CHICAGO, April 29, 2011 /PRNewswire/ -- Zacks Equity
Research highlights: AGCO Corporation (Nasdaq: AGCO) as the
Bull of the Day and Badger Meter Inc. (NYSE: BMI) the Bear
of the Day. In addition, Zacks Equity Research provides analysis on
Ford (NYSE: F), Kellogg's (NYSE: K) and
Wal-Mart (NYSE: WMT).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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:
AGCO Corporation's (Nasdaq: AGCO) adjusted first quarter
EPS of $0.81 was almost seven times
that of the year-ago quarter, driven by sales growth across all
segments and improved gross margins. For fiscal 2011, AGCO expects
EPS between $3.50 and $3.75. Global
industry sales are anticipated to grow in 2011.
With a full product line of farm equipment and a wide network of
dealers and distributors, we believe AGCO is well positioned over
the long-term to capitalize on the need for increased food
production, which is being driven by worldwide population growth.
Moreover, the company is also looking to expand operations in
high-growth emerging markets, which bode well for future operating
performance.
Over the last five years, the company's shares have traded in
the range of 4.2 to 36.4 trailing 12-month earnings. We maintain
our Outperform recommendation with a target price of $68.00, based on 20.0x P/E to our fiscal 2011
earnings estimate.
Bear of the Day:
Badger Meter Inc. (NYSE: BMI) delivered disappointing
first quarter results, as EPS declined 39% year over year to
$0.22 and fell short of the Zacks
Consensus Estimate at $0.43. Net
sales dropped 7.2% year over year to $57.4
million, compared to the Zacks Consensus Estimate of
$69 million.
The increased sales of manual meters were not enough to offset
the dismal sale of automatic meters. This resulted in decreased
gross margins as manual meters have lower margins compared with the
automatic meters.
Our long-term Underperform recommendation on the stock indicates
that it will perform below the overall market. Our $33 target price, 17.8x our 2011 EPS estimate,
reflects this view.
Latest Posts on the Zacks Analyst Blog:
How We Got to 1.8% Growth
Within the consumption of goods, consumption of non-durable
goods is about twice as large as the consumption of durable goods.
However, since people can defer purchase of durable goods like an
auto from Ford (NYSE: F) more easily than they can defer
purchase of a box of Corn Flakes from Kellogg's (NYSE: K),
durable goods demand is very volatile. As a result, durable goods
tend to "punch above their weight" in determining if the economy is
booming or slumping.
Durable goods consumption added 0.78 points to growth, down
sharply from an addition of 1.45 points in the fourth quarter but
up from 0.54 points in the third quarter. While that contribution
is not bad, the sharp slowdown is a bit disheartening. The sector
is only 10.88% of PCE and 7.75% of overall GDP, yet it contributed
43.33% of the overall GDP growth in the quarter. Early in
recoveries it tends to have a bigger positive impact, but it also
has a big negative impact when the economy falls into
recession.
Non-durable goods are 23.15% of PCE and 16.48% of overall GDP.
The sector's contribution to growth fell to 0.34 points in the
first quarter from 0.65 points in the fourth quarter and 0.39
points in the third quarter. For a "Steady Eddie" part of the
economy, this is nice solid, and importantly, sustainable level of
contribution to growth.
Overall, the Consumer is doing his and her part in getting the
economy rolling again. The strong contribution from the consumer
service sector is encouraging. All three parts made solid
contributions to growth, though goods much less so than in the
fourth quarter.
While over the long term we can worry that far too much of the
overall U.S. economy is dedicated to consumption and not enough to
investment and exports, for right now we want to see the Consumer
alive and kicking. Without a doubt he was in the first quarter, but
not kicking as hard as at the end of last year.
Our trade deficit is unsustainably large. It -- not the budget
deficit -- is the reason why we are so in debt to the rest of the
world. The budget deficit feeds into our overseas indebtedness only
indirectly. Over half of our overall trade deficit comes from our
addiction to imported oil.
Unfortunately, a weaker dollar is not likely to help
significantly on this front, as when the dollar weakens, the price
of oil tends to rise. However, a weaker dollar is very useful in
reducing the non-oil part of the deficit. It makes imported goods
more expensive, and therefore less competitive with domestically
made substitutes. It also makes our exports more competitive.
However, if we can start to replace imported oil with
domestically produced energy we could substantially boost the
overall rate of economic growth. While ultimately we would want to
do that with renewable sources, such as wind and solar, they mostly
produce electricity, and oil is mostly used as a transportation
fuel. We do, however, have very abundant supplies of natural gas,
and the technology for using natural gas as a transportation fuel
is already very well established.
We need to take steps NOW to transition to the use of more
natural gas as a transportation fuel to replace oil. Ethanol really
is not that good of an answer since the production of corn to be
made into ethanol for fuel requires using a lot of oil. The use of
a huge portion of our corn crop to make fuel is a big part of the
reason that food prices are rising so quickly. That is a bit of a
problem here, and it is a huge problem for the rest of the
world.
However if we can move to ethanol made from things like sawgrass
or the corn stalks that are left over from the corn harvests, that
would be a major step forward. Bio-fuels based on algae are also
another promising area. However, commercialization of non-food
based ethanol is several years away.
A weaker dollar would help significantly on the other half of
the trade deficit, the part that is made up of all the stuff lining
the shelves at Wal-Mart (NYSE: WMT). King Dollar is a tyrant and needs to be deposed.
It will help on reducing imports as foreign goods become relatively
more expensive and producers fill demand from domestic production.
That does not happen overnight, however.
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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