Zacks Bull and Bear of the Day Highlights: Toyota Motor Corporation, PMI Group, Hewlett-Packard, Dell and IBM

Aug 22, 2011, 09:54 ET from Zacks Investment Research, Inc.

CHICAGO, Aug. 22, 2011 /PRNewswire/ -- Zacks Equity Research highlights Toyota Motor Corporation (NYSE: TM) as the Bull of the Day and PMI Group Inc. (NYSE: PMI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL) and IBM (NYSE: IBM).


Full analysis of all these stocks is available at

Here is a synopsis of all five stocks:

Bull of the Day:

Toyota Motor Corporation (NYSE: TM) is the leading automaker in the world in terms of sales and production. The automaker has long played a pivotal role in the global market for fuel-efficient and environment-friendly vehicles, influencing other automakers to foray into the same market promoted by the governments of many countries.

Good news is that the company expects its loss-making European operations to revert to profit at the operating level for full year 2011. Moreover, its continued focus on the emerging markets is expected to boost sales.

Therefore, we have upgraded the recommendation on the shares of the company from Neutral to Outperform with a target price of $90. Toyota shares carry a Zacks #1 Rank (Strong Buy).

Bear of the Day:

PMI Group Inc.'s (NYSE: PMI) second-quarter operating loss was worse than the Zacks Consensus Estimate and widened year over year as the company continued to suffer mortgage losses. We expect losses and loss adjustment expenses from mortgage insurance operations, increased valuation allowances, lower premiums earned and shrunken investment income will continue to pressure PMI's earnings.

While increasing persistency levels will drive domestic growth, it will put additional pressure on capital. PMI Group is not able to sell new policies.

To add to its woes, Arizona-based PMI Mortgage Insurance Co., the main subsidiary, is short of funds, which is required to meet regulatory requirements in Arizona. As such, the State Insurance Department will likely bar it from selling new policies, which might result in either rehabilitation or liquidation of the unit.

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Uncertainty Driving Market Volatility

I don't think a recession is on the cards, but there is no doubt that the economic picture remains fragile and mixed. Some measures of economic health, such as regional manufacturing and consumer confidence, appear to be in recessionary territory already. But other metrics that capture trends in consumer spending, corporate investments and the labor market are pointing towards positive, though sub-par, economic growth.

So the best that can be said at this stage is that the economic picture is uncertain and mixed. I am reasonably confident that the underlying momentum in the economy will keep it in the positive territory. But it will take us at least another few weeks to get a better handle on the situation. Till then, brace yourself for a bumpy ride.

In corporate news, we don't have anything significant on the earnings front this morning. But we did have a couple of major earnings reports after the close on Thursday. Hewlett-Packard (NYSE: HPQ) came out with a positive EPS surprise on inline revenue. But the computer giant guided lower, confirming the consumer weakness that we saw in Dell's (Nasdaq: DELL) results a couple of days back.

But the earnings report was not the most important news out of Hewlett-Packard on Thursday; it was the announcement that they are going the IBM (NYSE: IBM) way in their business model. They want to get out of the PC business and bulk up on services. So, they plan to sell the computer business and acquire a British software firm.

Exiting from the low-margin commoditized PC business will be a net long-term positive for the company's margins and returns. But executing such major strategic moves is never easy or smooth. We will have to wait and see how Hewlett-Packard's 'newish' management team comes through on this plan.

Get the full analysis of all these stocks by going to

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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