CHICAGO, Feb. 2, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Qualcomm Inc. (Nasdaq: QCOM) as the Bull of the Day and Plexus Corp. (Nasdaq: PLXS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Parcel Services (NYSE: UPS), FedEx Corporation (NYSE: FDX) and Pfizer Inc. (NYSE: PFE).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Supported by significant surge in demand for the high-end 3G smartphones and tablets, Qualcomm Inc. (Nasdaq: QCOM) reported historic high earnings in the first quarter of fiscal 2011. Net income was up 39% year over year and 35% sequentially.
The company's state-of-the-art Snapdragon platform and product diversification make management more confident about fiscal 2011, and therefore it has provided a solid financial outlook. We continue to believe the robust growth of demand for wireless data, emerging 4G LTE networks and a very strong balance sheet will serve as long-term catalysts for Qualcomm.
In addition to North America, Japan and South Korea, China and India will be the future growth drivers for the company. Qualcomm has sound foothold in these two countries. We upgrade our recommendation to Outperform.
Plexus Corp. (Nasdaq: PLXS) posted mixed first quarter 2011 results with earnings surpassing but revenues missing the respective Zacks Consensus Estimates marginally. Plexus reduced its outlook for the next two quarters of 2011 due to significant headwinds resulting from a slow down in production for two significant customers, an increase in operating costs and a significant production delay for the Coca-Cola Company.
Plexus' weak revenue outlook will weigh on the company s 2011 results. Intense competition in the EMS market, small market share, continued component challenges and supply chain constraints pose threats.
We remain apprehensive about the company meeting its 2011 targets and expect revenues to be down with difficult operating performance. We have reduced our estimates for fiscal 2011 and downgrade the stock to Underperform. We lower our target price to $25.00.
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UPS Beats, Sees Record 2011
Before the opening bell, United Parcel Services (NYSE: UPS), the world's largest package delivery company, reported its fourth quarter 2010 adjusted earnings of $1.08 per share surpassing the Zacks Consensus Estimate of $1.05. Earnings per share showed a substantial 44% growth from 75 cents in the year-ago quarter.
Adjusted earnings exclude a net after-tax gain of $32 million related to the sale of certain non-core business units.
Adjusted earnings per share climbed 54% year over year to $3.56 in fiscal 2010.
Total revenue grew 8.4% year over year to $13.42 billion in the fourth quarter and was ahead of the Zacks Consensus Estimate of $13.41 billion. The year-over-year increase reflects consolidated volume growth of 3.9% and a 3.3% increase in total revenue per piece. Adjusted operating income leaped 39.7% year over year to $1.76 billion, reflecting an operating margin of 13.1%, up 290 basis points (bps). Supply Chain and Freight segment showed an impressive growth during the quarter.
In fiscal 2010, total revenue increased 9.4% year over year to $49.5 billion and adjusted operating profit soared 47% to $5.8 billion from the prior year. International Package as well as Supply Chain and Freight segments generated a record breaking operating income during the year.
For fiscal 2011, United Parcel projects adjusted earnings per share in the range of $4.12 to $4.35, representing an increase of 16% to 22% from the 2010 level. This guidance is expected to be higher than the peak earnings recorded by the company in 2007. The mid-point of $4.24 cents is well above the current Zacks Consensus Estimate of 4.17 per share.
The company expects to significantly ramp share repurchases to approximately $2 billion in FY11.
We believe investor sentiment continues to improve for United Parcel Services, which largely competes with FedEx Corporation (NYSE: FDX). Outstanding performance in Supply Chain and Freight segment, strong operating leverage, expanded yield, improved margins in domestic as well as international package, cost-control measures, the expected ramp up of share buybacks and continuous dividend payment make the stock attractive for investment. Based on these strong fundamentals, we are reiterating our Buy recommendation with a Zacks #2 Rank for the short term (1–3 months).
However, competitive threats, large European exposure and labor unionization keep us cautious on the stock. Thus, we are currently maintaining our long-term Neutral recommendation on United Parcel Services.
Pfizer Tops Ests, 2011 View Disappoints
Pfizer Inc. (NYSE: PFE) reported fourth quarter earnings of 47 cents per share, a penny above the Zacks Consensus Estimate, and 4% below the year-ago earnings of 49 cents. Full year earnings came in at $2.23 per share, a couple of cents above the Zacks Consensus Estimate and 10% above the year-ago earnings. Performance was boosted by higher revenues.
Fourth quarter revenues increased 6% to $17.6 billion, exceeding the Zacks Consensus Estimate of $16.9 billion. Meanwhile, full year revenues increased 36% to $67.8 billion, above the Zacks Consensus Estimate of $67.2 billion.
The Quarter in Detail
Fourth quarter revenue growth included the impact of the Wyeth acquisition, which added $2.3 billion or 14% to the total. While foreign exchange negatively impacted revenues by $70 million or 1%, legacy Pfizer products negatively impacted revenues by $1.2 billion or 7%. Revenues were also affected by the US health care reform and EU pricing austerity.
International revenues increased 13% to $10.3 billion, reflecting 14% operational growth and a 1% unfavorable foreign exchange impact. Meanwhile, US revenues declined 3% to $7.2 billion.
Following the Wyeth acquisition, Pfizer operates through two segments: Biopharmaceutical and Diversified. The Biopharmaceutical segment posted fourth quarter revenues of $15.1 billion, up 3%. Wyeth products contributed $1.6 billion to segment revenues with performance being boosted by drugs like Premarin, Pristiq, and Enbrel among others.
Pfizer legacy products like Norvasc continued to struggle during the quarter, mainly due to the presence of generic competition. Moreover, the loss of exclusivity on Lipitor in certain territories and Aricept in the US in 2010 impacted legacy Pfizer's performance by 8% or $500 million.
Sales of oncology product Sutent increased 1% to $295 million. Meanwhile, sales of Pfizer's mega-blockbuster anti-cholesterol medicine Lipitor declined 17% globally to $2.6 billion in the fourth quarter. While US sales of the drug declined 7% to $1.4 billion, international sales fell 25% to $1.2 billion. The product, which is facing increased competition from cheaper generic rivals, is slated to lose exclusivity in the US in 2011.
Sales of Chantix, an oral nicotinic partial agonist for smoking cessation, increased 32% to $233 million mainly due to strong performance in international markets. US sales, however, declined 6% to $78 million. Chantix has been under pressure over the past few quarters primarily because of safety concerns surrounding it. On July 1, 2009 Pfizer announced that the US Food and Drug Administration (FDA) required it to add a black-box warning to the Chantix label. This is the most severe warning the FDA issues and is expected to further impact US sales of the drug.
Generic competition continued to eat into sales of products like Norvasc ($386 million, down 21%) and Effexor ($206 million, down 60%). Wyeth legacy products like the Premarin family and Enbrel posted sales of $261 million and $865 million, respectively.
The Diversified segment posted fourth quarter revenues of $2.4 billion, up 34%. Products like Centrum, Advil, and Caltrate and other Nutrition products helped boost revenues. Foreign exchange fluctuations did not have a material impact on Diversified revenues.
Selling, informational and administrative (SI&A) expenses increased 7% to $5.7 billion during the quarter, mainly due to the Wyeth acquisition. R&D expenses remained flat at $2.8 billion primarily due to cost reductions that were offset by the addition of the legacy Wyeth operations and continued investment in the late-stage development portfolio.
In addition to reporting fourth quarter and full year results, the company announced an additional share repurchase program for up to $5 billion. This brings the company's total current authorization for share buybacks to $9 billion. While shares worth about $5 billion are expected to be repurchased in 2011, the balance amount will be used for share buybacks in 2012 and beyond.
2011 Earnings Guidance Disappoints
Pfizer expects 2011 earnings in the range of $2.16 - $2.26 per share on revenues of $66 - $68 billion. The Zacks Consensus Estimate currently stands at $2.30 per share, well above the higher end of the company's guidance.
While SI&A expenses are expected in the range of $19.2 - $20.2 billion, R&D expenses are expected in the range of $8.0- $8.5 billion.
Pfizer said that it remains on track to achieve its goal of realizing synergies of about $4 - $5 billion from the Wyeth acquisition by the end of 2012. The company achieved cost savings of more than $2 billion in 2010.
While Pfizer maintained its 2012 earnings guidance, the company tweaked other aspects of its guidance. The company cut its revenue guidance to $63.0 - $65.5 billion (old guidance: $65.2 - $67.7 billion) in order to reflect the elimination of revenue contributions from future business deals as well as certain changes in market conditions.
The company said it now expects to reduce its 2012 R&D spend to $6.5 - $7.0 billion compared to its earlier guidance of $8.0 - $8.5 billion. The company intends to focus on those disease areas which represent higher potential.
Pfizer maintained its EPS guidance of $2.25 - $2.35 per share. With the company cutting its revenue outlook, lower R&D spend and share buybacks are expected to drive 2012 earnings.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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