For Immediate Release
Chicago, IL – September 24, 2012 – Zacks Equity Research highlights The St. Joe Company (JOE) as the Bull of the Day and Avon Products, Inc. (AVP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple (AAPL), Darden Restaurants (DRI) and KB Home (KBH).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We have changed our long-term recommendation for The St. Joe Company (JOE) from Neutral to Outperform as we anticipate it to perform well above the broader market. St. Joe is currently in defensive mode and continues to reduce capital expenditures through stringent cost-cutting measures and reduction in operating expenses. St. Joe is one of the largest real estate developers in Florida.
The company is presently focusing on developing the adjacent area of the Panama-City Bay County Airport, which was opened in late 2010, to increase the future value of its holdings. The elimination of debt greatly reduces the risk to shareholders.
In addition, the company has adequate liquidity to satisfy its near-term working capital needs and capital expenditures. Our long-term Outperform recommendation on the stock indicates that it would perform well above the broader market.
Avon Products, Inc.'s (AVP) second-quarter 2012 earnings of $0.20 per share missed the Zacks Consensus Estimate by a penny and plummeted 59% year over year. Moreover, the company's net sales dipped 9%, reflecting a fall of 4% in total units. The disappointing result was primarily due to sluggish performance at each of the company's regions where it operates, along with increased input costs and operating expenses.
We believe the company's initiatives to change the product and price mix, improve earnings and reposition the business in the U.S. market will require significant advertising and promotional expenditures, which may weigh upon its margins. Further, we believe sluggish discretionary spending along with intense competition and exposure to foreign currency may undermine the company's future prospects.
Currently, we maintain a long-term Underperform recommendation on the stock. Our long-term Underperform recommendation on the stock indicates that it would perform below the broader market. Our target price of $15.00, 18.1x 2012 EPS reflects this view.
Latest Posts on the Zacks Analyst Blog:
Apple Takes Headlines, but Spain Explained
With nothing else on the economic calendar today, Spain-centric hopes are adding to market optimism that the Draghi Plan will finally become operational. Also on deck today is the release of Apple’s (AAPL) iPhone 5, which will likely bring in stories of long lines of fans around the company stores. Given Apple’s status in the market, the apparently successful iPhone 5 launch is a net positive for this market.
A little explanation of the Spain news is in order, as bailout hopes of a large country like that would generally be considered a negative for the market. The reason it’s a positive is that the Draghi Plan -- in which the European Central Bank will effectively backstop Spanish government bonds -- will only get triggered if the country formally asked for help (read: bailout). But the ECB bond purchases are preceded by strict budgetary and fiscal conditionalities.
The recently elected conservative government has been loath to put Spain in the same league as Greece, Portugal and Ireland by asking for a bailout, hoping that the mere presence of the Draghi Plan will do the trick for them. But sanity seems to be prevailing now, helping remove the uncertainty which has been holding back the ECB from playing its announced role.
Spain’s pride aside, there are other issues holding the Draghi Plan back. Tiny Finland is apparently not on board with the plan to leverage up the European Stability Mechanism -- the €500 billion permanent bailout facility that comes into being early next month.
The original plan was the fund would leverage up to increase its buying power beyond the level contributed by the members. The hope is that Finland will eventually be brought around to agree to the original plan, but its consent may not come soon enough if Spain’s request comes through in the next few days.
In earnings reports today, we got positive results from Darden Restaurants (DRI), the operator of Olive Garden and Red Lobster chains, and homebuilder KB Home (KBH). My sense is that the market will remain in a tentative mode till it gets a sense of the earnings picture as the third quarter reporting cycle gets underway.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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