Zacks Bull and Bear of the Day Highlights: Macy's, AGL Resources, Jones Lang LaSalle, Procter & Gamble and Safeway
Zacks
For Immediate Release
Chicago, IL – May 17, 2012 – Zacks Equity Research highlights Macy's, Inc. (M) as the Bull of the Day and AGL Resources, Inc. (GAS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Jones Lang LaSalle Incorporated (JLL), Procter & Gamble Co. (PG) and Safeway Inc. (SWY).
Macy's, Inc. (M) has been taking prudent steps to increase sales, profitability and cash flows. These include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy's continues to focus on price optimization, inventory management and merchandise planning. These help the company to deliver better-than-expected first-quarter 2012 results.
The quarterly earnings of $0.43 per share beat the Zacks Consensus Estimate of $0.40, and rose 43.3% from the prior-year quarter. Macy's continues to expect fiscal 2012 earnings between $3.25 and $3.30 per share.
The company hinted that it is seeking to expand both the Macy's and Bloomingdale's brands, which present enormous opportunities to enhance market share. Macy's, which saw a 1.2% increase in April comparable-store sales, now expects comps growth of approximately 3.7% for fiscal 2012.
We are maintaining our Underperform recommendation on AGL Resources, Inc. (GAS) with a target price of $35. We expect shareholder sentiment toward the company to remain lukewarm, considering its investment in higher-risk unregulated operations, ongoing regulatory uncertainties and the challenging economic environment.
AGL's earnings are likely to suffer in 2012 due to a less-than-favorable outlook at its wholesale segment. Additionally, the inclusion of the shipping operations (post Nicor acquisition) has left AGL with a weak business, thereby heightening its risk profile. Partially offsetting these negatives are the company's large and stable customer profile, consistent dividend growth and strong liquidity position.
Considering these factors, we see little reason for investors to own the stock and therefore maintain our Underperform recommendation. Our $35 price objective reflects a 2012 P/E multiple of 12.7x.
Jones Lang LaSalle Incorporated (JLL), a leading real estate investment trust (:REIT), has recently extended its global strategic alliance with Procter & Gamble Co. (PG), one of the largest consumer goods companies in the world, by forging a new five-year agreement as its global commercial facilities service partner.
With the deal, Jones Lang has further cemented its strategic ties and reinforced the business relationship with Procter & Gamble that had originated in 2003, when the two companies joined together to pioneer service delivery approaches and technology-supported platforms to excel competitive pressure.
Under the terms of the new agreement, Jones Lang would provide integrated facility management, project development, construction management and strategic occupancy planning services for all the owned and lobal leased corporate facilities portfolio of Procter & Gamble, spanning over 60 countries across 6 continents including North America, South America, Europe, Africa, Asia and Australia.
Several positives weighed in favor of Jones Lang in outsmarting competitors in the race to be adjudged the best in its business by Procter & Gamble, including its unrivalled track record of superior service delivery, flexible global service model and dedication to using facilities and real estate investments as a competitive advantage for the consumer goods company.
Safeway Boosts Dividend
Major grocery chain Safeway Inc. (SWY) recently announced a 21% increase in its regular quarterly dividend to 17.5 cents per share from earlier quarterly rate of 14.5 cents. The dividend will be payable on July 12 to shareholders of record as of June 21, 2012.
Safeway has an effective capital deployment policy in place and strives to benefit shareholders through dividend payments and share repurchases. During the first quarter, the company repurchased 46 million shares for $1 billion. It additionally increased its share repurchase authorization by $1.0 billion to $1.1 billion.
Despite the prevailing volatile macro environment, Safeway possesses high earnings visibility, consistent cash generation ability and disciplined investment. At the end of the first quarter of 2012, Safeway had $134.5 million in cash and cash equivalents compared with $729.4 million at the end of 2011.
The company’s free cash flow in the first quarter declined to negative $224 million from positive free cash flow of $112 million due to higher capital expenditure of $308 million ($185 million in the year-ago quarter). In 2012, Safeway expects around $900 million in capital expenditures with free cash flow in the range of $850–$950 million.
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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