Zacks Bull and Bear of the Day Highlights: Agrium, Quality Systems, M&T Bank, Synovus Financial and Popular
For Immediate Release
Chicago, IL – August 20, 2012 – Zacks Equity Research highlights Agrium, Inc. (AGU) as the Bull of the Day and Quality Systems, Inc. (QSII) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on M&T Bank Corp. (MTB), Synovus Financial Corp. (SNV) and Popular Inc. (BPOP).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We are retaining our Outperform recommendation on Agrium, Inc. (AGU) following its strong second-quarter 2012 results. Adjusted earnings of $5.43 per share topped the Zacks Consensus Estimate of $5.36, while profit surged 20% year over year to a record level. Revenues spiked roughly 10% on the back of strong demand for all crop input products.
Agrium stands to benefit from high crop prices and overall strong fundamentals for the agriculture and crop input market. The acquisition of AWB has expanded the company's retail division and provided access to the growing Southeast Asia market. We expect strong global demand for fertilizers and seeds to boost Agrium s results in 2012.
Our long-term Outperform recommendation on the stock indicates that it should exceed the broader market. Our price target of $119 is based on 11.9x our fiscal 2012 earnings estimate.
We downgrade our recommendation on Quality Systems, Inc. (QSII) to Underperform with a target price of $17. The company reported earnings per share of $0.26 in the first-quarter of fiscal 2013, missing the Zacks Consensus Estimate of $0.36.
Quality Systems offers an electronic health record (:EHR) product and benefits from the migration of ambulatory and inpatient practices to EHR under the Federal Stimulus. Of late, however, growth of its pipeline metric has been on a falling trend along with a progressively lower number of signed deals on a quarterly basis. The business is crowded with many players operating at the upper end of the market where Quality Systems has traditionally been strong.
The company has undertaken multiple acquisitions to bolster organic growth. These acquisitions are expected to facilitate its entry in the small hospital segment. We are concerned about execution risk emanating from Quality Systems entry into the rural inpatient market.
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Treasury to Shed Stake in M&T Bank
The U.S. Treasury is offloading its stake in M&T Bank Corp. (MTB). In this context, yesterday, Treasury announced a public offering of the preferred stock worth $381.5 million it holds in M&T Bank. The move comes as part of its efforts to unwind its bailout program. Public investors will now be able to hold the stock.
The $381.5 million worth of preferred stock comprises 230,000 shares of M&T fixed rate cumulative perpetual preferred stock, Series A, and 151,500 shares of M&T Fixed Rate Cumulative Perpetual Preferred Stock, Series C. The joint bookrunning managers for the offering are Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler O’Neill + Partners, L.P.
Back in 2008, M&T Bank participated in the Treasury’s Troubled Assets Relief Program (:TARP) and took $600 million in bailout funds. In return, preferred stocks were issued to the Treasury. In the meantime, the acquisitions of two TARP recipients, Provident Bankshares Corp. (acquired in 2009) and Wilmington Trust Corp. (2011), have burdened the company with more TARP funds to pay back. M&T Bank already paid back a part of its TARP dues ($700 million) in May 2011 and was left with the remaining $381.5 million in the TARP preferred stock.
Compared to a number of its Wall Street counterparts, the company is making a slow exit from the TARP as it has been quite hesitant in raising capital through common stock offering.
Our Take
The stake sale by Treasury is a strategic fit. As of now, it could achieve a profit on the whole from bailing out the banks. Also, a number of banks including Synovus Financial Corp. (SNV) and Popular Inc. (BPOP) are yet to repay their TARP dues.
On the other hand, an exit from TARP is considered a positive for M&T as it would free the company from significant government interventions, pay restrictions and allow financial flexibility. However, the prolonged period of dividend payment has somewhat muted investors’ enthusiasm.
M&T Bank otherwise boasts a solid business model that poises the company well for future growth. Benefits from the Wilmington Trust acquisition are expected to augment its earnings in the years ahead. While the sluggish economic recovery, regulatory issues and low interest rates remain the headwinds for M&T Bank, we believe that a sound capital position, along with a growing core deposit, will uphold it in the long run.
The shares of M&T Bank Corp. retain a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we have a 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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Read the analyst report on AGU
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