For Immediate Release
Chicago, IL – March 16, 2010 – Zacks Equity Research highlights Cisco Systems (CSCO) as the Bull of the Day and Bayer AG (BAYRY) the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase & Co. (JPM), Visa Inc. (V) and Kroger Company (KR).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Cisco Systems (CSCO) is a leading provider of IP-based networking and other products. The company’s second-quarter results beat the Zacks Consensus on both the top and bottom lines. Orders continued to strengthen in the last quarter, indicating continued business momentum.
New products, growth initiatives, improving operating performance, solid financials and a sound restructuring policy are positives. Of course, competition remains something to look out for, since the company has been losing some market share. Additionally, the complicated decision-making process and integration risks remain.
However, we believe the positives outweigh the negatives at this point. Consequently, we are upgrading CSCO shares to Outperform.
Bayer AG (BAYRY) reported fourth quarter core earnings per share of 0.90 surpassing 0.71 reported in the year-ago period. Bayer has been shifting its focus towards its HealthCare segment over the past few years in order to maintain solid growth in the long run.
While we are pleased with the growth recorded by the HealthCare segment, we remain concerned with the disappointing performance of the Material Science segment. Moreover, we are disappointed with the delay in approval of Xarelto, one of Bayer’s most promising pipeline candidates.
In addition, the outlook for 2010 provided by the company is not quite encouraging. Given these factors, we downgrade the stock to Underperform from Neutral.
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JPMorgan, FDIC Resolve with WaMu
Washington Mutual Inc.’s (WaMu) 18 month-long battle with the Federal Deposit Insurance Corp. (FDIC) and JPMorgan Chase & Co. (JPM) came to a resolution on Mar 12, whereby WaMu has agreed to accumulate about 6 billion as against the $20 billion to be collected from lawsuits, tax refunds and disputed cash deposits that were estimated by the shareholders of WaMu.
According to the terms of the resolution, fixed after the dispute between the WaMu, FDIC and JPMorgan, WaMu will receive the $4 billion of cash deposit that was held by JPMorgan when it bought Washington Mutual Bank for $1.9 billion in Sep 2008. The three entities will also share two tax refunds expected to be worth about $5.6 billion. In addition to turning over the $4 billion in deposits, JPMorgan has agreed to purchase Visa Inc. (V) shares from WaMu for $50 million.
The matter caught fire when WaMu’s bank was taken over by JPMorgan. While WaMu wanted to seek for the $4 billion cash deposit to repay its creditors worth $8 billion, FDIC argued that it should take temporary custody of the cash because of losses caused by the failure of WaMu’s bank. On the other hand, JPMorgan alleged that it should have a right to the cash as it had bought the failed bank.
Following the resolution, the money granted to WaMu will be used to repay $7 billion in debt, mostly owed to bondholders who support the settlement, which leaves a paltry sum for the shareholders. However, the judge must approve the settlement, which will be filed by Mar 26 with the court as a part of the WaMu’s liquidation plan.
Kroger Upped from Underperform
We recently upgraded our recommendation on Kroger Company (KR) to Neutral from Underperform with a target price of $23.00.
Kroger’s dominant position among the nation’s largest grocery retailers enables the company to sustain top-line growth, expand store base and boost market share. The company’s fourth-quarter 2009 total revenue (including fuel center sales) rose 7.2% to $18,554.5 million.
Kroger’s customer-centric business model provides a strong value proposition to consumers. The company is well positioned to deliver higher earnings primarily through strong identical supermarket sales growth (sans fuel). Identical supermarket sales are expected to grow 2% to 3% in fiscal 2010, although down from an average growth of 4.1% achieved in the last three years, given the economic conditions.
Kroger’s management is also actively managing its capital, returning much of its free cash to shareholders via share buybacks and dividends. Since the inception of the dividend program in 2006, the company has increased its dividend every year. The dividend was last increased in fiscal 2009 by 5.5% to 9.5 cents a share. Kroger also repurchased 10.3 million shares aggregating $218.3 million.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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