Chicago, IL – December 07, 2012 – Zacks Equity Research highlights Thoratec Corp. (THOR) as the Bull of the Day and ArcelorMittal (MT) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tiffany & Company (TIF), Signet Jewelers Limited (SIG) and Zale Corporation (ZLC).
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:
We maintain our recommendation for Thoratec Corp. (THOR) at Outperform. Its earnings per share of $0.44 in the third quarter beat the Zacks Consensus Estimate. The company achieved 27% unit growth for HeartMate II in the third quarter.
Thoratec's competitor HeartWare has gotten approval, in November 2012, from the FDA for its Ventricular Assist System as a bridge to transplantation. However, there is no imminent competitive threat from HeartWare in the DT segment, as its product is not expected to be launched till 2015. We believe that the DT condition will account for the major part of growth in the Ventricular Assist Device (:VAD) market.
Despite less visibility, Thoratec has expertise in product development. The company continues to do well in overseas markets despite economic turmoil in Europe. We maintain our recommendation on the stock with a price target of $44.00, based on a P/E of 27.5x our 2012 EPS estimate.
Bear of the Day:
We are retaining our Underperform recommendation on ArcelorMittal (MT) following its dismal third-quarter 2012 results. It turned to a loss in the quarter, hurt by weak economic conditions and lower steel pricing. Both revenues and adjusted loss per share missed the Zacks Consensus Estimates. The company announced its plans to cut its annual dividend.
ArcelorMittal remains affected by the challenging economic conditions in Europe. It is also exposed to volatility in steel pricing and tough competition and has significant debt which is almost equal to its market capitalization.
Steel industry oversupply due to imports and Chinese production has pressured prices and might lead to further price declines. Moreover, weakness in end markets due to macroeconomic uncertainty is another area of concern.
Latest Posts on the Zacks Analyst Blog:
Tiffany Losing Its Sheen
It seems as of now that Tiffany & Company’s (TIF) stake is at an unfavorable position as the challenging economic condition is taking away the sheen from this jewelry retailer. This is quite apparent from its lackluster performance for the fourth consecutive quarter and the lowered fiscal 2012 outlook.
Sluggish Sales Trend
Tiffany’s global net sales in the third quarter of fiscal 2012 rose 4%, following an increase of 2% in the second quarter, and 8% for both first-quarter fiscal 2012 and fourth-quarter fiscal 2011. From this perspective, it appears that sales growth rate has increased sequentially, but it has fallen to low-single digits from the high-single digit range.
Moreover, if we look back at the sales growth in the first three quarters of fiscal 2011, the story is much clearer. Total sales in the third, second and first quarters of fiscal 2011 enjoyed double-digit growth, increasing 21%, 30% and 20%, respectively.
Bottom-Line Missing Zacks Estimate
Tiffany continues to disappoint with its bottom line results. The company’s third-quarter 2012 bottom-line performance mirrored the results of the second and first quarters of fiscal 2012, and fourth quarter of fiscal 2011.
Third-quarter earnings of 49 cents a share fell way behind the Zacks Consensus Estimate of 63 cents, and dropped sharply from 70 cents earned in the prior-year quarter. The disappointing result was due to shriveled gross margin and higher tax rate, apart from difficult year-over-year comparisons.
The company’s second-quarter earnings of 72 cents a share had missed the Zacks Consensus Estimate by a couple of cents, and dropped sharply from 86 cents earned in the prior-year quarter. First-quarter 2012 earnings of 64 cents a share came below the Zacks Consensus Estimate of 69 cents, and dropped from 67 cents delivered in the prior-year quarter. With regard to the fourth-quarter 2011 performance, earnings of $1.39 per share fell short of the Zacks Consensus Estimate of $1.42, and dropped from $1.44 posted in the prior-year quarter.
The earnings lagged the Zacks Consensus Estimates by 22.2%, 2.7% and 7.3% in the third, second and first quarters of fiscal 2012, respectively, and by 2.1% in the fourth quarter of 2011.
Guidance Lowered
Given the weaker-than-expected third quarter results and sluggish economic recovery in most of the countries, management trimmed its fiscal 2012 outlook for the third time in a row. The company now projects earnings in the range of $3.20 to $3.40 per share, down from $3.55 to $3.70 forecasted earlier.
Tiffany now expects total net sales growth of 5% to 6% for fiscal 2012, down from the 6% to 7% increase predicted previously. Operating margin for the year is also expected to contract. Moreover, gross margin in the fourth quarter is expected to be lower than the prior-year quarter.
Downslide in Estimates
Following Tiffany’s third quarter results, the Zacks Consensus Estimates have been portraying a downward trend.
The Zacks Consensus Estimate for the fourth quarter of fiscal 2012 dropped by 12 cents to $1.47 per share in the last 7 days. For the first quarter of fiscal 2013, the estimate fell 4 cents to 70 cents. For fiscal 2012 and 2013, the Zacks Consensus Estimates slid 32 cents and 30 cents to $3.27 and $3.80, respectively, over the same time frame.
Closing Commentary
We will have to wait and watch as to how the story unfolds in the fourth quarter. Currently, we maintain our long-term “Underperform” recommendation on the stock. Moreover, Tiffany, which faces stiff competition from Signet Jewelers Limited (SIG) and Zale Corporation (ZLC), holds a Zacks #4 Rank that translates 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.
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