Zacks Equity Research highlights Aluminum Corporation of China (Chalco) (NYSE: ACH) as the Bull of the Day and ZION Bancorporation (Nasdaq: ZION) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Beacon Roofing Supply (Nasdaq: BECN), Procter & Gamble (NYSE: PG) and PepsiCo, Inc. (NYSE: PEP). Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Zacks Equity Research states Chalco announced higher revenues but lower earnings in 2007, mainly due to production increases in primary aluminum products and alumina price declines. Although the gloomy outlook for the worldwide economy in 2008 will continue to pressure the price of alumina and aluminum, Chalco should continue to benefit from strong alumina and aluminum demand in China.
We continue to view the company as having the best balanced value chain in China’s aluminum industry. Moreover, the company plans to continue to aggressively increase its production capacity. Chalco’s domestic acquisitions and offshore projects are also on the right track. Given its overall positive prospects, we are maintaining our Buy recommendation on Chalco shares.
Zacks Equity Research tells us that ZION’s 4Q07 diluted operating earnings of $0.40 per share were substantially below our estimate, as well as consensus. The earnings for the quarter were mostly impacted by $0.89 per share impairment and valuation losses on securities purchased from Lockhart Funding. Earnings were also hurt by continued weakness in the southwestern residential real estate markets, where the company has a significant exposure.
Though loan and deposit growth were impressive, net interest margin declined significantly. The quarter was also characterized by good expense control. After reviewing the results, we have lowered our EPS estimates, based on our concerns for further credit deterioration. We are maintaining our Sell recommendation on the shares of ZION with six-month target price of $46.00 per share.
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Beacon Roofing Supply (Nasdaq: BECN)
Beacon Roofing Supply reported first quarter EPS of $0.12, slightly below our estimate of $0.13 and down 40.0% from the year-ago level of $0.20, due to lower margins and high operating expenses. Going forward, BECN will benefit from market share gains, product mix, a scale-driven reduction in purchasing costs, acquisitions and other cost-reduction efforts.
A slowing housing industry in the U.S. will adversely impact its sales and margins. On account of a continuous slowdown in housing starts anticipated this year and lower-than-anticipated first quarter results, we further cut our FY08 EPS estimate to $0.47 from $0.56.
Procter & Gamble (NYSE: PG)
The Procter & Gamble Company's management is committed to a growth strategy based on (1) driving volume through product innovation and increasing penetration into developing markets, and (2) expanding profitability by focusing on higher margin categories. The plan is meeting with success in terms of top-line expansion, volume growth, and higher earnings.
Though the Gillette acquisition should be slightly accretive to earnings in fiscal 2008, the gross margin is being negatively impacted by increased commodity and energy costs. The Hold recommendation is maintained. Our target price of $76 is based on a 23.5 P/E on trailing 12-month earnings.
Management provided guidance for the third quarter and raised its full fiscal 2008 year outlook. Quarterly earnings for the third fiscal quarter are expected to be in the range of $0.79 to $0.81 per diluted share. Sales growth in the quarter is expected in the range of 8% to 10%, which includes a neutral impact from pricing and product mix, a positive 5% impact from foreign exchange, and a 1% negative impact from acquisitions/divestitures. Therefore, organic sales are expected to be in the range of 4% to 6% for the quarter.
PepsiCo, Inc. (NYSE: PEP)
Strong international growth, productivity improvements, an aggressive share repurchase program and a strong new product pipeline are driving low double-digit earnings growth for PepsiCo. Nevertheless, a sluggish domestic carbonated beverage environment, only modest low-single digit volume growth at Frito-Lay (3% in both 2006 and 2007), and pressure from higher energy and raw material costs (especially orange costs) are concerns.
Management provided its financial outlook for 2008. Earnings are expected to be at least $3.72 per diluted share, driven by volume growth in the 3% to 5% range and mid-to-high single-digit revenue growth. Management expects total commodity inflation to be in the mid single-digit range. Cash flow from operating activities is expected to be approximately $7.6 billion and capital spending is expected to be about $2.7 billion. In 2008, the company intends on repurchasing shares worth approximately $4.3 billion, and to continue selling PBG common stock to an ownership level of 35%.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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