Zacks Bull and Bear of the Day Highlights: Tractor Supply, ProAssurance, Ford, Kellogg and Wal-Mart

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Feb 28, 2011, 09:30 ET

CHICAGO, Feb. 28, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Tractor Supply Co. (Nasdaq: TSCO) as the Bull of the Day and ProAssurance Corp. (NYSE: PRA) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Ford (NYSE: F), Kellogg (NYSE: K) and Wal-Mart (NYSE: WMT).

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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:

On the back of strong same-store sales, improved merchandise mix, prudent inventory management and effective cost control, Tractor Supply Co. (Nasdaq: TSCO) posted better-than-expected fourth-quarter 2010 results. The quarterly earnings beat the Zacks Consensus Estimate of $0.62.

Furthermore, margins improved due to portfolio expansion of private label brands and focus on direct sourcing of merchandise. The company has set a long-term target of generating 25% of sales from private label brands and 13% from strategic direct sourcing. Tractor Supply is well positioned to capitalize on positive long-term trends. The company is expecting sales in the range of $4.0 billion to $4.07 billion in fiscal 2011.

Moreover, Tractor Supply's near debt-free balance sheet augurs well for future operating performance. Currently we maintain our Outperform recommendation on the stock.

Bear of the Day:

We are downgrading our recommendation on ProAssurance Corp. (NYSE: PRA) from Neutral to Underperform, owing to the decline in net premiums and increased total expenses, which also resulted in the deterioration of the top line and the combined ratio.

In addition, third quarter earnings declined year over year, though in line with the Zacks Consensus Estimate. Though the company has significantly expanded its footprint with the recent acquisition of American Physicians Service Group, and deployed sufficient capital through share repurchases, we believe price competition, loss cost trends and regulatory challenges limit the desired upside in the sector.

While the benefits of geographic diversity and strong financial position are likely to impact over time, we believe the inherent threats of the company will weigh on the performance in the near term.

Latest Posts on the Zacks Analyst Blog:

4Q Growth Revised Down to 2.8%

In the fourth quarter, the economy grew at an annual rate of 2.8%, up from 2.6% in the third quarter, and up from the 1.7% pace in the second three months of the year. The growth rate was somewhat below consensus expectations of 3.5% and frankly a bit lower than I was expecting. However, the quality of the growth was still extremely high, but not of higher quality than the first look, so overall I would have to say that this was a disappointing report.

Within the consumption of goods, consumption of non-durable goods is about twice as large as the consumption of durable goods. However, since people can defer purchase of durable goods like an Auto from Ford (NYSE: F) more easily than they can defer purchase of a box of corn flakes from Kellogg's (NYSE: K), durable goods demand is very volatile. As a result, durable goods tend to "punch above their weight" in determining is the economy is booming or slumping.

Durable goods consumption added 1.44 points to growth, up sharply from an addition of 0.54 points in the third quarter and 0.49 points in the second quarter. The high and accelerating contribution from durable goods is exactly what we want to see at this stage of the recovery (well actually it would have been nice to see it earlier, but I'll take it now).

While clearly it would have been nice to see this revised up, not down, shaving 0.04 points from growth here does not really change the overall picture. The sector is only 12.87% of PCE and 9.11% of overall GDP, yet it contributed 51.43% (46.25%) of the net overall GDP growth in the quarter.

A weaker dollar would help significantly on the other half of the trade deficit, the part that is made up of all the stuff lining the shelves at Wal-Mart (NYSE: WMT). King Dollar is a tyrant and needs to be deposed. It will help on reducing imports as foreign goods become relatively more expensive and producers fill demand from domestic production. That does not happen overnight, however.

The trade deficit is a far bigger economic problem than is the budget deficit, particularly over the short and intermediate term. The fact that we are making significant progress in bringing it down is extremely welcome news.

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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