For Immediate Release
Chicago, IL – September 27, 2010 – Zacks Equity Research highlights: Avnet (AVT) as the Bull of the Day and Universal Forest Products Inc. (UFPI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Nike Inc. (NKE), KB Home (KBH) and Rite Aid Corp. (RAD).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506.
Here is a synopsis of all five stocks:
Avnet (AVT) revived its business quite well in fiscal 2010 after a disastrous 2009, driven by strong global demand. Business began to recover in the first quarter of fiscal 2010 as end demand improved and participants began to realize inventory in the technology supply chain at unsustainably low levels.
This propelled growth for the rest of fiscal 2010. Revenue is back to pre-recession levels and Asia continues to contribute the larger portion of the total. Asia was less impacted by the downturn and began its recovery phase before the western regions.
The recent acquisition of Bell Microproducts should further expand the scale of operations and provide cross-selling opportunities. We maintain our Outperform recommendation.
Universal Forest Products Inc. (UFPI) reported disappointing results in second quarter 2010 with EPS falling 19 cents short of Zacks Consensus. Healthy top-line growth was offset by higher cost of sales due to volatile lumber prices in the quarter.
Also, Universal’s huge dependence on general market conditions and growth in end markets increase top-line risks in the event of any adverse conditions. Further, significant volatility in the cost of commodity lumber products from primary producers is problematic.
The company also derives a large portion of its sales from one single customer, which exposes it to customer concentration risks. In anticipation of a lack of positive catalysts, we downgrade the stock to an Underperform recommendation.
Latest Posts on the Zacks Analyst Blog:
Nike’s Earnings Up
Nike Inc. (NKE) posted strong fiscal 2011 first-quarter earnings of $1.14 per share, which reflects a growth of 10% from the year-ago earnings of $1.04. Earnings for the quarter also surpassed the Zacks Consensus Estimate of $1.01 per share. Healthy top-line growth coupled with higher gross margin and effective inventory management were the key highlights of the quarter. Quarterly Details
Despite macroeconomic headwinds, Nike’s total revenue grew 8% to $5,175 million from $4,799 million in the prior-year quarter. The company continued to benefit from its strategy of consistently focusing on innovative products that provide a competitive edge over its rivals. Revenue for the quarter fell short of the Zacks Consensus Estimate of $5,230 million.
During the quarter, Nike witnessed revenue growth across all geographic regions, except Japan and Western Europe. In Japan and Western Europe, revenue plunged 12% and 4%, respectively. Revenue growth was primarily led by emerging markets (namely, Brazil and India), which rose 30% year over year, followed by growth in China, Central and Eastern Europe, and North America of 11%, 3%, and 8%, respectively.
Nike’s quarterly gross profit grew 10% year over year to $2,434 million, while gross margin expanded 80 basis points to 47%. The solid growth was due primarily to better product margins, favorable profitability from Direct to Consumer operations and profitable close-out sales. Global inventories fell 3% year over year to $2,210 million, mainly due to prudent inventory management policies and efforts to align merchandise mix with sales trends.
Nike ended the quarter with cash and cash equivalents of $2,010 million compared with a cash balance of $2,261 million in the year-ago period. During the quarter, the company repurchased 7.3 million shares for about $517 million as part of its four-year $5 billion program approved in September 2008.
KB Home Reports Narrower Loss
KB Home (KBH) showed a narrower loss of $1.4 million or 2 cents per share in its third quarter ended August 31, 2010 compared with $66 million or 87 cents per share in the year-ago quarter. This is also an improvement from the Zacks Consensus Estimate of a loss of 15 cents per share for the quarter.
The better results were mainly attributable to higher housing revenues and lower selling, general and administrative expenses during the quarter.
Total revenues grew 9% to $501 million, mainly driven by a 9% rise in housing revenues to $496.9 million. The increase in housing revenues reflected a 4% rise in the number of homes delivered to 2,320 units and a 6% rise in the average selling price to $214,200. The company’s land sale revenues dipped 9.5% to $1.9 million.
Meanwhile, net orders went down 39% to 1,314 homes. As a percentage of beginning backlog, the company’s cancellation rate went up by 1 percentage point to 21% in the quarter. As of August 31, 2010, the company’s backlog totaled 2,169 homes, a 42% decline from 3,722 homes in backlog as of August 31, 2009.
Potential future housing revenues in backlog fell 38% to $455.3 million as of August 31, 2010 from $734.1 million as of August 31, 2009, primarily due to the lower number of homes in backlog.
Rite Aid Reports Disappointing 2Q
Leading drugstore chain operator Rite Aid Corp. (RAD) posted higher net loss of $197.0 million in the second-quarter of fiscal 2011, compared to a loss of $116.0 million in the year-ago period. The quarterly loss per share of 23 cents was much greater than the Zacks Consensus Estimate for a loss of 11 cents. The loss incurred was primarily due to a $44 million or 5 cents charge on debt modification related to the company’s recent refinancing and lower sales.
Quarterly Details
Rite Aid’s revenues declined 2.5% year over year to $6.2 billion from $6.3 billion, primarily due to a 1.5% decline in same-store sales, coupled with the net closure of 65 stores over the past year. During the quarter, the company closed 20 stores, relocated 5 and remodeled 1.
Pharmacy same-store sales decreased 1.8%, hurt by the introduction of new generic drugs, while prescriptions filled at comparable stores decreased 2.1% from the year-ago quarter. Front-end same-stores sales declined 0.9% year over year. Other than prescription drugs, Rite Aid sells a wide assortment of other merchandise, which it terms as “front end” products, including over-the-counter medications, health and beauty aids, personal care items and cosmetics.
Rite Aid’s gross profit fell 2.9% year over year to $1.6 billion, while gross margin contracted 11 basis points (bps) to 26.6%. Selling, general and administrative expenses (SG&A) declined 1.2% year over year to $1.6 billion, mainly due to management’s cost containment initiatives.
The company also recorded an 8.3% reduction in lease termination and impairment charges to $26.3 million, primarily due to fewer store closures in the reported quarter. Despite cost saving measures, Rite Aid reported operating loss (gross profit less SG&A and lease termination and impairment) of $194.1 million, compared to an operating loss of $112.0 million in the prior year quarter.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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 analyst 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.
Zacks “Profit from the Pros” e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=7159.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com
AVNET (AVT): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
NIKE INC-B (NKE): Free Stock Analysis Report
RITE AID CORP (RAD): Free Stock Analysis Report
UNIVL FST PRODS (UFPI): Free Stock Analysis Report
Zacks Investment Research
