CHICAGO, Feb. 23, 2012 /PRNewswire/ -- Zacks Equity Research highlights: Pool Corp. (Nasdaq: POOL) as the Bull of the Day and Excel Maritime Carriers (NYSE: EXM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Hewlett-Packard (NYSE: HPQ), Dell, Inc. (Nasdaq: DELL) and Safeway (NYSE: SWY).
Although Pool Corp. (Nasdaq: POOL) is expected to face tougher comparisons ahead amid weak growth in new pool construction and faltering consumer confidence, the company boasts a strong market position and earnings power. Pool is an acknowledged leader in the industry.
The potential for further market share gains and cost-containment initiatives augur well for the company. Pool's results reflect continued growth in its struggling green business. Amid tough business environment, Pool's revenue has been marching ahead.
The company also expects the market condition to improve beyond 2012. Hence, we rate the stock Outperform. Our six-month target price of $45.00 equates to 26.2x our earnings estimate for 2012. This price target implies an expected total return of 20.1% over that period.
We downgrade our recommendation on Excel Maritime Carriers (NYSE: EXM) to Underperform ahead of its fourth quarter of 2011 financial results. We believe the drybulk shipping industry has a gloomy outlook, facing serious challenges since spot vessel rates collapsed significantly.
The sole reason for this dismal condition is the sheer increase of newbuild ships under operation, which resulted in intense price competition. The spot rates of drybulk vessels have fallen to such low levels that even surging commodity prices in the Asian markets have failed to offset the loss of the vessel owners. We believe continuation of this pricing trend will certainly jeopardize the company's future financials.
In the last couple of quarters, Excel Maritime took a severe hit on its time charter equivalent rate. Additionally, its balance sheet is highly leveraged. We do not find any near-term catalyst.
Times are tough these days for PC makers. Hewlett-Packard (NYSE: HPQ), which reported fiscal first quarter 2012 earnings after the bell Wednesday, beat the Zacks Consensus Estimate for earnings but is seeing its shares selling off in the after-market, similar to the way Dell, Inc.'s (Nasdaq: DELL) did yesterday.
Hewlett-Packard reported earnings of 92 cents per share, a 5.75% positive surprise, on revenues totaling $30 billion in the quarter. But this was a pretty low hurdle to get over; in fact, the Zacks Consensus Estimate for the quarter had not moved from 87 cents per share the entire quarter, despite 2 analysts upwardly revising estimates within the past month.
This is typical of H-P's relationship with the analysts covering the company: tepid, modest growth expected, and a tepid, modest beat on the bottom line. H-P has averaged a positive earnings surprise of 3.8% over the past 4 quarters.
So Why the Sell-Off?
Though the bottom line posted a beat, revenues missed. The Zacks Consensus was looking for $30.8 billion in sales for the quarter.
Further, guidance for H-P's Q2 fell to 90-91 cents, lower than the 95 cents expected from the Zacks Consensus. Also, consumer client PC sales fell 25% in the quarter, and consumer printer sales were down 15%. These are obviously not very good numbers, so the headline earnings beat looks to be masking some deeper issues at H-P.
Everyone knows CEO Meg Whitman is doing plenty of heavy lifting to get H-P back on track following the tenure of her predecessor Leo Apotheker. And the world's biggest PC maker is looking for volume growth to increase considerably in 2012 from the previous couple years. But just when H-P will finally gain some traction and see top-line growth is the question.
Earnings Preview: Safeway
Safeway (NYSE: SWY), a leading food and drug retailer in North America, is scheduled to report its fourth quarter and fiscal 2011 results on Thursday, February 23 before the opening bell. The current Zacks Consensus Estimate for revenues and earnings per share for the quarter are pegged at $13.5 billion and 64 cents, respectively. For fiscal 2011, earnings are expected to be $1.72 on revenues of $43.45 billion, according to the Zacks Consensus Estimate.
Safeway had witnessed sluggish revenue growth primarily due to unemployment, deflation and price competition, which makes budget-conscious shoppers more alert. However, the company expects the scenario to improve going forward, aided by better volume and pricing. We are also encouraged by the company's cost-saving activities, which is likely to improve margins further.
Moreover, Safeway intends to strengthen its presence in international markets. The company is expanding its international business, especially in Canada, Australia and the UK.
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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