2011 with operating earnings of 55 cents a share, surpassing the Zacks Consensus Estimate by one cent. The quarterly earnings benefited from higher operating income, as well as cost saving actions.
Quarterly Sales Details
Total revenue in the second quarter grew 11% year-over-year to $883.7 million from the year-ago quarter, benefiting from McCormick's favorable volume, product mix and pricing actions taken to curtail increased raw and packaging material costs. Revenue also exceeded the Zacks Consensus Estimate of $855 million.
Acquisition
Acquisitions and joint ventures have remained top priority for McCormick. During June, McCormick signed an agreement with India-based Kohinoor Foods Limited for an 85% interest in a joint venture to market a leading brand of basmati rice and other food products in India. McCormick will consolidate sales and profit from Kohinoor in its financial results, with a minority interest reduction to net income for the 15% of the business it does not own. The acquisition is expected to close in the third quarter of 2011.
McCormick also agreed to acquire 100% of the shares of Kamis S.A., which is a leader of spices, seasonings and mustard in Poland with annual sales of approximately $105 million. The acquisition is expected to close by the end of third quarter of 2011, and the profits in the businesses will be minimal in 2011 due to integration costs and initial investments in growth, but is expected to be 7 cents-9 cents accretive to earnings per share in 2012.
The acquisition has led to a decline in the second quarter with the remaining $7 million expected to lower earnings per share in the third quarter by 5 cents.
Besides, McCormick will invest in its brands in the third quarter of 2011 with at least $6 million of incremental marketing which includes an emphasis on brand value, a U.S. campaign behind Hispanic products and advertising for the Zatarain's brand.
Outlook
For fiscal year 2011, management reaffirmed its earnings per share guidance in the range of $2.74 to $2.79, including the estimated transaction costs related to recent announcements of an acquisition and a joint venture. Sales are expected to grow 6 to 8% in local currency, including 1% of incremental sales from Kohinoor and Kamis. In addition, the sales impact of favorable currency exchange rates is now estimated to be 2%.
General Mills EPS Touches Mark
General Mills Inc. (NYSE: GIS) has reported results for the fourth quarter of fiscal 2011. For the quarter, adjusted earnings shot up by 26.8% to 52 cents a share compared with 41 cents in the year-ago period. The quarterly EPS was in line with the Zacks Consensus estimate.
The fiscal 2011 earnings went up by 7.82% to $2.48 a share compared to $2.30 a year ago. The fiscal earnings were also in line with the Zacks Estimate.
Management expects its fiscal 2012 earnings to be in the range of $2.60 - $2.62 a share.Excluding mark-to-market effects and the tax charge related to health care legislation, the fiscal 2011 earnings guidance reflects an annual growth of 5% - 6%.
Revenues and Margins
Total revenue for the reported quarter grew only marginally by 3% year over year to $3,634.3 million. During the quarter volume slipped by 4%. Revenues were marginally short of the Zacks Consensus Estimate of $3.7 billion.
For the fiscal year 2011, reported revenue inched up by 1.7% to $14,880.2 million from $14,635.6 million in the previous year. The revenue for the fiscal 2011 missed Zacks Estimate of $14,927.0 million.
Mark-to-market effect, holistic margin management (HMM) cost savings and price realization boosted gross margin for the quarter to 37.5 %, which was higher than the year-ago level.
For the fiscal year 2011, gross margin expanded to 40%, reflecting increased mark-to-market valuation for certain commodity positions as well as effective HMM cost-saving initiatives.
Constellation Shines in 1Q
Leading wine distributor Constellation Brands Inc. (NYSE: STZ) delivered an adjusted EPS of 39 cents in its first quarter ended May 31, 2011, outperforming the Zacks Consensus Estimate of 37 cents and improving by a penny from the prior-year quarters' earnings of 38 cents.
Both the reported and prior-year quarter's EPS excluded special items like inventory step-up costs, net gains/losses from its strategic business realignment initiatives and other items. Netting these items, the company reported EPS of 35 cents versus 22 cents in the year-ago quarter.
Sales in the quarter plummeted 19.3% to $635.3 million from the year-ago quarter. An organic constant currency net sales increase of 2.0% was more than offset by divestitures of the Australian and U.K. wine business and U.K. cider business. However, sales for the quarter surpassed the Zacks Consensus Estimate of $613.0 million.
In terms of geographic regions, North American net sales grew 8% year over year to $635.3 million, while Australia and Europe plunged 100.0% from the year-ago quarter due to fully divestiture of operation in this region. The increase in North American net sales was primarily driven by favorable product mix coupled with lower promotional expenses, partially offset by decline in volume.
Fiscal 2012 Outlook
The company expects its fiscal 2012 EPS to be in the band of $1.90 to $2.00. The guidance factors in an interest expense expectation in the range of approximately $180–$190 million, an approximate tax rate of 29% and weighted average diluted shares outstanding of approximately 216 million.
Constellation Brands expects to generate $685 million to $745 million of cash from operations in fiscal 2012 and deploy $85 million to $95 million toward capital expenditure. Accordingly, the company anticipates free cash flow in the range of $600.0 to $650.0 million in fiscal 2012.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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