Zacks Equity Research highlights Deckers Outdoor (Nasdaq: DECK) as the Bull of the Day and The Corporate Executive Board (NYSE: EXBD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Electronic Data Systems (NYSE: EDS), CF Industries Holdings (NYSE: CF) and Buffalo Wild Wings (Nasdaq: BWLD). 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: Deckers Outdoor (Nasdaq: DECK)
Deckers’ first quarter earnings were $0.10/share ahead of the consensus forecast, and management (which is usually conservative) increased its guidance for full-year 2008. The company’s UGG brand continues to drive its overall sales. In the first quarter, UGG brand sales grew an incredible 84% year-over-year. DECK shares popped about 15% on the news. Even after that spike higher, DECK shares are still down about 11% year-to-date. We continue to believe the company’s fundamental story, strong growth, and high visibility will enable its stock to outperform. We reiterate our Buy rating on DECK shares and increase our target price from $135 to $162, which is 25x our 2008 EPS estimate.
Bear of the Day: The Corporate Executive Board (NYSE: EXBD)
We maintain our Sell rating on shares of EXBD following the release of Q1 results. Although Q1 results exceeded expectations, the majority of the upside was attributable to timing issues, and we note that management left its full-year earnings guidance unchanged. Given the current operating pressures, along with ongoing concerns regarding a slowing economy, we believe the shares should trade at a discount to the peer group average. In light of these issues, we anticipate that the company’s shares will underperform the market in the near-term, and as such, we rate the shares of EXBD a Sell at this time.
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Electronic Data Systems (NYSE: EDS)
With several years of revenue growth under its belt, EDS has leveraged its operations into accelerating EPS growth. However, contract signings slowed in 2007, meaning 2008 looks to be a year of lackluster growth. Although Q1 exceeded estimates, EDS will have a back-end loaded year if it is to meet 2008 expectations. Moreover, we believe there are several major IT trends working against the traditional outsourcing model.
Given a potential slowdown in the U.S. economy, we maintain our six-month price target of $15.50 and a Sell rating on EDS shares. Shares of EDS are currently trading at 14.7x 2008 EPS estimate of $1.35, a discount to the industry mean. Although continued improvement in free cash flow is encouraging, EDS blamed the usage of free cash flow in Q108 to be seasonal. The company's guidance of $900 million for 2008 gives it a multiple of about 11.2x on price/operating cash flow.
CF Industries Holdings (NYSE: CF)
CF Industries has leading market shares in many key fertilizers. Strong domestic and international grain markets have produced an exceptionally high global demand for fertilizer, translating into substantially higher selling prices for all the products.
As a result, we rate the shares a Buy with a target of $160. On April 24, 2008, CF Industries reported net earnings of $2.77 per diluted share for the first quarter of 2008 versus $1.02 per share for the same quarter a year ago.
Net sales totaled $677 million, up 41% from the year-earlier quarter. Net sales for nitrogen totaled $438 million, up 25% from the first quarter 2007. Segment sales volumes for the quarter were down 11% from the first quarter 2007. Volume was 470,000 tons, up modestly from 461,000 in the year-earlier quarter, reflecting increased phosphate exports.
Buffalo Wild Wings (Nasdaq: BWLD)
Boasting a track record of strong annual growth and a viable strategy, Buffalo Wild Wings is well positioned in our view to attain its annual 25% net income growth over the next three years. A key growth driver will be the company's ability to continue its recent improvement in company-owned average weekly sales and bring it in line with its franchisees.
Despite falling 49% from its 52-week high, BWLD shares still trade at a slight premium to the restaurant growth group. We think the company's high exposure to the price of chicken wings and rising minimum wage rates offset the premium it deserves owing to a unique concept that has delivered consistent annual EPS growth.
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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