CHICAGO, April 18, 2012 /PRNewswire/ -- Zacks Equity Research highlights: T. Rowe Price Group (Nasdaq: TROW) as the Bull of the Day and United Continental (NYSE: UAL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on IBM (NYSE: IBM), Intel (Nasdaq: INTC) and Yahoo (Nasdaq: YHOO).
We are upgrading our recommendation on T. Rowe Price Group (Nasdaq: TROW) to Outperform from Neutral based on the company's debt-free position and steady profit trend. The company's fourth-quarter 2011 earnings outshined the Zacks Consensus Estimate. Moreover, earnings also compared favorably with the prior-year quarter.
Higher-than-expected top-line growth and increased assets under management (AUM) assisted the improved performance. Furthermore, relative mutual fund performance was also positive. Higher operating expenses were on the downside.
The company has the potential to take advantage of the economic recovery and benefit from the growth opportunities in the domestic and global AUM. Our six-month target price of $70.00 equates to about 20.8x our earnings estimate for 2012. Combined with the $1.36 per share annual dividend, this price target implies an expected return of 13.9% over that period.
We have downgraded our recommendation on United Continental (NYSE: UAL) to Underperform on projections of a weak first quarter. Although United Continental would benefit from merger synergies, global network, leading unit revenue growth, strong competitive position, fleet and network optimization, hedging strategies and a strong liquidity position, we believe surging fuel prices and the threat of recession in Europe pose downside risks to the stock.
Additionally, high non-fuel costs related to fleet optimization and product initiatives, high unionization, new advertising rules, competitive threats, and risks pertaining to the Continental integration could hurt the company's profitability going forward.
These negative factors are expected to overshadow the future growth prospects of United Continental. Thus, we have an Underperform rating with the target price of $19, based on 4.8x our earnings estimate for 2012.
We had three big boys of tech report earnings after the close today.
IBM (NYSE: IBM) reported total revenue of $24,673, down from $29,486 in 4Q11 and up slightly from $24,607 in 1Q11. We drill down on both service lines, Tech and Business as well as Software to determine the health of the quarter.
Tech Services came in at $10,035 down 4% from $10,452 in 4Q11 and 1.7% higher than the $9,863 reported in 1Q11.
Business Services reported revenue of $4,637 down 4.9% from the $4,877 reported in 4Q11 and off 1.55% from the year ago level of $4,710 reported in 1Q11.
Software revenue was $5600, down from $7648 in 4Q11 or 26% below the prior quarter and 5.5% ahead of the $5,308 reported in the year ago period. Software generally contributes a higher amount to gross margin.
Gross profit came at 45.1%, below last quarter's 49.9% but up from the year ago level of 44.1%.
Intel (Nasdaq: INTC) is the maker of the brains of most of today's computers.
Revenue came in at $12.9 billion, down from $13.8 billion in 4Q11 and slightly up from $12.8 billion in 1Q11.
Gross Margins were 64% in line with last quarter's gross margins and 3.2% higher than the 62% reported in the year ago period.
The PC and Data segment revenues were down both sequentially and year over year.
Yahoo! (Nasdaq: YHOO) is holding a conference call with new CEO Scott Thompson shortly after he has outlined three areas of focus for the struggling search company.
Search revenues of $470 million were up 25% sequentially and 3.3% from the $455 million posted in the year ago period.
Display was a big disappointment, at $511 million it was 6.2% below the prior quarter's $545 million and 2.1% below the year ago level of $522 million.
Other revenue came in at $239 million down 3% sequentially and up 1% from the year ago level.
Total revenues increased 4.5% sequentially and were basically flat with year ago levels as Yahoo! continues to struggle to find growth.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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