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Business
Zacks Bull and Bear of the Day Highlights: Hittite Microwave, Telmex, Safeway, Goodyear Tire and Ingram Micro
© Business Wire 2008
2008-04-29 12:11:13 - - Zacks Equity Research highlights Hittite Microwave (Nasdaq: HITT) as the Bull of the Day and Telmex (NYSE: TMX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Safeway, Inc. (NYSE: SWY), Goodyear Tire & Rubber (NYSE: GT) and Ingram Micro (NYSE: IM). Full analysis of all these stocks is available at
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Here is a synopsis of all five stocks:
Bull of the Day: Hittite Microwave (Nasdaq: HITT)
Hittite is a leader in integrated circuits, modules and subsystems for wireless communications. The company has a broad product portfolio across a large portion of the frequency spectrum, including radio frequency (RF), microwave and millimeterwave. Hittite is poised to grow from its international business, focus on new products and deeper penetration into existing customers. The company reported a strong Q1, and we still expect double-digit revenue growth for the full year. We therefore maintain our Buy rating on HITT shares with a $55.00 price target.
Bear of the Day: Telmex (NYSE: TMX)
We are reiterating our Sell recommendation on Telmex. First quarter 2008 results were lower than expected. As a result, we are changing our 2008 and 2009 estimates. Moreover, the Mexican domestic growth has also stalled. Expansion in other Latin American regions, particularly Brazil, is expected to continue in the near future. Meanwhile, the company still needs to increase the profit margins of its acquired units, which are currently well below that of its Mexican business. Its valuation seems excessive if compared to other Latin American operators, and the difficult economic environment in the U.S. is a source of concern.
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Safeway, Inc. (NYSE: SWY)
Safeway reported better-than-expected results for the first quarter, due to contributions from its Lifestyle stores, Canadian exchange rate benefits, and higher fuel sales. The company reiterated its fiscal 2008 EPS guidance of $2.25-$2.35, but lowered its identical-store sales guidance from 3%-3.2% to 2%-2.3%. We continue to believe Safeway's remodeling efforts, Lifestyle stores, and Blackhawk gift card businesses are reasons to be bullish on the stock.
Still, we think these positives are offset by headwinds such as the weak consumer spending environment and food inflation. During the first quarter of 2008, Safeway purchased 2.5 million shares of its common stock at an average price of $29.70 per share and a total cost of $74.1 million (including commissions). The remaining board authorization for stock repurchases at quarter-end was $447 million. Safeway confirmed guidance for 2008 (a 53-week year) of $2.25 to $2.35 diluted earnings per share and free cash flow of $500 million to $700 million.
Goodyear Tire & Rubber (NYSE: GT)
The Goodyear Tire & Rubber Company is one of the largest tire manufacturing companies worldwide. Goodyear Tire is benefiting from a major restructuring program along with lower raw material costs and improved selling prices. However, weak tire volumes compel us to rate the shares a Hold with a target of $28.50.
On April 25, 2008, Goodyear Tire & Rubber reported 2007 first quarter results. In the quarter, excluding special items, net income from continuing operations was $0.60 per share, compared to a loss of $0.61 per share in the prior-year quarter. The company sales were $4.9 billion, a 10% increase from the same quarter in 2007, offsetting lower volumes with higher prices and a richer product mix with favorable currency translation ($341 million).
Revenue per tire rose 7%, but weak OEM volumes in North America and weak replacement volumes in North America and Europe offset some of this benefit. North American sales fell 1%, European sales rose 16%, Latin American sales rose 29%, and Asia Pacific sales rose 21%. The company is now two-thirds through its $2 billion cost-cutting program.
Ingram Micro (NYSE: IM)
Ingram Micro's first quarter sales were $246 million below our estimate, and its EPS were $0.01 below our estimate. The lower-than-expected results were due to continued weakness in North America and Europe. Also, management's EPS guidance for the second quarter was in-line with our estimate thanks to share repurchases. We think that Ingram Micro will be able to deliver solid operating leverage over the long term.
However, we believe the company could disappoint in the near term because of slowing economic growth in North America and Europe, as well as industry-wide pricing pressures. As a result, we are reducing our estimates for 2008 and 2009. The company expects sales of $8.50 billion to $8.75 billion and net income of $59 million to $64 million, $0.34 to $0.37 per diluted share. These estimates do not include costs related to the company's expense reduction plans.
Get the full analysis of all these stocks by going to at.zacks.com/?id=2649.
About the Bull and Bear of the Day
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