Zacks Bull and Bear of the Day Highlights: Neurocrine Biosciences, Bemis, Societie Generale, Citigroup and Morgan Stanley
CHICAGO, Nov. 2, 2011 /PRNewswire/ -- Zacks Equity Research highlights Neurocrine Biosciences (Nasdaq: NBIX) as the Bull of the Day and Bemis Company (NYSE: BMS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Societie Generale (OTC: SCGLY.PK), Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS).
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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:
With a strong financial position, we believe Neurocrine Biosciences (Nasdaq: NBIX) is in an outstanding position to build shareholder value over the next several years. The company exited the third quarter 2011 with over $140 million in cash and investments, with the potential to earn several hundred million more as clinical development progresses.
The company's dramatically improved financial position affords management the opportunity to push forward the development of internal pipeline candidates, including VMAT-2, as well as in-license new pre-phase 2 molecules within the company's core CNS focus.
We are particularly excited about the VMAT-2 program at Neurocrine. It represents significant upside and diversification from elagolix. We recommend accumulating the stock at today's price, up to our $12 target.
Bemis Company (NYSE: BMS) reported third-quarter EPS of $0.56, a penny below the year-ago quarter and missing the Zacks Consensus Estimate by 2 cents. Rising raw materials prices have significantly impacted the company, putting downward pressure on its margins.
Nearly 35% of its total revenues last year came from its business outside the United States. Recent instability in the global markets and foreign exchange rates may hinder its revenue generation and other financial results.
Further, lower volume levels remain a point of concern. Thus, we reiterate our Underperform recommendation with a target price of $25.00.
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Euro Dilemma, In Depth
One of the biggest assumptions that fueled the sharp rise in the market on Thursday was that the European debt agreement was, well, an agreement, albeit one where there were still some important details to be worked out. There was some doubt as to if it would be enough to really do the trick and get ahead of the curve, but at least the feeling was that everyone was on board and working on the problem (and the can had been successfully kicked down the road).
Well it just goes to show what happens when you assume... Once again, it looks like things fall apart and the center cannot hold.
The whole ball of wax just fell apart yesterday afternoon when Greece announced that it will hold a referendum on going along with the deal. Given the riots in the street in opposition to it, almost bordering on civil war, it is FAR from a sure thing that the referendum will pass. I would say that passage of the referendum is probably a long shot, but I don't pretend to be an expert on the Greek political situation.
Since Greek debt is at the heart of the situation, Greece has to be fully on board. We will now not know if that is the case until sometime in January. Until then, the European markets will twist in the wind.
Italy's Debt Problem
The early indication that the deal was not going to work was seen in the Italian bond yield, which failed to drop in response to the deal. That worried me, but I still thought we at least had a few months of breathing room before the crisis would flare again. Now the Italian 10-year note is plunging in value and the yield is soaring.
Italy is up to its eyeballs in debt, and has been for a long time. That debt today is being quoted at a yield of over 6.3%, up from 5.85% on Thursday. The higher the yield goes, the bigger the primary surplus (tax revenues exceeding government spending excluding interest payments) that the government will have to run.
Austerity measures are not very popular in Italy, and the Berlusconi government does not have the political capital to push it through. In any case, austerity serves to slow the economy and thus suppress tax collections.
A backstop for Italian sovereign debt is not very credible if Italy itself is a big part of that backstop. Italy is both too big to fail, and also too big to bail out as it is the third largest economy in the Euro-zone. The fourth biggest member of the Euro-zone, Spain, faces similar issues.
...And It Doesn't Stop There
For that matter, even France is not looking that great right now. Its big banks are very exposed to the sovereign debt of the PIIGS. Part of the agreement was that the European banks were going to have to increase their tier-one capital to 9% from 5%, and would first turn to the private market to do so, then to their National government, and then finally to the European Financial Stability Fund (EFSF), or Euro-TARP.
Raising that capital will not be cheap for the banks, especially in the private market. The existing stock is currently trading far below book value because the market realizes that it belongs on the fiction shelf. France itself it probably going to have to supply most of the additional capital that Societie Generale (OTC: SCGLY.PK), BNP Paribas and Credit Agricole will need to raise. That, in turn, will put France's AAA rating in doubt.
Here in the U.S. we have already had one casualty from the European Problems as MF Global declared bankruptcy yesterday due to its heavy exposure. While not a household name, it was a very big player in the Forex markets, and was one of the primary dealers for Treasury paper.
It looks now like it will be a relatively orderly wind up, unlike the fall of Lehman Brothers; then again, MF Global was not nearly as big. Still, if it can be wrapped up cleanly, that is a big success for the Dodd-Frank financial reforms.
However, I sincerely doubt that MF Global will turn out to be the only major U.S. player to end up with a lot of egg on its face from the European debt situation. In particular, Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) are considered to be highly exposed. Not saying they'll go under -- we saw a few years ago that the government is not going to allow that -- but you don't want to be owning either of those stocks.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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