Zacks Equity Research highlights Avon Products, Inc. (NYSE: AVP) as the Bull of the Day and Huntington Bancshares, Inc. (Nasdaq: HBAN) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Ambac Financial Group, Inc. (NYSE: ABK), PetSmart, Inc. (NYSE: PETM) and ATS Medical, Inc. (Nasdaq: ATSI).
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: Avon Products, Inc. (NYSE: AVP)
Avon Products is benefiting from both the expansion into the developing and emerging markets and its emphasis on the Beauty products portfolio. Management aims to achieve high single-digit local currency revenue growth supported by margin expansion over the long term.
Management has instilled financial discipline throughout the company. Over $200 million in costs savings have been achieved since 2002 by implementing the multi-year supply chain cost reduction program. Management expects to achieve cost savings of an additional $300 million in savings as the company implements ERP in Europe and North America.
The company is also benefiting from a multi-year restructuring plan begun in November 2005. Due to attractive valuation, the stock is upgraded to a Buy.
Bear of the Day: Huntington Bancshares Incorporated (Nasdaq: HBAN)
Huntington Bancshares is a regional bank headquartered in Columbus, Ohio. HBAN conducts business through over 600 branches in Ohio, Michigan, Indiana, Kentucky, Pennsylvania and West Virginia, and a network of over 1,400 ATMs. Net interest income contributed 70% of HBAN's adjusted net revenue in 2007, while non-interest sources such as service charges on deposits, mortgage banking, trust, and insurance contributed the balance.
HBAN reported a 3Q08 net income of $75.1 million or $0.17 per share. Excluding the market-related losses, securities impairments and deferred tax-valuation allowance benefit, core results came in at $0.27 per share.
Credit quality continued to worsen. Net charge-offs were 0.82% of average total loans and leases, up 18 bps sequentially and 35 bps year-over-year. Non-performing assets as a percentage of related assets increased by 11 bps sequentially to 2.52% at the end of 3Q08. Increase in charge-offs and increase in allowance for credit losses are expected going forward.
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Ambac Financial Group, Inc. (NYSE: ABK)
We have increased our recommendation on the shares of Ambac Financial Group to a Hold from a Sell. Since our November 20, 2007 rating change, the shares yielded 97.2% return to investors.
Even tough concerns remain with respect to ABK industry and broader market pressures; the company has commuted certain CDO exposures, mitigating some of the overhang. As such, we suggest investors might want to begin to take some profits at this point of time considering the limited downside potential. Hence, we have changed our rating.
PetSmart, Inc. (NYSE: PETM)
PetSmart is the leading specialty retailer of services and solutions for pets. The company reported in-line results for the third quarter results. Looking ahead to 2009, management indicated that is not immune from the slowing economy and will scale back on new store openings and capital spending. We maintain our Hold rating on PETM shares, as the valuation looks fair.
PetSmart shares currently trade at 10.0x our fiscal year 2008 EPS estimate and 9.5x our fiscal year 2009 EPS estimate. At its current valuation, PETM shares appropriately reflect the company’s near-term challenges and its long-term growth opportunities, in our view. Our target price is $15.50, which is 10x our fiscal year 2009 EPS estimate.
ATS Medical, Inc. (Nasdaq: ATSI)
ATS Medical has the goal of becoming the #1 mechanical valve company in the world and has about 20% worldwide market share on a procedure basis. While mechanical heart valves are still growing in international markets, this product is declining in U.S. markets in favor of the tissue valve.
We believe overseas markets will eventually adopt this trend. Expanding the offering of complementary products has fueled ATSI's growth. And, the acquisition of 3F Therapeutics may bring ATSI into the tissue valve market, leveraging its current infrastructure, and turning profitable by the end of fiscal 2009.
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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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