The Zacks Analyst Blog Highlights: JPMorgan Chase, U.S. Bancorp, BB&T, Time Warner Cable and Netflix.
For Immediate Release
Chicago, IL – July 31, 2012 – 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 JPMorgan Chase & Co. (JPM), U.S. Bancorp (USB), BB&T Corporation (BBT), Time Warner Cable Inc. (TWC) and Netflix, Inc. (NFLX).
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Here are highlights from Monday’s Analyst Blog:
Georgia Bank Fails, Tally Reaches 39
Last Friday, the Georgia Department of Banking and Finance shuttered Jasper, Georgia-based Jasper Banking Company, taking the number of failed U.S. banks thus far in 2012 to 39. This follows 92 bank failures in 2011, 157 in 2010, 140 in 2009 and 25 in 2008.
The failed bank had total assets of $216.7 million and total deposits of $213.1 million as of March 31, 2012.
While the financials of a few large banks are stabilizing on the back of an economic recovery and increasing dependence on noninterest revenue sources, the industry is still on shaky ground. The sector presents a picture similar to that of 2011, with nagging issues like depressed home prices, still-high loan defaults and unemployment levels troubling such institutions.
The lingering economic uncertainty and its effects also weigh on many banks. The need to absorb bad loans offered during the credit explosion has made these banks susceptible to severe problems.
The Acquirer
St. Cloud, Minnesota-based Stearns Bank National Association has agreed to assume all the deposits and assets of Jasper Banking Company. The FDIC and the acquirer agreed to share losses on $106.0 million of Jasper Banking Company's assets.
Impact on FDIC Fund
This bank failure represents a further dent in the deposit insurance fund (:DIF), meant for protecting customer accounts.
The FDIC insures deposits in 7,309 banks and savings associations in the country as well as promotes their safety and soundness. When a bank fails, the agency reimburses customer deposits of up to $250,000 per account.
Though the FDIC has managed to shore up its deposit insurance fund over the last few quarters, the long spate of bank failures have kept it under pressure. However, as of March 31, 2012, the fund was in surplus for the fourth straight quarter.
Also, the balance increased to $15.3 billion as of March 31, 2012 from $11.8 billion at the end of 2011. The continued improvement in the net worth of the fund is attributable to an abating pace of bank failures and rising assessment revenue.
The failure of Jasper Banking Company will cost the FDIC about $58.1 million. From 2012 through 2016, bank failures are estimated to cost the FDIC about $12 billion.
Shrinking Problem Bank List
The number of banks on FDIC’s list of problem institutions saw a sharp decline for the fourth straight quarter to 772 in the January-March period from 813 in the preceding sequential period.
Increasing loan losses on commercial real estate could trigger many more bank failures in the upcoming years. However, considering the moderate pace of bank failures, the 2012 number is not expected to exceed the 2011 tally.
Consolidation to Continue
With so many bank failures, consolidation has become the industry trend. For most of the failed banks, the FDIC enters into a purchase agreement with healthy institutions.
When Washington Mutual collapsed in 2008 (the largest bank failure in the U.S. history), it was acquired by JPMorgan Chase & Co. (JPM). Other major acquirers of failed institutions since 2008 include U.S. Bancorp (USB) and BB&T Corporation (BBT).
Earnings Preview: Time Warner Cable
Time Warner Cable Inc. (TWC) is slated to release its second quarter 2012 results on Thursday, August 2, before the opening bell. The current Zacks Consensus Estimate for the second quarter is pegged at $1.38, representing annualized growth of 16.55%.
With respect to earnings surprises over the trailing four quarters, Time Warner Cable has outperformed the Zacks Consensus Estimate in three out of the last four quarters. The average earnings surprise was positive 5.36%.
First Quarter Recap
On April 26, 2012, Time Warner Cable reported its first quarter 2012 financial results. Quarterly GAAP net income was $382 million or $1.20 per share compared with a net income of $325 million or 93 cents per share in the prior-year quarter. First-quarter 2012 adjusted (excluding special items) EPS of $1.30 easily surpassed the Zacks Consensus Estimate of $1.22.
Total revenue in the quarter increased 6.4% year over year to $5,134 million, surpassing the Zacks Consensus Estimate of $5,121 million. Quarterly adjusted operating income before depreciation and amortization (:OIBDA) climbed 8.2% year over year to $1,873 million. GAAP operating income grew 6.9% year over year to $1,042 million.
Agreement of Estimate Revisions
In the last 30 days, out of the 17 analysts covering the stock, one analyst increased the EPS estimate for the second quarter of 2012, but two analysts reduced. However, for the third quarter of fiscal 2012, out of the 15 analysts covering the stock, one analyst raised EPS estimates, while three revised downwards.
For fiscal 2012, in the last 30 days, out of the 20 analysts covering the stock, two moved their estimates upward, while two analysts moved downward. However, for fiscal 2013, in the last 30 days, out of the 20 analysts covering the stock, one analyst moved the estimates upward, while two analysts moved it downwards.
Magnitude of Estimate Revisions
The current Zacks Consensus Estimates for the second quarter of fiscal 2012 has been stable over the last 30 days, at US$1.38. However, the estimates for the third quarter of fiscal 2012 over the last 30 days have changed by a penny to US$ 1.46.
The current Zacks Consensus Estimate for fiscal 2012 and 2013 remained stable over the last 30 days, at US$5.65 and US$6.89, respectively.
Earnings Surprises
The current Zacks Consensus Estimate for the ongoing quarter contains a 0.00% upside potential, while for the upcoming quarter it is reflecting a 4.11% downside risk (essentially a proxy for future earnings surprises). Similarly, for fiscal 2012, the Zacks Consensus Estimate reflects a 0.89% downside risk, while the same for 2013 contains a downside risk of 0.73%.
Our Recommendation
We believe that continuous loss of subscribers coupled with stiff competition from online video streaming companies like Netflix, Inc. (NFLX) and Hulu will hurt profitability going forward.
We thus maintain our long-term Neutral recommendation on Time Warner Cable.
Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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Read the analyst report on JPM
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Read the analyst report on BBT
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