For Immediate Release
Chicago, IL – August 19, 2009 – Zacks Equity Research highlights Medtronic (MDT) as the Bull of the Day and Tesoro (TSO) the Bear of the Day. In addition, Zacks Equity Research provides analysis on American Express Co. (AXP), Bank of America (BAC) and Discover (DFS).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676
Here is a synopsis of all five stocks:
Medtronic’s (MDT) story is improving — product approvals, launches and a renewed focus on operating margins should drive healthy near-term earnings growth. While sales growth has been hampered by weak U.S. end-markets, the company produced solid free cash flow of over $3 billion that can be used for acquisitions.
The company is well on track for achieving goals set by its ONE Medtronic approach. Earnings of 82 cents per share in the last quarter of the fiscal year were in line with the Zacks Consensus Estimate.
Manufacturing efficiencies and low product costs drove margins higher. We rate this stock Outperform with a target price of $42.
Our Underperform recommendation on Tesoro (TSO) shares takes into account the bearish refining margin outlook. A growing supply overhang in the face of a recession-induced fall in global oil product demand has led to a squeeze in refiners profits.
Tesoro’s lack of geographic diversification and heavy exposure to the weak California market has also become a major liability, in our view. Weighed down by these factors, the company posted a second-quarter 2009 loss.
Overall, we see a fairly unfavorable macro backdrop for independent refiners like Tesoro. We believe this will cause Tesoro shares to underperform relative to the market as well as the sector in the coming quarters.
Latest Posts on the Zacks Analyst Blog:
AmEx Sees Better Credit Trends
American Express Co. (AXP) reported a slight improvement in its July credit-card defaults. Some of the credit metrics showed an improvement over the previous month.
Net loss rate has fallen to 8.92% in July, versus 10.18% in the previous month. Net charge-offs (gross amount of loans charged off as bad debt) have also shrank to 9.2% in July versus 9.9% in June. The rate of delinquencies (failure to pay mortgage dues) slipped to 4.2% last month from 4.4% in June.
Despite the modest improvement, American Express’ rate of losses on credit-card loans is still significantly higher than the 5.3% rate it experienced in the second quarter of last year. Credit-card losses have become the norm among lenders as consumers struggle to pay their debt amid rising unemployment and decline in personal wealth.
Though there’s no way to know exactly why the pace of growth is slowing, it appears that programs aimed at helping distressed homeowners from both the government and mortgage lenders are beginning to help.
In addition, consumers are being more cautious with their expenditures. Nevertheless, it is going to take about a year before the credit card default reverses completely.
Other lenders who also faced a fall in credit card default rates were the Bank of America (BAC) and Discover (DFS), among others.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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