For Immediate Release
Chicago, IL – March 15, 2010 – Zacks Equity Research highlights Family Dollar (FDO) as the Bull of the Day and FTI Consulting (FCN) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wells Fargo (WFC), Citigroup (C) and Starwood Hotels & Resorts Worldwide Inc.(HOT).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Family Dollar’s (FDO) strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines. The company’s point-of-sale technology and store realignment initiatives are helping to drive traffic.
There is tremendous opportunity to increase gross margins by a renewed effort on its store brand portfolio. These initiatives helped the company post better-than-expected second-quarter 2010 sales results, and prompted management to raise its earnings guidance.
Although the intense competition and shift in demand to lower-margin consumable merchandise categories triggered by the recent economic downturn remains a concern, we have an Outperform recommendation on the stock.
We are downgrading our recommendation on FTI Consulting (FCN) to Underperform from Neutral as a dramatic deceleration is expected in Corporate Finance and Restructuring through the remainder of 2010.
The company’s fourth quarter earnings came in only a couple of pennies short of the Zacks Consensus Estimate due to disciplined expense management and fewer share count. However, any significant growth was restricted by declining revenues from Technology and Strategic Communication segments.
Further, the near-term outlook on these segments remains cautious due to the ongoing market turmoil, which is also expected to adversely affect the company’s primary segment, Corporate Finance and Restructuring. We believe there is no significant growth driver to pull operating leverage in the near term.
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Keeping the Fed Funds rate low is needed right now given the enormous amount of slack in the economy. The two key measures of this are the unemployment rate — which on an “official basis” (U-3) stands at 9.7% — and people who have been involuntarily cut back to part-time status or are otherwise under-employed are factored in (U-6) stands at 16.8%.
Capacity utilization is currently at 72.6%; 80% is more normal. Under such conditions, runaway inflation is unlikely to be a major problem. There is simply no way for the wage side of a wage-price spiral to gain any traction.
A low Fed Funds rate will also keep the yield curve very steep. This is very good news for the banks, as one of their core economic functions is to borrow short (for example, take in checking deposits which can be withdrawn at any time) and lend long (say, a mortgage or a commercial term loan). The steeper the curve; the greater the margin.
This is allowing banks like Wells Fargo (WFC) and even Citigroup (C) to earn their way back to health. Since banks have cut back on dividend payments and share repurchases (ordered, too, in the case of the TARP banks, strongly encouraged to by the regulators by smaller banks), this has allowed banks to rebuild their depleted capital.
Starwood’s Rating Outlook Stable
Yesterday, Fitch Ratings affirmed Starwood Hotels & Resorts Worldwide Inc.’s (HOT) ratings. The outlook was revised to Stable from Negative.
Fitch has affirmed the Issuer Default Rating (IDR) at ‘BB+’, $1.875 billion senior unsecured credit facility at ‘BB+’ and $2.7 billion of senior unsecured notes at ‘BB+’.
The affirmation of Starwood’s ratings and its outlook revision to stable reflects the improved scenario in lodging. There is a modest recovery in industry demand trends. Additionally, the ratings reflect the company’s effort to strengthen the balance sheet, the repositioning of its timeshare business and its ability to access the capital markets during difficult market conditions.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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