For Immediate Release
Chicago, IL – December 29, 2009 – Zacks Equity Research highlights Cabela’s (CAB) as the Bull of the Day and Regency Centers (REG) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fannie Mae (FNM), Freddie Mac (FRE) and Accenture (ACN).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Boasting a healthy balance sheet, viable strategy and improving operating efficiencies, Cabela’s (CAB) offers investors a strong growth profile. Cabela’s remains on course to achieve its targeted long-term return on invested capital of 12%-14%.
Next generation store format, multi-channel strategy and seasonal product assortments enable CAB to focus on increasing stores productivity and sales per square foot, and lowering labor costs. Retail operating income margin expanded 240 basis points to 11.6% in third-quarter 2009.
Another growth engine is Cabela’s Club Visa credit card, which is enhancing brand name and increasing merchandise revenue. We have recently upgraded our recommendation on CAB to Outperform, and set our 6-month target price to $16.00 per share.
We are changing our long-term recommendation for Regency Centers (REG) to Underperform as we anticipate it to move well below the broader market. The prolonged recession has led to increased tenant bankruptcies, which in turn have led to a decline in occupancy and an increase in vacancy rates.
In addition, consumer discretionary spending continues to be under severe stress with a reduction in disposable income. However, Regency Centers is one of the largest retail-strip format REITs in the U.S. with properties in high income, high-barrier markets that are tenanted by leading national and regional retailers.
If REG can weather the storm, it may expect a reversal of fortunes in the future. For now, we have a 6-month target price of $30.00 per share.
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Fannie & Freddie Find Support
The U.S. Treasury announced late last week that it would offer significant new financial support to the stressed mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), notwithstanding their performances for the next 3 years. This move by the Fed follows the recent repayment of bailout money by the nation’s biggest financial institutions.
To keep Fannie Mae and Freddie Mac afloat, the Treasury has removed the $200 billion caps on the capital availability of both companies. Already, taxpayers have provided $111 billion to them. According to the Treasury, losses for Fannie Mae and Freddie Mac are not expected to exceed the government’s estimate of $170 billion over 10 years.
Uncapped access to bailout funds through 2012 is necessary to protect the strength and stability of the U.S. mortgage market, the Treasury said. Together, Fannie Mae and Freddie Mac own or guarantee almost 31 million home loans worth about $5.5 trillion — about half of all mortgages.
Amid increasing concerns that Fannie and Freddie did not have enough capital to withstand losses on their portfolio, the government ultimately announced the takeover of these companies to prevent a collapse last year. However, as expected, the biggest losers were the shareholders of these companies.
Finally, Fannie Mae and Freddie Mac were placed under the conservatorship of Federal Housing Finance Agency (FHFA). Under the conservatorship, Fannie and Freddie no longer manage a strategy to maximize common shareholder returns and the Conservator has eliminated common and preferred stock dividends (other than dividends on the senior preferred stock). However, since then they have provided most of the liquidity in the mortgage market, allowing homeowners to refinance and buy new homes.
With the move to support Fannie Mae and Freddie Mac in the long-term, the government has ultimately transformed them into its arms, making them take active part in its mortgage modification programs.
The companies disclosed on Thursday that their chief executives received $6 million as annual compensation as the mortgage giants try to attract and retain talent to support the U.S. mortgage market. The packages were approved by the Treasury and FHFA.
Fannie Mae and Freddie Mac have been among the firms hardest hit by the housing slump, credit crisis and ongoing recession. We anticipate losses to increase in the coming quarters and the conservatorship to continue for a long time, and thus see no value for the common shareholders.
However, we do foresee Fannie Mae and Freddie Mac’s increased participation in the Making Home Affordable Program, potentially lowering losses from foreclosures in the upcoming quarters.
Accenture Revs Down, EPS Beats
Accenture (ACN) has reported first quarter 2010 EPS of 67 cents, exceeding the Zacks Consensus Estimate of 65 cents.
Revenue
Accenture reported first quarter 2010 total revenue of $5.75 billion, down 11.0% from $6.47 billion reported in the year ago quarter. Revenue declined across all its operating groups, with Communication & High Tech revenue declining 15.0% from the year ago quarter. Financial Services revenue declined 11.0% year-over-year, Health & Public Services revenue remained flat, Product revenue declined 13.0% from the year ago quarter, while Resources revenue was down11.0% from the year ago quarter.
Geographically, the Americas reported 13.0% decline in revenue compared to the year ago quarter, Europe Middle East Africa (EMEA) reported 11.0% decline in revenue and Asia-Pacific region reported 6.0% decline in revenue from the year ago quarter.
Guidance
For full fiscal year 2010, management expects net revenue growth in the range of negative 3.0% to positive 1.0%. The company has increased its outlook for EPS for full fiscal year by 3 cents, reflecting the updated foreign currency assumption, and expects diluted EPS to be in the range of $2.67 to $2.75. The company also expects operating margin for full fiscal year at 13.4%.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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