For Immediate Release
Chicago, IL – October 4, 2010 – Zacks Equity Research highlights: Triumph Group (TGI) as the Bull of the Day and Regis Corp (RGS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco (CSCO, Microsoft (MSFT) and Wal-Mart (WMT).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506.
Here is a synopsis of all five stocks:
Bull of the Day:
Triumph Group (TGI) has been benefiting from acquisitions and internal manufacturing, and the recent Vought acquisition has been highly accretive to earnings. The reported EPS of $1.33 in the first quarter surpassed the Zacks Consensus Estimate of $1.08.
Management expects the acquisition to add approximately $1.10 to the earnings estimate in fiscal 2011 and hence raised the guidance to approximately $6.00 per share, an approximately 17.0% increase from fiscal 2010. The Zacks Estimate is even higher at $6.14.
Moreover, the company’s focus on growing its core businesses along with its strict cost-control strategy will help it to profit in the long run. Thus, we upgrade our recommendation on the stock from Neutral to Outperform.
Bear of the Day:
Regis Corp’s (RGS) fourth quarter 2010 earnings fell short of the Zacks Consensus Estimate, due to a decline in revenues. Slower traffic and limited new product introduction due to economic concerns remain a drag on same-store sales.
Moreover, same-store sales are unlikely to be positive before second half of 2011, as consumer behavior has changed in this difficult economic scenario. Consumers across the globe are cutting back on expenditure, resulting in a slowdown in spending and longer recesses between salon visits. The company also faces lingering risks from fashion changes.
Strategic alternatives are currently being evaluated; however, with no further update, we see limited near-term growth catalysts. Hence, we downgraded our rating from Neutral to Underperform.
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Income, Spending and Savings All Rise
Capital income or income from dividends and interest, plunged by $11.0 billion in August on top of a $10.3 billion decline in July but after a $2.3 billion increase in June. This is the dark side of the low interest rate environment we are in.
This income is particularly important to retirees. They are finding that as their bonds and CD’s mature, they have to reinvest the proceeds at lower and lower rates. While both interest payments and dividends are income from assets, they tell a very different story.
Since January, interest income has fallen by $30.3 billion, or 2.5%, while dividend income is up $13.7 billion or 1.9%. Recently there have been several very large dividend increases announced (but not yet paid), including a first-ever at Cisco (CSCO and a 23% increase at Microsoft (MSFT). That should mean a nice increase in dividend income going forward.
Income-oriented investors should emphasize dividend-paying stocks over fixed income. It is not hard to find big, solid companies that now have higher dividend yields than the 10-year T-note. Currently 139 of the S&P 500 yield more than the 10-year, and 89 of those do so with payout ratios of less than 60%. High and rising is better than low and flat.
Government Transfer Payments
Like government salaries, this source of income has to come from either taxes or increased deficits, and so it is a less desirable source of personal income from the point of view of the economy as a whole. However, it is still income that gets spent in the economy.
Wal-Mart (WMT) really doesn’t care if the money spent in its stores is from the elderly using their Social Security checks or the dividends they get from their investments, or really if it is retirees shopping there or people still in their working years spending their wages there, or their unemployment benefits.
Transfer payments were by far the biggest swing factor in the month, rising $35.8 billion in August, after only being up $0.5 billion in July. The reason was the temporary cut-off of extended unemployment benefits. Due to the Senate filibuster, millions were thrown off the rolls in July, causing income from unemployment benefits (both state paid and federal paid) to plunge by $17.1 billion, or 11.5%.
Benefit income rose by $20.6 billion in August, as the filibuster was overcome and the flow of income started again for those who have been out of work for more than six months. The other big category of transfer payments, Social Security, saw a $2.0 billion increase, down from a 10.8 billion increase in July.
Over the long term, though, the economy cannot simply grow through ever increasing amounts of money being handed out by the government. Those payments are very useful in the short run to help hold up overall consumer spending when the economy has turned soft.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
About the Bull and Bear of the Day
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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CISCO SYSTEMS (CSCO): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
REGIS CORP/MN (RGS): Free Stock Analysis Report
TRIUMPH GRP INC (TGI): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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