Zacks Bull and Bear of the Day Highlights: Priceline.com, Genworth Financial, Google, Microsoft and Supervalu
CHICAGO, April 15, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Priceline.com (Nasdaq: PCLN) as the Bull of the Day and Genworth Financial (NYSE: GNW) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Google, Inc. (Nasdaq: GOOG), Microsoft (Nasdaq: MSFT) and Supervalu Inc. (NYSE: SVU).
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Here is a synopsis of all five stocks:
Priceline.com (Nasdaq: PCLN) is one of the leading online travel companies in the world. Priceline's fourth quarter earnings beat the Zacks Consensus and management expects strong double-digit bookings growth in the next quarter, with international growing much faster than domestic.
The secular growth trend in the online travel space, Priceline's own business momentum, international growth opportunities, good execution, prudent marketing strategy and strong financial position are likely to drive upside to the shares. While occupancy tax-related litigation remains an overhang, it is likely to have the same impact on all peer companies.
With demand strengthening considerably following the recession, we remain optimistic. We therefore have an Outperform rating on PCLN shares.
Genworth Financial's (NYSE: GNW) fourth-quarter operating loss lagged the Zacks Consensus Estimate led by a substantially higher year-over-year loss at the U.S. Mortgage Insurance segment, which was partially offset by better results at Retirement & Protection and at International. We expect an elevated unemployment rate will continue pressuring its mortgage insurance business.
Though the business is showing signs of improvement, the mortgage line is still experiencing losses. Additionally, improvements in its other business lines are expected to be slow, given the economy's sluggish recovery.
Our six-month target price of $11.00 equates to 10.0x our earnings estimate for 2011. This is consistent with our Underperform recommendation on the shares.
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Google Misses on Bottom Line
Search engine giant Google, Inc. (Nasdaq: GOOG) reported first quarter 2011 earnings after the closing bell today. Google's earnings of $7.04 per share missed the Zacks Consensus Estimate by a dime, but revenues for the quarter came in at a healthy $6.54 billion -- higher than the Zacks Consensus Estimate of $6.29 billion and even the most recent estimate of $6.38 billion.
Google shares had been up slightly in regular-day trading on Thursday ($2.23 per share, or 0.39%), but in the after-market have slid badly, over 5% and more than $29 per share. Even with net revenue gains of 29% year over year, the miss on the bottom line must be raising red flags to traders.
Over the past month, there has been downward pressure on Google shares, with 5 analysts having lowered estimate revisions for the 1st quarter, and 4 downward revisions for the 2nd quarter and fiscal 2011, as well. The $7.14 per share Zacks Consensus Estimate had come down 5 cents in just the past month, and the company couldn't even come close to hitting that mark.
Other challenges pertaining to Google's success in the coming quarters include a changing of the guard from CEO Eric Schmidt to Larry Page, the company's involvement (or lack thereof) and its burgeoning competition in the Chinese market, and disruptions due to recent catastrophic developments in Japan.
This is now the second earnings miss for Google in the past four quarters. And being that it is the first earnings announcement with Page at the helm, questions may begin to swirl about the company on the management side. But one should not lose sight of the fact that Google has come a very long way in a short amount of time, and will continue to be a stalwart in the industry for a long time to come.
That said, the big question is: will Larry Page be able to find a new goldmine somewhere in its vast expanse of different kinds of business the way Schmidt was able to do with Internet search a few years ago? If so, it will mark another major tier in the relatively brief history of the company. If not, perhaps Google is destined to become another Microsoft (Nasdaq: MSFT), ultimately still successful but unable to capture that elusive "next wave."
Supervalu Reports Weak 4Q
Supervalu Inc. (NYSE: SVU) one of the largest grocery chains in the United States, reported fourth-quarter 2011 earnings. The quarterly earnings of 44 cents a share outpaced the Zacks Consensus Estimate of 34 cents by 29.4%. However, on a year-over-year basis earnings plunged 29.0%
The company now expects fiscal 2012 GAAP earnings to be in the range of $1.20 to $1.40 per share, which is above the Zacks Consensus Estimate of $1.17.
Revenue and Margins
Supervalu's total sales dipped 5.9% to $8,673 million in the quarter, compared with $9,205 million in the prior-year period. The reported revenue fell short of the Zacks Consensus Estimate of $8,751 million.
Supervalu's gross margin was almost flat year-over-year contracting 10 basis points to 23.3% on account of a shift in business segment mix and rise in promotional expenditure.
Segment Details
Net sales at Retail Food (77.0% of the total sales in the quarter) slipped 7.1% to $6,694 million in the quarter compared to $7,206 million in the prior-year quarter. Results followed an identical store sales decline of 5.0% and the adverse impact of retail market exits.
Retail square footage dipped 1.7% year over year in the quarter. However, excluding the impact of market exits and store closures, retail square footage grew marginally by 1.7% in the quarter.
Net sales at Supply Chain Services (23.0% of the total sales in the quarter) increased 1.6% to $1,966 million in the quarter compared with $1,999 million in the prior-year quarter.
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