CHICAGO, March 8, 2012 /PRNewswire/ -- Zacks Equity Research highlights: The Kroger Company (NYSE: KR) as the Bull of the Day and Loews Corporation (NYSE: L) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sara Lee Corporation (NYSE: SLE), TheJ.M. Smucker Company (NYSE: SJM) and Molson Coors Brewing Company(NYSE: TAP).
We upgraded our recommendation on The Kroger Company (NYSE: KR) to Outperform following the company's fourth-quarter 2011 results. The quarterly earnings of $0.50 per share beat the Zacks Consensus Estimate by a penny, and rose 8.7% from the prior-year quarter. Total revenue climbed 7.7% during the quarter. Kroger now expects fiscal 2012 earnings between $2.28 and $2.38 per share and forecasts identical supermarket sales (sans fuel) growth of 3% to 3.5%.
We believe that a dominant position among the nation's largest grocery retailers enables Kroger to sustain top-line growth, expand store base, and boost market share. The company is also well positioned to deliver higher earnings primarily through strong super market sales (sans fuel) growth.
Kroger is also actively managing its capital and returning much of its free cash to shareholders via share buybacks and dividends. Moreover, management continues to deploy capital to concentrate more on remodels, merchandising and other viable projects.
We are downgrading Loews Corporation (NYSE: L) to Underperform from Neutral on the back of weak fourth quarter results. Operating earnings in the fourth quarter lagged the Zacks Consensus Estimate owing to lower investment income from limited partnership, increase in insurance reserves for its payout annuity business, lower earnings at Diamond Offshore and weak performance of equity investments.
Results at HighMount remained soft due to lower sales volume stemming from lower drilling activity and lower natural gas prices. CNA has substantial exposure to catastrophe losses. Losses in the fourth quarter totaled $208 million, a substantial deterioration from $113 million a year ago.
Our six-month target price of $35.00 per share equates to about 12.1x our 2012 earnings estimate. This price target along with the annual dividend of $0.25 per share implies an expected negative total return of 9.6% over that period.
Sara Lee Corporation (NYSE: SLE) recently announced that it will pay off up to $970 million of its outstanding debt.
The food and coffee giant will redeem all of its 3.875% Notes due 2013 on April 6, 2012. The notes carry an aggregate outstanding principal amount of $500 million. The company has also begun a cash tender offer to purchase three series (6 1/8% Notes due 2032, 4.10% Notes due 2020 and 2.75% Notes due 2015) of its outstanding debt securities. The aggregate principal amount of the three series of the debt securities will be up to $470 million. The offer will expire on April 2 at midnight.
Sara Lee plans to split the company into two publicly-traded companies: an international coffee and tea business and a North American retail, foodservice and specialty meats business. The widely awaited spin-off will be completed by the end of June 2012. Post spin-off, the international Coffee and Tea business will be domiciled in the Netherlands and will move its headquarters to Amsterdam in the second half of 2012.
The spin-off is part of Sara Lee's plan to trim its portfolio in order to provide the best foundation for a strong and focused business. Sara Lee has been shedding its redundant units one by one to focus on its most profitable food and beverage businesses.
Among the latest deals, in early January this year, Sara Lee completed the sale of the majority of its North American Foodservice coffee and tea operations to TheJ.M. Smucker Company (NYSE: SJM) in an all-cash transaction. In December 2011, Sara Lee divested its fresh bakery business in Spain and Portugal to Mexico's Grupo Bimbo S.A.B. de C.V.
We currently have a Neutral recommendation on Sara Lee Corporation. The stock carries a Zacks #2 Rank (short-term 'Buy' rating).
Molson Coors to Launch New Products
Reuters recently reported that beer maker Molson Coors Brewing Company(NYSE: TAP) plans to introduce new products to revamp its flagging beer sales. Numbering among the newly introduced products is an iced tea flavored beer under the Coors Light brand. The company gave out this information at an analyst meeting held in New York recently.
Molson Coors, the maker of popular beer brands like Coors Light and Miller Lite, has been witnessing weak beer sales due to changing consumer tastes and an inclination towards wines and cocktails. Moreover, continuing weak economic conditions and high unemployment among core beer consumers have also pulled down sales.
Global beer volumes were down 0.7% in full year 2011. The company believes that Coors Light Iced Tea as well as other new products like Carling Zest (citrus flavored beer) and Leinenkugels beer will revitalize beer sales and subsequently reduce pressure on margins.
Coors Light Iced Tea is expected to be launched in Canada and Molson Coors may also look to expand it in the US. Reuters further reported that, at the meet, management highlighted that Batch 19, the new craft beer, is doing better than expected. The beer will be launched in additional countries in April this year and is expected to be available in 40 US markets by fall.
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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