CBS Corporation (CBS) – Bull of the Day
CBS Corporation's (CBS) fourth-quarter 2011 earnings of $0.57 per share surpassed the Zacks Consensus Estimate of $0.53 and surged 23.9% from $0.46 earned in the year-ago quarter buoyed by growth in high margin operations and cost-containment efforts. The quarter saw a step up in both the advertising marketplace as well as profitable content deals.Management remains confident about continued growth momentum in fiscal 2012. However, the significant potential risk is CBS's high dependence on advertising revenue, which is driven by the health of the economy. To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles, which include retransmission, affiliate and online distribution fees.
Further, CBS's substantial liquidity, positions it to drive future growth and enhance shareholders return. Currently, we maintain our Outperform recommendation on the stock.
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ProAssurance Corp. (PRA) – Bull of the Day
ProAssurance Corp.'s (PRA) fourth-quarter earnings surpassed the Zacks Consensus Estimate on the back of an improved top line. Additionally, enhanced operating cash flow and asset position aided in driving the book value of shares. Higher operating cash flow is also likely to translate into enhanced operating leverage and generation of excess capital for share repurchases.Though the intense price and product competition, weak rate environment, loss cost trends and regulatory challenges limit the desired upside in the sector, we believe the benefits of geographic diversity, aggressive claims defense, stable ratings, improving ROE and strong financial position are likely to have a positive impact on the company over time.
Our six-month target price of $104.00 per share equates to about 14.6x our earnings estimate for 2012. Combined with the $1.00 per share annual dividend, this target price implies an expected return of 20.8% over that period, which is consistent with our Outperform recommendation.
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Alexion Pharmaceuticals (ALXN) – Bull of the Day
We are upgrading Alexion Pharmaceuticals (ALXN) to Outperform from Neutral on valuation grounds; we believe that there is significant upside scope from current levels. Alexion performed very well in the final quarter of 2011, beating the Zacks Consensus Estimate by $0.07 thanks to strong Soliris sales.We are also impressed by the label expansion of Soliris in the US and EU for the aHUS indication, which has boosted the sales potential of the drug. We expect Soliris to continue performing well in 2012.
Consequently, we have increased our revenue estimate for 2012 and expect Soliris sales to exceed $1 billion in 2012. Management, too, gave a bright outlook for 2012. Our long-term recommendation is in line with the Zacks #1 Rank (Strong Buy rating) carried by the stock in the short run. Our target price is $106.00.
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T. Rowe Price Group (TROW) – Bull of the Day
We are upgrading our recommendation on T. Rowe Price Group (TROW) to Outperform from Neutral based on the company's debt-free position and steady profit trend. The company's fourth-quarter 2011 earnings outshined the Zacks Consensus Estimate. Moreover, earnings also compared favorably with the prior-year quarter.Higher-than-expected top-line growth and increased assets under management (AUM) assisted the improved performance. Furthermore, relative mutual fund performance was also positive. Higher operating expenses were on the downside.
The company has the potential to take advantage of the economic recovery and benefit from the growth opportunities in the domestic and global AUM. Our six-month target price of $70.00 equates to about 20.8x our earnings estimate for 2012. Combined with the $1.36 per share annual dividend, this price target implies an expected return of 13.9% over that period.
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Hain Celestial Group (HAIN) – Bull of the Day
A leader in natural food and personal care products with an array of well-known brands, Hain Celestial Group (HAIN) offers investors one of the strongest growth profiles in the industry. The company's strategic investments plus continued efforts to contain costs, increase productivity, and enhance cash flows and margins have enabled it to deliver healthy results.This is quite evident from Hain's second-quarter 2012 results. The quarterly earnings of $0.52 per share beat the Zacks Consensus Estimate of $0.49, and rose 33.3% from the prior-year quarter. The company's top line also grew an impressive 32.1%.
The company continues to expect total revenue between $1,455 million and $1,480 million, and earnings in the range of $1.63 to $1.73 per share for fiscal 2012. Buoyed by better-than-expected results and an optimistic outlook, we maintain our Outperform recommendation on the stock.
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Invesco, Ltd. (IVZ) – Bull of the Day
We are upgrading our recommendation on Invesco, Ltd. (IVZ) to Outperform based on its sustained earnings and healthy asset under management. The company's fourth quarter 2011 earnings inched past the Zacks Consensus Estimate. Results were aided by enhanced interest and dividend income as well as lower interest expense.An uptrend in the global equity markets helped in improving the long-term investment performance of the company, which is further expected to uplift the company's operating results. Moreover, the operating leverage is expected to improve significantly over the long term due to its cost-control initiatives.
Invesco is well-positioned to benefit from improved global investment flows, resulting from its broad diversification. Our six-month target price of $28.00 per share equates to about 14.5x our earnings estimate for 2012. Combined with the annual dividend of $0.49 per share, this target price implies an expected total return of 13.8% over that period.
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Valmont Industries (VMI) – Bull of the Day
We are reaffirming our Outperform recommendation on Valmont Industries (VMI). Fourth quarter earnings of $1.83 per share outpaced the Zacks Consensus Estimate. Revenues increased by double digits, led by significant growth in the Irrigation Segment.Valmont is witnessing significant strength in the irrigation market and an improving demand for utility transmission structure. Going forward, management envisions a continued strong performance in 2012. The outlook for irrigation equipment is healthy while demand for Utility Support Structures is expected to rise.
Our long-term Outperform recommendation on the stock indicates that it would exceed the broader market. Our price target of $138 is based on 18.3x our fiscal 2012 earnings estimate.
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Marathon Petroleum Corp. (MPC) – Bull of the Day
We are initiating coverage on Marathon Petroleum Corp. (MPC) with an Outperform recommendation and a target price of $51. Spun out of parent Marathon Oil Co. in June 2011, the company is a leading refiner and marketer of petroleum products in the U.S.Our bullish investment theme stems from Marathon Petroleum's scale advantage, impressive asset quality, and an extensive midstream/retail network that diversifies its portfolio and provides more stable revenue streams. We believe management's recently approved $2 billion share repurchase program and potential formation of a midstream MLP could further boost shareholder value.
Marathon Petroleum's low debt ratio and hefty cash balance add to the positive sentiment. All in all, we believe the company is well positioned going forward and view it as an attractive investment.
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Cepheid, Inc. (CPHD) – Bull of the Day
Molecular diagnostics company Cepheid Inc. (CPHD) reported a strong fourth quarter with both revenues and earnings going past the Zacks Consensus Estimate. Apart from portfolio expansion, the company is expanding its international operations, which is encouraging.While MRSA surveillance continues to be the largest test, its C. difficile test is gaining increasing acceptance. Placements for the HBDC program were encouraging, although Cepheid prefers to hold a cautious stand given funding uncertainties.
Based on an expanding test menu coupled with rising HAI costs, we expect GeneXpert placements to maintain an uptrend. With encouraging guidance for 2012, which exceeded our expectations, we upgrade the stock to Outperform.
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Aetna, Inc. (AET) – Bull of the Day
We reiterate our outperform rating on Aetna Inc. (AET) prior to the release of its first-quarter earnings scheduled on April 25, 2012, to reflect its better-than-average operating fundamentals and expected strong performance in 2012.The company ended the year 2011 with better performances, demonstrating growth in membership, revenues, operating margins and cash flow on the back of low medical utilization, pricing discipline, medical cost management strategies and cost controls. In 2011, the company made strategic investments in acquisitions and technologies, with the intent to extend its core health business and also to capitalize on exciting new consumer as well as provider opportunities emerging in the marketplace.
Aetna's strong operating results and significant capital generation will allow it to continue investing for the future. We expect the company to keep performing better in 2012. The Zacks Consensus estimates earnings of $1.39 per share for first quarter 2012, which translates into an expected earnings growth of 10.5% year over year.
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