For Immediate Release
Chicago, IL – September 2, 2010 – Zacks Equity Research highlights: DST Systems Inc. (DST) as the Bull of the Day and PPL Corporation (PPL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing (ADP), D.R. Horton (DHI) and Beazer (BHZ).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506.
Here is a synopsis of all five stocks:
DST Systems Inc. (DST) reported good second quarter results, with earnings per share (EPS) exceeding our expectations. The company has supplemented internal growth with strategic acquisitions.
We remain encouraged with the quarter’s revenue outperformance and solid cost structure. We believe that DST Systems leadership and scale in Financial Services will attract new customers based on the increasing popularity of mutual funds.
Moreover, the company is winning new customers at regular intervals. However, competition from Lombardi, Savvion and TIBCO Software may pose some challenges. We thereby upgrade our rating to Outperform on DST.
PPL Corporations’ (PPL) earnings of $0.62 per share in the second quarter of 2010 came in below the Zacks Consensus Estimate, impacted by weak performances at the Pennsylvania Delivery and International Delivery businesses.
Going forward, we are apprehensive about the company given management’s lowered 2010 earnings guidance, due to the recent dilution in the company’s shares outstanding. Additionally, expectations for continued pressure on PPL’s hedges and projections for higher coal transportation costs could weigh on future earnings, in our view.
This has led us to lower our estimates for 2010 and 2011 and also downgrade our recommendation on the stock to Underperform.
Latest Posts on the Zacks Analyst Blog:
ADP Sees 10,000 Jobs Lost
The Automatic Data Processing (ADP)employment survey was a big disappointment in August. It shows that private sector employment fell by 10,000 in August, well below consensus expectations for a 13,000 increase. This was the first decline in jobs as calculated by ADP this year.
ADP, as the largest payroll processing firm in the country, is in a very good position to look at the state of the job market. In addition, July’s job gains were revised down to 37,000 from 42,000. This is more evidence of the slowdown in the economy over the last few months, as the inventory cycle is largely over and the federal stimulus spending begins to fade.
Job Gains/Losses by Company Size
Small businesses, defined as those with fewer than 50 employees, dropped a total of 6,000 jobs in the month. Medium sized firms, those with between 50 and 499 employees, lost 5,000 jobs while large firms with 500 or more, employees added just 1,000 jobs. Large businesses are a relatively small share of total employment in the country, accounting for just 17.504 million out of a total of 106.956 million private sector jobs in the country. Small businesses are the largest source of employment at 48.247 million; medium businesses have 41.205 million jobs.
Goods Producing Not Delivering the Goods
All of the jobs lost were from the goods producing sector, which lost a total of 40,000 jobs. Overall, goods producing industries are not that big a source of jobs in this country, just 17.477 million (16.3%) in total. Employment in goods producing industries tends to be more volatile than in the service sector, and thus the goods producing industries have an outsized influence on the overall strength of the job market.
Worst hit in the goods producing sector were the small firms which shed 21,000 workers, followed by a loss of 12,000 among the medium-sized firms while the large goods producing firms dropped 7,000 workers in the month. The goods producing sector is made up of Manufacturing, Construction and Mining.
It appears that all three areas dropped jobs in the month, with the construction industry again bearing the brunt of the pain, on balance issuing 33,000 more pink slips in the month. The construction industry has been shedding jobs since January 2007, and over that period has shrunk employment by a total of 2.275 million.
Construction Spending Falls in July
Total Construction Spending fell in July to a seasonally adjusted annual rate of $805.2 billion, down 1.0% from June, and down 11.7% from a year ago. The decline was greater than the 0.7% decline that was expected. In addition, June was revised down to be 0.8% below May rather than the 0.1% increase originally reported.
The downward revision to June’s figures means that when we get the final look at the second quarter GDP numbers, it will show even less growth than the 1.6% currently estimated. It also means that we are not off to a good start for the third quarter.
Construction spending has been a persistent thorn in the side of economic growth for most of this recession, although it did actually contribute positively to the second quarter growth (just barely) based on the current estimates, but now it looks like it will be revised to a small drag on growth in the second quarter.
Year to date, construction spending has totaled $460.3 billion, down 11.8% from the $522.0 billion spent on construction in the first seven months of 2009.
For the month, private construction fell to an annual rate of $506.4 billion, a decline of 0.8% from June and off 12.2% from a year ago. Private construction comes in two basic flavors, residential and non-residential. Residential construction spending fell to an annual rate of $240.3 billion, off 2.6% from June, but up 5.5% from a year ago. The year-over-year gains are probably due to the now expired home-buyer tax credit.
Construction Spending Only to Fall Further
Based on recent trends in new home sales, housing starts and building permits, expect to see residential construction spending fall further in the months to come. The home builders like D.R. Horton (DHI) and Beazer (BHZ) still have a rough road in front of them. Eventually the current overhang of excess housing supply will get absorbed, but that is not likely to happen in the near future.
Non-residential construction edged up by 0.8% on the month to an annual rate of $266.1 billion, but it has plunged 23.7% from a year ago. I doubt that this month’s increase is a fundamental change in direction. It would be nice if it were, but I doubt it is. More than all of the total increase in non-residential construction spending came from the Power sector, as utilities continue to upgrade their power plants and install more renewable sources of energy.
Public construction also fell to an annual rate of $298.8 billion, a 1.2% decline from June and 7.9% below last year. Given the massive overcapacity in the construction industry due to lack of private demand, the decline in public construction spending is just plain inexcusable. There are massive public sector needs to repair our infrastructure that are going unmet.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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AUTOMATIC DATA (ADP): Free Stock Analysis Report
BEAZER HOMES (BZH): Free Stock Analysis Report
D R HORTON INC (DHI): Free Stock Analysis Report
DST SYSTEMS (DST): Free Stock Analysis Report
PPL CORP (PPL): Free Stock Analysis Report
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