Zacks Bull and Bear of the Day Highlights: TAM S.A., RadioShack, Intel, ExxonMobil and Schlumberger

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Jan 14, 2011, 09:30 ET

CHICAGO, Jan. 14, 2011 /PRNewswire/ -- Zacks Equity Research highlights: TAM S.A. (NYSE: TAM) as the Bull of the Day and RadioShack Corp. (NYSE: RSH) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Intel Corp. (Nasdaq: INTC), ExxonMobil Corporation (NYSE: XOM) and Schlumberger Ltd. (NYSE: SLB).

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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:

We upgrade our rating on TAM S.A. (NYSE: TAM) from Neutral to Outperform based on the proposed merger of LAN Airlines S.A. and TAM, to be christened LATAM with the total expected synergies of US$400 million. The merger, which is expected to close by the middle of fiscal 2011 will make LATAM a strong competitor in the domestic market.

The company also reported decent numbers in the third quarter with EPADS of $1.14, much above the Zacks Consensus Estimate of $0.45. Moreover, the recovery in market conditions and particularly the emerging economies like Latin America including a fall in fuel price compared with 2008 level is encouraging.

The International Air Transport Association (IATA) expects the airline industry to make a profit of $9.1 billion in 2011. Our target price of $28.00 is derived from the P/E ratio of 24.8x 2011 EPS.

Bear of the Day:

We downgrade our recommendation for RadioShack Corp. (NYSE: RSH) to Underperform following our view that the company's profitability may suffer in 2011 due to several reasons. Transition of its Kiosks businesses from Sam's Club to Target stores will result in huge losses in operating profit.

Management predicted that pressure on gross margin will continue in the near future since the company is working hard to revamp its struggling electronics accessories segment and deploying wireless kiosks inside Target stores. A precipitous fall in demand for the non-wireless category products remain a serious concern for the company.

Additionally, we believe RadioShack is facing increasing competitive pressure from other large retail stores, online shopping stores and some mobile carriers which directly sales handsets to customers. Increasing competitive threat from several fronts may result in lower wireless sales going forward.

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Intel Beats Low Expectations Again

Following a similar pattern from the past several quarters, Intel Corp. (Nasdaq: INTC) has posted an impressive earnings beat headline of 59 cents per share on revenues of $11.5 billion in the company's fiscal 4th quarter of 2010 after the bell Thursday. The Zacks Consensus Estimates had been 53 cents per share on $11.367 billion in revenues.

In fact, the numbers marked Intel's best 4th quarter ever, and set company records for EPS, revenue, gross margin (67.5%) operating income ($4.3 billion) and net income ($3.4 billion). President and CEO Paul Otellini proudly crowed, "2010 was the best year in Intel's history." This is also true. And with full-year EPS of $2.05, that's a 166% increase over fiscal 2009 EPS of $1.28, on revenues totaling $43.6 billion, up 24% year over year.

You'll forgive us if we don't overstate the importance of this outperformance; we seem to see this every quarter from Intel. First, analysts tend to keep their initial quarterly estimates locked in for the entire quarter with almost no upward revisions. Second, there always seems to be some point within each quarter where analysts doubt whether Intel has enough oomph to meet its estimates come earnings report time. And third, even when the positive earnings surprises do occur, they tend to be met with a lukewarm reception by investors in after-hours trading.

To wit, the Zacks Consensus Estimate of 53 cents per share is unchanged from 90 days ago. There had been some downward pressure on estimates as recently as last week, in fact, when 5 of the 40 analysts covering Intel downwardly revised their earnings estimates for both the quarter and fiscal 2010. And after INTC shares dipped by a penny before the bell today, it has gone up 2.77% (59 cents) since its earnings announcement -- to right about the mid-point of where the shares have been trading over the past year.

Exxon to Divest North Sea Stakes

ExxonMobil Corporation (NYSE: XOM) intends to divest its interest in four blocks in the North Sea as a part of its plan to shed non core assets. As per reports in IndigoPool, the website operated by Schlumberger Ltd. (NYSE: SLB), ExxonMobil's recently acquired XTO Energy owns the properties and the company did not specify any value for the assets.

The world's largest publicly traded company, ExxonMobil's XTO unit is offering 15% interest in three blocks, which include the Platypus natural-gas discovery. The fourth block constitutes a 33% stake for sale in the Witch Ground Graben area.

Dana Petroleum PLC is the majority stakeholder of the Platypus well and acts as the operator. Dana earlier reported that Platypus has a reserve potential of 130 billion cubic feet of natural gas and holds a 45% interest in the discovery.

In connection to valuation of the assets, Exxon pointed out that it was willing to consider a transaction that includes an asset exchange, or cash, or a combination of both.

With the XTO deal complete, ExxonMobil is enjoying access to significant unconventional resources and is now getting a major handle on North America's newest energy discoveries, as it looks forward to the growth of natural gas in expanding its share of the world's largest energy market.

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

About the Bull and Bear of the Day

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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