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The Zacks Analyst Blog Highlights: JoS. A. Bank Clothiers, Men's Wearhouse, Finish Line, DSW and Caterpillar

Zacks Equity Research

For Immediate Release

Chicago, IL – November 14, 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 the JoS. A. Bank Clothiers Inc. ( JOSB- Free Report), The Men’s Wearhouse Inc. ( MW- Free Report), Finish Line Inc. ( FINL- Free Report), DSW Inc. ( DSW- Free Report) and Caterpillar Inc. ( CAT- Free Report).
 
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Wednesday’s Analyst Blog:

JoS. A. Bank Up on Q3 Forecast
 
Shares of JoS. A. Bank Clothiers Inc. ( JOSB- Free Report) rallied 3.5% following the announcement of an encouraging guidance for the third quarter of fiscal 2013. The company is scheduled to report third-quarter results before the stock market opens on Dec 5, 2013.

JoS. A. Bank projects adjusted earnings per share for the third-quarter to grow 4% – 9% year over year, ranging from 49 – 51 cents per share, compared with 47 cents per share earned in the year-ago comparable quarter. Results for the third quarter continue to benefit from positive trends witnessed near the close of the second quarter, partially offset by the shutdown of government offices in the third quarter.

The company’s adjusted earnings forecast for the to-be-reported quarter excludes legal and professional charges of about 2 – 3 cents per share associated with the proposed acquisition of rival, The Men’s Wearhouse Inc. ( MW- Free Report).

Further, the company anticipates sales growth in the mid single-digits range, driven by a double digit upside in its direct business and nearly flat comparable store sales projections. Together, sales from the company’s comparable stores and online portal are expected to increase in the low single digits.

Driven by the improved sales forecasts, the company expects its gross margin rate to grow for the second consecutive quarter, reporting a slight increase in the third quarter.

Overall, JoS. A. Bank attributes the impressive third-quarter performance to the gains realized from the implementation of new promotional strategies and their adjustments in the past few quarters. This has helped the company achieve marketing efficiency while boosting third-quarter results. Alongside, the company continues to gain from the outstanding performance of its non-promotional segments, which continue to post sales improvement.

Going forward, the company expects to sustain the sales growth trend, on account of the strategies in place for its brands.

Last month, the Hampstead, MD-based men's apparel retailer proposed to acquire its greater rival Men’s Wearhouse for $48 per share (total of $2.3 billion) cash. However, the latter rejected the bid outright describing it as “opportunistic” and “inadequate”. Following the rejection, JoS. A. Bank communicated a deadline of Nov 14, 2013 for Men’s Wearhouse to rethink on the bid.

In a recent development, Men’s Wearhouse’s largest shareholder, Eminence Capital LLC, urged the board at Men’s Wearhouse to engage in talks for a takeover bid with JoS. A. Bank before the Nov 14 deadline. Though Eminence Capital, which owns 9.8% stake in Men’s Wearhouse, believes the offer of $48 per share was too low, it expects JoS. A. Bank to raise the bid.

Jos. A. Bank believes the merger will prove beneficial to the shareholders and customers of both the companies, creating a behemoth men’s wear retailer with nearly 2,000 stores.

While we await a public notice from Men’s Wearhouse regarding its decision on the takeover proposal, the suitor, JoS. A. Bank, carries a Zacks Rank #3 (Hold).

Other stocks performing well among apparel-shoe retailers include Finish Line Inc. ( FINL- Free Report) and DSW Inc. ( DSW- Free Report). Both these stocks carry a Zacks Rank #2 (Buy).
 
Caterpillar Downgraded to Underperform
 
On Nov 12, we downgraded Caterpillar Inc. ( CAT- Free Report), a leading manufacturer of construction and mining equipment, from Neutral to Underperform given its lackluster third quarter results, trimmed outlook for 2013, declining backlog and negative impact of the European debt crisis. Caterpillar retains a Zacks Rank #5 (Strong Sell).

Why Downgraded?

Reduced mining demand led to a 43% slump in third quarter 2013 earnings of Caterpillar to $1.45 per share and an 18% decline in revenues to $13.4 billion in the quarter. Sales volume decreased $2.7 billion, with changes in dealer inventories accounting for over 50% of the decline.

Caterpillar’s worldwide sales declined 9% for the three months ending Sep 2013, the tenth consecutive month of sales decline. Latin America, which has otherwise outperformed other regions in 2013 with positive growth in contrast to decline across the board, disappointed again with a 10% dip in September, worsening from the 3% sales dip in August. Asia dragged down overall results with a 24% decline and EAME was down 11%.

Caterpillar forecasts sales in the fourth quarter to be slightly higher than in the third quarter, but it cautioned that earnings per share will be lower due to higher costs resulting from seasonal spending patterns. The company also expects another substantial decline in dealer inventories in the fourth quarter.

For fiscal 2013, Caterpillar now projects sales of $55 billion, down from the previous range of $56 billion to $58 billion. Caterpillar now expects to earn $5.50 per share in 2013, down from the earlier projection of earnings of $6.50 per share due to lower sales volume including an unfavorable mix of products and lower price realization. This is the third quarter in a row in which Caterpillar has trimmed its fiscal 2013 guidance.

Caterpillar ended the quarter with a backlog of $19.1 billion compared with $23.1 billion at the end of the third quarter of 2012. The decline was due to a substantial reduction in mining-related products within Resource Industries, which was partially offset by an increase in Construction Industries. Caterpillar will need additional orders during the year to meet its guidance.

The European debt crisis had a negative impact on Caterpillar’s results. The continuation of economic uncertainty in the region will continue to be a headwind moving forward. Furthermore, emerging markets, like China, are now showing a contraction from robust levels witnessed over the last decade. Major mining companies are cutting their spending budgets to prioritize improved production at existing projects rather than resorting to new project expansion. These headwinds could weigh on Caterpillar’s growth and operating performance over the next several quarters.

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