For Immediate Release
Chicago, IL – March 8, 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: Kraft Inc. (KFT), American Express Company (AXP), Overseas Shipholding Group, Inc. (OSG), Goldman, Sachs & Co. (GS) and Eastman Chemical Co. (EMN).
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Here are highlights from Friday’s Analyst Blog:
Kraft’s Estimate Trends Declining
Earnings estimates for Kraft Inc. (KFT) are declining following the release of strong fourth quarter and full year 2009 results. Kraft completed 2009 on a strong note with fourth-quarter earnings increasing 17.1% from the year-ago period to 48 cents per share. Full-year earnings increased 6.8% to $2.03 per share.
Fourth-quarter revenues grew 3.2% to $11.0 billion. Revenues were positively impacted by foreign exchange (FX) fluctuations (3.2%). However, full-year revenues declined 3.7% to $40.4 billion.
Providing for the impact of the divestiture mentioned above, several analysts following the stock have revised their estimates over the past 30 days. As a result, six of the 17 analysts following the stock lowered earnings estimates for fiscal 2010. This brought the Zacks Consensus Estimate for the year down to $2.11, 5 cents below the estimate 30 days ago.
The estimates for the March and June quarters of 2010 have also been reduced by 3 cents each.
The company expects revenue growth of 4% for the upcoming quarter and earnings growth excluding special items are expected at the high end of the 7% to 9% guidance range, which is between 53 cents and 55 cents. The current Zacks Consensus Estimate of $0.47 is below the guided range. However, considering Kraft’s previous track record, we believe the company will achieve the guided numbers.
Our belief is strengthened by the fact that earnings exceeded the Zacks Consensus Estimate in each of the last four quarters, with a four-quarter average positive surprise of 8.25%. This means that on average, earnings beat the Zacks Consensus Estimate by 8.25%. Therefore, although surprises have varied considerably from quarter to quarter and this trend could continue in future, we expect the average surprise for the year to be positive.
AmEx Downgraded to Neutral
We are downgrading our recommendation on American Express Company (AXP) to Neutral from Outperform as we expect the overall economic recovery to be sluggish and hence AmEx’s top line growth will face obstacles in the near term.
AmEx’s fourth quarter earnings from continuing operations of 59 cents per share were ahead of the Zacks Consensus Estimate of 56 cents, driven primarily by lower provision for credit losses, increased cardmember spending and stable expenses as a result of its re-engineering efforts.
Also, credit trends are now showing signs of improvement. However, decreased revenue, a lower return on average equity (ROE) and miserable real estate values as a result of higher unemployment were downsides.
OSG Commences Stock Offering
Overseas Shipholding Group, Inc. (OSG) yesterday announced the beginning of the public offering of its 3,500,000 shares underwritten on its common stock. With this move, the company aims to increase its capital and enhance liquidity.
At a sale price of $46.99 per share, the public stock offering is expected to raise about $165 million for OSG upon successful completion on Mar 10, 2010. For this, the company has appointed Goldman, Sachs & Co. (GS) as the sole underwriter.
OSG expects to utilize the net proceeds of the stock offering for general and corporate purposes that includes apportioning funds for capital expenditure and working capital of the company. OSG also expects to pay back its revolving credit facilities and other existing debt obligations from the proceeds of the stock offering.
Given the current volatility in the markets and the sluggish recovery that has been affecting the operating results adversely, we believe that increasing capital through share issue can provide liquidity and stability to the balance sheet of OSG, although dilution of shares weighs on the earnings per share.
Eastman Guides Lower
Eastman Chemical Co. (EMN) has announced recently that it expects profits in the first quarter to be down 25 cents per share. Eastman had previously forecast first-quarter earnings to be slightly above fourth-quarter earnings of $1.14 per share. The Zacks Consensus Estimate is pegged at $1.15.
The Kingsport, TN-based company attributed the decline in earnings to power outages at a Texas facility. Eastman had announced a power outage at its Longview, Texas, plant on February 20 this year. The company stated that it expects most of the impact of the outage to be offset by higher-than-expected sales and operating margins.
Eastman Chemical Company manufactures and sells chemicals, plastics and fibers with 12 manufacturing sites in the U.S., Europe and Asia-Pacific, supplying products throughout the world. Eastman is the global leader in acetate yarn and the only producer of acetate flake as well as acetate yarn in the U.S. This provides the company an edge over its competitors such as Industrias del Acetato de Celulosa S.A., SK, Mitsubishi Rayon, UAB Korelita and Novaceta SpA.
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