Zacks Bull and Bear of the Day Highlights: Polo Ralph Lauren, Gerdau S.A., Men's Wearhouse, Hovnanian Enterprises and Smithfield Foods

Sep 09, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Sept. 9, 2011 /PRNewswire/ -- Zacks Equity Research highlights Polo Ralph Lauren (NYSE: RL) as the Bull of the Day and Gerdau S.A. (NYSE: GGB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Men's Wearhouse (NYSE: MW), Hovnanian Enterprises (NYSE: HOV) and Smithfield Foods (NYSE: SFD).


Full analysis of all these stocks is available at

Here is a synopsis of all five stocks:

Bull of the Day:

Polo Ralph Lauren's (NYSE: RL) first-quarter 2012 earnings of $1.90 per share beat the Zacks Consensus Estimate of $1.45 and surged 57% from the prior-year period, on the heels of strong top-line performance resulting from the company's growth initiatives and improved margins. Moreover, robust quarterly performance prompted management to raise its revenue growth guidance for fiscal 2012.

Further, management's initiatives to capitalize on opportunities in Asia and reduced long-term debt augur well for future operating performance. Moreover, the company leverages its sturdy array of globally renowned brands and their premium positioning to bolster its well-established business in the specialty retailing sector.

Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $150.00, 22.1x 2012 EPS, reflects this view.

Bear of the Day:

Brazilian steelmaker Gerdau S.A.'s (NYSE: GGB) second quarter results were rather disappointing as the company's EPS of $0.18 plummeted 38% year over year and lagged behind the Zacks Consensus by 14 cents. Results were plagued by higher raw material costs that have been persistently affecting the company's financial health.

To add to the peril, Gerdau's positive momentum gets restricted by the headwinds arising from foreign currency fluctuation, cyclicality of the industry and stiff competition. Thus, we have downgraded our recommendation on the stock from Neutral to Underperform.

Gerdau's current trailing 12-month earnings multiple is 11.6X, compared with 27.4X for the peer group and 15.9X for the S&P 500. Our $7.75 target price is based on 9.6X 2011 earnings per ADR.

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Bernanke, Obama & Jobs

Bernanke's speech this afternoon will be parsed for clues to the Fed's next move at its two-day meeting on September 20th. In one policy option, generally referred to as 'operation twist,' the Fed will replace maturing short-term treasury and mortgage bonds on its balance sheet with longer-maturity instruments.

This is expected to bring down the yields on long-term bonds. In anticipation of this Fed move, coupled with the economy's dire straits, the yield on the 10-year Treasury bond is currently flirting with the record low 2% level.

Media reports indicate that the president is expected to unveil a roughly $300 billion jobs program in his speech later this evening. It is difficult to envision in the current partisan deadlock that he can have Congress go along with new spending plans. But there could nevertheless be some common ground on tax issues.

The president is reportedly planning to announce an extension to the payroll-tax holiday that expires at the end of this year. He may also unveil a job-centric tax credit for employers. There is also talk of a temporary holiday for repatriation of corporate cash parked overseas at present. I am not very hopeful that these measures will get enacted.

In corporate news, we got better-than-expected results and positive guidance from Men's Wearhouse (NYSE: MW). Hovnanian Enterprises (NYSE: HOV), the homebuilder, reported a narrower-than-expected loss, but its sales came short of expectations. Smithfield Foods (NYSE: SFD), the processor of pork and other fresh meats, beat on EPS, but fell short of revenue expectations.

The market will likely remain tentative ahead of the major speeches by Bernanke and Obama, particularly given the solid gains on Wednesday. While the president's speech comes after the markets close, Bernanke's comments have the potential to generate some late-session momentum.

Get the full analysis of all these stocks by going to

About the Bull and Bear of the Day

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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