For Immediate Release
Chicago, IL – March 29, 2010 – Zacks Equity Research highlights Cliffs Natural Resources Inc. (CLF) as the Bull of the Day and Greatbatch (GB) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Macy’s (M), Lockheed Martin (LMT) and General Dynamics (GD).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Cliffs Natural Resources Inc. (CLF) is the largest producer of iron ore pellets in the U.S. Cliffs increasing its international iron ore exposure, recovery in its coal business and longer-term diversification into the chromium business are huge positives for the stock.
The company focuses on growing its international exposure in the face of a consistent decline in North American production. The Wabush acquisition is consistent with this approach, as production from this mine will be sold primarily in Europe. The company has recently raised its iron ore and coal sales and production volumes with steel demand recovering in the last couple of months.
Separately, Cliffs has also enhanced its financial flexibility by raising about $347 million through equity followed by compensation reductions, which should result in annual savings of $37 million.
Greatbatch (GB) is a leading producer and supplier of batteries, capacitors and components used in implantable medical devices. The company has been acquiring several businesses over the last few years to revive top-line growth, which has been declining over the past few quarters.
Total revenues in the fourth quarter declined 14% year over year. The decline was broad-based across all sub-segments.
We continue to rate the stock an Underperform with a target price of $18. This is based on a P/E of 10.9x our fiscal 2010 EPS estimate.
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Final Q4 GDP Revised Down to 5.6%
In the fourth quarter, inventories still fell by $23.6 billion, but that was down from a decline of $156.5 billion in the third quarter. Inventories are not going to continue to decline in absolute terms forever, and Macy’s (M) in New York is not going to start to resemble the G.U.M. department store in Moscow under Brezhnev. Thus there could still be some growth coming from inventories in the first quarter, and perhaps into the second, but probably not as much of a contribution, and it will most likely peter out after that.
Government consumption and net investment was essentially a non-factor in the growth of the economy in the 4Q. It had a net drag of just 0.26 points in the 4Q, after adding 0.55 points to growth in the 3Q. A slight positive contribution from the federal government of 0.01 points was offset by a slight drag of 0.27 points from state and local (S&L) governments.
In the 3Q, federal spending contributed 0.62 points to growth (0.45 from defense, 0.17 from non-defense) while state and local governments were a slight 0.08 drag on economic growth. On both counts, though, Government was essentially a rounding error as far as overall growth was concerned in the 4Q.
However, in the national income accounting, transfer payments like Social Security are counted as part of PCE, not Government. Within the federal spending, expenditures on national defense were a 0.20 point drag on growth, after being a positive contributor of 0.45 points in the 3Q. Non-defense spending added 0.21 points to growth, up from a 0.17 point contribution in the 3Q. In other words, government spending on the military, and for the stuff it buys for Lockheed Martin (LMT) and General Dynamics (GD) fell a bit relative to what it was spending in the 3Q, but that was offset by increases in spending for things like highway infrastructure and civilian government salaries.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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