Zacks Equity Research highlights Arch Coal, Inc. (NYSE: ACI) as the Bull of the Day and CEMEX, S.A. (NYSE: CX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tractor Supply Company (Nasdaq: TSCO), Anadigics (Nasdaq: ANAD) and Apple, Inc. (Nasdaq: AAPL). 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: Arch Coal, Inc. (NYSE: ACI)
We are maintaining our Buy recommendation on Arch Coal and increasing our 2008 earnings estimate from $2.37 per share to $2.64 per share. With international and domestic coal prices at record levels, Arch’s market driven strategy should help maximize its reserve base. Having significant unpriced volumes of 60% and 77% in ‘09 and ‘10, respectively, and recently pricing several million tons of 2008 unpriced production at significant premiums to Q1 08 prices, we feel that ACI will experience significant earnings growth in the near term.
Additionally, In Central Appalachia, nearly one third of its 2008 estimated production is metallurgical in nature. This type of coal fetches prices in the triple digits and should boost earnings and cash flow. We see very little downside to the company’s story with large near-term upside potential.
Bear of the Day: CEMEX, S.A. (NYSE: CX)
We are keeping our Sell rating on CEMEX, S.A. de C.V. First quarter results were weak, even though the sale of a stake in Axtel improved net income. The continued weak cement volumes/revenues in the key U.S. and Mexican markets are problematic. We believe the construction business in the U.S. is already facing a more difficult environment, and that the short-term outlook for this industry remains highly uncertain, mainly due to the continued problems in the subprime mortgage segment. Moreover, concerns about real estate prices in Spain are also troublesome.
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Tractor Supply Company (Nasdaq: TSCO)
Tractor Supply Company’s first quarter results came in below expectations, and management lowered its guidance for full-year 2008. The weaker-than-expected results were due to the consumer cutting back. Management now expects full-year EPS to be at or slightly below the low end of its previously provided range, which was $2.54 to $2.62. We reduced our EPS estimates accordingly.
That said, the company’s store expansion plans, expanded merchandise mix, and operating improvements bode well for its long-term growth. But near-term issues will continue to pressure consumer spending, and that will cause TSCO’s earnings growth to come in below trend for the next few quarters.
Anadigics (Nasdaq: ANAD)
Anadigics, Inc. recently reported Q1:2008 results, which topped our estimates. Revenues of $74.4 million, up 10% quarter-over-quarter and 50% year-over-year, exceeded our estimate of $69 million. Pro-forma EPS of $0.15 (excluding stock options expense) beat our estimate of $0.10. GAAP EPS was $0.07. GAAP gross margin improved to 35.8% from 32.8% recorded in the year-ago period and 34.7% in the prior quarter.
The company’s wireless business (21.1% quarter-over-quarter growth) comprised 69% of its total sales and was the primary driver for Q1 revenue growth. However, broadband revenues were down 5.8% year-over-year to $23.2 million and down 8.5% quarter-over-quarter. WLAN/WiMAX was up 47%, while cable infrastructure results were down sequentially.
Going forward, management expects revenues between $77 million and $79 million in the second quarter of FY2008. Pro-forma EPS is estimated to come around $0.16-$0.17. ANAD reported strong Q1results recently with EPS of $0.15 on $74.4 million in revenues, which was much higher than street expectations of $0.10 on $69.2 million in revenues. ANAD's strong results were driven by stellar growth in the wireless business which expanded 21% sequentially and approximately 105% year-over-year.
Apple, Inc. (Nasdaq: AAPL)
The strength of Apple Inc.'s iPod business has carried over into its computer business, and we expect Macintosh to continue taking share from traditional PCs as consumers become more familiar with Apple products and enjoy the enhanced media capabilities. However, we are cautious on consumer spending going into 2008, and believe the market for AAPL's successful iPod line could slow over the next several years.
At its current price of $162.89 per share, Apple's stock is trading at 31.5x our fiscal 2008 estimate of $5.17. Apple's has established a strong track record of earnings growth, which went from a loss of $0.07 per share in 2001, to an expected profit of $5.17 per share in the current fiscal year. With a strong new product pipeline for 2008, including MacBook Air, Mac Pro, iTunes Movie Rentals, and major software upgrade and developer platform for iPhone 2, we believe the stock deserves a premium valuation to its peer group.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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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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