For Immediate Release
Chicago, IL – March 24, 2010 – Zacks Equity Research highlights Gap, Inc. (GPS) as the Bull of the Day and BRE Properties (BRE) the Bear of the Day. In addition, Zacks Equity Research provides analysis on RPM International (RPM), Sherwin-Williams (SHW) and Ethan Allen (ETH).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
We maintain our Outperform recommendation on Gap, Inc. (GPS) as we anticipate it to perform well above the market. Gap is the leading player in the highly fragmented specialty retail sector, and has a market cap which is more than double its nearest competitor.
The company has improved its business model by realigning its inventory to sales trends. In addition, the company has a strong balance sheet with adequate liquidity and no outstanding debt. Gap has also been active on the share buyback front and has been paying a steady dividend.
However, macroeconomic headwinds may continue to affect the U.S. discretionary spending environment and limit the above-market performance of the company.
Our long-term recommendation for BRE Properties (BRE) is Underperform as we anticipate it to perform well below the broader market. We expect continued volatility in the multifamily sector with increasing job cuts and decline in the market fundamentals.
BRE Properties also has exposure to some weakening multifamily markets, notably, The Inland Empire, Los Angeles, and Orange County. However, home values in most of BRE Properties markets are still among the highest in the country and the rent-to-own gap remains high.
The company also maintains strong occupancy levels and high operating margins. If the company can weather the current storm, it may expect a reversal of fortunes. However, our target price of $32.00 at 16.4X 2010 FFO/Share factors in the view that BRE will perform well below the broader market.
Latest Posts on the Zacks Analyst Blog:
Used Home Sales Slip Slightly
Existing home sales shot up in the fall as people thought that the “first-time buyer” tax credit was going to expire on them. The credit was not only extended at the last minute, but it was expanded to non-first-time buyers as well. To qualify for the extended tax credit, people must be under contract by the end of April and close by the end of June.
…The extended tax credit has not packed nearly as much punch as the first one did. It will be extremely interesting to see if there is another flurry of used home buying as the credit nears expiration in a few months. However, looking at the graph, it appears to me that a rate of around 5.0 million is not particularly unhealthy from a longer-term point of view.
Yes, it is well below the bubble peaks, but it is also around where we were from late 1998 to the end of 2001. In any case, used home sales really only affect overall economic activity indirectly. When people move into a new (for them) house, they tend to redecorate it to suit their tastes. That can stimulate sales of paint, which is nice for the likes of RPM International (RPM) and Sherwin-Williams (SHW) and of furniture, helping out firms like Ethan Allen (ETH).
However, the amount of economic activity generated by a used home sale is insignificant relative to the effect that a new home sale has on the overall economy (the new home sales data is due out tomorrow morning). The biggest economic beneficiaries of higher used home sales are used home dealers, aka realtors, just as the biggest beneficiaries of higher used car sales are used car dealers. (Have you ever noticed that nobody really cares about the level of used car sales in the country, but lots of ink is spilled each month when the new car sales numbers come out? There is a good reason for that, and the same principal holds with houses.)
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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