CHICAGO, Sept. 20, 2011 /PRNewswire/ -- Zacks Equity
Research highlights SM Energy Co. (NYSE: SM) as the Bull of
the Day and Telesp S.A. (NYSE: VIV) as the Bear of the Day.
In addition, Zacks Equity Research provides analysis Tyco
International (NYSE: TYC), McGraw-Hill (NYSE: MHP) and
ITT Corp (NYSE: ITT).
(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:
SM Energy Co. (NYSE: SM) reported stellar second-quarter
2011 results, buoyed by higher production, divestitures and higher
price realization. The company also experienced a considerable 58%
jump in production volume during the quarter, exceeding its target
range.
Furthermore, SM Energy remains upbeat regarding production for
this year and the next, given impressive performances by three
Galvan Ranch Eagle Ford wells and
additional capacity coming online through 2012. We believe that the
company's emerging core portfolio is a catalyst for visible organic
growth over the next several years.
Considering these factors, we are upgrading our recommendation
to Outperform from Neutral. Our $92
price objective reflects a multiple of 13.0x the trailing the
12-month cash flow.
Bear of the Day:
We are downgrading our recommendation to Underperform from
Outperform on Telesp S.A. (NYSE: VIV). Although the Vivo
merger boosted Telesp's existing operations, competition in
fixed-line and mobile businesses weigh on its results. We are
skeptical about the company's ability to regain lost profitability
of the fixed-line business.
Tariff cuts or changes in government regulations would also
create added pressure. All these factors might restrict potential
synergies derived from the merger and restrain top and bottom-line
growth. Hence, we expect the company to underperform the
market.
Telesp is expected to suffer intense inflationary pressure,
competition and excessive government intervention. We give an
Underperform rating to the stock, with a price target of
$27, based on 10.7x our 2011 EPADS
estimate.
Latest Posts on the Zacks Analyst Blog:
Greece Fears Are Back
Renewed Greece-related
headlines are expected to come in the way of the budding stock
market rally. Stocks gained almost 5% last week as some of the more
dire scenarios about Europe lost
ground following concerted actions by global central banks,
including the U.S. Fed, to prop up the liquidity of European
banks.
The overall tone of public statements from EU officials,
particularly about Greece, also
appeared to soften up a bit. But the weekend meeting of EU finance
ministers, with a guest appearance from U.S. Treasury Secretary
Tim Geithner, failed to provide a
unified stance on the core issues bedeviling the currency
union.
As a result, we start this week with fresh worries about
Greece's ability to get the next
tranche of funding. Greece does
not have the liquidity to keep operating beyond just a few weeks if
it fails to get the next payment tranche. Greece's creditors apparently are not
convinced that it has done all it needed to do to qualify for the
payment. We will have to wait and see what comes out of this latest
round of wrangling between the Greeks and its creditors. But one
thing is for sure, it will keep the markets on edge.
The market will also be watching closely the Fed's two-day
meeting this week. The expectation is that the Fed will initiate
the so-called 'Operation Twist' following this meeting, which will
be aimed at changing the composition of its balance sheet towards
more longer-dated securities. This is expected to result in
bringing down the interest rate on long-term Treasury bonds, which
will in turn have a beneficial effect on the broader economy. The
idea is fine in theory, but with yields on 10-year Treasury bonds
in the 2% vicinity, it is difficult to envision further yield
compression.
In corporate news, Tyco International (NYSE: TYC)
announced plans to split its security, fire protection, and
flow-control divisions into separate companies. The conglomerate
corporate structure appears to be going out of favor as a number of
well-known conglomerates, ranging from McGraw-Hill (NYSE:
MHP) to ITT Corp (NYSE: ITT), have announced plans to split
themselves up.
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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events impacting stocks and the financial markets.
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