Zacks Bull and Bear of the Day Highlights: Western Refining, Cooper Tire & Rubber, Bank of America Corporation, Freddie Mac and Fannie Mae
CHICAGO, Aug. 10, 2011 /PRNewswire/ -- Zacks Equity Research highlights Western Refining, Inc. (NYSE: WNR) as the Bull of the Day and Cooper Tire & Rubber (NYSE: CTB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Bank of America Corporation (NYSE: BAC), Freddie Mac (OTC: FMCC) and Fannie Mae (OTC: FNMA).
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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:
We are upgrading Western Refining, Inc. (NYSE: WNR) shares to Outperform from Neutral, based on favorable trends in the refining industry along with company initiatives to improve reliability and reduce operating costs. An uptick in economic activity overseas and prospects for stronger fuel demand in the domestic market make us optimistic about the sector.
Additionally, we believe Western Refining's strategic actions to improve its performance and competitiveness in a cost-effective manner will drive growth in the company's profits and boost its stock valuation. Western Refining's strong retail and wholesale operations, along with exposure to the profitable Southwest refining assets, add to the positive sentiment.
As such, we believe Western Refining is well positioned going forward and view it as an attractive investment. Our $18 price target, 13.3X trailing twelve-month cash flow, reflects this view.
Cooper Tire & Rubber (NYSE: CTB) reported second quarter income of $0.18 per share from continuing operations, down 40% from last year's $0.30. Earnings per share were also much lower than the Zacks Consensus Estimate of $0.46. Cooper Tire & Rubber faces intensifying competition and soaring material costs, which can be regarded as major threats for the company.
Moreover, its deteriorated cash balance is likely to limit the company's business expansion plans. Considering all these elements, we have an Underperform recommendation on shares of Cooper Tire & Rubber.
Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our $11 target price, 4.8x our 2011 EPS estimate, reflects this view.
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More Mortgage Woes for BofA
In its quarterly earnings filing with the Securities and Exchange Commission (SEC), Bank of America Corporation (NYSE: BAC) stated that the liabilities for mortgage repurchase claims from the two Government Sponsored Enterprises (GSEs) – Freddie Mac (OTC: FMCC) and Fannie Mae (OTC: FNMA) – could get larger than expected.
According to BofA the increase in liabilities is mostly due to the rigid stance taken by Fannie and Freddie. Also, these two GSEs are sending back more repurchase claims than previously anticipated by the company.
During 2004–2008, BofA sold loans of nearly $1.1 trillion to these two GSEs. However, as of June 30, 2011, about $121 billion or 11% of these loans have defaulted or are at least 180 days past due.
Furthermore, as per the quarterly earnings filings, BofA received $27.7 billion in claims and resolved $22 billion of these, leading to a net loss of approximately 30%. The company also stated that cumulative GSE representations and warranties losses as of June 30, 2011 stood at $7.8 billion ($2.8 billion as of December 31, 2011 and $5.0 billion for six months ended June 30).
Additionally, BofA commented that it expects many more litigations as the company would be unable to resolve these repurchase claims with the mortgage insurance companies before the expiration of the appeal period allowed by Fannie. Hence, this would lead to higher representations and warranties costs going forward.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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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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