The Zacks Analyst Blog Highlights: RadioShack, Best Buy, Ford Motor, General Electric and Toyota Motor
Zacks Equity Research
For Immediate Release
Chicago, IL – November 26, 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 includeRadioShack Corporation (RSH), Best Buy Co. (BBY), Ford Motor Co. (F), General Electric Company (GE) and Toyota Motor Corporation (TM).
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Here are highlights from Friday’s Analyst Blog:
S&P Lowers RadioShack Rating
Rating agency Standard and Poor’s (S&P) downgraded the credit rating of the struggling U.S. consumer electronics and service retailer RadioShack Corporation (RSH) to CCC+ from B- along with a negative outlook. S&P expects RadioShack to continue with its poor financial performances as the company remains surrounded with fierce competition from its rival Best Buy Co. (BBY) and stores operated by other wireless carriers.
RadioShack's rating was downgraded on the back of the company’s vulnerability to non-payment of its dues and its dependence on favorable business and economic condition to meet its financial obligations. Meanwhile, the negative rating outlook conferred to RadioShack indicates that in case of any poor financial performance by the company, there remain chances of further reduction in outlook.
The primary cause of concern for the creditors of RadioShack is that the recovery rating on the company’s senior unsecured debt is “4”, which indicates that in case of a payment default, there is only a 30-50% chance of recovering the money.
According to S&P, the rationale behind the rating downgrade is that they expect the company’s earnings to remain under pressure in 2012 and 2013, mainly attributable to the competitive nature of the consumer electronics business and the high concentration of low margin mobility business, which constitute more than 50% of RadioShack’s revenue.
However, the only upside for the company is its liquidity position as it has adequate cash to meet its need over the next 12 months. RadioShack has achieved its target of securing $175 million worth of new financing at a blended interest rate of approximately 9%, which will be used to refinance half of its convertible bonds worth $375 billion, due in August 2013. However, the company’s cash position could slide if it fails to stabilize its falling margins.
The sluggish economic growth in the U.S. is hardly helping RadioShack’s prospects in any way. Weak consumer spending on the back of limited disposable income along with a very competitive industry dynamics remains the major road block for the company. Accordingly, we do not foresee any meaningful changes in the company’s operating performances and thus remain skeptical about the growth of the company.
We currently maintain a long-term Underperform recommendation on RadioShack. However, it holds a Zacks #3 Rank, implying a short-term Hold rating.
Ford Joins with General Electric
Ford Motor Co. (F) has announced the collaboration with General Electric Company (GE) wherein the latter will purchase Ford’s 2,000 C-MAX Energi plug-in hybrids in order to convert half of its global fleet with alternative fuel vehicles. Under the deal, Ford will jointly offer General Electric’s alternative fuel infrastructure technology, including WattStation charging stations and CNG natural gas fueling station to customers.
The purchase of C-MAX Energi by General Electric is a part of its commitment for ecomagination. Through this strategy, the company provides innovative solutions that maximize resources utilization, drive economic performance and support the world in smooth functioning.
General Electric focuses on providing its customers more economical and eco-friendly vehicles, thereby adding value to the customers. After the purchase, General Electric will have a fleet of 5000 vehicles with alternative fuel. The company has set a target of having 25,000 vehicles with alternative fuel.
The partnership will mutually benefit both the companies. Both General Electric and Ford are focusing on promoting energy saving and advanced technology for the vehicles. Ford will be launching six new electrified vehicles to meet the rising demand for fuel efficient vehicles.
Both the companies will be working with the researchers from Georgia Institute of Technology to study employee driving and charging habits. This move will improve the efficiency of the electric vehicles and charging performance. Ford also plans to share the research results with the other companies interested in having electric vehicles in their fleet.
Michigan-based Ford is one of the largest automobile producers globally. The company is divided into two segments: Automotive and Financial services. Although the U.S. is Ford’s primary selling ground, Europe, South America, and the Asia-Pacific constitute its other major markets.
We appreciate the company’s expansion plan in both the mature and emerging markets, continuous focus on hybrid vehicles and plans for launching 6 new Lincoln models in the next 3 years. However, we are concerned about its sluggish European and South American operations together with disappointing results from its Financial Services.
Ford, which competes with Toyota Motor Corporation (TM), maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have a long-term (more than 6 months) Neutral recommendation on its shares.
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