For Immediate Release
Chicago, IL - April 25, 2012 - Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include
Kellogg Company
(
K
),
Procter & Gamble
(
PG
),
RadioShack Corp.
(
RSH
),
Target Corp.
(
TGT
) and
Sprint Nextel Corp.
(
S
).
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Here are highlights from Tuesday's Analyst Blog:
Kellogg Cuts 2012 View
Kellogg Company
(
K
) recently cut its 2012 financial outlook, just a few days before
the release of first quarter earnings results, citing weak US
volumes and a struggling European business.
The world's largest cereal maker also pre-announced its sales
and earnings growth rates for the first quarter of 2012. Total
revenue was down 1.3% in the quarter. However, organically
(excluding impact of acquisitions and foreign exchange), revenues
were flat with the prior-year quarter. The maker of popular brands
like Pop-Tarts, Keebler and Eggo witnessed weak volume growth in
some food categories in its US segment. The European business was
also sluggish as the region continued to face difficult economic
conditions and competitive activity. Kellogg's adjusted operating
profit was also down 6.1%.
The company reported first quarter adjusted earnings per share
of 95 cents (excluding the impact from the pending Pringles
acquisition), 4 cents below the Zacks Consensus Estimate of 99
cents due to weak top-line results.
Following a weak start to 2012, the company lowered its overall
financial guidance for fiscal 2012. For the year, the internal net
sales growth guidance was cut from a prior range of 4%-5% to a band
of 2%-3%.
Adjusted earnings per share are now expected to be $3.24-3.41 in
fiscal 2012, down from the prior guidance of $3.45-$3.52. The
guidance excludes any impact from the pending acquisition of the
Pringles business from retail giant
Procter & Gamble
(
PG
). The $2.7 billion Pringles deal, which will dilute 2012 earnings
by 6-11 cents per share, is expected to close in June this year.
The Zacks Consensus Estimate for 2012 was $3.48 before the guidance
cut was announced.
Operating profit is expected to decrease in the range of 2%-4%
in 2012, down from prior expectations that profits would remain
flat to slightly up from 2011 levels. Kellogg will release its
first quarter financial results on April 26, 2012 before the market
opens.
Our recommendation
We currently have a Neutral recommendation on Kellogg Company.
The stock carries a Zacks #3 Rank in the near term ('Hold'
rating).
Overall, we like the company's strong market position and its
continued focus on brand building and innovation. The Pringles deal
will provide additional growth opportunity in the fast growing
emerging nations. It will also reduce Kellogg's dependence on its
mainstay cereals business which is somewhat struggling. However, we
are disappointed with the poor first quarter preliminary results
and the related cut in guidance. The sluggish cereal business
together with rising pressures in Europe keeps us on the
sidelines.
RadioShack Crushed in 1Q
The nightmare for
RadioShack Corp.
(
RSH
) persists as the company continues with its disappointing
performance. The company's first-quarter 2012 financial results
were well below the Zacks Consensus Estimates.
The comparable store sales for the company-operated stores and
kiosks (stores and kiosks opened at least a year) decreased 4.2%
year over year. This is a key retail performance indicator
measuring growth from existing sales locations.
GAAP net loss from continuing operation, in the first quarter of
2012, was $8 million or a loss of 8 cents per share compared with a
net income of $31.4 million or 30 cents per share in the year-ago
quarter. Quarterly EPS of a loss of 8 cents was nowhere near the
Zacks Consensus Estimate of an income of 5 cents.
Quarterly net revenue was $1,008.3 million, down 0.9% year over
year, missing the Zacks Consensus Estimate of $1,065 million. The
year-over-year decrease in revenue is primarily attributable to a
significant decline in sales from the U.S. RadioShack
company-operated stores.
Quarterly gross profit was $394.5 million compared with $454.4
million in the prior-year quarter. Gross margin was 39.1% in the
reported quarter compared with 44.7% in the prior-year quarter.
This was mainly due to unfavorable sales mix toward lower margin
smartphones and other mobile devices coupled with higher percentage
of mobility sales due to expansion of kiosks within
Target Corp.
(
TGT
) stores.
Quarterly Selling, General, and Administrative expenses were
$373.3 million compared with $370.6 million in the year-ago
quarter. Operating income in the first quarter of 2012 was a mere
$1.8 million compared with $65.1 million in the year-ago
quarter.
During the first quarter of 2012, RadioShack generated $48.5
million of cash from operations compared with $60.8 million in the
year-ago quarter. Free cash flow (cash flow from operations less
capital expenditures) in the reported quarter was $37.3 million
compared with $46.3 million in the prior-year quarter.
At the end of the first quarter of 2012, RadioShack had $566.4
million of cash & cash equivalents, compared with $591.7
million at the end of 2011. Total debt, at the end of the previous
quarter, was $674.9 million compared with $670.6 million at the end
of 2011. At the end of the first quarter of 2012,
debt-to-capitalization ratio was 0.48 compared with 0.47 at the end
of 2011.
Segment Results
U.S. RadioShack Company-operated store
segment, which is the prime contributor of total revenue, was down
6.9% year over year to $833.6 million.
Within this segment, Mobility sales were down 5.2%, primarily
due to lower postpaid wireless sales from
Sprint Nextel Corp.
(
S
). Signature revenue was up 0.7% due to higher sales of tablet
accessories, headphones, wireless accessories and service
agreements. Consumer Electronics sales were down 24.1% mainly due
to lower sales of digital TVs, digital music players, and digital
cameras.
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KELLOGG CO (
K
): Free Stock Analysis Report
PROCTER & GAMBL (
PG
): Free Stock Analysis Report
RADIOSHACK CORP (
RSH
): Free Stock Analysis Report
SPRINT NEXTEL (
S
): Free Stock Analysis Report
TARGET CORP (
TGT
): Free Stock Analysis Report
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