Zacks Bull and Bear of the Day Highlights: NVIDIA, Strayer Education, Automatic Data Processing, Costco Wholesale and Staples

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Mar 03, 2011, 09:54 ET

CHICAGO, March 3, 2011 /PRNewswire/ -- Zacks Equity Research highlights: NVIDIA Corp. (Nasdaq: NVDA) as the Bull of the Day and Strayer Education (Nasdaq: STRA) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Automatic Data Processing (NYSE: ADP), Costco Wholesale Corporation (Nasdaq: COST) and Staples, Inc. (Nasdaq: SPLS).

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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:

Bull of the Day:

NVIDIA Corp. (Nasdaq: NVDA) is a worldwide leader in visual computing technologies. The company reported decent fourth-quarter numbers, but is optimistic about its long-term growth with the gradual recovery in demand for graphic chips.

Moreover, the company rolled out the first quad-core mobile processor. The company also received $1.5 billion in a licensing agreement with Intel Corp. that spans for six years.

The stock has traded in a trailing twelve month P/E of 36.3x, and going forward we expect it to trade around this multiple. We upgrade NVDA to Outperform and set a price target of $28.00, representing a P/E of 27.1x our 2012 EPS estimate.

Bear of the Day:

Although Strayer Education (Nasdaq: STRA) posted better-than-expected fourth-quarter 2010 results, enrollments continue to fall. We observe that the growth in enrollments has decelerated sequentially.

After increasing 11% in the third quarter of 2010, the rate of growth in campus-based students dropped to 4% in the fourth quarter. Moreover, the rate growth in online students falls to 10%, following an 18% increase in the previous quarter. The company also informed that new student enrollment dropped 20% during the quarter.

The current potential risk looming over the education sector is the regulation proposed by the Department of Education creating an uncertainty over student enrollment trends. Currently, we maintain our Underperform recommendation on the stock.

Latest Posts on the Zacks Analyst Blog:

ADP: 217K Private-Sector Jobs Gained

The Automatic Data Processing (NYSE: ADP) employment survey was better than expected in February. It shows that private sector employment rose by 217,000, well above consensus expectations for a 165,000 increase.

In January it was far too optimistic, showing a gain of 187,000 (now revised up to 189,000) and then the BLS only reported a gain in private sector jobs of 50,000. In December, ADP was even further off the mark and reported a gain of 297,000 private sector jobs and the BLS only reported a gain of 113,000 (later revised up to 139,000) from the private sector.

Prior to the last three months, for most of 2010, ADP was being too conservative. Given the big misses in the last two months, one has to wonder if the ADP algorithm is broken. If it isn't, then this is good news. I just don't want to get my hopes up for a great report on Friday based on these numbers. Fool me once…

Results by Business Size

Small businesses, defined as those with fewer than 50 employees, rose a total of 100,000 jobs in the month. Medium-sized firms, those with between 50 and 499 employees, gained 104,000 jobs, while large firms with 500 or more employees added 13,000 jobs.

Large businesses are a relatively small share of total employment in the country, accounting for just 17.436 million out of a total of 108.099 million private sector jobs (16.1%). Small business is the largest source of employment at 48.923 (45.3%) million, followed by medium businesses at 41.741 million (38.6%).

Costco's Earnings Surge

Costco Wholesale Corporation (Nasdaq: COST), one of the leading U.S. warehouse club operators, recently posted better-than-expected second-quarter 2011 results. The quarterly earnings of 79 cents a share came a penny ahead of the Zacks Consensus Estimate, and rose 12.9% from 70 cents earned in the prior-year quarter.

The Zacks Consensus Estimate had remained stable prior to the earnings release, despite of 7 out of 28 analysts covering the stock raising their projections in the last 30 days.

The double-digit increase in the bottom-line was buoyed by growth in the top-line due to improved sales of discretionary items, as consumers seeking discounts started flocking to warehouse clubs. The company's international operations have been the major driver.

The warehouse retailer's total revenue, which includes net sales and membership fee, climbed 11.4% to $20,875 million from the prior-year quarter, and handily beat the Zacks Consensus Estimate of $20,545 million. Net sales jumped 11.4% to $20,449 million, whereas membership fee rose 10.4% to $426 million.

The sales results include contribution from the company's Mexico joint venture. Costco began incorporating results of its Mexican operations on a prospective basis with the commencement of its fiscal 2011 on August 30, 2010. The company's Mexican joint venture contributed a 3% increase in sales.

Staples Misses, Earnings Rise

Staples, Inc. (Nasdaq: SPLS), the global leader in the supply of office products, recently posted lower-than-expected fourth-quarter 2010 results. The quarterly earnings of 39 cents a share missed the Zacks Consensus Estimate of 41 cents but rose 2.6% from 38 cents earned in the prior-year quarter.

On a reported basis, including one-time items, earnings came in at 38 cents a share, up 18.8% from 32 cents posted in the year-ago quarter.

The Zacks Consensus Estimate had remained stable prior to the earnings release despite 5 out of 17 analysts covering the stock lowering their estimates and 1 analyst raising the projection in the last 30 days.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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