For Immediate Release
Chicago, IL – January 22, 2013 – Zacks Equity Research highlights School Specialty (SCHS) as the Bull of the Day and Tiffany & Co. (TIF) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NYSE Euronext Inc. (NYX), IntercontinentalExchange Inc. (ICE) and NASDAQ OMX Group Inc. (NDAQ).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
School Specialty's (SCHS) second quarter fiscal 2013 adjusted earnings of $0.82 a share beat the Zacks Consensus Estimate by 28% and the prior-year quarter earnings by 60.8%, driven by overall margin improvement and the company s cost control strategy. Though down year over year, total revenue also surpassed the Zacks Consensus Estimate.
Although School Specialty lowered its revenue expectations for fiscal 2013 due to a challenging market environment, we believe that the company's diversified product and geographic mix, strategic and cost-control initiatives, combined with its product innovation efforts place it well for long-term growth once the school spending trends return to more normal levels.
Moreover, the industry has been witnessing a slow recovery in State and local property tax receipts over the last few months, which should improve the company's demand scenario ahead. We therefore upgrade our recommendation from Neutral to Outperform.
Tiffany & Co. (TIF) witnessed soft holiday sales numbers that prompted management to take a conservative stance on its future earnings. Results were at the lower end of management s expectations. It seems that the company is in an unfavorable position as the challenging economy is taking away some of the sheen from the high-end retailer.
On a constant-currency basis, total worldwide net sales for the two months period ended Dec 31, 2012, marked an increase of 4%, whereas comparable-store sales remained flat. We observe that the rate of growth of net sales and comps decelerated from 6% and 4%, respectively, registered during the two months period ended Dec. 31, 2011. Management now expects fiscal 2012 earnings to be at the lower end of the previously provided guidance range of $3.20 to $3.40 per share.
Tiffany had earlier trimmed its sales growth forecast to 5% to 6% for fiscal 2012, and hinted of contraction in operating margin. Consequently, we maintain our Underperform recommendation on the stock, until we see any catalyst triggering an upside.
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NYSE Upped to Neutral
On Jan 18, we upgraded our recommendation on NYSE Euronext Inc. (NYX) to Neutral based on its proposed $8.2 billion merger with IntercontinentalExchange Inc. (ICE). This shall further boost efficiencies, though higher debt raises the concerns of the rating agencies. Hence, this stock has gained a Zacks Rank #3 (Hold), indicating no clear directional pressure in the near term.
Why the Upgrade?
NYSE reported third-quarter 2012 operating earnings per share of 44 cents, up 3 cents from the Zacks Consensus Estimate. However, results plunged 38% from 71 cents recorded in the year-ago quarter. Net revenues stood at $559 million, sliding 20.6% from $704 million in the prior-year quarter. It also fell short of the Zacks Consensus Estimate of $570 million. Over the past 4 quarters, NYSE has delivered an average surprise of 1.82%.
Following the release of the third quarter results, the Zacks Consensus Estimate for 2012 has edged down 1.1% to $1.80 per share. Moreover, the Zacks Consensus Estimate for 2013 declined (down 1.8% to $2.26 per share) at a slower pace.
Although NYSE’s financial results reflect the industry-wide low trading scenario, it continues to maintain a leading position by developing a market model in response to the emerging trends and technological advancements in the trading environment.
Most significantly, the proposed merger with IntercontinentalExchange is expected to generate more than 15% of earnings accretion within the first year of completion, while boosting the operating and competitive leverage of the merged entity. Additionally, management projects run-rate expenses synergies of about $450 million, which will be reaped in the second year of the merger startup.
Following the merger, IntercontinentalExchange will also initiate annual dividends of about $300 million, which is the current dividend payout of NYSE, scheduled to culminate by the first half of 2013.
However, wariness prevails over the combined debt of the merged entity, which is projected to be about $4.7 billion, as IntercontinentalExchange plans to use all of its $1.0 billion cash and raise another $1.8 billion from its revolving credit facility to buyout NYSE.
Although the business profile of the merger appears strong and NYSE is making efforts to reduce its debt obligations through refinancing and other activities, we believe these actions would take quite a long time given the company’s capital and other extraordinary cost requirements in the upcoming quarters.
Other Stocks to Consider
Apart from NYSE, other stocks in the stock exchange industry that are expected to rebound with economic improvement include NASDAQ OMX Group Inc. (NDAQ) and IntercontinentalExchange. All these companies carry a Zacks Rank #3 (Hold).
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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