For Immediate Release
Chicago, IL – June 6, 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 Verizon Communications Inc. (VZ), Vodafone Group Plc (VOD), Apple Inc. (AAPL), FedEx Corporation (FDX) and United Parcel Service Inc. (UPS).
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Here are highlights from Tuesday’s Analyst Blog:
Verizon Offers Buyout to Workers
Wireless leader Verizon Communications Inc. (VZ) is offering voluntary buyout to 1,700 workers. They will primarily include technicians and call-center employees from the wireline segment.
Verizon plans to cut employees only in the wireline segment. The company is making efforts to reduce cost in the wireline as the division is struggling with persistent losses in access lines that are weighing on its revenues and margins.
The move comes after several months of talks over new contracts with labor unions, which went on strike last August. About 45,000 employees, represented by Communications Workers of America and International Brotherhood of Electrical Workers, went on strike after Verizon pushed them for cuts in health benefits and pension freezes. Additionally, Verizon has surplus employees in certain parts of the wireline business.
Out of Verizon’s 192,000 total workers, 102,000 do not belong to any union and are employed in its wireless division, a joint venture with Vodafone Group Plc (VOD). The division will not be affected by the buyout offers.
Verizon remains the leading provider of wireless voice and data communication services in the U.S. as it continues to expand its 3G and 4G Long-Term Evolution mobile broadband networks. Further, Verizon’s wireless growth prospects remain strong, driven by customer growth, higher smartphone adoption and the sale of Apple Inc.’s (AAPL) iPhone that will lead to improved revenue.
The voluntary buyout offer applies to less than 1% of the total Verizon workforce and about 2% of the wireline workers. Verizon expects the affected employees to leave in early July. The company will lay off employees if only a few accept the voluntary package.
We remain on the sidelines for now and will carefully watch the financial impact of the buyout plan in both the short and long term. As a result, we are maintaining our long-term Neutral recommendation on Verizon. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1–3 months).
Fedex Hikes Dividend
The world’s biggest cargo airline company, FedEx Corporation (FDX), raised its quarterly dividend by 7.7% to 14 cents per share, representing an increase of a penny over the previous payout. The new dividend is payable on July 2 to shareholders of record as of June 18. The hike in dividend rate will be effective after the payment of the earlier dividend of 13 cents per share as announced by the company on June 6, 2011.
We believe that the hike in dividend was primarily based on the robust financial performance of the company in the fiscal third quarter, based on strong holiday shipping and higher tariffs.
This is the ninth time Fedex is raising its dividend since the initiation of its dividend payout in 2002. The yearly dividend payment will be 56 cents and will cost the company about $12.6 million more per year. The current payout translates into a dividend yield of 0.66. However, rival United Parcel Service Inc. (UPS) maintains a current dividend yield of 3.11.
Over the years, it has been seen that Fedex does not distribute a substantial part of its earnings to its shareholders, which is evident from its dividend payout ratio. The payout ratio of the company remained around 10% in the last three years.
Fedex Corporation possesses a strong balance sheet with $2.04 billion of cash and marketable securities. The strong cash position enables the company to either acquire new companies or to pay dividends to its shareholders.
Fedex Corporation reported record-high earnings in the third quarter of fiscal 2012. Net income was up 91% year over year. Rising fuel prices and moderate economic growth induce confidence in management to provide a solid outlook for fiscal 2012.
Recommendation: We thus maintain our long-term Neutral recommendation for Fedex Corporation. Currently, Fedex Corporation has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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