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The Zacks Analyst Blog Highlights: Lockheed Martin, Activision Blizzard, Apple, Zynga and Electronic Arts

Zacks Equity Research

For Immediate Release

Chicago, IL – March 27, 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 Lockheed Martin Corporation (LMT), Activision Blizzard Inc. (ATVI), Apple (AAPL), Zynga (ZNGA) and Electronic Arts (EA).

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Here are highlights from Tuesday’s Analyst Blog:

Strong Buy on Lockheed Martin

 On Mar 26, we upgraded aerospace and defense major Lockheed Martin Corporation (LMT) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Lockheed reported mixed results in the fourth quarter 2012 with earnings below and revenue above the Zacks Consensus Estimates. But that did not deter us from holding a bullish outlook on the company. Our favorable outlook stems from a solid order backlog, incremental dividend payouts and positive initiatives taken by the company.

Lockheed Martin is a well-managed defense prime. Its working capital improvements continue to impress, as is evident from its inventory turnover of 16.1 times in the trailing twelve months at the end of 2012, compared to only 3.1 times for the Zacks industry average -- a strong sign of operational efficiency.  In addition, Lockheed’s operational effectiveness is evident in its industry-high Return on Investment (ROI) of 34.9% in 2012.

Lockheed Martin has one of the strongest balance sheets among its peers, with a stable long-term debt-to-capitalization of 80.2% at the end of 2012. Lockheed continues to be a strong cash generator with its operating cash flow reaching approximately $1.6 billion during 2012.

Lockheed’s premier position in the defense space is upheld by the company’s solid 2013 guidance. Lockheed Martin forecast full-year 2013 earnings per share in the range of $8.80–$9.10 on net revenues of $44.5–$46.0 billion.

Over the long term, the earnings growth rate is pegged at 6.08% while the top line is expected to rise at a clip of 2.66%. The last 90 days saw the Zacks Consensus Estimates for 2013 and 2014 rise a respective 7.6% and 2.9% to $8.87 and $9.11.

 ATVI’s New Free-to-Play Card Game

 Activision Blizzard Inc. (ATVI) has announced a new free-to-play strategy card game Hearthstone: Heroes of Warcraft, at PAX East. Beta testing of the game, which is developed by Blizzard Entertainment, is expected to begin soon.

The new game will be available for Windows and Apple’s (AAPL) Mac platforms later this year and the iPad version would be released soon after. Moreover, Hearthstone: Heroes of Warcraft is expected to be released for Android as well.

Gamers reviewed the game to simple and engaging after playing the demo version of the game at PAX. Gamers can play in two modes, namely “Play Mode” and “The Forge”, where they can get a chance to dwell with opponents and increase their card packs.

Reportedly, Hearthstone: Heroes of Warcraft will initially feature 300 cards, with five cards in a pack. Though the game is available for free but gamers have the option to purchase card packs to advance in the game quicker.

Hearthstone: Heroes of Warcraft is Blizzard’s first free-to-play game collectible card game. Free-to-play games enable gamers to access the game for free. Developers and publishers earn revenues through the sales of in-game items (also known as micro-transactions) and advertisement.

The current game is expected to boost the company’s presence in the free-to play gaming segment, which is dominated by Zynga (ZNGA) and Electronic Arts (EA).

Moreover, Activision’s limited presence in the mobile segment, particularly on Android platform (no other game except Call of Duty Elite), is a major growth impediment in our view.

Additionally, volatile macroeconomic environment, uncertainty related to console transition and tough year-over-year comparisons are the other headwinds. We believe that the continued softness in video game industry retail sales despite increasing investments in new products will continue to hurt Activision’s profitability in the near term.

Currently, Activision Blizzard has a Zacks Rank #4 (Sell).

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Read the analyst report on LMT

Read the analyst report on ATVI

Read the analyst report on AAPL

Read the analyst report on ZNGA

Read the analyst report on EA

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