For Immediate Release
Chicago, IL – March 5, 2012 – Zacks Equity Research highlights Lorillard Inc. (LO) as the Bull of the Day and Westamerica Bancorp (WABC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Advanced Micro Devices Inc. (AMD), Intel (INTC) and NVIDIA Corp (NVDA).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Lorillard Inc.'s (LO) fourth-quarter and fiscal 2011 earnings exceeded both the Zacks Consensus Estimate by 12.2% and 3.0%, and the prior-year earnings by 26.4% and 16.2%, respectively. The company's results continued to outperform in terms of volume and retail shipments, despite a difficult macro-economic environment.
Sales also increased on the back of higher unit sales volume and higher average prices, partially offset by higher sales promotion costs, which were primarily driven by the introduction of Newport Non-Menthol. The company also remains committed to returning cash to shareholders through both share repurchases and dividends.
Our six-month target price of $155.00 per share equates to about 17.4x of earnings estimate for 2012. With annual cash dividend of $5.20, the target price implies the expected total return of 22.1% over that period.
We are downgrading our long-term recommendation on Westamerica Bancorp (WABC) from Neutral to Underperform based on weak fourth-quarter results and an overall sluggish economic environment. The company's fourth quarter 2011 earnings slightly missed the Zacks Consensus Estimate.
Results were negatively impacted by reduced revenues, partially offset by lower non-interest expenses. The company's credit quality continued to show improvement in the quarter. We believe that a weak interest rate environment, and low investment returns will restrict any significant bottom-line improvement in the near term.
Our six-month target price of $43.00 equates to about 14.0x our earnings estimate for 2012. Combined with the $1.48 per share annual dividend, this price target implies an expected negative return of 8.5% over that period, which is consistent with our long-term Underperform recommendation on the shares.
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Advanced Micro Eyes SeaMicro
In a bold move to boost its position in next-generation servers, chipmaker Advanced Micro Devices Inc. (AMD) announced that it will acquire microserver start-up SeaMicro for $334 million, of which approximately $281 million will be paid in cash.
This would mark Advanced Micro’s first major acquisition under its new CEO Rory Read. The company expects the deal to increase its appealing to data center operators.
SeaMicro, based in Sunnyvale, California, makes energy-efficient servers that are used in data centers for cloud computing. It uses Intel (INTC) chips in its next-generation servers, which offer dramatic reductions in power and space usage.
Recent industry reports suggest that out of the total energy supply in 2011, more than 2.5% was being used by data centers. Hence, efficiency remains a major concern for IT companies. SeaMicro’s technology dramatically reduces the power consumed by servers, while increasing compute density and bandwidth.
The acquisition of SeaMicro will boost the company’s offerings for cloud computing providers with a range of processor choices that reduce data center complexity and energy consumption.
Cloud computing has changed the dynamics of the data center and increased server usage. In fact, using the cloud has a number of benefits, the most significant of which is the cost advantage from sharing resources. This has, in fact resulted in its increased adoption across various industries. SeaMicro’s networking fabric allows hundreds of low-power processors to work together, saving both cost and time. However, proper management and usage of the technology is a prerequisite.
The cloud computing market is expected to grow at a CAGR of 40.0% from 2010 to 2015, crossing $7.0 billion in revenues by 2015. According to the market research firm IDC, cloud data centers are projected to be the fastest growing segment of the server market through 2015. Cloud computing leads to improved services and elevated security requirements for companies that use it and the acquisition should help Advanced Micro tap this opportunity for long-term benefit.
Advanced Micro plans to offer the first Opteron processor-based solution that combines its technology with SeaMicro’s technology, in the second half of 2012. Hence, the acquisition is expected to be accretive to earnings only after 2012 and not in the near term.
However, most of Advanced Micro’s business is in chips for PCs that don’t have a meaningful presence in smartphones and tablets. In order to stay ahead of rivals like Intel and NVIDIA Corp (NVDA), we believe Advanced Micro also needs to enter these emerging markets.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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