CHICAGO--()--Zacks Equity Research highlights Agrium Inc. (NYSE: AGU) as the Bull of the Day and Embarq (NYSE: EQ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sierra Wireless Inc. (Nasdaq: SWIR), Epic Software Corp. (Nasdaq: EPIC) and The Ryland Group (NYSE: RYL).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Agrium Inc. (NYSE: AGU)
Agrium is growing through acquisition and organic expansion. The acquisition of United Agri-Products (UAP) is driving revenues and profits supported by an expanded product line in the major business segment. Rising global prices for nitrogen, potash, and phosphate leveraged by strong demand augur well for AGU.
The company also has a significant free cash flow. Therefore, we rate the shares a Buy with a target of $90.00. This is 10.9x our 2008 estimate. Currently, Agrium is trading at 9.5x our 2008 estimate of $8.27.
Our outlook for the Chemical and Fertilizer industry is positive. The industry is divided into commodity chemicals (45%) and specialty chemicals (55%). Demand for fertilizers is driven by crop plantings and crop prices, both of which are favorable. Economies of scale are important to keeping costs low. Investors should overweight chemical stocks now.
Bear of the Day: Embarq (NYSE: EQ)
We maintain our Sell rating for Embarq, the fourth largest local U.S. telecommunications carrier that was spun off from Sprint Nextel in 2006 and has agreed to consolidate with CenturyTel under an $11.6 billion merger deal (expected to close in 2Q 2009). Lower revenue forecasts for 2008, acceleration of access line loss, recently revised guidance, and expectations of lower valuation levels for CenturyTel following the merger support our thesis.
We believe that the local phone business in North America, in particular service offered by regional carriers, has significant challenges ahead as local access lines continue to decline (reflected in EQ's most recent quarterly results) and as consumers and business customers migrate to alternative solutions, including VoIP, wireless and cable offerings.
We also believe pricing pressure and the need to invest further in broadband infrastructure may strain balance sheet conditions as the high level of debt and weak cash position remain concerning.
Latest Posts on the Zacks Analyst Blog:
Sierra Wireless Inc. (Nasdaq: SWIR)
Sierra Wireless Inc., a leading developer of OEM wireless modem cards and access solutions, declared third quarter 2008 financial results below our estimates.
The company continues to be challenged with intensifying competition in the PC OEM market, coupled with unfavorable economic conditions. We remain concerned that a severe global economic downturn may reduce demand for wireless data cards and USB modems moving forward.
Epic Software Corp. (Nasdaq: EPIC)
Epicor Software Corporation reported Q308 GAAP revenues of $135.8 million were up 31.7% year over year and up 6.2% quarter over quarter. Non-GAAP revenues came in at $137.7 million. Pro-forma EPS of $0.19 was in line with our estimate.
The company has released Epicor 9 a business solution for next-generation Enterprise Resource Planning (ERP). Management expects to report revenues between $125 million and $140 million in Q408, down from Q3 mainly due to uncertain economic conditions which should constrain IT budgets of a lot of customers. Non-GAAP EPS is projected between $0.18 and $0.28.
The Ryland Group (NYSE: RYL)
The Ryland Group sells single-family detached homes -- as well as attached homes such as town homes and condominiums -- to the entry-level and to the first and second time move-up buyers.
Ryland reported a loss of $1.54 per share in 3Q08 compared to a loss of $1.30 per share in the prior-year, due to a decline in sales and margins as a result of the slowdown in the U.S. housing market. For the remainder of this industry downturn, we expect management to focus on generating cash flow, lowering inventory, reducing land investment and shedding overhead costs.
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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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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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