November 11, 2008
Zacks Bull and Bear of the Day Highlights
Zacks Equity Research highlights AmBev (NYSE: ABV) as the Bull of the Day and General Motors (NYSE: GM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ctrip.com International (Nasdaq: CTRP), Freeport McMoRan (NYSE: FCX) and Health Net, Inc. (NYSE: HNT).
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: AmBev (NYSE: ABV)
We are changing our recommendation on Companhia de Bebidas das Americas, or AmBev, from Hold to Buy. The company posted positive results for the third quarter of 2008, with excellent results in Brazil and in Argentina.
Parent company InBev's desire to acquire Anheuser-Busch appears to be positive for the company. Despite the difficult economic environment throughout the world due to the global credit crunch, the company, which is focusing on low cost, daily use products, is not tied directly to the international economic cycle.
Moreover, we believe that the company being a producer of a low-cost, daily use product focusing on domestic markets will be less exposed to the recent international crisis. Indeed, we have an optimistic view on the medium to long term demand for soft drinks in Latin America.
Bear of the Day: General Motors (NYSE: GM)
General Motors Corporation is one of the largest automobile manufacturers in the world. But weak North American sales, falling production volumes and rising raw material costs are increasing our concern for the stock.
Significant incentives to stimulate sales and keep inventories lean are eating into margins. Furthermore, GM sales are hampered by poor resale values. The company is at a disadvantage compared to its competitors owing to huge pension and health care costs.
GM has also delayed new model launches and has slowed production. It apprehends a significant cash crunch and might even face bankruptcy if the U.S. economic slump continues and it fails to get any government aid. These issues compel us to rate the shares a Sell with a six-month target price of $2.00.
Latest Posts on the Zacks Analyst Blog:
Ctrip.com International (Nasdaq: CTRP)
We are downgrading Ctrip.com International, Ltd. - ADR shares from Buy to Hold. Longer term, Ctrip.com is well-positioned to generate strong growth as more Chinese consumers use online travel-related services. Unfortunately, the company's near-term picture is not as bright.
Slowing global economic growth is reducing the demand for travel-related services, and that is negatively impacting Ctrip.com's revenues and profit margins. We are lowering our estimates for 2008 and 2009 to reflect slower expected growth and lower profit margin assumptions. Our target price of $29 is about 26x our 2009 EPS estimate.
Freeport McMoRan (NYSE: FCX)
Freeport McMoRan Copper & Gold Inc. reported third quarter EPS of $1.31, a 48.0% year-over-year decline, due to higher input costs at Grasberg, lower realized copper prices, and higher-than-expected unit costs at its North American mines (Morenci and Safford). Given our lowered 2009 copper price assumption, rising LME copper inventory levels, and the deteriorating global economic environment, we project an FY09 EPS estimate of $4.34 and rate FCX shares a Hold.
We believe management is taking the right steps to preserve the balance sheet. Freeport plans to reduce 2009 CAPEX, limit investment on certain capital projects, defer exploration expenditures, and potentially reduce production at high-cost operations. Unfortunately, we expect the current global slowdown to persist for the foreseeable future, which should keep a lid on copper prices and end-user demand. Our target price of $28.00 is based on around 6.5x our 2009 EPS estimate.
Health Net, Inc. (NYSE: HNT)
Health Net is one of the nation's largest publicly traded multiregional managed care companies. The company reported a lower-than-expected third-quarter net income of $18.5 million, or EPS of $0.17. Adjusted EPS excluding non-recurring items was $0.35 versus consensus of $0.88.
The result was characterized by a sharp increase in health care costs as reflected in a higher medical loss ratios, and driven in large part by higher-than-expected utilization across MA and Part D products, and a decline in commercial risk membership as a result of a weakening economy and increased competition. We retain a Hold recommendation at current levels.
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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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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.
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