Zacks Bull and Bear of the Day Highlights: W.W. Grainger, Penn Virginia Resources, ConocoPhillips, Chevron and Abbott Laboratories

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Jan 27, 2011, 10:19 ET

CHICAGO, Jan. 27, 2011 /PRNewswire/ -- Zacks Equity Research highlights: W.W. Grainger (NYSE: GWW) as the Bull of the Day and Penn Virginia Resources (NYSE: PVR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ConocoPhillips (NYSE: COP), Chevron Corp. (NYSE: CVX) and Abbott Laboratories (NYSE: ABT).

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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:

W.W. Grainger's (NYSE: GWW) third quarter adjusted EPS improved 32% year over year while revenues jumped 19%; both outperforming Zacks Consensus Estimates. For fiscal 2010, Grainger maintained its sales growth guidance in the range of 14% to 15% and raised its EPS guidance.

For fiscal 2011, Grainger forecasts EPS between $7.15 and $7.90, driven by 5% to 9% growth in sales. Grainger remains focused on expanding its product offering and has the financial flexibility to further invest in growth opportunities, increase dividends and reinvest capital through share repurchases.

Gradually improving economic activity, market share gains, benefits from growth investments, share repurchases and acquisition accretion should lead to strong earnings growth in 2011. We maintain our Outperform rating with a target price of $162.

Bear of the Day:

Penn Virginia Resources' (NYSE: PVR) merger with its general partner is expected to reap profits in the long term, benefiting from the partnership's lower cost of capital. This would place the company in a better position to compete for acquisitions, increasing returns on future transactions.

However, this transaction would, in our opinion, be dilutive to the partnership's distributions in the near term, affecting investor sentiments. Based on expectations for lower distributions, we are retaining our Underperform recommendation on the stock.

Furthermore, we expect the partnership's future results to be affected by the instability in the capital markets and fluctuation in commodity prices. Penn Virginia shares are presently trading at 23.4x trailing 12-month EPU, compared to the 28.3x average for the peer group. Our target price of $25.00 is based on the 2011 P/E multiple of 15.3.

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ConocoPhillips Scrapes Through

ConocoPhillips (NYSE: COP) reported its fourth-quarter 2010 earnings of $1.32 per share (excluding non-recurring items), beating the Zacks Consensus Estimate by a penny. The quarter's earnings increased from $1.20 in the year-ago quarter. The improved performance primarily reflects a hike in commodity prices associated with better U.S. refining margins, partially offset by lower production volumes.

Revenues in the reported quarter improved more than 17% year over year to $53.2 billion, comfortably beating the Zacks Consensus Estimate of $44.0 billion.

Outlook

We remain optimistic about ConocoPhillips' ability to generate free cash flow by unlocking capital tied up in non-core assets. Although we are encouraged by the recent discoveries and the company's new exploration efforts, the transition into improvements in the reserves base, finding and development costs, the production growth rate remains a long-term story.

The divestment of certain non-strategic assets helps the company to apportion capital to higher margin projects such as Canadian oil sands, LNG and unconventional resource plays.

ConocoPhillips' exploration initiatives toward liquids rich plays such as Eagle Ford, Bakken and North Barnett shale plays are gaining momentum.

As the new management team is on board and initiatives of offloading its stake in LUKOIL are on track, it remains to be seen how the company moves toward improving its bottom line.

Conoco's major competitor Chevron Corp. (NYSE: CVX) is expected to report its fourth quarter on January 28.

Our long-term Neutral recommendation remains unchanged at this stage and the company holds a Zacks #3 Rank (short term 'Hold' rating).

Abbott Labs Tops 4Q Estimates

Abbott Laboratories (NYSE: ABT) reported fourth quarter earnings of $1.30 per share, a penny above the Zacks Consensus Estimate and within the guidance range provided by the company. Earnings increased 10.2% from the year-ago period. Higher revenues helped drive results. However, including one-time items, earnings declined 6.1% to 92 cents per share.

Fourth quarter revenues increased 13.4% to $9.97 billion, above the Zacks Consensus Estimate of $9.89 billion.

Full year earnings came in at $4.17 per share, in-line with the Zacks Consensus Estimate and 12.1% above the year-ago earnings. Full year revenues increased 14.3% to $35.2 billion, just above the Zacks Consensus Estimate of $35.1 billion.

Abbott Labs Guides In Line

Following the release of fourth quarter and full year results, Abbott Labs issued guidance for 2011. The company expects earnings per share in the range of $4.54 to $4.64. The guidance includes the impact of US health care reform and EU austerity measures. We note that the Zacks Consensus Estimate is currently towards the higher end of this guidance range at $4.63 per share.

Abbott Labs also announced a restructuring program for its US pharma business given the impact of the US health care reform and the challenging regulatory environment. As part of the initiative, Abbott Labs intends to streamline operations to reduce costs and improve efficiencies.

Abbott Labs also provided an update on its pipeline. The company stated that it expects to gain approval for 75 new products or additional indications in the next five years. The company expects to have about 20 new compounds in phase II/III development by year end.

Abbott Labs is working on boosting its vascular products portfolio and expects to launch more than 10 technologies in the next five years. These include the potential US launches of MitraClip, XIENCE PRIME and XIENCE Nano. Abbott Labs expects to launch TREK, its next-generation balloon dilatation catheter, in the US and Japan in early 2011.

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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