Zacks Bull and Bear of the Day Highlights: American Physicians Service Group, AGCO Corp., Freddie Mac, Fannie Mae and Microsoft Corporation

CHICAGO--(BUSINESS WIRE)--Zacks Equity Research highlights American Physicians Service Group (Nasdaq: AMPH) as the Bull of the Day and AGCO Corp. (NYSE: AGCO) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Freddie Mac (NYSE: FRE), Fannie Mae (NYSE: FNM) and Microsoft Corporation (Nasdaq: MSFT).

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:

We are upgrading our recommendation on American Physicians Service Group (Nasdaq: AMPH) from Neutral to Outperform. American Physicians second quarter operating earnings of 82 cents per share were significantly ahead of the Zacks Consensus Estimate of 66 cents.

Results were driven by better-than-expected results in the Financial Service segment, strong policyholder retention and favorable developments from prior years. The company is also experiencing the benefits of the implementation of its cost containment measures.

Though declining rate continued to partially offset growth, policyholder retention, conservative reserve position and capital position augur well for a solid growth path with the market recovery.

Bear of the Day:

We are downgrading our rating on AGCO Corp. (NYSE: AGCO) from Neutral to Underperform. The company is witnessing soft demand conditions in most of its markets due to the significant slowdown in the global economy.

The near-term outlook for agricultural equipment is extremely uncertain, especially in Europe, which represents a major portion of the company's total revenue. Given the continued slowdown in the global economy, tighter credit markets and unfavorable foreign currency exchange rates, AGCO expects 2009 revenue to decline 20 23% from $8.4 billion in 2008.

Also, the company forecasts 2009 EPS in the range of $1.30 $1.50, compared to $4.09 in 2008 due to weak sales and lower margins.

Latest Posts on the Zacks Analyst Blog:

Used Home Sales Soar

While the official inventories are down, I am still concerned about the "shadow inventory" out there. Banks have been slow to foreclose, in part due to political pressures, but also because if they do so, then they are going to have to book the loss. Instead, they are trying to modify the mortgages through the HAMP program, which allows them to "extend and pretend" that the mortgages are still performing just fine.

In the meantime, more and more people are falling behind on their mortgage payments. In a separate report, Freddie Mac (NYSE: FRE) reported that delinquencies jumped to 3.33 percent of its book of business in September from 3.13 percent in August and 1.22 percent in September 2008. Those are not just one payment late, but delinquencies of 90 days or more.

The rise in delinquencies has been relentless and shows no signs of slowing. One of four things has to happen. Either all these folks who are behind on their mortgages will have to:

1) Come up with the cash to back to current

2) The mortgage must be modified in a way that people can afford the house, resulting in a big hit to the value of the mortgage to the bank by either cutting the interest rate and or principal on the mortgage

3) The banks and ultimately Freddie -- and Fannie Mae (NYSE: FNM) -- will just have to let people continue to live rent- and mortgage-payment-free indefinitely

4) Or there will have to be another wave of foreclosures.

Microsoft Beats, Results Down

Microsoft Corporation (Nasdaq: MSFT) reported first quarter 2010 earnings that beat the Zacks Consensus Estimate by 8 cents. Revenue beat the consensus by 4.9%.

Revenue of $12.9 billion was down 1.4% sequentially and 14.2% year over year. This excludes $1.47 billion in deferred revenue related to the Windows 7 Upgrade Option as well as initial sales of Windows 7 to OEMs and retailers. Consumer demand drove increases in Windows and Xbox products, but this was offset by sluggish business spending. Foreign exchange had a $233 million impact on revenue in the last quarter.

Approximately 35% of total revenue came from annuity, 30% from OEM, 25% from licenses and 10% from other business. Management estimates that the PC market was up mid-teens from the Jun 2009 quarter, with approximately 12% of the total market consisting of net books.

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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