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Southwest Airlines, Pier 1 Imports, State Street, Bank of New York Mellon and JPMorgan Chase highlighted as Zacks Bull and Bear of the Day

Zacks Equity Research

For Immediate Release

Chicago, IL – July 11, 2014– Zacks Equity Research highlights Southwest Airlines Company (LUV-Free Report) as the Bull of the Day and Pier 1 Imports, Inc. (PIR-Free Report)  as the Bear of the Day. In addition, Zacks Equity Research provides analysis on State Street Corporation (STT-Free Report), Bank of New York Mellon Corp. (BK-Free Report) and JPMorgan Chase & Co. (JPM-Free Report).
Here is a synopsis of all five stocks:

Bull of the Day:

Southwest Airlines Company (LUV-Free Report) is flying high as travel demand has picked up in the United States and it rolls out international routes for the first time. This Zacks Rank #1 (Strong Buy) is expected to grow its earnings by the double digits in both 2014 and 2015.

Southwest Airlines is the largest U.S. domestic airlines serving 93 destinations in 40 states, Washington DC and Puerto Rico. In May 2011, Southwest acquired AirTran Airlines, which also operated international routes to the Caribbean and Mexico.

It has been integrating AirTran into the Southwest system. On July 1, it flew its first international flights to Aruba, Jamaica and the Bahamas under its namesake brand. It will be expanding to 5 international destinations this year, including to Mexico.

By expanding to Caribbean beach destinations, it has also been able to grow its Southwest Vacations business by offering joint hotel and airfare packages.

Anyone who has flown this year has seen how crowded the flights have been. Southwest flew 52.7 billion revenue passenger miles (RPMs) for the first six months of 2014, up 2% compared to the same period in 2013. The year-to-date load factor was 81.7% compared to 79.5% in the first six months of 2013.

In June, the good news continued as it flew 10.1 billion RPMs, up 2.2% from June 2013. Passenger revenue per ASM was estimated to have risen 7% to 8% year over year.

On Apr 24, Southwest reported its first quarter results and beat the Zacks Consensus for the third quarter in a row. Earnings were a record for the first quarter at $0.18 compared to the Zacks Consensus of $0.16.

Bear of the Day:

Pier 1 Imports, Inc. (PIR-Free Report) has been in the midst of a turnaround but a recent first quarter earnings miss put that in jeopardy. As a result, this Zacks Rank #5 (Strong Sell) has seen its full year estimates slashed in the last 30 days.

Pier 1 Imports is an importer of global decorative home furnishings and gifts. It sells through retail stores as well as through its e-commerce site Pier1.com.

On June 19, Pier 1 reported fiscal first quarter results for the quarter ending May 31. It missed the Zacks Consensus by 4 cents. Earnings were $0.16 compared to the consensus of $0.20.

It was the third miss in the last four quarters.

While same store sales grew 6.3% due to higher average ticket and an increase in total brand traffic, and e-Commerce sales came in way ahead of expectations, at 9% of total sales for the quarter, the company also was pessimistic about the retail environment.

It described it as being "highly promotional." Gross profits were also still being pressured in the near-term.

Given the retail pressures, it lowered its full year EPS guidance by 2 cents to the range of $1.14 to $1.22 from $1.16 to $1.24.

Additional content:

State Street to Settle Forex Lawsuit for $60M
State Street Corporation (STT-Free Report), the third-largest U.S. custodial bank, has agreed to pay a total of $70 million in order to settle shareholder and employee lawsuits. Of the total, $60 million will be paid to resolve shareholders’ claims of inflating revenues by overcharging clients illegally for foreign-exchange services. The remaining $10 million will be expended to settle two lawsuits by employees who owned the company’s stock in their retirement accounts.  
Notably, the currency services of the custodial banks such as State Street, The Bank of New York Mellon Corp. (BK-Free Report) and JPMorgan Chase & Co. (JPM-Free Report) are under investigation since the 2008 financial crisis. Both federal and state regulators along with the pension funds were increasingly suspicious about clients being overcharged.
The shareholder lawsuit accused State Street of charging unlawful markup on clients, which translated into huge revenues for the Boston-based bank. Again, the bank was sued for overcharges to the public pension funds – The California Public Employees’ Retirement System (CalPERS) and The California State Teachers’ Retirement System (CalSTRS). In fact, the shares of the bank plunged 8.4% on Oct 20, 2009, after the charges were pressed by the state of California.
Throughout the litigation process and even now, State Street has been denying the allegations against it. The settlement, according to the bank, was reached because it was unwilling to continue with the litigation hassles. Nevertheless, the settlement resolves an over four-year long legal battle, leaving investors appeased at the end.
State Street currently carries a Zacks Rank #3 (Hold).
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