For Immediate Release
Chicago, IL –August 10, 2010 – Zacks Equity Research highlights: Grupo TMM S.A.B. (TMM) as the Bull of the Day and Quest Diagnostics (DGX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco (CSCO), Toll Brothers (TOL) and Hyatt Hotels Corp. (H).
Here is a synopsis of all five stocks:
Grupo TMM S.A.B. (TMM) is one of the largest integrated logistics and transportation companies in Mexico. The firm, through its subsidiaries, provides maritime services, land transportation services, integrated logistics services and ports and terminals management to international and domestic clients throughout Mexico.
Despite the global recession in 2009, TMM continues to record solid EBITDA growth. The firm is committed to modernizing its fleet, which will in turn maximize margins. TMM’s offshore and product tanker fleet generally work with long and medium-term contracts which has the effect of predictable cash flows.
Through participation in profitable niche markets complimented by predictable revenues and cash flows through medium and long-term contracts at its Maritime division, TMM appears poised for long-term growth. We reiterate our Outperform recommendation.
Quest Diagnostics (DGX) second-quarter EPS of $0.89 beat the Zacks Consensus Estimate by a penny and the year-ago quarter by 7 cents. However, revenues declined 1.4% to $1.9 billion, driven by a decline in both volume and pricing.
Meanwhile, the company proactively negotiated contracts with some MCOs at reduced prices. Although this gives more visibility, revenue per requisition was affected in the near term. Quest is adopting strategies such as suitable acquisitions, increased sales force and targeting additional geographies to drive its top line.
However, we believe in the near term volume and pricing outlook will remain under pressure unless economic scenario improves. As a result, we lower our estimates for the company and downgrade the stock to Underperform.
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Post-Recession Private Job Growth
Without question, there needs to be more job creation. People are hurting and want to find jobs. I have argued over and over again that we need more fiscal stimulus to do that. The consumer was deeply in debt before the crisis, having used the run-up in house prices to extract equity, and when the value of his house fell his personal balance sheet was destroyed and now needs to be rebuilt. That means paying down debt and saving more, not new spending.
That reduced overall demand and resulted in lots of idle capacity. With lots of equipment sitting idle, businesses see little reason to build more. With lots of vacant offices and storefronts, why put up more? That depresses demand even more.
The only thing that is left is for the government to help prime the pump and cushion the downturn. Given the scale of the problem, $800 billion spread over three years simply was not enough. Just because a garden hose was not able to put out a roaring wildfire being pushed by Santa Ana winds would not lead one to conclude that water will not put out a wood-based fire.
The bubble in the 1990’s was based on overinvestment, particularly the resources put in place to stave off problems from the largely illusory Y2K problem. Investors bid up the value of firms like Cisco (CSCO) to absurd heights, extrapolating the growth they were showing into the infinite horizon. The Internet backbone that was put in place during those years was productive capacity that increased the country’s potential.
The bubble leading up to the Great Recession was based on firms like Toll Brothers (TOL) building small palaces far from where people work. Those McMansions are essentially consumption, even though the building of them counts as residential investment. It is just consumption that lasts a long time. It is not the sort of investment that will lead to further growth or increased output. Furthermore, when the housing bubble started, it was not like the country was particularly ill-housed.
However, is it too much to ask the press to have just a little bit of historical perspective when reporting on the economy? It is not like this data is some sort of state secret — it is available for free on the St. Louis Federal Reserve website if anyone wants to check out the numbers for themselves.
Hyatt Surpasses Zacks Consensus
Hyatt Hotels Corp. (H) reported its second-quarter 2010 adjusted earnings of 18 cents per share, higher than the Zacks Consensus Estimate of 8 cents per share. On a GAAP basis, net income per share was 14 cents versus a loss of 34 cents recorded in the comparable quarter last year. The last year’s loss widened due to a hefty one-time charge of 43 cents per share mostly as debt settlement cost. However, in the reported quarter, the one-time charge is 4 cents per share.
Inside the Headline Numbers
Total revenues rose 4.7% year-over-year to $889.0 million. The RevPAR (Revenue per Available Room) for comparable owned and leased properties jumped 9.6% (up 9.4% on a constant-dollar basis).
International RevPAR increased 21.4% year-over-year (up 17.5% on a constant-dollar basis) due to a hike in average daily rate. ?In North America, comparable full service RevPAR rose 6.8% (up 6.4% at constant dollar). RevPAR at the company’s comparable North American select-service hotels was up 7.8%.
Adjusted EBITDA surged 12.5% from the prior year quarter to $135 million, driven by stronger performance at owned and leased hotels and higher management and franchise fees.
Selling, general and administrative expenses declined 15.9% from the prior year quarter to $58.0 million. However, adjusted selling, general and administrative expenses increased by 4.9% to $64.0 million due to higher incentive compensation costs and professional fees.
The company opened 12 properties during the second quarter of 2010.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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CISCO SYSTEMS (CSCO): Free Stock Analysis Report
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
HYATT HOTELS CP (H): Free Stock Analysis Report
TOLL BROTHERS (TOL): Free Stock Analysis Report
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