CHICAGO, June 30, 2011 /PRNewswire/ -- Zacks Equity Research highlights: PerkinElmer, Inc. (NYSE: PKI) as the Bull of the Day and Hudson City Bancorp (Nasdaq: HCBK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on KB Home (NYSE: KBH), Family Dollar Stores Inc. (NYSE: FDO) and Shaw Communications Inc. (NYSE: SJR).
We upgrade our rating for PerkinElmer, Inc. (NYSE: PKI) to Outperform based on solid results and benefits from reorganization. First-quarter 2011 earnings per share of $0.34 surpassed the Zacks Consensus Estimate of $0.30. PerkinElmer is a leader in several life science segments. It has added new related areas as part of its reorganization and divested unrelated businesses. As a consequence, it has emerged as a higher-growth, higher-margin company.
Its operations, both sales and manufacturing, are diversified on a geographic basis. The company has implemented cost containment measures. Growing recurring revenue stream and operating margin expansion are its pillars of strength.
Based on the company's recent performance, we upgrade our rating on the stock to Outperform with a price target of $31, which is based on a P/E of approximately 18.6X our fiscal 2011 EPS estimate.
We are downgrading our recommendation on Hudson City Bancorp (Nasdaq: HCBK) to Underperform. It reported a loss on a GAAP basis in the first quarter of 2011 for the completion of the balance sheet restructuring during the quarter. Lower interest and dividend income, and increased non-interest expense, were on the downside.
Going forward, the low interest rate environment would likely result in a compression of the net interest margin from its new higher level resulting from the restructuring transaction, and in combination with the reduction in the size of its balance sheet from the restructuring transaction, would lead to a reduction of net interest income.
While its strong business model and solid capital position would aid results, the dividend cut somewhat dampens investors appetite for the stock. Increase in FDIC insurance costs also remains an overhang. .
KB Home (NYSE: KBH) reported a net loss of $68.5 million or 89 cents per share in the second quarter of fiscal 2011, compared with a net loss of $30.7 million or 40 cents per share a year ago.
However, excluding inventory impairments and land option contract abandonment charges of $20.6 million and a loss of $14.6 million on loan guaranty related to the company's investment in South Edge, LLC, the adjusted net loss stood at $33.3 million or 43 cents per share, which is much wider than the Zacks Consensus Estimate of a loss of 32 cents per share.
Total revenue fell 27% to $271.7 million, mainly driven by a 28% decline in housing revenues to $270 million. The decrease in housing revenues reflected a 29% decrease in the number of homes delivered to 1,265 homes, partly offset by a 3% rise in average selling price to $213,400. However, quarterly revenues were higher than the Zacks Consensus Estimate of $266 million.
Meanwhile, net orders fell 11% to 1,998 homes from 2,244 homes a year ago. As a percentage of gross orders, the company's cancellation rate was 25% in the quarter compared with 24% in the prior-year period.
Family Dollar Misses, Earnings Up
Family Dollar Stores Inc. (NYSE: FDO) recently posted third-quarter 2011 results. The quarterly earnings of 91 cents a share missed the Zacks Consensus Estimate of 95 cents, but jumped 18.2% from 77 cents earned in the prior-year quarter due to healthy sales witnessed in the Consumable and Home Products categories.
However, the shares of Family Dollar dropped 3.3% or $1.76 to $51.26 in pre-market trading.
The company had earlier guided earnings in the range of 92 cents to 97 cents for the quarter under review. Management now expects fourth-quarter 2011 earnings between 62 cents and 70 cents, and fiscal 2011 earnings between $3.08 and $3.16. The current Zacks Consensus Estimates for the fourth quarter and fiscal 2011 are 65 cents and $3.15 per share.
We observe that Family Dollar's strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines.
The operator of self-service retail discount store chains posted a 7.8% increase in revenue to $2,153.4 million from the prior-year quarter, and reflected sales growth across Consumables categories (up 10.6%) and Home Products (up 8.2%) but sales declined at Seasonal and Electronics (down 0.4%) and Apparel and Accessories (down 1.1%). Total revenue also fell short of the Zacks Consensus Estimate of $2,166 million.
Shaw Communications Beats
Shaw Communications Inc. (NYSE: SJR) declared its third quarter 2011 financial results, which beat the Zacks Consensus Estimate.
In the reported quarter, the company laid off 550 employees including 150 managers. Although the business restructuring is estimated to cost between $29 million and $30.7 million, it will result in early cost savings of more than $50 million.
Second Quarter Results in Detail
Net income in the reported quarter was $209.5 million or 46 cents per share compared with a net income of $163.5 million or 38 cents per share in the prior-year quarter. Earnings per share (EPS) of 46 cents comfortably beat the Zacks Consensus Estimate of 40 cents per share.
Quarterly total revenue of approximately $1,327.6 million was up 36.1% year over year and was above the Zacks Consensus Estimate of $1,290 million. The year-over-year improvement was primarily attributable to the acquisition of the Shaw Media coupled with customer growth and rate increases in the Cable and Satellite segments.
Quarterly operating income before amortization was $598.9 million, up 33% year over year. Quarterly operating margin was 45.1% compared with 46.2% in the prior-year quarter. In the third quarter of 2011, Shaw Communications generated $379.4 million in cash from operations compared with $339.5 million in the year-ago quarter. Free cash flow in the reported quarter was approximately $250.1 million versus $155.9 million in the year-ago quarter.
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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