For Immediate Release
Chicago, IL – November 2, 2009 – Zacks Equity Research highlights Dow Chemical Company (DOW) as the Bull of the Day and RC2 Corporation (RCRC) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Citigroup (C), Bank of America (BAC) and Chevron Corporation (CVX).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676
Here is a synopsis of all five stocks:
We have upgraded Dow Chemical Company (DOW) from Neutral to Outperform. Earnings of 24 cents in the third quarter of 2009 (significantly better than the Zacks Consensus Estimate of 9 cents, and the 5 cents reported in the previous quarter) were driven by cost reduction and asset sales.
The company achieved cost synergies of over $1 billion in the first nine months of 2009. The Rohm and Haas acquisition is a positive for Dow, which is expected to consolidate higher margin and higher growth specialty businesses and reduce volatility in earnings and cash flow going forward.
We are downgrading our recommendation on RC2 Corporation (RCRC) from Neutral to Underperform. While third quarter results were ahead of the Zacks Consensus Estimate, primarily due to the benefits of the cost containment initiatives, we note that the company has reported a drop in sales in the quarter.
Also, the holiday season is expected to be a challenge as families are restricting their discretionary spending. Hence, we expect the company to continue to face a difficult operating environment in the near future.
Additionally, the loss of the Thomas & Friends license to Fisher-Price will likely prove to be a significant blow in 2010. Further, the chances of retaining the Wooden track system license when it expires in 2012 have been reduced, in our opinion.
Latest Posts on the Zacks Analyst Blog:
Savings Rate Goes Up
Personal interest income fell 0.6% in September and is essentially flat over the last six months. Personal dividend income has been consistently ugly, falling for at lest seven straight months (that’s all that is presented in the release, and I have not gone back to check previous releases). Interest rates have been low, and companies have been cutting or eliminating dividends.
Historically, big banks like Citigroup (C) and Bank of America (BAC) were among the most generous dividend payers, but they should not be paying common dividends for a long time now. In September, dividend income fell by 1.3% and is down 12.5% over the last six months.
So if it’s not coming from wages or supplements, and it’s not coming from financial assets (and rental income is too small to make that big of a difference), where is the personal income coming from? Why, good old Uncle Sam. In September, transfer income like Social Security income and unemployment benefits rose by $17.3 billion or 0.8%, following a $9.3 billion or 0.5% increase in August. Over the last six months they are up by 6.4%. These six month increases are not annualized, so you can double them to get the annual rate (well, technically, convert the 6.4% to 1.064 and square it).
While rising income from Social Security and unemployment insurance does help keep the economy moving in the short run, it is hardly a healthy long-term situation.
Chevron Tops on Plunging Earnings
Chevron Corporation (CVX) posted significantly better-than-expected third-quarter 2009 earnings, driven by robust upstream volumes and cost cutting initiatives. Earnings per share (excluding gains from asset sales and tax items, as well as foreign-currency effects), came in at $1.80, well above the Zacks Consensus Estimate of $1.42.
However, compared to the third quarter of 2008, Chevron’s adjusted earnings per share plunged 51.5% (from $3.71 to $1.80), while revenue declined 40.9% to $46.6 billion, reflecting lower commodity prices and weak refining environment.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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