DST Systems, Inc. (DST) – Bull of the Day
DST Systems Inc. (DST) reported good second quarter results, with earnings per share (EPS) exceeding our expectations. The company has supplemented internal growth with strategic acquisitions.We remain encouraged with the quarter's revenue outperformance and solid cost structure. We believe that DST Systems leadership and scale in Financial Services will attract new customers based on the increasing popularity of mutual funds.
Moreover, the company is winning new customers at regular intervals. However, competition from Lombardi, Savvion and TIBCO Software may pose some challenges. We thereby upgrade our rating to Outperform on DST.
Zacks Investment Research
AutoNation, Inc. (AN) – Bull of the Day
AutoNation (AN) remains focused on improving its product mix and cost-cutting initiatives. The company's profit increased 36% in the second quarter of 2010 and surpassed the Zacks Consensus Estimate by $0.02 per share.Cost reduction revolved around lower interest expense, disciplined operations and inventory management. The company's strong new vehicle unit sales are expected to be boosted further by its recent acquisitions of three dealerships.
These factors have led us to upgrade our recommendation on the stock from Neutral to Outperform and set a target price of $28.
Zacks Investment Research
Expeditors International (EXPD) – Bull of the Day
We are upgrading our recommendation to Outperform for Expeditors International (EXPD) following second-quarter results. The company's second quarter earnings surpassed the Zacks Consensus Estimate and the year-ago quarter level on strong airfreight and ocean shipping demand.Yields declined despite an increase in air and ocean volumes, which led to contracting gross margins. However, as the freight is recovering, we expect yields to stabilize at lower and more normal levels. We also expect Expeditors to benefit from a slow and steady economic recovery.
The company's strong balance sheet with no debt is encouraging and provides flexibility for internal growth. Over the long term, the company is poised for growth as it plans to expand its presence and operations internationally and invests in new opportunities and services.
Zacks Investment Research
PACCAR, Inc. (PCAR) – Bull of the Day
We have upgraded our rating from Neutral to Outperform on PACCAR (PCAR), a designer and manufacturer of premium light, medium and heavy duty trucks. PACCAR maintains a robust market share, bolstered by strong growth in Mexico and Australia.In addition, its core business in Europe is improving. The company's profit improved significantly in the second quarter of 2010, based on strong truck sales in North America as well as a rise in Financial Services profits.
Furthermore, its cash flow nearly doubled during the first half of 2010. We set a target price of $53 for the stock.
Zacks Investment Research
Ryder System, Inc. (R) – Bull of the Day
We are upgrading our rating to Outperform on Ryder System (R) following its second-quarter earnings. Second-quarter earnings surpassed the Zacks Consensus Estimate on stronger automotive volume, improved commercial rental demand and strong used vehicle sales.Ryder is planning for a better relative freight pricing market and more freight opportunities in 2010. With an improvement in market conditions, the company has ample balance sheet strength to support its capital spending. Ryder is aggressively evaluating its pipeline of acquisition candidates along with fleet expansion and spending on equipment.
Further, the company remains committed to its shareholders via dividends and share repurchase. However, Ryder faces a prolonged freight recession on its lease business, which may impact near-term earnings.
Zacks Investment Research
RC2 Corporation (RCRC) – Bull of the Day
RC2 Corp's (RCRC) second quarter 2010 earnings surpassed the Zacks Consensus Estimate, driven by strong international sales. The company also raised the lower end of its earnings guidance for fiscal 2010.We expect the company to benefit from its aggressive acquisition strategy, and remain optimistic regarding its recent acquisition of privately-held JJ Cole Collections, a marketer of premium infant products. Additionally, the company's cost reduction initiatives will likely drive the margins. Given the demographic trends, RC2's focus on core early childhood also bodes well.
Considering the company's product line-up in the second half of 2010, we expect an improvement in the top line. Moreover, strong cash flow and modestly levered balance sheet offer a solid operating backdrop. Thus, we are upgrading the stock from Neutral to Outperform.
Zacks Investment Research
JAKKS Pacific (JAKK) – Bull of the Day
JAKKS Pacific (JAKK) posted second quarter 2010 results, which were way ahead of the Zacks Consensus Estimate. Although key brands like WWE, Hannah Montana and Pokemon continued to weigh on the company's sales growth, improving consumer spending and cost-cutting initiatives benefited its profitability.Besides, the company sits on ample cash balance. We remain optimistic about the company's long-term growth potential with new product launches, possible acquisitions, improved earnings helped by cost-saving measures, resolution of litigation and a strong financial condition to materialize such growth.
Hence, we reiterated an Outperform rating on the stock. Our six-month target price of $18.00 equates to about 14.8x our estimate for 2010. The target price implies an expected total return of 20.8% over that period.
Zacks Investment Research
Magna International (MGA) – Bull of the Day
Magna International (MGA) enjoys a strong competitive position in the automotive industry by virtue of its complete range of interior and exterior auto systems.The company is strengthening its positions in the emerging markets of Asia, Eastern Europe and Russia. It is also poised for growth through its major business wins from original equipment manufacturers (OEMs).
In the most recent quarter, the company outpaced the Zacks Consensus Estimate by $1.27 per share. These factors have led us to upgrade shares from Neutral to Outperform and set a target price of $91.
Zacks Investment Research
Energizer Holdings – Bull of the Day
Energizer Holdings' (ENR) third quarter 2010 earnings beat the Zacks Consensus Estimate by $0.39 per share or 41%, riding on higher sales, launch of new Schick Hydro, meaningful cost-saving initiatives, favorable foreign currency impact, higher battery sales and lower-than-expected A&P spending.We expect Energizer s top line to grow modestly (+4%) in the fourth quarter of 2010 along with an improved operating leverage and organic growth going forward. The new Schick Hydro brand, higher margins, share repurchases and improving condition in its battery business along with a huge third quarter upside in earnings have led us to raise our earnings per share estimates by 7.4% for fiscal 2011.
However, investors should note that intense competition,
inventory destocking and weak consumer environment are
potential negatives. We believe that ENR is set for a stronger
growth in 2011. With cheap valuation, we upgrade the stock
to Outperform and raise our price target to $77.00.
Zacks Investment Research
Nile Therapeutics, Inc. – Bull of the Day
Nile Therapeutics, Inc. (NLTX) is developing CD-NP, a chimeric natriuretic peptide currently in phase II clinical studies for the treatment of acute decompensated heart failure (ADHF). Prior phase I and phase II data so far has been highly encouraging. With a market capitalization of only $14 million, Nile Therapeutics shares are bafflingly under-valued.
We believe with positive data from the ongoing phase II
program in hand the company is worth at least $80 to 100
million. Taking the mid-range at $90 million, and then backing
out the $20 million most likely required to fund the phase IIb
program, we arrive at a value of $70 million for Nile
Therapeutics. This equates to a price of $2.00 per share.
Zacks Investment Research