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The Zacks Analyst Blog Highlights: Quest Diagnostics, Vornado Realty Trust, Equity One, Simon Property Group and Duke Realty

Zacks Equity Research

For Immediate Release
Chicago, IL – April 15, 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 Quest Diagnostics Inc. (DGX-Free Report), Vornado Realty Trust (VNO-Free Report), Equity One Inc. (EQY-Free Report), Simon Property Group Inc. (SPG-Free Report) and Duke Realty Corp. (DRE-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Quest Diagnostics Raised to Buy

Zacks Investment Research upgraded Quest Diagnostics Inc. (DGX-Free Report) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Of late, Quest Diagnostics has been witnessing rising earnings estimates on the back of healthy fourth-quarter and full-year 2013 results. The company delivered a positive earnings surprise of 9.6% in the last reported quarter. The long-term expected earnings growth rate for the stock is 10.6%. 

Quest Diagnostics reported fourth-quarter and full-year 2013 results on Jan 30. Adjusted earnings per share of this New Jersey-based global diagnostic testing information services provider came in at $1.03, beating the Zacks Consensus Estimate of 94 cents by 9.6%, and exceeding the company's prior-year earnings by 2%.

During the fourth quarter, the company's volume increased 2.3% year over year, while sequential trends over the years improved for revenues, volume and revenues per requisition.

Despite a 1% drop in revenues, management remained optimistic about long-term growth at the company. This is because it anticipates that the healthcare market will benefit from continuous population growth and favorable demographics, along with expected growth in esoteric testing. This in turn should provide Quest Diagnostics significant opportunity to emerge as a leading high-quality, low-cost provider of diagnostic information services.

Quest Diagnostics has been making consistent progress in driving operational excellence. The company exited 2013 with run rate savings of more than $500 million, thereby surpassing its original Invigorate Goal established in 2011.

In addition, the company's board of directors has authorized a 10% hike in its quarterly dividend from 30 cents to 33 cents per share, or $1.32 per share annually, payable on April 23, 2014, to shareholders of record of Quest Diagnostics' common stock on April 8, 2014.

The Zacks Consensus Estimate for earnings for fiscal 2014 increased 0.2% to $4.04 per share over the last 30 days. For fiscal 2015, the Zacks Consensus Estimate rose 0.7% to $4.32 per share over the same time frame.

Vornado to Spin Off Shopping Centers

Real estate investment trust (:REIT) Vornado Realty Trust (VNO-Free Report) will spin off its U.S. shopping center business into a new publicly traded REIT. The move will help Vornado focus exclusively on the office assets in the New York City and Washington, DC region and the Manhattan street retail assets.

The company will spin off 81 strip shopping centers and four malls. These strip shopping centers are positioned in the Northeast U.S. and the malls comprise the Bergen Town Center in Paramus, NJ, Monmouth Mall in Eatontown, NJ as well as two malls in the suburbs of San Juan, Puerto Rico. These 85 properties span around 16.1 million square feet and enjoy considerable occupancy levels (average occupancy of 95.5% as of Dec 31, 2013).

For the new unit, the move will help unleash the potential of strip centers and malls that will be owned by it and Vornado projects this unit’s net operating income to be around $200 million in 2014. The average base rent of these properties is $18.75 per square foot and this is well above that of the peer median of $15.66 per square foot.

This new unit will have Jeffrey S. Olson as its Chairman of the Board and Chief Executive Officer. Olson is currently serving as the Chief Executive Officer of Equity One Inc. (EQY-Free Report).

However, Vornado will keep 20 small retail assets, worth around $100 million, for sale in the near term. Two other properties – Beverly Connection and Springfield Town Center – which are currently under contract for disposition – will also be retained by Vornado.

As a matter of fact, this spin off is an outcome of Vornado’s decision to separate two businesses, which have been together for legacy reasons but with no real operating synergies. The move will result in the company having properties exclusively in the Manhattan and Washington region and we expect the stream lining efforts on part of Vornado to enhance its profitability, going forward.

The filing of the initial Form 10 registration statement with the SEC is expected to be made in the second quarter of 2014, while the transaction is targeted to be accomplished in the fourth quarter of this year.

In recent times, another REIT – Simon Property Group Inc. (SPG-Free Report) – also decided to spin off its strip center business and smaller enclosed malls into a publicly traded REIT. The move would help this retail real estate investment trust (:REIT) to increase utilization of resources for expanding its global portfolio of larger malls, mills and premium outlets.

At present, Vornado carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider Duke Realty Corp. (DRE-Free Report) which has a Zacks Rank #2 (Buy).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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