Zacks Bull and Bear of the Day Highlights: St. Joe, Fujifilm Holdings, HSBC Holdings, Standard Chartered and ING Groep

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Dec 13, 2012, 09:30 ET

CHICAGO, Dec. 13, 2012 /PRNewswire/ -- Zacks Equity Research highlights The St. Joe Company (NYSE:JOE) as the Bull of the Day and Fujifilm Holdings (OTC:FUJIY) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on HSBC Holdings plc. (NYSE:HBC), Standard Chartered PLC (OTC:SCBFF) and ING Groep NV (NYSE:ING).

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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:

Bull of the Day:

The St. Joe Company (NYSE:JOE) reported strong third quarter 2012 results with a healthy year-over-year increase in revenue and EPS, with the latter exceeding the Zacks Consensus Estimate by $0.18. St. Joe is one of the largest real estate developers in Florida.

The company is presently focusing on developing the adjacent area of the Panama-City Bay County Airport, which was opened in late 2010, to increase the future value of its holdings. However, St. Joe's business is primarily concentrated in Florida, which was one of the hardest hit states in the recession and had adversely affected its bottom line in the recent past, thereby undermining the future growth potential to some extent.

Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market. Our target price of $27.00, 158.8X 2012 EPS, factors in this view.

Bear of the Day:

Fujifilm Holdings (OTC:FUJIY) generated net income of $101.3 million during the three months ending September 30, 2012. The company far exceeded the $5.0 million reported in the year-ago quarter. Yet the company finds it difficult to maintain its traditional business within the digitalization phase of growth.

Also, due to the existence of many players in the industry, it becomes challenging for the company to earn profits. Moreover, the ever increasing prices of raw materials remain a nagging concern.

Thus, anticipating Fujifilm to face troubles in revenue generation, we are downgrading the stock from Neutral to Underperform. Our $17.00 target price, 13.4x 2013 EPS, reflects this view.

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Money Laundering Costs HSBC Nearly $2B

HSBC Holdings plc. (NYSE:HBC) reached a settlement with the U.S. law enforcement authorities in the money laundering case and agreed to pay a hefty amount for it. The company would pay a penalty of $1.9 billion for its misdeeds and take proper measures to avoid such issues going forward.

As a matter of fact, HSBC was blamed for substantial lapses in its anti-money laundering compliance. The company was accused of being involved in the displacement of funds through the U.S. financial system for countries under the sanctioned list of the United States.

Moreover, it was charged for controversial transactions pertaining to the illegal narcotics trade in Mexico. No less than $881 million of drug trafficking earnings are said to have been laundered through HSBC Bank USA between 2006 and 2010.

The settlement includes a Deferred Prosecution Agreement with the US Department of Justice. Over the five-year term of the agreement, HSBC's progress in executing the measures would be evaluated by an independent monitor. As per the type of agreement, in case the company falters again, it may be sued by the Justice Department.

Notably, HSBC, which admitted to its misdeeds, undertook measures to increase its controls and compliances. In addition to elevating its expenditures on anti-money laundering as well as increasing the unit staff strength, the company has overhauled its Know Your Customer program.

HSBC has already initiated a review of all Know Your Customer files worldwide, which would cost the company an estimated $700 million over five years. Moreover, on grounds of risk, the company exited 109 correspondent relationships while a number of senior officers' bonus have been revoked. Also, a set of guiding principles have been adopted for restricting business in countries which pose a high financial crime risk.

HSBC reached an agreement with all other US government agencies which have probed the former's prior activities associated with these issues. Further, it expects to finalize an agreement with the U.K. Financial Services Authority shortly.

The settlement with HSBC demonstrates the efforts of the U.S. regulators to come down hard on the unjustifiable activities of the banks and terminate the illegal cash flow through its financial system.

In August this year, the New York State Department of Financial Services (DFS) reached a $340 million settlement with Standard Chartered PLC (OTC:SCBFF) for its involvement in money laundering in Iran.

Earlier this year, the U.S. government held Netherlands-based ING Groep NV (NYSE:ING) responsible for transferring billions of dollars through the American financial system to nations that were economically restricted by the U.S. As a result, ING bank ended up paying $619 million in penalties.

For HSBC, whose shares currently retain a Zacks #4 Rank (implying a short-term Sell rating), though the settlement comes as a relief as the burden of litigation overhangs would be lessened and legal costs would be curtailed, it also exhausts the company's financials. Moreover, we believe that negligence relating to such critical rules is not acceptable since these issues can subject the global economy to dire consequences.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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