CHICAGO, Feb. 14, 2011 /PRNewswire/ -- Zacks Equity
Research highlights: RLI Corporation (NYSE: RLI) as the Bull
of the Day and DryShips Inc. (Nasdaq: DRYS) as the Bear of
the Day. In addition, Zacks Equity Research provides analysis on
Kraft Foods Inc. (NYSE: KFT), Chiquita Brands
International Inc. (NYSE: CQB) and B&G Foods
Inc. (NYSE: BGS).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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:
We are upgrading RLI Corporation (NYSE: RLI) to
Outperform on the back of strong results during the fourth quarter.
The company's fourth quarter earnings results exceeded the Zacks
Consensus Estimate largely on the heels of lower expenses and
better performance at the Property and Surety segment.
The company continues to benefit from its business expansion
drive diversification into crop and other assumed property
reinsurance. Also its extensive product offerings, strong local
branch network and focus on specialty insurance lines are expected
to aid top-line growth.
RLI also scores strongly with rating agencies. Continued
dividend payments, coupled with special dividend payment and share
repurchases further reflect a solid capital position.
Bear of the Day:
We downgrade our recommendation for DryShips
Inc. (Nasdaq: DRYS) to Underperform ahead of its fourth
quarter 2010 financial results. The drybulk shipping industry is
through its most depressive situation where the vessel rate
collapsed even below the rate under recession just a year ago.
The spot rate has fallen to such a low level that even surging
commodity prices in the Asian markets will fail to offset the loss
of the vessel owners. We believe continuation of this pricing trend
may significantly jeopardize DryShips' future financials.
The company is highly leveraged with nearly $2.3 billion of net debt at the end of the third
quarter of 2010. We believe recent decision of DryShips to acquire
12 new oil tankers may not be able to generate required synergies
due to weak global oil tanker market.
Latest Posts on the Zacks Analyst Blog:
Kraft Foods Meets Estimates
Kraft Foods Inc. (NYSE: KFT) posted fourth
quarter 2010 operating EPS of 46
cents, in line with the Zacks Consensus Estimate and
reflected strong gains from operations and lower taxes, which were
offset by various factors. The quarter was primarily driven by
strong volume-mix gains in each geography but could only manage the
EPS to remain flat compared with year ago quarter.
Full year EPS increased 4.7% from last year to $2.02 but fell short by a penny of the full year
Zacks Consensus Estimate.
Management credited the benefits of increased investments behind
the Power Brands, strong productivity and disciplined cash
management. Also the company is said to have been making good
progress in capturing the synergies from the Cadbury
acquisition.
Highlights From The Quarter & Year
Revenues in the quarter soared 30% to $13.8 billion and included a 26.2 percentage
point impact from the Cadbury acquisition, among other impacts. The
revenue also moved ahead of the Zacks Consensus Revenue Estimate of
$13.4 billion.
Revenue grew in each of the geographies with the Developing
Markets leading the race with an increase in revenue of 73.5%. It
was followed by an increase of 28.6% in Europe and 12.2% in North America.
Full year 2010 net revenues increased 27.0% from prior year to
$49.2 billion and surpassed the Zacks
Consensus Revenue Estimate of $48.8
billion.
Favorable impact of 30.4 percentage points from Cadbury, which
was partially offset by a negative 26.9 percentage points from the
Integration and acquisition related costs, helped the operating
income increase 2.2% on a year over year basis to $1.2 billion. Operating margin shed 240 basis
points from last year quarter to 9%.
An impact of year-end tax legislation in 2010 and discrete items
brought the tax rate to 23.2% versus 26.8% last year.
As on December 31, 2010, Kraft
Foods had $2.48 million of cash and
cash equivalents compared with $2.10
million at the end of year 2009.
The Way Forward
Kraft is stated to drive confidence from the belief of
continuing strong business momentum in the challenging environment
of weak consumer and category growth as well as significant input
cost inflation.
The confidence is thus reflected in its 2011 outlook and the
company expects to have an organic net revenue growth of at least
5%, or roughly 4% after excluding the impact of accounting calendar
changes. Management expects the operating EPS growth in the range
of 11-13%.
Zacks Consensus Estimate projects the EPS for next year to be
$2.31 and revenue to be $51.8 billion.
Conclusion
Estimates for the quarter had been stable in the run-up to the
earnings release, though one analyst gave a negative revision in
the last one month. The full-year estimate for next year moved down
by a penny to $2.31 per share over
the past month, with 4 analysts revising negatively and only 1
analyst giving a positive revision.
We believe, over the past four to five quarters, the strong
dollar and volatile commodity markets, especially dairy, had
affected the top and bottom lines of the company. However, the
company has implemented several turnaround plans to increase
profitability, and revive organic growth.
The company has also strengthened its business model by
increasing investments in promotion and marketing that increased
its pricing power and improved product positioning. These
initiatives are paying off now, and margins are improving.
Furthermore, the combination of Kraft Foods and Cadbury is
expected to provide meaningful revenue synergies. The combined
company expects long-term organic net revenue growth of more than
5%.
Peers for Kraft Foods include Chiquita Brands
International Inc. (NYSE: CQB) and B&G Foods
Inc. (NYSE: BGS).
We currently have a Zacks #4 Rank for Kraft Foods, which
translates into a Sell rating on short term basis. For long term we
have a Neutral 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.
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