CHICAGO, Aug. 29, 2012 /PRNewswire/ -- Zacks Equity Research highlights Panera Bread Co. (Nasdaq:PNRA) as the Bull of the Day and Kirkland's, Inc. (Nasdaq:KIRK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Lennar (NYSE:LEN), Toll Brothers (NYSE:TOL) and PulteGroup (NYSE:PHM).
We believe Panera Bread Co. (Nasdaq:PNRA) remains well positioned to reinvigorate brands, revitalize comparable store sales and accelerate unit growth in the long run. The introduction of a new menu, increased positive impact from media support, traction to off-premises catering program and faster recovery of higher-end consumers promises further growth.
Most importantly, Panera expects commodity inflation to cool down as the year progresses. We find Panera's second-quarter earnings and revenue beat, raise in full-year guidance for two consecutive quarters, the expectation of continued margin improvement and pricing power quite encouraging.
A more stable traffic growth compared to its restaurant peers also raises optimism. Hence, we upgrade our recommendation from Neutral to Outperform.
Kirkland's, Inc. (Nasdaq:KIRK) second-quarter 2012 loss of $0.11 per share widened than the prior-year loss of $0.02 due to higher promotional activity and softer-than-expected sales. Sales also missed the Zacks Consensus Estimate. Margins were crippled due to a high rate of inflation and fuel cost.
The company lowered its profit and sales guidance for fiscal 2012. It also expects same-store sales to remain flat or decline in the coming quarters. Although the company has undertaken some reformative measures like new marketing strategies and technological enhancements, we are concerned by the company's lack of exposure outside the U.S.
We maintain an Underperform rating on the stock. Our target price of $9.00 is based on a price-to-book multiple of 1.5x.
Hurricane Isaac is heading towards New Orleans and is expected to evolve from a tropical storm to hurricane as it makes landfall later today or early tomorrow. The storm's impact is far from clear at this stage, but key oil and gas production, refining and petrochemical facilities fall in its likely path. No sustained damage is expected, but even a temporary shutdown of the region's refining capacity – about a fifth of the nation's total – will show up in fuel prices nationwide.
While Isaac is in the headlines, the major event that investors are focusing on is Bernanke's Jackson Hole speech on Friday, in which the Fed chairman is expected to layout the contours of monetary policy. Bernanke had used the same forum to announce the last bond purchase program in 2010 and many seem to be counting on a repeat performance. But the central bank was concerned about deflationary pressures back then, while the pace of economic growth is the primary issue at present.
The question is whether the economy's growth momentum is weak enough to warrant a new bond purchase program. The last FOMC meeting seemed to be leaning towards more easing, but we have had a few stronger looking economic reports since then, prompting many to wonder if the Fed will actually follow through.
While questions remain about the overall health of the U.S. economy, one major segment that has lately been showing signs of improvement is housing. This has helped build momentum in the stock prices of homebuilders like Lennar (NYSE:LEN), Toll Brothers (NYSE:TOL) and PulteGroup(NYSE:PHM).
We will get a key home price reading today through the June S&P/Case-Shiller home price index. The Case-Shiller index does not represent real-time developments in home prices, but it is nevertheless a good gauge of pricing trends on a national basis.
Today's data is expected to show positive year-over-year gain for the main 20-city index, which will be the first for that benchmark since the fall of 2010 when government tax credits gave the sector a temporary boost. Excluding that one-off 2010 positive year-over-year gain for the price index, we would have to go back to late 2006 for a positive reading.
Housing is critical to the stabilization of the economic growth outlook as it has knock-on effects in a number of different sectors. Given the favorable developments in this key sector of the economy, housing is expected to be a net positive contributor to GDP growth this year, the first time this would be happening since 2005.
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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