For Immediate Release
Chicago, IL – April 29, 2010 – Zacks Equity Research highlights J.C. Penney (JCP) as the Bull of the Day and PulteGroup (PHM) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sprint Nextel (S), Verizon (VZ) and AT&T (T).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
J.C. Penney’s (JCP) well-diversified supplier base, compelling merchandise, marketing campaigns, technological initiatives as well as effective cost and inventory management should drive sales and margin trends over the long term.
The company remains on track to deliver comparable-store sales growth and boost market share. The Sephora concept inspires confidence and is expected to be a significant revenue driver. Moreover, J.C. Penney’s healthy cash balance and significant free cash flow positions it to drive future growth and enhance shareholders return.
We have a long-term Outperform recommendation on the stock. Our target price of $35.00, or 21.5X 2010 EPS, reflects this view.
Despite being the largest homebuilder in the U.S., with operations in more than 50 markets, PulteGroup (PHM) suffers from high cyclicality in the industry. The company also faces intense competition from the resale of existing or foreclosed homes and available rental housing.
The sub-prime mortgage crisis will have a long-term impact on Pulte. It will continue to negatively impact Pulte’s sales and pricing in the homebuilding business, as well as reduce the volume and margins in its financial services business.
Therefore, we have downgraded our recommendation from Neutral to Underperform and set a target price of $11. Our $11 target price, or 27.5X our 2011 EPS estimate, reflects this view.
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Sprint Loss Widens on Lofty Charge
Sprint Nextel (S) reported first-quarter 2010 results with an adjusted net loss per share of 17 cents, a penny below the Zacks Consensus Estimate. Adjusted earnings exclude a one-time tax related non-cash charge of $365 million.
The third-largest U.S. wireless carrier posted a net loss of $865 million (29 cents a share), 46% more than the net loss of $594 million (21 cents per share) reported a year ago, as a result of the lofty one-time charge.
Consolidated operating revenue fell 2% year-over-year to $8.09 billion due to lower contributions from its wireline and postpaid wireless businesses. However, the revenues were modestly higher than the Zacks Consensus Estimate of $8.04 billion.
Adjusted OIBDA (operating income/loss before depreciation, amortization, asset impairments and abandonments) dipped 14% year-over-year to $1.5 billion, due to decreased wireless service revenues and a higher handset subsidy.
Consolidated revenues from the wireless segment were $7 billion, flat year-over-year, as a result of stable wireless service revenues which came in at $6.4 billion. Sprint lost a net of 75,000 subscribers in the quarter, representing an improvement from 182,000 customers lost in the prior-year quarter due to the significant annualized improvement in contract subscriber losses and respectable growth in prepaid.
A net loss of 578,000 customers in the retail postpaid business reflects a considerable year-over-year decline from a net loss of 1.25 million subscribers in the year-ago quarter. Sprint gained 348,000 customers in the “Boost Mobile” prepaid business, partly offsetting the losses in the postpaid business. The carrier’s popular $50 unlimited price plan continues to support its prepaid business.
Sprint’s core postpaid business remains in a shambles as the carrier is losing valuable contract customers to competition due to intense pricing pressure, the maturing US wireless market and the problems associated with the integration of its CDMA and iDEN wireless network platforms. Sprint’s bigger rivals Verizon (VZ) and AT&T (T) recently reported lower postpaid net additions in the first quarter.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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