Zacks Bull and Bear of the Day Highlights: Unilever, McDermott International, Cummins, Caterpillar and Navistar International
For Immediate Release
Chicago, IL – December 17, 2012 – Zacks Equity Research highlights Unilever Plc (UL) as the Bull of the Day and McDermott International (MDR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cummins Inc. (CMI), Caterpillar Inc. (CAT) and Navistar International Corporation (NAV).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We are upgrading our recommendation on Unilever Plc (UL) to Outperform from Neutral based on impressive third quarter 2012 results. Despite high input costs and a tough currency environment, Unilever posted healthy underlying sales growth of 5.9% on the back of both volume and pricing gains.
Increased investment in innovation and brand-building also contributed to the growth. Organic sales in the emerging markets improved as well. The company maintained its dominant market share in all its business segments and recorded decent growth in spite of the global economic crisis.
We are encouraged by Unilever's solid fundamentals and a wide portfolio of globally recognized flagship brands. Moreover, continuous innovation in all the segments adds to its growth prospects.
Given its erratic earnings trend over the last few quarters and a disappointing outlook for 2013, we are downgrading McDermott International (MDR) shares to Underperform from Neutral. Though the energy-focused engineering and construction firm beat revenue estimates in the most recent quarter, it had to deal with steeper operating costs.
McDermott has already hinted that its top line will suffer next year due to uncertainty regarding the timing of big awards. Near-term bookings also remain lumpy, 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. Our $9.75 price objective reflects 2013 P/E multiple of 11.1x.
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Cummins Boosts Share Repurchase
Cummins Inc. (CMI) revealed that its Board of Directors has authorized a new share repurchase program and the acquisition of up to $1 billion of the company’s stock. The new repurchase program has been announced at a time when the existing $1 billion share repurchase program is about to end.
Under the existing $1 billion share repurchase program, approved in February 2011, Cummins has repurchased a total of $749 million worth of shares. Of the total amount, $518 million worth of shares have been repurchased in 2011 and the rest $231 million in the first nine months of 2012,
Cummins reported a 19.1% fall in adjusted earnings per share to $1.78 in the third quarter of 2012 from $2.20 in the year-ago quarter. Net income declined 20.6% to $336.0 million from $423.0 million in the third quarter of 2011. With this, profits in the quarter missed the Zacks Consensus Estimate by 6 cents per share.
The decrease in earnings was due to uncertainty in most of the markets served by the company. The company has actively responded to this situation by canceling or delaying some projects, reducing production at some of its manufacturing plants and cutting discretionary expenses. It also plans to reduce workforce by 1000 to 1500 people by the end of this year.
The company’s revenues for the quarter dipped 11% to $4.1 billion, lower than the Zacks Consensus Estimate of $4.2 billion. The decline in revenues was driven by a 21% fall in revenues in the international market, which offset the 2% rise in revenues in North America.
For 2012, Cummins expects revenues of $17.0 billion, which is lower than the previous guidance of $18.0 billion. It also expects EBIT margin of 13.5%, down from the previous estimate of 14.25%–14.75% for the year.
Cummins Inc. is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems.
The company faces stiff competition from Caterpillar Inc. (CAT) and Navistar International Corporation (NAV). Currently, the stock retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) rating of Hold.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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