Zacks Bull and Bear of the Day Highlights: Loews, Republic Services,A123 Systems, General Motors and Johnson Controls
CHICAGO, June 13, 2012 /PRNewswire/ -- Zacks Equity Research highlights Loews Corporation (NYSE: L) as the Bull of the Day and Republic Services, Inc. (NYSE: RSG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onA123 Systems Inc. (Nasdaq: AONE), General Motors Company (NYSE: GM) and Johnson Controls Inc. (NYSE: JCI).
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 Loews Corporation (NYSE: L) to Outperform from Neutral on the back of strong first quarter results and initiatives taken to strengthen its hotel business. Loews' first quarter earnings comfortably surpassed the Zacks Consensus Estimate. Higher earnings at CNA Financial and higher parent company investment income were the positives.
Loews aims to strengthen its hotel business by doubling its hotel count within the next three to five years, and expects to triple the net income within the next three years. Elsewhere, Diamond Offshore continues to work on improving its fleet. Boardwalk's increased capacity and expansion projects, strong balance sheet with low leverage and adequate cash also bodes well.
Our six-month target price of $48.00 per share equates to about 15.5x our 2012 earnings estimate. This price target along with the annual dividend of $0.25 per share implies an expected total return of 20.7% over that period, which is consistent with our Outperform recommendation.
We are downgrading our recommendation on Republic Services, Inc. (NYSE: RSG) to Underperform with a target price of $24. The company's first-quarter 2012 adjusted earnings were $0.38 per share, missing the Zacks Consensus Estimate of $0.42. Total revenues increased 0.9% to $1.98 billion, lagging behind the Zacks Consensus Estimate of $1.99 billion.
The company is facing a challenging pricing environment and has lost four contracts in the quarter to its peers. As a result, volumes are expected to remain flat year over year in the second quarter, thereby creating pressure on margins.
We downgrade our recommendation to Underperform as we do not see any near-term volume increase in this tough pricing environment. Our price target of $24 is based on 12.8x our fiscal 2012 earnings estimate.
Latest Posts on the Zacks Analyst Blog:
A123 Systems to Boost Headcount
A123 Systems Inc. (Nasdaq: AONE) plans to enlarge its workforce at its two Michigan plants by 400 workers, according to Reuters. The company will be employing about 100 workers per month over the next several months in its Livonia and Romulus plants. The new workforce will be utilized to enhance the company's business in its commercial transportation and grid operations.
In the Livonia plant, the company produces prismatic cells which are used in the lithium-ion batteries of the vehicles. Currently, there is a rising demand for prismatic-based systems among commercial transportation and power-grid customers.
A123 manufactures batteries for BMW hybrid 3- and 5-Series vehicles and General Motors Company's (NYSE: GM) all-electric Chevy Spark. The company also has future contracts for producing batteries of Fisker Automotive, General Motors and BMW.
A123 Systems recorded a loss of $125 million or 87 cents per share in the first quarter of 2012 compared to a loss of $53.6 million or 51 cents per share in the corresponding quarter of last year. It missed the Zacks Consensus Estimate of a loss of 39 cents per share. Revenues went down 40% to $10.9 million from $18.1 million in the first quarter of 2011. The decline was due to the decrease in revenues from products sold.
Based in Waltham Massachusetts, A123 develops and manufactures advanced lithium iron phosphate batteries and battery systems for the transportation, electric grid and commercial markets. The company also develops nanophosphate technology. The batteries produced by A123 dominate the automotive market due to its power, safety and durability.
A123 Systems competes with companies like Johnson Controls Inc. (NYSE: JCI) and Ener1 Inc. Currently, A123 Systems retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.
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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