Zacks Bull and Bear of the Day Highlights: Aetna, McDermott International, Kellogg, General Mills and Ralcorp Holdings - Press Releases

By
A A A

For Immediate Release

Chicago, IL - November 23, 2011 - Zacks Equity Research highlights Aetna Inc. ( AET ) as the Bull of the Day and McDermott International ( MDR ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Kellogg, Inc. ( K ), General Mills, Inc. ( GIS ) and Ralcorp Holdings Inc. ( RAH ).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2678 .

Here is a synopsis of all five stocks:

Bull of the Day :

Aetna Inc.'s ( AET ) third quarter 2011 results exceeded the Zacks Consensus Estimate. Declining utilization, strong performance across all the product lines, disciplined pricing and medical cost trends powered the earnings upside.

Aetna is making very good progress in its Medicare business. The lifting of the CMS sanctions in June and the acquisition of Genworth's Medicare Supplement business will advance its Medicare platform. Aetna is also aggressively looking to generate incremental fee revenues by managing the infrastructure necessary for care organizations. Aetna is growing its international business for diversification benefits.

Moreover, its deployment of $1.2 billion for acquisitions will gear it fully for the changed environment after the implementation of the Health Care law. A solid balance sheet, in-target range of debt and adequate liquidity provide strength.

Bear of the Day :

Following a third quarter earnings miss and disappointing outlook for 2012, we are maintaining our Underperform recommendation for McDermott International ( MDR ) shares. The company recently reported lower-than-expected EPS for the September quarter, adversely affected by higher costs and weak activity in the Middle East.

McDermott has already warned that its margins will suffer next year due to lower marine activity and fabrication work. Near-term bookings remain lumpy at McDermott, as the current uncertain environment has hurt the economics of building new oil and gas infrastructure. Additionally, the transfer of the power generation and government operations has left McDermott with a less diversified business, thereby heightening its risk profile.

These factors are reflected in our continued Underperform recommendation on the company's shares. Our $11 price objective reflects 2012 P/E multiple of 10.2x.

Latest Posts on the Zacks Analyst Blog :

Kellogg Slips to Sell

Following the third quarter 2011 earnings, we have downgraded our recommendation on Kellogg, Inc. ( K ) to Sell from Hold.

Kellogg posted weak third-quarter 2011 earnings of 80 cents per share, which lagged the Zacks Consensus Estimate by 10.1% and the prior-year earnings by 11%, on the back of economic slowdown, increased cost of goods sold, increased supply-chain costs and reinstatement of incentive compensation costs.

The cost of commodities, energy and fuel soared and peaked in the year, exceeding the expectations. Gross margins and operating margins also plummeted by 270 and 310 basis points, respectively, in the third quarter of 2011 due to mounting costs. Besides, the investments in the supply chain infrastructure across the U.S. added to the gross margin pressure, resulting in increased logistic costs, and reduced operating leverage.

Kellogg also expects gross margin to remain under pressure in fiscal 2011 and be down approximately 100 basis points compared to 2010. Kellogg has also narrowed its internal operating profit guidance to a range of down 2% to 4% for the year 2011 due to the impact of third quarter results and expected continued investments in supply chain during the remainder of the year.

Though the company has shown signs of improvement in the third quarter, particularly in the top-line growth, the results do not inspire in a challenging environment. Thus, the company has reaffirmed its 2011 internal sales guidance growth in the range of 4% to 5%. Earnings are also expected to remain flat for 2012.

In addition, Kellogg has a highly leveraged balance sheet, and is focused on continued reinvestment in the brands, as well as optimizing its business model and global organization. All these activities require huge cash investment. Though Kellogg has a strong cash-generating capability, but it is utilized to repurchase shares or pay dividends.

Additionally, Kellogg needs to finance the interest obligations on its long-term debts, which have increased at a 4-year CAGR (2006-2010) of 13%; whereas Kellogg had a total debt of approximately $5.3 billion and total equity of $2.3 billion, at the end of October 1, 2011.

Though the company has provided greater visibility in achieving its long-term profit growth targets with its continued spending on cost-reduction initiatives, we believe that intense competition from other established players and high debt load undermine the company's future growth prospects.

Agreement of Analysts

For the current fiscal 2011, 16 out of 17 analysts covering the stock lowered their estimates over the past 30 days, while 15 out of the 19 analysts reduced their estimates for fiscal 2012. Thus, there are no positive catalysts to drive the stock.

Magnitude of Estimates Revisions

For fiscal 2011, the estimates plummeted from $3.48 to $3.38 over the past 30 days, while the analysts lowered their estimates from $3.78 to $3.57 in fiscal 2012.

Kellogg, which competes with General Mills, Inc. ( GIS ) and Ralcorp Holdings Inc. ( RAH ), holds a Zacks #4 Rank, translating into a short-term Sell rating.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649 .

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.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=7158 .

About Zacks

Zacks.com is a property of Zacks Investment Research , Inc., which was formed in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank , which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment

Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4582 .

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter:  http://twitter.com/zacksresearch

Join us on Facebook:  http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com

http://www.zacks.com


 
AETNA INC-NEW ( AET ): Free Stock Analysis Report
 
GENL MILLS ( GIS ): Free Stock Analysis Report
 
KELLOGG CO ( K ): Free Stock Analysis Report
 
MCDERMOTT INTL ( MDR ): Free Stock Analysis Report
 
RALCORP HLD-NEW ( RAH ): Free Stock Analysis Report
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AET , GIS , K , MDR , RAH

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
100%
67%
100%

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com