CHICAGO, July 8, 2011 /PRNewswire/ -- Zacks Equity
Research highlights Standard Motor Products (NYSE: SMP) as
the Bull of the Day and Hudson City Bancorp (Nasdaq: HCBK)
as the Bear of the Day. In addition, Zacks Equity Research provides
analysis on Family Dollar Stores Inc. (NYSE: FDO),
Wal-Mart Stores Inc. (NYSE: WMT) and Dollar General
Corporation (NYSE: DG).
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Full analysis of all these stocks is available at
http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
Standard Motor Products (NYSE: SMP) enjoys strong brand
recognition worldwide. Successful R&D and perfect strategic
acquisitions have helped the company enrich its product portfolio
and maintain a broad customer base. Standard Motor's recently
amended credit agreement with GE capital has increased its scope
for further investments.
Moreover, Standard Motor has hiked its dividend payment,
signaling the company's improved confidence in its operations.
Furthermore, the company is not vulnerable to the cyclicality of
the auto industry. In the first quarter, its earnings exceeded the
Zacks Consensus Estimate by $0.18 per
share.
Therefore, we have maintained our Outperform recommendation on
the stock. Our $17.00 target price,
which is 12.1x our 2011 EPS estimate, reflects this view.
Bear of the Day:
We are downgrading our recommendation on Hudson City
Bancorp (Nasdaq: HCBK) to Underperform. It reported a loss on a
GAAP basis in the first quarter of 2011 for the completion of the
balance sheet restructuring during the quarter. Lower interest and
dividend income, and increased non-interest expense, were on the
downside.
Going forward, the low interest rate environment would likely
result in a compression of the net interest margin from its new
higher level resulting from the restructuring transaction, and in
combination with the reduction in the size of its balance sheet
from the restructuring transaction, would lead to a reduction of
net interest income.
While its strong business model and solid capital position would
aid results, the dividend cut somewhat dampens investors appetite
for the stock. Increase in FDIC insurance costs also remains an
overhang.
Latest Posts on the Zacks Analyst Blog:
Earnings Scorecard: Family Dollar
Family Dollar Stores Inc. (NYSE: FDO), the operator of
self-service retail discount store chains, recently posted
third-quarter 2011 results.
Street analysts had a week to ponder on the news. In the
subsequent paragraphs, we will cover the recent earnings
announcement, subsequent analysts' estimate revisions as well as
the Zacks Rank and long-term recommendation on the stock.
Earnings Report Review
Family dollar's quarterly earnings of 91
cents a share missed the Zacks Consensus Estimate of
95 cents, but jumped 18.2% from
77 cents earned in the prior-year
quarter due to healthy sales witnessed in the Consumable and Home
Products categories.
Management now expects fourth-quarter 2011 earnings between
62 cents and 70 cents, and fiscal
2011 earnings between $3.08 and
$3.16.
The company posted an increase of 7.8% in revenue to
$2,153.4 million from the prior-year
quarter, and reflected sales growth across Consumables categories
(up 10.6%) and Home Products (up 8.2%) but sales declined at
Seasonal and Electronics (down 0.4%) and Apparel and Accessories
(down 1.1%). Total revenue also fell short of the Zacks Consensus
Estimate of $2,166 million.
Family Dollar, which faces stiff competition from Wal-Mart
Stores Inc. (NYSE: WMT) and Dollar General
Corporation (NYSE: DG), forecasts fiscal 2011 net sales to
jump by 8% to 9%. We believe effective price and inventory
management, private label offering, expanded operating hours and
merchandise initiatives should drive sales trends.
Our View
We believe that there is a tremendous opportunity for Family
Dollar to increase sales and improve gross margin through
effective price management, cost containment, tighter inventory
control, private label offering, expanded operating hours and
merchandise initiatives. Moreover, in order to enhance its market
share, the company intends to focus on both consumable and
discretionary categories.
The company's point-of-sale technology (credit card and food
stamp acceptance) and store realignment initiatives better
positions it to drive traffic, meet customer oriented demand and
improve in-store shopping experience.
The self-service retail discount store chain has also been
actively managing its cash flows, returning much of its free cash
to shareholders through share repurchases and dividends. The
company has also been making prudent investments related to store
infrastructure, store openings, expansions and relocations, and
improvement of distribution centers to drive revenue growth.
However, the company's customers remain sensitive to
macroeconomic factors including interest rate hikes, increase in
fuel and energy costs, credit availability, unemployment levels and
high household debt levels, which may negatively impact their
discretionary spending, and in turn, the company's growth and
profitability.
Currently, we maintain our long-term Neutral rating on the
stock. Furthermore, Family Dollar shares maintain a Zacks #3 Rank,
which translates into a short-term 'Hold' recommendation.
Get the full analysis of all these stocks by going to
http://at.zacks.com/?id=2649.
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.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides
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events impacting stocks and the financial markets.
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