For Immediate Release
Chicago, IL – August 16, 2012 – Zacks Equity Research highlights Tenet Healthcare Corp. (THC) as the Bull of the Day and Methanex Corp. (MEOH) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Companhia Paranaense de Energia (ELP), Cia Energetica de Minas Gerais (CIG) and Enersis S.A. (ENI).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Tenet Healthcare Corp.'s (THC) second-quarter earnings surpassed the Zacks Consensus Estimate and the year-ago results based on growth in revenues arising from higher adjusted admissions, outpatient visits and surgeries, partly offset by a rise in bad debt. We subsequently raise of recommendation from Neutral to Outperform.
The Patient Protection and Affordable Care Act signed in March 2010 is expected to positively impact hospital companies like Tenet Healthcare. It aims to expand the pool of insured patients, which should aid hospitals' bottom lines.
Overall, we believe that growth through the acquisitions, ratings upgrades and volumes can help boost the future earnings outlook. Our six-month target price of $6.00 per share equates to about 10.5x our earnings estimate for 2012, which implies an expected total return of 18.1% over that period.
We are downgrading our recommendation on Methanex Corp. (MEOH) to Underperform following its lower-than-expected second-quarter 2012 results. Revenues and earnings missed Zacks Consensus Estimates by a wide margin.
Shortage of natural gas supplies has been a headwind for some time now and is expected to continue in the near-term. The company's production has taken a hit due to curtailment in natural gas supplies and constrained revenues. Moreover, methanol prices depend upon factors such as economic health and demand.
With the current economic situation being sluggish, Methanex may face more headwinds due to constrained spending in end-markets. Our price target of $26 is based on 10.9x our fiscal 2012 earnings estimate.
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Net Income Declines at COPEL
Companhia Paranaense de Energia (ELP), also known as COPEL, reported a 28.2% decline in its net earnings in the second quarter of 2012. Net income in the quarter came in at R$184.9 million (US$94.3 million). COPEL posted an EPS of R$1.84 per share (US$94 cents per ADR) in the second quarter of 2012.
Net operating revenues in the second quarter increased 10.3% year over year to R$2,031.5 million (US$1,036.5 million).
Revenue improvement was witnessed across all the company’s business categories: Electricity sales to final customers grew about 4.5%; sales to distributors surged 34.7%; use of main transmission grid climbed 3.6%; telecommunications revenue increased 6.1%; distribution of piped gas spiked 24.0%. Other operating revenues shot up 97%. However, construction revenue dipped 9.5% year over year.
During the quarter, operating costs and expenses went up 18.1% year over year to R$1,788.1 million (US$912.3 million), primarily due to a rise in expenses in some categories including 40.3% in electricity purchased for resale, 30.3% in expenses related to use of main transmission grid, 21.5% in personnel and management, 24.3% in pension and healthcare, and 52.6% in natural gas and supplies for the gas business, among others.
However, higher costs in the above-mentioned categories were partially offset by a 0.4% decline in material and supplies costs; a 16.4% drop in raw material and supplies for electricity generation; a 52.5% decrease in provisions and reversals and a 9.0% fall in construction costs.
EBITDA declined 18.5% to R$378.3 million (US$193.0 million) with an EBITDA margin of 18.6% versus 25.2% in the year-ago quarter.
Exiting the second quarter 2012, COPEL’s cash and cash equivalents plummeted 17.9% sequentially to R$673.7 (US$323.9 million) while loans and financing inched up 0.4% to R$2,127.4 million (US$1,022.8 million).
In the first half of 2012, COPEL generated R$437.7 million (US$223.3 million) of net cash flow from operating activities, while capital spending was R$442.2 million (US$225.6 million).
Companhia Paranaense de Energia is a fully integrated electric utility of Brazil engaged in the generation, transmission and distribution of electricity to the State of Paraná. The provincial government of the State of Paraná controls about 58.6% of the shares of COPEL. The company faces stiff competition from Cia Energetica de Minas Gerais (CIG) and Enersis S.A. (ENI).
We currently maintain a Neutral recommendation on the stock. Our Neutral recommendation is supported by a Zacks #3 Rank, implying a short-term Hold rating.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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