CHICAGO, Aug. 4, 2011 /PRNewswire/ -- Zacks Equity Research highlights Whole Foods Market's (Nasdaq: WFM) as the Bull of the Day and Skechers USA (NYSE: SKX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Frontier Communications(NYSE: FTR), Verizon Communications (NYSE: VZ) and Morton's Restaurant Group, Inc. (NYSE: MRT).
Whole Foods Market's (Nasdaq: WFM) third-quarter 2011 earnings of $0.50 per share beat the Zacks Consensus Estimate of $0.48, and rose 31.6% from the prior-year quarter on the heels of strong sales as shoppers flocked the grocery chain for natural and organic products. The company is revamping its pricing strategy and concentrating more on value offerings, while maintaining healthy margins.
Cost containment efforts, effective inventory management, and improved store-level performance are driving earnings growth. In the wake of better-than-expected results, the company raised its fiscal 2011 outlook, and now expects sales growth in a band of 12.2% to 12.4% and bottom-line increase of 34%.
Moreover, a prudent capital investment is also translating into improved cash flows with a lower debt level and healthy balance sheet. We have a long-term Outperform recommendation on the stock. Our target price of $73.00, 38.0X 2011 EPS, reflects this view.
Skechers USA (NYSE: SKX) posted disappointing second-quarter 2011 results. Weak top-line performance coupled with the company's aggressive inventory offloading and reserve for additional product, weighed upon its bottom-line results. The company sold 2 million pairs of Shape-ups for a loss of $21 million to right-size its inventory, and registered a $4.4 million reserve for additional products.
Total net sales for the quarter dropped 14% due to a 32% fall in domestic wholesale business. Management expects softness in the domestic wholesale business to continue for the remaining year.
We believe that excess toning of inventory will continue to weigh upon average selling prices and margins, and in turn the overall sales and profitability. We have a long-term Underperform recommendation on the stock. Our target price of $15.00, 36.6X 2011 EPS, reflects this view.
Frontier Communications (NYSE: FTR), a provider of telecommunications services to rural areas, has reported lower-than-expected second quarter 2011 adjusted earnings per share. Not only did adjusted earnings of 6 cents miss the Zacks Consensus Estimate by a penny, it also deteriorated from the year-ago earnings 19 cents.
The decline was mainly due increased interest and income tax expenses, mostly offset by a higher operating income from the acquired properties.
Adjusted earnings excluded acquisition and integration costs of $20.3 million related to the integration of West Virginia operations acquired from Verizon Communications' (NYSE: VZ) fixed-line business, $11.0 million for severance and early retirement costs and $10.5 million for a discrete tax items (a total of $29.9 million or 3 cents per share). On a GAAP basis, earnings decreased to 3 cents from 11 cents in the year-ago quarter.
Revenue soared 156.2% year over year to $1,322.3 million primarily aided by the acquired Verizon properties (acquired on July 1, 2010), but missed the Zacks Consensus Estimate of $1,334 million. The year-over-year increase in revenue was offset by a decline in Frontier legacy operations.
On a year-over-year basis, local and long-distance services revenues leaped 176.7% to $617.17 million and data and Internet services revenues increased a whopping 177.5% to $461.6 million. Other revenues shot up 84.0% to $85.1 million and Switched Access revenue climbed 96.6% to $157.8 million.
Morton's Surpasses Estimates
Chicago-based Morton's Restaurant Group, Inc. (NYSE: MRT) recently posted second quarter 2011 adjusted earnings of 5 cents, beating the Zacks Consensus Estimate by a penny. Reported earnings were also ahead of the year-ago earnings of 2 cents per share. The earnings were driven by improvement in business travel resulting in positive comps for the sixth consecutive quarter and margin expansion.
During the quarter, GAAP net income from continuing operations was $0.7 million or 4 cents per share compared with $0.3 million or 2 cents per share in the year-ago quarter.
Morton's, one of the leading operators of steakhouses in the world, reported total revenue of $78.0 million, up 10.7% year over year. The upside in revenues was attributable to higher comparable sales at Morton's steakhouse restaurants (up 8.2%).
During the quarter, operating margin expanded 150 basis points (bps) to 3.0%, aided by a 140-bp fall in restaurant operating expense, a 10-bp dip in depreciation and amortization expense, a 40-bp plunge in pre-opening cost and a 50-bp decline in marketing and promotional expense, partially offset by higher food and beverage costs (up 20 bps), and general and administrative expense (up 70 bps).
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