Zacks Bull and Bear of the Day Highlights: Priceline.com, Washington Federal, Wal-Mart Mart Stores, Target and Costco Wholesale
CHICAGO, May 17, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Priceline.com (Nasdaq: PCLN) as the Bull of the Day and Washington Federal (Nasdaq: WFSL), as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT) and Costco Wholesale Corporation (Nasdaq: COST).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
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 first quarter earnings missed the Zacks Consensus but 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.
We are downgrading our recommendation on Washington Federal (Nasdaq: WFSL) to Underperform from Neutral, based on the pressure on net interest margin (NIM) and its lag with respect to deposit re-pricing. The company's fiscal second-quarter 2011 earnings marginally missed the Zacks Consensus Estimate.
Increased interest income, lower expenses and a substantial drop in provision for loan losses were among the positives during the quarter. However, weak loan demand and lower profitability metrics were the downside. We remain concerned about the company's considerable exposure to real estate markets where values remain soft.
Our six-month target price of $14.00 per share equates to about 14.4x our earnings estimate for fiscal 2011. Combined with the $0.24 per share annual dividend, this price target implies an expected negative total return of 8.2% over that period.
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Earnings Preview: Wal-Mart
Wal-Mart Mart Stores Inc. (NYSE: WMT) is scheduled to announce its first quarter 2012 results on May 17, 2011, and we see limited revisions in analyst estimates at this point. Currently, the Zacks Consensus Estimate is 96 cents per share and sales estimate is around $103.12 billion.
Fourth Quarter Overview
Wal-Mart's fourth quarter earnings increased 11.9% from the year-ago period. However, (excluding the benefit of one-time items) earnings were $1.34 a share, which was ahead of the Zacks Consensus Estimate of $1.31, by 2.3%.
For full year 2011, reported earnings came in at $4.18 per share, while adjusted earnings were $4.07. Both reported and adjusted earnings were ahead of the Zacks Consensus Estimate of $4.04.
Net sales for the quarter recorded a growth of 2.5% to $115.6 billion from $112.8 billion in the year-ago quarter. The expansion was primarily driven by a robust 8.9% expansion in the International segment, which benefited from favourable currency translations, coupled with a 4.4% growth in the Sam's Club segment. Revenues were in line with the Zacks Consensus Estimate.
Annual revenues spurred 3.4% to $419 billion. Net sales included a currency exchange rate benefit of $4.5 billion. Income from continuing operations attributable to Walmart were $15.4 billion, a 6.3% increase from $14.4 billion last year.
However, sales at Wal-Mart's U.S. segment were down year-over-year, declining marginally by 0.5%.
Wal-Mart, widely regarded as a bellwether for the U.S. economy, stated that U.S. same-store sales decreased 1.1% year-over-year, while that for Sam's Club grew by 2.7%.
Meanwhile, quarterly operating income grew by 7.3% year-over-year to $8.0 billion, while the operating margin increased by 31 basis points to 6.9%. The growth was primarily seen due to favorable foreign currency translations.
Wal-Mart ended the year with 985 million square feet of retail space. In fiscal 2012, the company expects organic square footage to increase between 3% and 4%.
Management Guidance
Driven by strong profits in fiscal 2011, the company provided first quarter and full fiscal 2012 earnings guidance. For the first quarter, the company expects earnings to be in the range of 68 cents to 73 cents, whereas for the full year earnings are projected in the range of $4.05 to $4.25 a share.
First-Quarter 2012 Zacks Consensus
Analysts covered by Zacks expect Walmart to post first-quarter 2012 earnings of 96 cents a share. The current Zacks Consensus inched up 9.1% from the year-ago period and ranges within 90 cents and $1.00.
Agreement of Analysts
Out of the twenty three analysts providing estimates for the first quarter 2012, none of the analysts have changed their estimates in the last 7 days.
The limited number of changes to estimates indicate the absence of any major catalyst during the quarter that could drive results. Consequently, most of the analysts are sticking to the estimates they had projected post fourth quarter earnings.
Magnitude of Estimate Revisions
There was no change in the Zacks Consensus Estimates for the first quarter and fiscal 2011 over the past 30 days. However, the fiscal 2011 estimates moved down by 1 penny in the past ninety days.
Recommendation
We remain encouraged by the company's significant presence in the international market. The international segment of the company consists of retail operations in 14 countries and Puerto Rico. Moreover, the company earns the trust of its customers by providing a broad assortment of quality merchandise and services at 'every day low prices' (EDLP).
Currently, Walmart which faces stiff competition from Target Corp. (NYSE: TGT) and Costco Wholesale Corporation (Nasdaq: COST) has a Zacks #2 Rank, implying a short-term Buy recommendation.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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