Zacks Bull and Bear of the Day Highlights: Standard Motor Products, Research In Motion, Nike, Brown Shoe Company, Delta Air Lines
CHICAGO, June 29, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Standard Motor Products (NYSE: SMP) as the Bull of the Day and Research In Motion (Nasdaq: RIMM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nike Inc. (NYSE: NKE), Brown Shoe Company Inc. (NYSE: BWS) and Delta Air Lines Inc. (NYSE: DAL).
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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:
Standard Motor Products (NYSE: SMP) enjoys strong brand recognition worldwide. Successful R&D and perfect strategic acquisitions have helped the company enrich its product portfolio and maintain a broad customer base. Standard Motor's recently amended credit agreement with GE capital has increased its scope for further investments.
Moreover, Standard Motor has hiked its dividend payment, signaling the company's improved confidence in its operations. Furthermore, the company is not vulnerable to the cyclicality of the auto industry. In the first quarter, its earnings exceeded the Zacks Consensus Estimate by $0.18 per share.
Therefore, we have maintained our Outperform recommendation on the stock. Our $17.00 target price, which is 12.1x our 2011 EPS estimate, reflects this view.
The nightmare of Research In Motion (Nasdaq: RIMM) continues and so far the company has failed to provide any specific timeframe when its free-fall will come to an end. Ever since Apple's iPhone hit the market, Research In Motion has been losing its leadership position. For the last couple of years, the company failed to launch any device that could capture market share from iPhone or Android-based high-end smartphones.
After experiencing weak financial results for the first quarter of fiscal 2012, the company reported highly disappointing future financial guidance. It seems management is doing research in slow motion, as the company failed to understand how the tastes and preferences of consumers are changing.
Meanwhile, the market becomes intensely competitive with the emergence of several low-cost Asian phone developers. We do not find any immediate catalyst and therefore downgrade our recommendation to Underperform.
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Nike Beats, US & China Outshine
Nike Inc. (NYSE: NKE) posted strong fiscal 2011 fourth-quarter earnings of $1.24 per share, up 17.0% from the year-ago earnings of $1.06 per share, handily beating the Zacks Consensus Estimate of $1.16 per share.
Strong quarterly growth in revenue coupled with lower selling, general and advertisement expenses as a percentage of revenue drive the company to post a record fourth-quarter 2011 earnings.
Future Orders
Nike reported an increase of 15.0% year over year in future orders, which are scheduled for delivery from June 2011 through November 2011; and the order amount reaching $10.3 billion. Future orders measure customer orders, which are scheduled for delivery in the coming season and are a widely used metric to gauge the performance of retailers.
Nike is the industry leader by a stretch in the U.S. footwear and athletic apparel industry. Furthermore, a strong portfolio of globally recognized brands, Cole Haan, Converse, Chuck Taylor, Hurley and Umbro provides a competitive advantage to the company and bolsters its dominant position in the market.
However, Nike faces an intense competition in both domestic and international markets from local players as well as established players, such as Adidas AG (including Reebok) and Brown Shoe Company Inc. (NYSE: BWS). All these companies are primarily in athletic wear and want to grab market share in active wear or lifestyle consumer products. Moreover, the athletic footwear and apparel industry is characterized by rapidly changing customer preferences and technology, which requires continuous innovation in order to stay ahead of trends and competitors.
Currently, Nike maintains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. Moreover, we retain a long-term 'Neutral' recommendation on the stock.
Delta Sees Solid Rev in Q2
The second largest U.S. airline Delta Air Lines Inc. (NYSE: DAL) expects second quarter 2011 to be profitable owing to higher revenues, which would largely offset the fuel price inflation.
Despite the lingering uncertainty in U.S. recovery as well as debt concerns in Europe, the demand for air travel has rebounded to some extent after the March 11 catastrophe. Delta now expects the disaster in Japan to hurt total revenue by $125 million in the second quarter compared with the previous expectation of $150 million.
The company also expects the current quarter's passenger revenue per seat mile (PRASM or unit revenue) to grow 10% year over year. In the recently concluded first quarter, the company's PRASM rose 7% year over year.
For the past several months, air carriers are struggling with the rising fuel prices. In order to alleviate the pressure, the carriers are passing the increased cost to customers in the form of fare hikes. The second quarter fuel cost is expected to be $3.23 per gallon, down from the prior expectation of $3.26 per gallon. The third quarter projection for fuel cost is $3.03 per gallon. Further, Delta's non-fuel expenses also remain steep due to higher maintenance costs and lower-than-expected capacity.
To keep costs down, Delta Air Lines plans to trim its capacity by 4% post Labor Day, retire less fuel-efficient planes and remove 140 aircraft by the end of the next year. In addition, Delta offers voluntary buyouts to 55,000 of its workers
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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