CHICAGO, April 19, 2011 /PRNewswire/ -- Zacks Equity
Research highlights Tractor Supply Co. (Nasdaq: TSCO) as the
Bull of the Day and YRC Worldwide Inc. (Nasdaq: YRCW) the
Bear of the Day. In addition, Zacks Equity Research provides
analysis on Citigroup Inc. (NYSE: C), JPMorgan Chase
& Company (NYSE: JPM) and Bank of America
Corporation (NYSE: BAC).
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View Full analysis of all these stocks
Here is a synopsis of all five stocks:
Bull of the Day:
On the back of strong same-store sales, improved merchandise
mix, prudent inventory management and effective cost control,
Tractor Supply Co. (Nasdaq: TSCO) posted
better-than-expected fourth-quarter 2010 results. The quarterly
earnings beat the Zacks Consensus Estimate of $0.62. Furthermore, margins improved due to
portfolio expansion of private label brands and focus on direct
sourcing of merchandise.
The company has set a long-term target of generating 25% of
sales from private label brands and 13% from strategic direct
sourcing. Tractor is well positioned to capitalize on positive
long-term trends. The company is expecting sales in the range of
$4.0 billion to $4.07 billion in
fiscal 2011.
Moreover, Tractor Supply's nearly debt-free balance sheet augurs
well for future operating performance. Currently we maintain our
Outperform recommendation on the stock.
Bear of the Day:
Struggling trucking company YRC Worldwide Inc. (Nasdaq:
YRCW) continues to suffer from one setback after another. In its
annual report, management declared that it missed a major
restructuring milestone in the first week of March 2011.
This may prompt the company's lenders to declare YRC Worldwide
as a defaulter in its credit agreements. If this actually happens,
the company has to seek protection under the bankruptcy law. During
the last two and half years, YRC Worldwide is reeling under
possible bankruptcy due to a significant fall in freight volume
coupled with its highly leveraged balance sheet.
Although the trucking industry is recovering from recession, YRC
Worldwide fails to cope with this current recovery. The company's
viability depends on its ability to become profitable but
unfortunately, we do not expect the company to reach that stage
anytime soon. We are downgrading our recommendation to
Underperform.
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Citi Scrapes Through, Misses Revs
Citigroup Inc. (NYSE: C) reported first quarter 2011
earnings of 10 cents per share, a
penny ahead of the Zacks Consensus Estimate. The result also
improved from the prior quarter earnings of 4 cents but fell short 14
cents earned in the year-ago quarter.
The slightly better-than-expected result was driven by a fall in
provisions for credit losses as well as benefits and claims. Yet
the top-line headwind at Citigroup continued, with revenue dropping
from the prior-year period and falling behind the Zacks Consensus
Estimate. Expenses also increased year over year.
Citigroup reported net income of $3.0
billion, which more than doubled from $1.3 billion in the prior quarter. However, net
income came in below the prior-year quarter's income of
$4.4 billion.
Revenues came in at $19.7 billion,
down 22% year over year. The revenue figure also fell short of the
Zacks Consensus Estimate of $20.8
billion. The year-over-year decrease resulted from a decline
in both interest and non-interest revenues.
However, total provisions for credit losses and for benefits and
claims at Citigroup plunged 63% year over year to $3.2 billion. Net release of allowance for loan
losses and unfunded lending commitments was $3.3 billion, compared to $53 million in the prior-year quarter.
Behind the Headline Numbers
Citigroup's net interest revenues were $12.2 billion, down 16% from the prior-year
period. The decrease stemmed from a fall in loan balances in the
Local Consumer Lending division. Moreover, a $245 million pre-tax charge to increase reserves
related to customer refunds in Japan Consumer Finance were also included in
the net interest revenue figure.
Net interest margin fell 6 basis points sequentially and 43
basis points year over year to 2.91% as loan balances and yields
declined and for a higher reserve build related to Japan Consumer
Finance.
Citigroup's non-interest revenues fell 31% year over year to
$7.5 billion, primarily due to lower
Securities and Banking division's revenues, negative Credit Value
Adjustment (CVA), as well as for net charge resulting from the
asset transfer in Special Asset Pool.
Expenses at Citigroup ascended 7% year over year to $12.3 billion. The uptick was due to higher legal
and related costs, foreign exchange impact and continued investment
spending as well as increased business volumes. This increase was
partially offset by a decline in expenses at Citi Holdings as well
as productivity savings across the firm.
Credit Quality
Citigroup's credit quality metrics improved in the quarter.
Non-accrual loans of $14.8 billion
decreased 48% from the prior year quarter, primarily due to the
recapitalization of Maltby Acquisitions Limited, the holding
company that controls EMI Group Ltd., during the first quarter
2011.
Citigroup's total allowance for loan losses was $36.6 billion at quarter-end, or 5.79% of total
loans, down from $48.7 billion, or
6.80%, in the prior year period. Asset sales, lower non-accrual
loans, and overall improvement in credit quality in Citigroup's
loan portfolio drove the improvement.
Capital Ratios
Citigroup continued to improve its capital strength, with Tier 1
Capital ratio and Tier 1 Common ratio improving to 13.3% and 11.3%
from 12.9% and 10.7%, respectively. Book Value per share moved up
to $5.85 from $5.61 in the prior quarter and $5.28 in the year ago quarter. Tangible Book
Value per share increased to $4.69
from $4.45 in the prior quarter and
$4.09 in the year ago quarter.
At quarter end, Citigroup's end of period assets were
$1.95 trillion, down 3% year over
year while deposits were $866
billion, up 5% year over year, driven by a 28% increase in
non-interest bearing deposits.
Winding Down of Citi Holdings
Citi Holdings' assets declined 33% year over year to
$337 billion at the end of first
quarter 2011. Its assets stand at approximately 17% of total
Citigroup assets at the end of the first quarter 2011.
Competitor's Performance
Similar to Citigroup, JPMorgan Chase & Company (NYSE:
JPM) reported results substantially ahead of the Zacks Consensus
Estimate last Wednesday, on the back of a significant slowdown in
provision for credit losses. While Bank of America
Corporation's (NYSE: BAC) results disappointed us, the company
benefited from credit quality improvement. We believe this trend of
lower credit costs will continue in the first quarter results.
Get the full analysis of all these stocks
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