For Immediate Release
Chicago, IL – June 15, 2009 – Zacks Equity Research highlights Abbott Laboratories (ABT) as the Bull of the Day and School Specialty (SCHS) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford (F), Toyota (TM) and AutoZone (AZO).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day:
Abbott Laboratories (ABT) discovers, develops, manufactures and sells a diversified line of healthcare products. We expect almost 10% EPS growth over the next five years driven by strong sales of Humira and the company’s rapidly growing vascular business.
Several new drug applications have recently been filed with the FDA, which should accelerate sales in the pharmaceutical business. We believe ABT possesses a low risk profile and will continue to trade at an industry premium.
Accordingly, we reiterate our Buy recommendation with a price target of $65.
Bear of the Day:
School Specialty’s (SCHS) fiscal fourth quarter sales came in as expected, but the company’s earnings easily beat our estimate thanks to strong cost-cutting efforts. The company did not provide specific guidance for fiscal year 2010, citing delays in the passage of state and school budgets.
SCHS is highly dependent on state and local governments for its revenues, and many of those governments are dealing with falling tax receipts and rising budget deficits. The federal government’s stimulus package should help, but there is no guarantee that those funds find their way into education.
As such, School Specialty’s revenue could come in below even our pessimistic forecasts. We would continue to avoid SCHS shares because the company’s future results will not be due to the execution of its business model — they will be determined by decisions made by state and local governments. Trying to game spending by state and local governments is not a prudent investment strategy.
Latest Posts on the Zacks Analyst Blog:
Still Leveraging Up
The prospect of very high inflation down the road is real. It is not a current danger given the huge amount of slack in the system. With unemployment at 9.4% and rising, there is simply no way that the wage side of a wage-price spiral can take hold. Thus for the time being, any inflation will simply serve as a method to reduce the real incomes of Americans.
The invisible hand of the market is going to force us to cut back on our consumption one way or the other. This means, among other things, that we will most likely never go back to an annual sales rate of 17 million for car sales. That is not good news over the long term for Ford (F) or even Toyota (TM). It might, however, be good news for AutoZone (AZO) since we will be patching up the old jalopy for much longer.
Dramatically lower consumption over time is not going to be good news for the vast majority of retailers or for the firms in the consumer discretionary sector. I’m not just talking about this year’s revenues and earnings, but their revenues and earnings for the next decade (at least). On the corporate side, to reduce total debt companies are going to have to pay far less in dividends and not repurchase stock, and use retained earnings to increase equity relative to debt. State and Local governments will have to both raise taxes and cut services. This is going to seriously slow GDP growth, which will make it all the more difficult to reduce the level of debt relative to GDP.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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