For Immediate Release
Chicago, IL – January 7, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Family Dollar Stores, Inc. (FDO), Sohu.com, Inc. (SOHU), Sina Corp. (SINA), NetEase.com Inc. (NTES) and Baidu, Inc. (BIDU).
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Here are highlights from Wednesday’s Analyst Blog:
Family Dollar Earnings Surge
Family Dollar Stores, Inc. (FDO) recently reported better-than-expected first-quarter 2010 results with a low single-digit growth in the top-line, but a surprise double-digit growth in the bottom-line buoyed by effective cost and inventory management.
Family Dollar’s quarterly earnings of 49 cents a share surpassed the Zacks Consensus Estimate of 47 cents, and climbed 16.7% from 42 cents delivered in the prior-year quarter. Management now expects second-quarter 2010 earnings between 65 cents and 70 cents a share.
Family Dollar’s strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines. The company’s shares rose $2.37, or 8.6%, to $29.86 in pre-market trading.
The operator of self-service retail discount store chains posted a 3.9% year-on-year increase in revenue to $1,822.9 million due to a rise in sales registered across consumables categories (up 5.8%), seasonal and electronics categories (up 2.4%) and home products (up 0.7%), partially offset by lower sales experienced in apparel and accessories (down 2%).
The company’s point-of-sale technology and store realignment initiatives better positions it to drive traffic, meet customer-oriented demand and improve in-store shopping experience. Cash-strapped consumers are now prioritizing their purchases and looking for low-priced options. The company trades in merchandise generally priced in the range from under $1 to $10.
Sohu.com Upped to Neutral
We are upgrading Sohu.com, Inc. (SOHU) to Neutral from our previous Underperform rating and setting a price target of $65. Strength in the company’s online games and portal business is encouraging. We expect the company to achieve the estimates for 2009 and advise investors to wait for a more favorable exit point.
Sohu is the third-largest internet portal and a leading online brand in China. The strength in its online games and portal business are expected to be the strongest drivers for growth beyond 2010.
Moreover, Sohu is expected to benefit from China’s growing online advertising industry and expects increased online advertising spending in 2010, reinforced by the World Cup and Asian games.
We are encouraged by the company’s growing cash balance as well as its debt free balance sheet. At the end of the third quarter, Sohu had $596.4 million in cash and cash equivalents versus $546.7 million in the previous quarter.
While Sohu’s third-quarter earnings beat the Zacks Consensus estimate and have been in line with the company’s own guidance, the outlook for the fourth quarter was much below expectation.
Sohu expects total revenues in the range of $134.5 million to $138.5 million, with advertising revenues within the $48 – $50 million range. Brand advertising revenue is expected to be within $45 – $47 million and online game revenues to be in the range of $69 – $71 million. The company expects its net income on a non-GAAP basis to be in the $41.5 million or 78 cents per share to $42.5 million or 80 cents per share range.
The company expects additional bandwidth costs and amortized video content costs of $2 million in the fourth quarter as a result of which, operating margin is expected to be slightly depressed. The company’s operating expenses have been going up steadily, which we fear could limit the growth in earnings.
Moreover, recent delay in game launches and intense competition from Tencent Holdings, Sina Corp. (SINA), NetEase.com Inc. (NTES) and Baidu, Inc. (BIDU) pose a threat.
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