For Immediate Release
Chicago, IL – April 15, 2010 – Zacks Equity Research highlights Avnet, Inc. (AVT) as the Bull of the Day and Telesp (TSP) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Exxon (XOM), AutoNation (AN) and CarMax (KMX).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Avnet, Inc. (AVT) is one of the world’s largest distributors of electronic components and computer products. The company continues to expand business in Asia, which is associated with lower ASPs and also lower costs.
While other factors may help margin expansion, a larger percentage of Asian revenue in the mix enhances Avnet’s basic low-margin profile. Given the early signs of recovery, IT spending is expected to pick up. Although the recovery would be slow and steady, orders are expected to return to normal levels by the end of calendar 2010.
The recent acquisition of Bell Microproducts should further expand the scale of operations and provide cross-selling opportunities. We upgrade our recommendation for Avnet to Outperform from Neutral.
We downgrade our recommendation for Telesp (TSP) to Underperform based on the company’s lackluster operating results in the last quarter. Telesp remains significantly challenged by the sustained erosion in its core wireline voice business due to stiff competition, which continues to weigh on the top-line and margins.
Earnings for the last quarter missed the Zacks Consensus Estimate due to lower local voice revenue and higher losses from financial operations. Moreover, revenue growth for the Pay-TV business was more than offset by the declines in fixed voice telephony and broadband Internet.
Telesp operates in a highly matured local and long-distance phone market and faces a stringent regulatory environment. We expect operating performance in the near term to be restricted by the prevailing competitive and regulatory factors.
Latest Posts on the Zacks Analyst Blog:
Inflation? What Inflation?
The only real major inflation is in energy, and even there it is just energy commodities like gasoline that are rising — or at least were rising — quickly. Over the last year they are up 39.6%, although after seasonal adjustments they actually fell 1.0% in March on top of a 1.3% decline in February.
The seasonal adjustment is a big one for gasoline, so don’t start screaming about the government being a bunch of liars just because you paid more when you filled up at your local Exxon (XOM) station two weeks ago than you did six weeks ago. On a non-seasonally adjusted basis, gas prices were up 4.5% in March.
The point is that gasoline prices almost always go up in March, but the increase this year was less than normal. There will be other months where the price you actually pay goes down, but the statistics will show prices going up (usually late summer). Also, while gasoline prices are very visible, they are a relatively small part of most people’s spending, and as a result only have a 4.53% weighting in the overall CPI.
The price energy services, such as electricity, sort of followed the opposite path. They were up a sharp 1.4% on the month, on top of a 0.5% increase in February, but on a year-over-year basis, they are actually down 1.8%.
The only other area where prices have risen even remotely close to the rise in energy costs over the last year is used cars, which are up 16.3% year over year, and rose 0.5% in March on top of a 0.7% increase in February and a 1.5% rise in January. So even there, the trend is slowing sharply.
However, it is clearly good news for used car dealers such as AutoNation (AN) and CarMax (KMX), although they have bigger new car than used car operations, but the used cars are significant to them. New car prices, by comparison, have been relatively well-behaved — up 3.0% over the last year, and up 0.1% in each of the last two months, after a 0.5% decline in January.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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