For Immediate Release
Chicago, IL – May 22, 2012 – Zacks Equity Research highlights Pool Corporation (POOL) as the Bull of the Day and ArcelorMittal (MT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Woori Finance Holdings Co. Ltd. (WF), Bank of America Corporation (BAC) and Citigroup Inc. (C).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Pool Corporation's (POOL) first-quarter 2012 earnings outperformed the Zacks Consensus Estimate. The company is a recognized leader in the industry. The potential for market growth is significant and cost-containment initiatives augur well for the business.
Pool's results reflect continued growth in its once-struggling green business. Amid a tough business environment in terms of weak growth in new pool constructions and faltering consumer confidence, Pool's revenue has been marching ahead and exhibits strong earnings power. The upcoming quarter is also seasonally strong.
The company expects the market condition to improve beyond 2012 as well. The company is focused on bolstering shareholder returns by share buybacks and dividend hikes. Hence, we rate the stock Outperform.
We are maintaining our Underperform recommendation on ArcelorMittal (MT) following our assessment of its first-quarter 2012 results. Earnings missed the Zacks Consensus Estimate while revenues beat the forecast.
The company's net debt climbed by roughly $1.1 billion in the quarter. ArcelorMittal also reduced its growth outlook for steel and announced a few divestments including the sale of its steel foundation distribution business to Nucor Corporation. These divestments are a part of the company's strategy to dispose its non-core assets, a move which it expects to continue in the second quarter.
ArcelorMittal remains affected by the challenging economic conditions in Europe. It is also exposed to volatility in steel pricing and tough competition. Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our price target of $13 is based on 6.5x our fiscal 2012 earnings estimate.
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BofA Entangled in Another Lawsuit
South Korea-based Woori Bank, a unit of Woori Finance Holdings Co. Ltd. (WF), sued Merrill Lynch unit of Bank of America Corporation (BAC). Woori's complaint accuses the investment bank of creating and selling seven collateralized debt obligations (CDOs) that were made up of residential mortgage-backed securities in 2005 and 2006.
CDOs typically repackage bonds and other assets into new securities. These are not traded on a public exchange, and hence allow the firms like BofA to generate fees by brokering deals between buyers and sellers. However, CDOs have performed dismally since these were invested in securities comprising sub-prime mortgages, which are known to have larger-than-average risk of defaulting in the market. Eventually, the market downturn shattered the investment banker’s expectations and led to huge losses for the common investors.
Woori alleged that Merrill issued misleading statements and omissions related to the mortgage-backed securities and also concealed the risks associated with the securities. The company claims that the documents used in offering these securities contained untrue statements or omissions regarding the risks involved in these investments. These misrepresentations of the risks provoked investments, which virtually have no value at current levels.
Woori has filed the lawsuit in the New York State Supreme Court in Manhattan. The company demands for damages worth $143 million along with other penal charges.
Recently, the U.S. District Judge in Manhattan approved BofA’s $315 million settlement with investors related to the Public Employees' Retirement System of Mississippi pension fund. The settlement was made to compensate the investors as BofA misled these investors by giving them deceptive information on risks associated with mortgage-backed securities issued by its Merrill Lynch unit.
BofA denied all the charges made against it. However, Merrill Lynch, which was purchased by the investment bank in 2009, averred that the losses faced by the investors were attributable to the downturn in economy and housing bubble.
Last week, Citigroup Inc. (C) also faced similar legal charges made by Woori Bank. The complaint lodged claims that Citi misrepresented documents as an underwriter in the sale of CDOs and residential mortgage-backed securities, which turned Woori’s $95 million investment, made during 2006 and 2007, into loss.
Numerous lawsuits alleging BofA of such wrongdoings would surely dent its reputation and financials. However, we believe that the investors, who have lost their hard-earned money in such investments, should feel relieved.
Shares of BofA currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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