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Zacks Broker Upgrades: Wal-Mart, Dell, Royal Caribbean, United Health Services

Posted on: Friday, 8 June 2007, 12:00 CDT

Studies have shown that broker upgrades lead to short-term outperformance. Stocks recently upgraded by brokerage analysts include Wal-Mart (NYSE: WMT), Dell Inc. (NASDAQ: DELL), Royal Caribbean (NYSE: RCL) and United Health Services (NYSE: UHS). To learn more about how you can profit from broker upgrades, visit: http://at.zacks.com/?id=139.

Here is a synopsis of stocks with recent broker upgrades:

Wal-Mart's (NYSE: WMT) Average Broker Recommendation is up to 1.47 announced its 4Q06 and FY06 earnings release that reported record sales of $98 billion, an increase of 10.9% y/y. Income from continuing operations was $3.94 billion, an increase of 8.8% with EPS of $0.95. The company also said that it will spend $49 million to open 14 new stores in Costa Rica in 2007. The new stores will create 1,500 new jobs in the Central American country.

Analysts polled by Zacks Research Digest are positive about WMT's low financial risk on account of the stock's liquidity, huge market capitalization, large cash balances, strong balance sheet, and excellent debt rating. The company also possesses one of the most experienced, cohesive, and stable management teams in retailing and in corporate America.

In the long-term, the company intends to double sales in the U.S. in the next seven years, from its move to double the number of Supercenters in the US and by remodeling its existing stores. WMT is currently upgrading its existing stores to provide a new look to its customers with greater focus on high-margin categories, such as home, electronics, and apparel. The company is also trying to control costs and improve its margins through better leverage of wages and has introduced a new compensation program that will be more performance oriented and will reward only those people who achieve their individual goals, such as sales and return on inventory. WMT is also undertaking a complete revamp of its marketing and advertising strategy.

Dell Inc.'s (NASDAQ: DELL) Average Broker Recommendation has risen to 2.39. Analysts believe DELL has a growing market opportunity in servers, storage and services for commodity products. It also has the opportunity to gain share in the PC market outside the US.

The management stated that it is moving quickly to strengthen its management team, unify business units, and eliminate redundancies, while redeploying resources to drive greater value for customers. The Company also said it is moving to shorten product development cycles, make decisions closer to the customer, and develop new approaches to manufacturing and distribution to better reach and serve customers in fast-growing and emerging markets.

The consensus long-term growth rate for Dell is 12.0%. The long-term growth rates range between 5.0% and 16.3%. According to analysts, an investment decision on Dell depends upon the strength in the PC market and the ability to maintain operating margins given firming component prices and aggressive pricing, and a long-term outlook for growth initiatives.

Royal Caribbean (NYSE: RCL) is the second largest cruise operator in the world. The company operates a fleet of 29 modern ships across two major brands Royal Caribbean International and Celebrity Cruises. It also provides cruise tour vacations in Alaska combining a 7-night cruise with a state-of-the-art glass-domed railcar into the wilds of the Alaskan wilderness. The stock's ABR is up to 1.59.

Analysts are positive on the stock due favorable demographic trends which include affluent baby boomers that continue to love taking cruises. Also, industry consolidation has created a duopolistic environment aiding pricing power, reducing capacity expansion, and erecting effective barriers to entry.

Over the longer term, analysts believe RCL's high operating leverage competitively positions the company to outperform its peers. Reduced levels of capacity growth increase future pricing power. If one expects favorable demand trends to come

to fruition and geopolitical and economic uncertainty to lift, RCL is a highly levered player, loaded with upside potential.

United Health Services' (NYSE: UHS) Average Broker Recommendation is up to 2.04. Analysts polled by Zacks Research Digest believe management has taken several initiatives to capture market share in McAllen, Texas, which could help UHS, going forward. EPS in the Behavioral Health business could rise due to the implementation of Inpatient Prospective Payment Systems (IP-PPS).

According to the analysts, the company plans to focus its spending on increasing capacity at behavioral facilities in well performing markets over the next few years. UHS is currently constructing three facilities, two acute care facilities and one behavioral health facility: (1) Centennial Hospital (170 beds) in Las Vegas, Nevada, (2) a 171 bed acute-care facility in Palm Dale, California, and (3) Heart Grove behavioral health in Chicago, Illinois. Centennial Hospital is expected to open in 4Q07, while the California facility is expected to open in late 2008. The Chicago behavioral health facility should open in 2Q07.

About Broker Upgrades

Zacks is the leader in helping investors profit from brokerage research. On any given day we compile and analyze thousands of brokerage research reports released by over 200 brokerage firms. We have conclusively proven over the years that stocks recently upgraded by brokerage firms are likely to outperform the market.

To take advantage of Broker Upgrades, go to http://at.zacks.com/?id=140.

Zacks "Profit from the Pros" e-mail newsletter offers continuous analysis of broker research and highlights those stocks poised to outperform the market. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=141.

About Zacks

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Source: Business Wire

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