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The Zacks Analyst Blog Highlights: Liberty Global, Vodafone Group, BT Group, News Corp. and ProAssurance

Zacks Equity Research

For Immediate Release
Chicago, IL – March 19, 2014 – 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 Liberty Global plc. (LBTYA-Free Report), Vodafone Group plc. (VOD-Free Report), BT Group plc. (BT-Free Report), News Corp. (NWSA-Free Report) and ProAssurance Corporation (PRA-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Liberty Global Revamps Business

Liberty Global plc. (LBTYA-Free Report), a leading cable TV operator in Europe and Latin America, has acquired the remaining 20% stake in VTR, the largest cable operator in Chile.

The company purchased the outstanding shares of both VTR GlobalCom SpA and VTR Wireless SpA from a subsidiary of Corp Group Holding Inversiones Limitada after issuing 10.1 million of its own Class C ordinary shares. The total consideration was approximately $422 million.

Liberty Global is trying to extensively penetrate into the European region with its bundled video, voice and Internet (data) services. In Jan 2014, Bloomberg reported that the company may consider a decision to spin off its Latin American operations.

Liberty Global’s Latin American operations include VTR Internet and wireless businesses in Chile and its 60% share in Liberty Cablevision of Puerto Rico.

Recently, Liberty Global terminated its negotiations to acquire British IT group, Daisy. Daisy sells telecoms services especially in the business-to-business segment. The deal was annulled after Daisy demanded more than GBP 500 million, which Liberty Global considered pricey.

Recently, Bloomberg also reported that Liberty Global intends to establish a pan-European mobile virtual network operator (:MVNO) system to provide mobile phone services. MVNO is a company which uses the established network infrastructure of an existing wireless operator to offer its own services.

The service will be provided across Europe, especially in the Netherlands, Belgium, Switzerland, Austria and the U.K. Consequently, the company will become a competitor to major wireless operators such as Vodafone Group plc. (VOD-Free Report),  Deutsche Telekom, Royal KPN N.V. and Belgacon.

Currently, Liberty Global is in the process of acquiringa 100% stake in Ziggo N.V., the largest cable TV operator in the Netherlands. At present, Liberty Global holds a 28.5% stake in Ziggo. The deal is expected to close by the second half of 2014, subject to regulatory approvals.

Liberty Global is also trying to acquire full control of Belgian cable TV operator Telenet Group Holding NV. Currently, the company holds a 58.4% stake in Telenet.

In Jun 2013, Liberty Global acquired a 100% stake in British cable MSO Virgin Media. In the U.K., the merged entity poses a serious competitive threat to British Sky Broadcasting Group plc and BT Group plc. (BT-Free Report).

British Sky Broadcasting Group is the largest pay-TV operator in the U.K. and is partially controlled by News Corp. (NWSA-Free Report). Currently, Liberty Global carries a Zacks Rank #3 (Hold).

ProAssurance Slips to Strong Sell

On Mar 18, Zacks Investment Research downgraded ProAssurance Corporation (PRA-Free Report) to a Zacks Rank #5 (Strong Sell) as estimates have been going down ever since it reported weak fourth-quarter 2013 results.

Why the Downgrade?

ProAssurance witnessed downward estimate revisions following weak fourth-quarter results reported on Feb 20, 2014. The results clocked a negative surprise of 3.9%. Moreover, shares of this property and casualty insurer lost nearly 7.9% since the company reported disappointing fourth-quarter results. Given its current quarter Earnings ESP of -4.1%, we feel the company is slated for difficult times going ahead.

ProAssurance reported fourth-quarter operating earnings per share of 99 cents, which missed the Zacks Consensus Estimate of $1.03 by 3.9%. Earnings also decreased 36.5% year over year.

The underperformance by ProAssurance was largely due to surging expenses coupled with lower revenues. During the last reported quarter, net losses and loss adjustment expenses also rose significantly higher. Additionally, ProAssurance has been consistently suffering from higher underwriting, policy acquisition and operating expenses driven by higher acquisition expenses and compensation costs. This escalation is also deteriorating the underwriting ratio.

Another major risk is associated with ProAssurance’s investment portfolio, which primarily consists of fixed income securities. The declining interest rate forces the company to reinvest its matured investments at comparatively lower interest rates, which leads to declining investment income.

Moreover, ProAssurance has been facing volatility in premium retention in its physician business for quite some time now mainly due to increased competition. If the company continues to lose its insured clients to competitors or to self-insurance mechanisms and risk retention groups, this might weigh largely on premiums, thereby hurting top line growth going forward.

Over the last 30 days, the Zacks Consensus Estimate for 2014 slid by 5.7% to $3.13 per share as 3 of 5 estimates were revised downward.

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