For Immediate Release
Chicago, IL – September 11, 2012 – 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 Intel Corp. (INTC), Apple (AAPL), C.H. Robinson Worldwide, Inc. (CHRW), FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS).
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Here are highlights from Monday’s Analyst Blog:
Intel Trims Guidance
The world’s largest manufacturer of semiconductor products, Intel Corp. (INTC) lowered its sales guidance for the third quarter of 2012. Following the news, the shares fell 3.61% to $24.19 after the markets closed on Friday.
The chip maker expects third quarter net sales to be $13.2 billion (plus or minus $300 million), below the previously announced range of $13.8–$14.8 billion. This also represents a decline of 7% from the year-ago quarter. The company also lowered its gross margin guidance to 62% (plus or minus one percentage point), lower than the previous expectation of 63% (plus or minus a couple of percentage points).
Additionally, management now expects full-year capital spending to be at the lower end of its previous outlook of $12.1 billion to 12.9 billion, as the company accelerates the re-use of existing equipment to the 14nm node.
Management said that the guidance cut was on account of lower-than-expected demand and a challenging global economy.It stated that customers are reducing their orders due to lower demand for PCs or servers. Intel also stated that it is experiencing weak demand in the enterprise PC segment, which has generally been strong for some time now.
The weakening PC sales in the corporate market are a sign of a technological shift, driven by the growing popularity of smartphones and tablet computers. We believe that Apple’s (AAPL) iPad and other tablets will continue to eat into notebook sales.
The popularity of tablets is definitely one of the chief factors resulting in a weak PC market. Also, a few customers are holding back their purchases owing to the forthcoming release of Windows 8. However, we believe that the release of Windows 8 will not be a major help to the ailing PC market in the near term as businesses tend to be conservative when it comes to upgrading Windows. There are still a lot of companies which haven’t upgraded from Windows XP.
Market research firms, Gartner and IDF estimate that shipments of traditional computers were down 0.1% from the prior-year quarter to 87.5 million units in the second quarter, when Intel's IvyBridgeprocessors and Ultrabooks were supposed to revive the PC market, indicating a weak PC market ahead.
Intel remains the leading producer of microprocessors for the PC market and there do not appear to be any near-term challenges to this position. In the second quarter, Intel posted decent numbers, with both revenue and earnings surpassing our expectations.
Currently, Intel has a Zacks #3 Rank, which implies a Hold rating in the short term (1-3 months).
C.H. Robinson to Buy Polish Company
One of the leading third party logistic companies, C.H. Robinson Worldwide, Inc. (CHRW) recently announced to acquire Polish freight carrier Apreo Logistics S.A. The deal terms remain undisclosed.
Apreo specializes in truckload offerings that involve dry van and temperature controlled freight transportation. In addition, the company has warehouse facilities and deals in ocean and air freight forwarding.
C.H. Robinson is expected to benefit from Apreo’s gross annual revenues of more than $100 million and a market base comprising 2000 customers. Apreo is also expected to add infrastructural capabilities with 21 offices across Poland and a work force of 300 employees.
C.H. Robinson did not specify any timeline for closing the acquisition but stated that the deal is subject to regulatory approvals from the Polish Office for Competition and Consumer Protection.
Despite the looming economic backdrop and a slow down in the freight demand, C.H. Robinson remains keen on expanding its footprint via acquisitions.
Although the near-term outcomes are too early to project, we foresee long-term synergies arising from these acquisitions. Given the on-going Eurozone crisis and dwindling financials of small European companies, industry big wigs like C.H. Robinson are leveraging the opportunity of penetrating into a potential market of Europe.
Since poor market conditions are weighing on the market value of these companies, the acquisition cost remains comparatively lower. Further, the European freight market remains highly fragmented and mainly constitute small operators that cater to localized regions. This makes them all the more susceptible to acquisition by larger peers.
However, a large carrier like C.H. Robinson with substantial financial and infrastructural facilities would like to seize the opportunity of integrating its operations through various acquisitions in Europe. The strategy can be well demonstrated by the emerging expansion trend in the parcel delivery industry.
Companies like FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS), pursued expansions plans through multiple European acquisitions. While, FedEx acquired Opek Sp. z o.o., a Polish courier company and TATEX, a French B2B Express transportation company. United Parcel Service bought Kiala, a European consumer delivery company and is also on the verge of completing the acquisition of Dutch shipping company TNT Express.
However, over the near term, heavy capital expenditures involved in funding acquisitions can lead to financial distress. The company may finance its acquisitions either with available cash, issuing equity or raising debt. In such an event, the key concern would either be the liquidity position of the company or the margins, which may be weighed down by the rising interest burden due to loans.
We are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short term, the company holds a Zacks #3 (Hold) Rank.
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