For Immediate Release
Chicago, IL – August 10, 2012 – Zacks Equity Research highlights Discover Financial Services (DFS) as the Bull of the Day and CRA International (CRAI) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Citigroup, Inc. (C), Oaktree Capital Group, LLC (OAK) and Bank of America Corporation (BAC).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Discover Financial Services' (DFS) second quarter earnings surpassed the Zacks Consensus Estimate but lagged the year-ago earnings due to lower reserve releases, which offset higher revenue and interest income. Nevertheless, higher transaction and credit card sales volumes as well as record-low delinquency and charge-off rates were positives.
Dividend increment and share buyback also injected optimism. The company's strong inorganic growth policy and introduction of home loan products are expected to boost revenues and diversify the product portfolio, although regulatory restrictions and higher expenses could weigh on the margins.
Overall, the company's extensive network, sound capital position, stable ratings, rapidly expanding acceptances and cost-containment initiatives will help accentuate growth over the long term. Our six-month target price of $44.00 equates to 10.5x our earnings estimate for 2012. Given the annual cash dividend of $0.40, this price target implies an expected total return of 19.8% over that period.
CRA International's (CRAI) second quarter 2012 results were discouraging. The earnings lagged the Zacks Consensus Estimate, owing to the drastically poor performance of its management consulting business, which was partially offset by healthy litigation business. As a result of the soft consulting business, all key-line items experienced a downside.
The performance of management consulting segment suffered because of delays in several projects, particularly in Europe. However, management is undertaking restructuring actions to improve profitability and boost performance.
Moreover, we are concerned about the ongoing economic uncertainty in Europe, cautious spending by clients, stiff competition and currency fluctuations. Hence, we reiterate our Underperform stance on the stock.
Latest Posts on the Zacks Analyst Blog:
Citi Initiates Rental Home Program
On Wednesday, Citigroup, Inc. (C) introduced a home rental program to allow distressed homeowners rent their homes by signing a deed. This arrangement would act as an alternative to foreclosure.
The home rental program will be managed by the joint venture between Carrington Capital Management LLC and Oaktree Capital Group, LLC (OAK). These firms specialize in investing in distressed assets. To initiate this plan, Citigroup has sold mortgage loans worth $158 million to the venture.
The pilot program will be introduced in the states of Arizona, California, Texas, Florida, Nevada and Georgia and will involve about 500 troubled homeowners. This will help homeowners to reside in their homes and avoid eviction.
Under the “deed-in-lieu” of foreclosure, the eligible borrowers will transfer their ownership rights to the venture led by Carrington and Oaktree. For this, the eligible borrowers must owe more than their home is worth and must be delinquent for more than 120 days. Further, borrowers who cannot qualify for loan modification but are able to pay rents at market rates, will be considered for the program.
The suitable candidates need not sign a lease option. Candidates, who prefer the lease option, will be asked to sign a deed-for-lease. This agreement would create a lease on the property and borrowers will be paying a monthly charge on the lease. The charges would be fixed by considering the local market rates and are anticipated to be lower than the current mortgage obligation.
Earlier this year, Bank of America Corporation (BAC) had announced its ‘Mortgage to Lease’ initiative, allowing the distressed customers (related to foreclosures) to continue staying in their houses while the ownership of their property would be taken over by the bank. BofA had launched the pilot project in the states of Nevada, Arizona and New York and only about 1,000 homeowners became a part of this program.
Citigroup’s efforts will prevent foreclosures and assist in regional development, which will propel national economic recovery. This program will also benefit the overall housing market by stabilizing property prices. In addition, the company stands to gain from lower costs and improved credit quality as its balance sheet will be able to get rid of the delinquent properties.
Citigroup currently retains 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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