The Zacks Analyst Blog Highlights: Intel, Goldman Sachs, Bank of America, JPMorgan Chase and Wells Fargo

Zacks

For Immediate Release

Chicago, IL – April 16, 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 Intel (INTC), The Goldman Sachs Group, Inc. (GS), Bank of America Corporation’ (BAC), JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC).

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Here are highlights from Monday’s Analyst Blog:

What Does 1Q Have in Store for Intel?

 Intel (INTC) primarily sells chips, which are used in notebooks, netbooks and desktop computers. The transition to tablets and mobile devices has led to lower PC sales, which impacted the company’s results through 2012. We do not expect the personal computer market to return to normal growth rates any time soon.

This is quite evident from the data released last week by U.S. market research firm IDC. Per the data, first-quarter shipments of PCs fell 14% worldwide from last year, the steepest quarterly drop since 1994. Gartneralso pegged a decline of 11% for the same time period.

Therefore, with the changing dynamics, Intel has to increase efforts to move beyond the computer market. The company’s focus on producing chips for mobile Internet applications will likely account for most of Intel’s growth in the coming years. Also, the company’s focus on its fourth-generation core processors and new processors, which will be used to power ultrabooks and hybrid tablets might bring a sigh of relief in the latter half of the year.

Also, Intel’s plan for a TV service is a new step for the chip maker. But competition will remain fierce in this segment as many media firms as well as technology companies are all vying for a share of the pie.

Earnings Whispers?

Our proven model does not conclusively show that Intel is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 42 cents. Hence, the difference is 0.00%.

Zacks Rank #3 (Hold): Intel’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

 Is Blankfein’s Huge Pay Hike Justified?

The Goldman Sachs Group, Inc. (GS) CEO Lloyd Blankfein received a massive pay raise of nearly 75% in 2012, as per a latest SEC filing by the bank. However, the hike in compensation, which will bring Blankfein’s salary to $21 million, is mostly driven by the doubling of the stock-based compensation and bonus. Further, this will be Blankfein’s highest pay since 2007, before the financial crisis walloped major U.S. banks.

With this increment, Blankfein will join the elite list of the highest paid mega bank CEOs, surpassing Bank of America Corporation’s (BAC) CEO Brian T. Moynihan, whose pay package amounted to $12.1 million in 2012. Blankfein also surpassed JPMorgan Chase & Co. (JPM) CEO Jamie Dimon, whose pay was nearly $11.5 million for 2012, after his bonus was substantially slashed following the London Whale trading debacle. However, Blankfein will be behind Wells Fargo & Company’s (WFC) John Stumpf, who was paid $22.87 million in 2012.

However, the foremost question lingering in the minds of investors is whether Blankfein’s hefty pay hike justified? The hike, as believed, is well deserved keeping in mind Blankfein’s contribution to Goldman, when he took over the reins of the company in 2006. He has been instrumental in almost doubling full-year 2012 net profits to $7.5 billion from 2011. Further, Goldman’s shares rose a whopping 41% in 2012 and went up by almost 17% year to date.

Blankfein has also been adept in strategically evaluating the various facets of Goldman’s major businesses. Besides announcing numerous cost cutting initiatives and divestment of non-core units, the CEO has single-handedly revived profitability at Goldman with several legal settlements. This impressive performance led to Blankfein receiving $2 million as base pay, and a cash bonus and stock award of $5.7 million and $13.3 million, respectively, each of which almost doubled compared to the prior year. Further, Blankfein was awarded a $5 million cash bonus to be paid out over the span of 3 years, subject to the meeting of certain targets.

We believe Blankfein’s pay hike will prove to be a major morale booster. Even though Goldman’s fundamentals remain highly promising with a diverse business model and a strong balance sheet, regulatory issues, including lawsuits and the fundamental pressures on the banking sector are anticipated to pose as headwinds to profitability.

Yet we consider Goldman to be a value investment due to its steady dividend-yielding nature, well-managed global franchise and healthy capital base.

Goldman currently carries a Zacks Rank #3 (Hold).

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