For Immediate Release
Chicago, IL – September 16, 2009 – Zacks Equity Research highlights Joy Global (JOYG) as the Bull of the Day and Zions Bancorporation (ZION) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fannie (FNM), Freddie (FRE) and J.P. Morgan (JPM).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676
Here is a synopsis of all five stocks:
We are confident about the long-term fundamentals of the mining industry, which is further supported by a sustainable secular shift in commodity demand in the emerging economies. This will provide Joy Global (JOYG) substantial growth potential once the global economy emerges from the ongoing turmoil.
Joy Global aims at maximizing operating efficiency and useful life of mining equipment through value-added aftermarket services, which gives the company significant edge over its competitors. Additionally, the stable revenue stream from the high-margin aftermarket operations help Joy Global offset its cyclical original equipment business.
Of late, Joy Global management has implemented several strategies to optimize cost-structure and realign production capacity to cope with the slowing customer orders and stay competitive amid the ongoing global slowdown. The company is pushing its overall inventory and working capital efficiency. Moreover, Joy Global is looking at increasingly relocating production capacity to low-cost regions like China, Poland, and South Africa. These actions will improve operational efficiency, boost profitability and also solidify long term viability of the company.
Given the high competitive pressures in the banking industry, we expect continuous deposit pricing pressures as well as growth in higher cost funding accounts to weigh on Zions Bancorporation’s (ZION) net interest margins (NIM), creating headwinds on the revenue front.
Loan growth has remained solid, but slowing growth in core deposits could cause a negative mix shift, another setback for the NIM. Management expects deposit growth to continue to lag loan growth and that a portion of future loan growth may be funded from alternative higher cost funding sources.
The growth through acquisition model exposes the company to the risk of overpaying for targets. We are concerned about Zions commercial real estate (CRE) exposure. CRE represents over one-third of Zions overall loan portfolio. Continued weakness in the residential development and construction activity in the southwest has resulted in further deterioration of credit metrics in the past several quarters. Given the sluggish economic conditions, we expect credit to further deteriorate across the industry in the coming quarters.
Latest Posts on the Zacks Analyst Blog:
Obama and Market Regulation
Some of the proposals that President Obama has made sound reasonable and possibly workable, but the real devil is in the details. He will attempt to solve the ‘too big to fail’ problem by requiring the bigger, TBTF banks to hold higher levels of capital than smaller non-systemically important banks. The big question is how much higher?
If it is only a nominal difference, then the big banks will be in a great position. The Federal government will be in effect guaranteeing the debt of those banks (just like it did for Fannie (FNM) and Freddie (FRE) before taking them over). This will result in a much lower cost of capital for a TBTF bank like J.P. Morgan (JPM) than for your average mid sized bank. The big banks will then be free to take the money and pile it all on 23 red on the roulette wheel (metaphorically). If they win, the bank makes a fortune, which it will then share generously with its top executives. If they lose, the taxpayers will pick up the tab if the amount lost exceeds the bank’s capital. Debt obligations of the big banks will be almost as safe as treasuries.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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