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The Zacks Analyst Blog Highlights: General Motors, H.J. Heinz, STRATTEC Security, Visteon and Agrium

Zacks Equity Research

For Immediate Release

Chicago, IL – June 5, 2013 – 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 General Motors Company (GM), H.J. Heinz Co. (HNZ), STRATTEC Security Corp (STRT), Visteon Corp. (VC) and Agrium Inc. (AGU).

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Here are highlights from Tuesday’s Analyst Blog:

General Motors Returns to S&P 500


General Motors Company (GM) will be replacing H.J. Heinz Co. (HNZ) in the Standard & Poor’s 500 and Standard & Poor’s 100 indices after the close of trading on Jun 6, 2013. The automaker was removed from the S&P 500 index in 2009 due to bankruptcy filing and $50 billion government bailout. General Motors returned to the New York Stock Exchange in 2010.

Heinz on the other hand will be acquired by Warren Buffett’s Berkshire Hathaway Inc. and a private equity firm of Jorge Paulo Lemann’s 3G Capital.

The return of the automaker in the America's benchmark stock market indicates that the automaker has been able to enhance investor value. Recently, shares of General Motors hit new 52-week high of $33.77 on May 17, above its previous level of $32.44 as well as the Initial Public Offering (:IPO) price of $33.00 (held in Nov 2010).

Shares of the company started escalating following its announcement of revival plan in Europe and U.S. Treasury department’s announcement of selling a significant stake in the company as well as improvements in the U.S. and Chinese markets.

GM reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower profits generated from the company’s all geographic operations except Europe. Despite this, the automaker’s earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. Nevertheless, revenues were higher than the Zacks Consensus Estimate of $36.4 billion.

General Motors is gearing up for more than 40 major vehicle launches in 2013 across the globe in order to drive sales and revenues. In addition, the company expects its European results will improve further based on its cost reduction measures.

Currently, shares of GM retain a Zacks Rank #3 (Hold). While we remain on the sidelines about General Motors, STRATTEC Security Corp (STRT) and Visteon Corp. (VC) are currently performing well in the auto industry and carry a Zacks Rank #1 (Strong Buy).


Agrium Slips to Underperform


We have downgraded leading fertilizer company Agrium Inc. (AGU) to Underperform following its disappointing first-quarter 2013 results. Our view reflects the weak phosphate price environment, weak demand in India and unfavorable weather conditions.

Why the Downgrade?

Both revenues and earnings for the first quarter, reported on May 9, missed Zacks Consensus Estimates. Lower revenues from the larger Retail segment coupled with adverse weather conditions hurt the top line. Agrium witnessed lower sales for crop protection products and crop nutrients in the quarter. Moreover, weak global demand hurt its phosphate business.

Earnings estimates for Agrium are declining following the release of the first quarter results. The Zacks Consensus Estimate for 2013 has gone down roughly 6% to $9.55 per share. The Zacks Consensus Estimate for 2014 has also declined roughly 2% to $9.72. With Zacks Consensus Estimates for both 2013 and 2014 going down, Agrium now has a Zacks Rank #4 (Sell).

Cause for Concern

While Agrium may benefit from high crop prices and overall strong fundamentals for the crop input market, demand for potash and phosphate is expected to be weak in India, a key market. Changes in pricing and subsidy policies by the Indian government are expected to continue to affect demand in the country.

Moreover, the pricing environment for phosphate is expected to remain soft in the second quarter. The global phosphate market is expected to remain weak in the near term, partly due to lower demand from India (a major phosphate import market). We also account for unfavorable weather conditions which may hurt crop yields.


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