For Immediate Release
Chicago, IL – June 10, 2013 – Zacks Equity Research highlights Hanover Insurance Group (THG - Free Report) as the Bull of the Day and U.S. Steel Company (X - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Credit Suisse Group AG (CS - Free Report), Julius Baer Group Ltd. (JBAXY- Free Report) and Bank of America Corporation (BAC - Free Report).
Here is a synopsis of all five stocks:
Although the stock market has been pretty sluggish lately, there are a few corners that are still holding up rather well. One such sector that is leading the market is undoubtedly financials, as these have taken a leadership role, and are seeing fresh capital from those following a sector rotation strategy.
In particular, the insurance segment has been doing quite well, as it is a relatively low beta sector that has been able to perform well no matter what the broad market trends have been. While many investors may be focusing in on the giants in the industry, there are a few small cap securities which may be offering more compelling values at this time, such as the Hanover Insurance Group (THG - Free Report).
Hanover Insurance Group is based in the great city of Worcester, Massachusetts and is in the property and casualty segment of the insurance industry. The firm has four segments; commercial, personal, Chaucer (think boats, planes, etc.) and a broad other property and casualty division.
THG is pretty spread out among these businesses, though the Chaucer division, in the most recent quarter, contributed the most in terms of operating income before income taxes. It is also worth noting that for the most recent quarter, income before income taxes saw good growth while the premiums taken in also represented a decent level of growth in terms of year-over-year figures.
Although the U.S. economy has seen some decent figures on the industrial production front, many investors remain lukewarm at best about the materials sector. Part of the reason for this is because many other markets—such as China and Europe—are still facing extremely sluggish conditions, which is curtailing demand for a variety of materials.
This trend has been especially apparent in the steel market, as a number of key producers have found it to be incredibly difficult to grow earnings or even revenues in this lethargic environment. In particular, this gloomy situation has been terrible news for the once-giant U.S. Steel Company (X - Free Report).
U.S. Steel is still the country’s largest domestically owned integrated steel producer, though its glory days have since long past. Now, the company is a mere shell of its former self, struggling to remain profitable in the face of extreme levels of foreign competition.
This terrible trend is especially apparent when investors look at the earnings estimate picture for the company. Estimates have fallen like a stone for all time periods we follow, with the consensus now projecting a full year loss for U.S. Steel of about $1.31/share.
This represents an incredible slide, as just two months ago the consensus was at (a positive) 99 cents/share. Current quarter figures are equally depressing; the consensus from two months ago was at $0.41/share, while the current figure comes in at -$0.79/share.
Credit Suisse to Divest German Unit
Credit Suisse Group AG (CS - Free Report) is considering the sale of a part of its German wealth management unit to reduce expenses in its onshore businesses in Western Europe. The strategic sale is part of the bank’s efforts to reorganize its business by developing core businesses and downsizing troubled units.
After combining its private bank with its asset management wing last year, Credit Suisse has been consistently striving to improve its market position in the intensely competitive European market. Management expects such measures to drive the company toward its desired performances.
The aforementioned sale is a part of the Swiss bank’s strategy to achieve CHF1.9 billion in cost reduction by the end of 2015. A major chunk of these expense savings, totaling CHF750 million, will be from the private banking unit.
Currently, many global banks are struggling to reduce costs amid the sovereign debt crisis in Europe. Among others, Credit Suisse is resorting to extensive restructuring measures to address low profitability. Notably, the bank faced huge headwinds in the private banking segment in 2012, with a declining margin caused by decreased client activity.
To mitigate these headwinds, in Nov, 2012, the company announced 300 job cuts in the bank’s retail and private banking divisions in Switzerland starting Jan 2013.
Similar Action by Other Banks
Given a pressured operating environment, lower returns and stringent capital norms, many Swiss banks are rightsizing their businesses. In Sep, 2012, as part of its integration process and cost reduction efforts, Julius Baer Group Ltd. (JBAXY- Free Report) announced 30%–40% reduction in workforce at its recently acquired foreign wealth management division of Merrill Lynch − a unit of Bank of America Corporation (BAC - Free Report).
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