Zacks Equity Research highlights Cadbury-Schweppes (NYSE: CSG) as the Bull of the Day and CarMax Group (NYSE: KMX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on UST, Inc. (NYSE: UST), American Electric Power (NYSE: AEP) and CME Group (NYSE: CME). Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Cadbury-Schweppes (NYSE: CSG)
The implementation of the Vision into Action plan should stimulate revenue growth and improve the operating margin over time. The company has already become more focused with the purchase of Adams Confectionery and the divestiture of the non-core businesses, especially the European Beverage business. With the de-merger of Americas Beverages expected in May, management will be able to leverage scale and improve profitability by focusing on the faster-growing confectionery business. A Buy recommendation has been reinitiated.
Bear of the Day: CarMax Group (NYSE: KMX)
CarMax continues to face a difficult used vehicle environment, largely due to aggressive incentives from new vehicle manufacturers. Declining used-car value due to the ongoing weakness in the overall economy and higher funding cost at the CarMax Auto Finance is eroding the margins of the company. Moreover, drop in earnings, conservative guidance for 2009 along with higher valuation makes us apprehensive about the stock performance in the near-term. Thus, we rate the stock a SELL and maintain our six-month target price of $18.00.
Latest Posts on the Zacks Analyst Blog:
UST, Inc. (NYSE: UST)
UST Inc. is the leading producer of moist smokeless tobacco products and dominates the premium sector of the domestic market. However, over the last 15 years UST has been losing its market share steadily to discounters in the sub-premium categories. The declines are also attributable to margin pressures in the smokeless tobacco segment, higher input costs, increased sales of lower margin Antinori products, continued investment in the Premium Loyalty Program and higher legal and professional fees.
In addition, the fourth quarter of 2007 was particularly challenging for the company with a major competitive entry in Atlanta (Marlboro snuff) and the integration of the Stag's Leap Wine Cellars acquisition. The last six quarters have seen a return of positive growth in premium moist smokeless can sales as a result of Project Momentum. In addition, the share repurchase program was tripled to $600 million in 2007.
American Electric Power (NYSE: AEP)
Consistent performance at the East Regulated Segment, new 765-KV transmission lines at PJM, ongoing debt reduction, new power supply contracts in ERCOT, and the favorable approval of rate changes from the PUCO and PUCT are expected to drive modest earnings growth at American Electric Power Company, Inc. over the near-term. However, the unfavorable order on Appalachian Power’s base-rate filing, higher operating and maintenance expenses and uncertainty surrounding pending regulatory cases collectively continue to weigh on the stock.
Going forward, AEP offers investors stable underlying core utility earnings, although with only modest growth potential. As of this report, AEP common stock trades at 13.4x our current-year 2008 operating earnings per share estimate and 12.8x our forward 2009 EPS estimate, or at a moderate discount to the P/E multiple range of comparable diversified energy utilities and the broader electric power utility industry.
CME Group, Inc. (NYSE: CME)
CME Group intends to release its first quarter 2008 earnings before the markets open on April 22, 2008 with a conference call scheduled later in the morning. 4Q07 results were slightly below our estimates. We remain optimistic about the continued growth prospects, especially with the recent acquisitions and the global expansion initiatives and also expect CME to continue to benefit from the ongoing volatility in the markets.
However, recently announced plans for regulatory reforms in the financial sector, which include the merger of CFTC and the Security and Exchange Commission (though not likely to be implemented in the near future) may not be positive news for CME. Further, relative valuation continues to look very expensive and the current concerns for the sector continue to weigh on the shares.
CME currently trades at 25.1 times the consensus forward estimate (versus 31 times at the time of our last report), a 19% premium to the peer group's median (versus 42% premium at that time). On a price-to-book basis, the shares trade at a 2% premium to the peer median (versus a 39% discount as on January 8, 2008).
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.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2677.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contacts:
Mark Vickery
312-265-9380
Visit: www.zacks.com
