Zacks Bull and Bear of the Day Highlights: SABESP, Westamerica Bancorp, Sprint Nextel, Verzion Communications and AT&T
CHICAGO, Sept. 4, 2012 /PRNewswire/ -- Zacks Equity Research highlights SABESP - ADR (NYSE:SBS) as the Bull of the Day and Westamerica Bancorp (Nasdaq:WABC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onSprint Nextel Corp. (NYSE:S), Verzion Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T).
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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:
We believe Sao Paulo, Brazil-based utility SABESP - ADR (NYSE:SBS) will gain momentum and continue to work for its long-term target of providing 1.3 million new water connections and 1.7 million sewage connections by 2019. Satisfactory liquidity position supports investments aimed for expansion; a R$7.9 billion plan has been launched to increase water supply coverage, sewage collection and treatment of collected sewage.
SABESP keeps up its position as one of the largest water and sewage services providers in the world. It recorded a rise in billed water and sewage volume during the second quarter 2012, primarily due to a higher number of connections and acceleration in consumption. Its non-cyclical regulated utility business in the Brazilian emerging market is an attractive and relatively low-risk investment opportunity.
Despite a little setback emanating from a rise in cost of sales and services, long-term growth prospects compelled us to maintain an Outperform recommendation on the stock. Our $105.00 price objective results from 13.4x earnings multiple (2012).
Westamerica Bancorp's (Nasdaq:WABC) second quarter 2012 earnings were in line with the Zacks Consensus Estimate. Results were adversely impacted by lower revenue. Reduced non-interest expenses, improving credit quality and stable capital ratios were the positives.
Due to challenging economic environment, net interest margin (NIM) in the second quarter declined to 4.89% from 5.38% in the prior-year period. We believe that the slow economic recovery and the Federal Reserve s decision to keep short-term interest rates low will keep NIM under pressure in the upcoming quarters.
Our six-month target price of $43.00 equates to about 14.3x the Zacks Consensus Estimate for 2012. Combined with the $1.48 per share annual dividend, this price target implies an expected negative return of 7.0% over that period, which is consistent with our long-term Underperform recommendation.
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More LTE Markets for Sprint
The third-largest U.S. wireless carrier Sprint Nextel Corp. (NYSE:S) added 4G LTE services to four more cities namely Baltimore, Gainesville, Manhattan/Junction City and Sedalia.
The move is part of the multi-billion dollar restructuring program known as Network Vision plan, which aims to combine 3G and 4G technologies into one seamless network. This would lead to the efficient use of capital, reduction of cell sites, the elimination of dual networks, backhaul efficiencies, reduced churn, lower roaming charges and energy cost savings. As a result, the plan is expected to generate $10 billion to $11 billion in savings over a seven-year period (2011–2017). The company expects the Network Vision deployment to be over by the end of 2013.
The expansion will strengthen Sprint's competitive position in LTE deployments. Sprint is about a year and a half behind the wireless giant Verzion Communications Inc. (NYSE:VZ) and 10 months behind the second wireless carrier AT&T Inc. (NYSE:T) in deploying LTE networks.
Sprint made its LTE debut in five major markets – Atlanta, Dallas, Houston, Kansas City and San Antonio – in mid-July. The company expects to complete nationwide deployment by the end of 2013. The LTE coverage is expected to reach more than 120 million people (or roughly half of its CDMA footprint) by the year-end and 250 million by next year.
Since Verizon launched its 4G LTE in December 2010, it has deployed the service in 337 markets, covering more than 200 million people (nearly 75% of the U.S. population). Verizon expects to expand its 4G networks to the entire nationwide 3G footprint by mid-2013. AT&T LTE service is currently available in 47 markets covering more than 275 million in population. AT&T expects this deployment to reach to 80% of the U.S. population by next year.
In addition to the LTE rollouts, Sprint also plans to upgrade its existing 3G networks in Baltimore, Boston and Washington DC.
No doubt, these LTE investments will dilute Sprint's free cash flow for the next two years. However, liquidity is expected to improve once LTE is fully deployed.
We are maintaining our long-term Neutral recommendation on Sprint. For the short term (1–3 months), the stock retains a Zacks #3 (Hold) Rank.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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