The Zacks Analyst Blog Highlights: Disney, UBS, Assured Guaranty, Moody's and Deutsche Bank

Zacks Equity Research


For Immediate Release

Chicago, IL – May 8, 2013 – 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 Disney Co. (DIS), UBS AG (UBS), Assured Guaranty Ltd. (AGO), Moody's Corp. (MCO) and Deutsche Bank AG (DB).

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Here are highlights from Tuesday’s Analyst Blog:

Disney Beats on Theme Park Strength

Household-name media conglomerate -- and no Mickey Mouse operation, thank you -- Disney Co. (DIS) posted strong numbers for the company's fiscal 2nd quarter 2013 report. The company brought in 79 cents per share on $10.55 billion in revenues, which was a 2 cent beat on the bottom line and relatively in-line with the top.

Disney owns a major film studio, the ABC Network, ESPN, leading international theme parks Disneyworld, Disneyland, et. al., and is currently entering its hottest time of year. That the company posted a positive surprise in its latest quarter speaks to strength within the company's latest offerings: blockbuster film "Iron Man 3" has posted among the best box office receipts for an opening weekend in history, sports network ESPN has had plenty of grist for the mill in an eventful college basketball, Major League Baseball and NFL Draft quarter, and theme parks continue to be an attractive option for families looking for a short-term getaway.

Analysts have been positive overall on earnings estimates leading up to Disney's report after the bell Tuesday, with 4 upward revisions for the quarter in both the past one month and 60 days, and 7 estimate raises in the fiscal year (ending September) over the same time periods. Thus, Disney had earned a Zacks Rank #2 prior to the earnings release.

The company does not issue official guidance, but with summer movie season getting into full swing, the NBA playoffs underway and theme parks continuing to be attractive, Disney looks to have a good quarter and fiscal year looking forward, as well. CEO Robert Eiger said he is "relatively bullish" on the rest of the fiscal year.

 

 

UBS Shells Out $358 in Settlement

 

ecently, UBS AG (UBS) resolved a lawsuit filed by Assured Guaranty Ltd. (AGO) in a U.S. district federal court in Manhattan. The Swiss bank agreed to pay an initial amount of $358 million to settle the charges levied against it. Further, UBS entered into a collateralized loss-sharing reinsurance agreement to compensate a part of future losses incurred by the plaintiff.

In a lawsuit filed against the Zurich-based bank in Feb 2012, Assured accused it of misrepresenting the quality of the loans underlining $1.49 billion of mortgage-backed securities (:MBS) insured by UBS.

During 2006-2007, Assured had provided financial guaranty insurance, which warranted that if cash flows from the mortgages were inadequate for paying investors their dues, it would cover those losses. However, a large number of these loans defaulted as they did not match the standards that UBS had set.

Further, Assured received permission to sue UBS for providing misleading information to the major rating agencies – Standard & Poor's (S&P) and Moody's, a unit of Moody's Corp. (MCO) – as it was a breach of agreement. The company had placed a condition that MBS should be rated ‘AAA’ or slightly lower for receiving guarantees. It alleged that UBS, in an effort to get higher ratings for these risky MBS, offered fraudulent data to the rating agencies.

Earlier, in Aug 2012, a U.S. district judge dismissed part of the litigation under which Assured demanded that UBS should repurchase $1.6 billion worth of these faulty mortgages. However, Assured was granted sanction to proceed with the rest of the litigation.

Legal Woes Continue

Trouble has been brewing for major banks in recent times due to fraudulent representations and breaches of contract. These banks face several other charges related to the sale of defective securities.

Litigation overhangs have been a common problem for these banks since the financial meltdown. In effect, these litigations are expected to cause huge expenses, tarnish their reputation and be an overhang on the financials over time. However, the measures being undertaken by the regulatory and legal authorities to come down hard on such unwarranted activities will provide huge relief to the affected investors and other financial institutions.

Conclusion

With the settlement of the lawsuit, UBS plans to move forward with its business strategies. However, pending lawsuits can further trigger financial hassles while tarnishing the company’s image. Therefore, it is in the interest of the company to resolve such matters at the earliest.

Currently, UBS carries a Zacks Rank #3 (Hold). Better performing foreign banks include Deutsche Bank AG (DB), which carries a Zacks Rank #2 (Buy).

 

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Read the analyst report on DIS

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