CHICAGO, Aug. 18, 2011 Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include: Staples Inc. (Nasdaq: SPLS), Deere &
Co. (NYSE: DE), Red Robin Gourmet Burgers Inc.
(Nasdaq: RRGB), Saks Incorporated (NYSE: SKS) and Gap
Inc. (NYSE: GPS).
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Here are highlights from Wednesday's Analyst Blog:
Staples Beats, Guides High
A sturdy international performance facilitated Staples
Inc. (Nasdaq: SPLS), the global leader in the supply of office
products, to post better-than-expected second-quarter 2011 results.
The quarterly earnings of 22 cents a
share topped the Zacks Consensus Estimate of 19 cents and jumped 10% from 20 cents delivered in the prior-year quarter.
However, on a reported basis, including one-time items, Staples
delivered earnings of 25 cents a
share, up 38.9% from the prior-year quarter.
Guidance Raised
Given better-than-expected results, the company raised its
fiscal 2011 earnings guidance.
Staples now expect third-quarter earnings in the range of
46 cents to 48 cents and fiscal 2011
earnings between $1.39 and $1.45 per
share. However, on a reported basis, including one-time items, the
company expects to deliver earnings in the range of $1.42 to $1.48 per share in fiscal 2011.
Earlier, the company had projected fiscal 2011 earnings between
$1.35 and $1.45 per share.
Management now forecasts sales to increase in the low
single-digits in the third quarter and fiscal 2011,
respectively.
Deere Strides Ahead of Estimates
Deere & Co. (NYSE: DE) delivered earnings of
$1.69 per share in its third quarter
ended July 31, 2011, comfortably
exceeding the Zacks Consensus Estimate of $1.68. Results were 17% ahead of $1.44 earned in the year-ago quarter. Net income
improved 15% from the year-ago quarter to $712.3 million in third quarter of 2011.
The outperformance was largely driven by strong demand for farm
machinery, increased sales of construction equipment and effective
cost management.
Operational Update
Deere's worldwide total sales increased 22% year over year to
$8.4 billion, beating the Zacks
Consensus Estimate of $7.7 billion.
Net sales of equipment operations (which comprise Agriculture and
Turf, Construction and Forestry) were $6.4
billion, a 22% year-over-year increase including a favorable
currency translation effect of 6% and a price increase of 3%. On a
geographic basis, equipment net sales were up 10% in the United States and Canada and 49% in rest of the world.
Cost of sales in the quarter totaled $5.79 billion, up 28% year over year.
Operating profit improved 12% year over year to $1.16 billion in the quarter.
Looking Forward
Deere expects equipment sales to grow 20% in the fourth quarter
and about 25% for fiscal 2011. Guidance includes a favorable
currency-translation impact of 4% for both fourth quarter and
fiscal year.
Full year guidance includes an adverse effect of about
$70 million in sales and $10 million in operating profit due to the
Japanese earthquake and tsunami.
Net income is estimated at $2.7
billion in 2011.
Segment wise, Deere expects worldwide sales of Agriculture and
Turf equipment to grow by 21% for full-year 2011, benefiting from
favorable global farm conditions. Construction and Forestry
equipment are expected to improve 45% for 2011.
Net income from Financial Services is estimated at $460 million, reflecting continued growth in the
portfolio.
Region-wise, Deere expects industry farm-machinery sales in the
U.S. and Canada to grow 5% to 10%
for 2011. Western and Central
Europe is expected to increase 10% to 15% while sales in the
Commonwealth of Independent States are expected to see moderate
gains. Industry sales of turf and utility equipment in the U.S. and
Canada are expected to be flat
compared to the 2010 level.
However, In South America, the company expects industry sales to
decline 5% over 2010.
Our Take
Deere continues to remain focused on expanding its production
capacities. The company's investments to expand capacities as well
as to offer new products favorably position it to cater to the
increasing demand for food, shelter and infrastructure, thereby
fueling topline growth in the upcoming quarters. Deere also pays a
regular quarterly dividend and increases the dividend from time to
time, which enhances shareholders value.
The quantitative Zacks #3 Rank (short-term Hold rating) for the
company indicates no clear directional pressure on the shares over
the near term.
Red Robin Outperforms in 2Q
Casual dining restaurant operator Red Robin Gourmet Burgers
Inc. (Nasdaq: RRGB) reported adjusted earnings of 48 cents per share in the second quarter of 2011,
handily beating the Zacks Consensus Estimate of 36 cents and the year-ago quarter earnings of
29 cents.
However, including executive transition and severance expense,
GAAP net income in the reported quarter was $6.9 million or 44
cents per share. Results benefited from the upside in
revenue arising from comparable sales growth and margin
expansion.
The company reported total revenue of $215.8 million in the second quarter, up 7.2%
year over year and ahead of the Zacks Consensus Estimate of
$213.0 million.
Our Take
We expect estimates to move up in the coming days, as the
company's Project RED initiative has succeeded in generating
improved comparable sales and margin outlook. Additionally, the
recent appointment of Stuart B.
Brown as the senior vice president and chief financial
officer will further drive growth in the long term.
The Zacks Consensus Estimates for 2011 and 2012 are pegged at
$1.59 and $1.92, respectively.
The company retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We also have a long-term Outperform
recommendation on the stock.
Saks Posts Loss, but Ups Comp Sales
Saks Incorporated (NYSE: SKS) delivered a second-quarter
2011 adjusted loss per share of 5
cents, better than the Zacks Consensus Loss Estimate of
8 cents. Saks reported a loss of
13 cents per share in the year-ago
quarter. The year-over-year improvement in the quarter reflects
strong same-store sales growth and gross margin expansion.
The adjusted losses in the reported quarter excludes the
after-tax charges of $0.8 million
related to pension and related benefit charge, a write-down of a
third party receivable, and an asset impairment charge, offset by
the reversal of state income tax reserves.
The adjusted loss in the second-quarter 2010 excludes the
after-tax charges totaling $11.7
million, or 8 cents per share,
comprising net lease termination costs and severance and other
store closing costs.
On a reported basis, Saks generated a loss of 5 cents a share, better than the prior-year loss
of 21 cents per share.
Guidance Update
Saks anticipates same-store sales to progress in the mid-to-high
single digit range in the second half of the fiscal year.
The company projects inventories on the basis of same-store
sales to go up by mid single digit throughout the rest of the
year.
The company forecasts a gross margin rate increase in the range
of 40 to 70 bps in the second half of the fiscal year, with more
year-over-year improvement expected in the third quarter than in
the fourth quarter.
With respect to the current capital structure, Saks expects an
interest expense of $20 million for
the second half of fiscal year 2011. The company's effective tax
rate is expected to be 40.0% at the end of fiscal 2011.
Saks anticipates net capital expenditures to be in the range of
$70 million to $75 million for the
full year. The company expects diluted common share count of 202
million for the full year.
Management is optimistic about its performance in fiscal 2011,
as it has seen strong growth in sales across store formats, thanks
to its merchandising, service and marketing initiatives. Further,
the company intends to be very strategic in its SG&A spending,
inventory management and capital expenditure investments.
However, Saks remains concerned with the recent increased
volatility and downturn in the financial markets and the overall
uncertainty in the macroeconomic environment. The company is
therefore expected to strategize with its expense, capital, and
inventory spending, making investments in areas with the most
potential for profitable growth.
Saks shares maintain a Zacks #2 Rank, which translates into a
short-term Buy recommendation. Our long-term recommendation for the
stock remains Neutral.
Earnings Preview: Gap, Inc.
Gap Inc. (NYSE: GPS), one of world's leading premier
specialty retailers, is scheduled to report its second-quarter 2011
financial results after the market closes on August 18, 2011. The current Zacks Consensus
Estimates for the quarter is earnings of 34
cents a share. For the quarter under review, revenue is
expected at $3,372.0 million,
according to the Zacks Consensus Estimate.
Positive Earnings Surprise History
With respect to earnings surprises, Gap has topped the Zacks
Consensus Estimate over the last four quarters in the range of
approximately 0.0% to 5.3%. The average remained at approximately
3.6%. This suggests that Gap has beaten the Zacks Consensus
Estimate by an average of 3.6% in the trailing four quarters.
Our View
In a drive to boost its international operations, Gap seeks to
consolidate its foreign business under one division from
London. Lackluster sales in
North America compelled the
company to explore overseas market. In order to counter the
domestic market saturation, Gap is aiming to generate 30% of total
sales from its overseas operations and online business by 2013. To
achieve this end, Gap has opened its stores in China, Italy
and Australia and has launched
e-commerce business in more than 90 markets, which are expected to
further strengthen its top- and bottom-lines performance, moving
forward.
Further, in order to optimize its capital structure, Gap has
entered into a new $500.0 million
revolving credit facility maturing in 2016 with a syndicate of
banks comprising BofA Merrill Lynch, Citigroup Global Markets and
J.P. Morgan. The new credit facility will replace the existing
$500.0 million revolving credit
facility. Moreover, the company will get a five-year term loan
facility of $400.0 million which will
help in achieving its aim of expanding internationally.
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