Zacks Equity Research highlights Companhia Vale do Rio Doce (NYSE: RIO) as the Bull of the Day and Deckers Outdoor (Nasdaq: DECK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Barclays PLC (NYSE: BCS), Genomic Health, Inc. (Nasdaq: GHDX) and Newfield Exploration Company (NYSE: NFX).
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: Companhia Vale do Rio Doce (NYSE: RIO)
RIO reported very positive numbers for the second quarter 2008. However, the share price has been under pressure due to a more challenging international economic environment for cyclical industries, like mining. Despite all the short-term problems, we believe iron ore prices will not be affected.
Moreover, the stock’s current valuation already discounts a worst-case economic scenario. We consider the recent sell-off as a great buying opportunity.
Bear of the Day: Deckers Outdoor (Nasdaq: DECK)
Despite the upside in the second quarter and positive guidance, we believe the risks associated with DECK shares are not reflected in its current stock price. These risks include UGG sales growth decelerating and profit margin contraction.
Given the market’s high expectations for Deckers’ continued growth, the stock has substantial downside risk if the company’s earnings growth were to slow and its profit margins to decline. As a result, we are downgrading DECK shares from Hold to Sell.
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Barclays PLC (NYSE: BCS)
We are maintaining our Hold on Barclays PLC, an international financial services group engaged primarily in banking, investment banking, and asset management. In its first half report, Barclays posted net earnings of £1.7 billion, down 35% year over year and below our estimate due to higher impairment and provision charges from credit market dislocations at Barclays Capital.
Most other units performed reasonably well in view of the circumstances. We are cutting our EPADS estimates to $4.00 from $4.50 for 2008 and to $4.50 from $5.30 for 2009, partly reflecting dilution from the issue of 1.6 billion shares in July. In addition, results should continue to reflect turmoil in the US subprime and other credit markets. Positively, Barclays reduced credit market exposures by £5.1 billion during the half. We believe the dividend is safe.
Genomic Health, Inc. (Nasdaq: GHDX)
Genomic Health’s lead product is Oncotype DX, which is used for early stage breast cancer patients to predict the likelihood of cancer recurrence. The company is also conducting studies to expand the product offering of Oncotype DX for patients with colorectal cancer. Sales of Oncotype remain robust. We maintain our Hold rating on the stock with a price target of $25.00.
On August 5, the company announced its second quarter results where total revenue increased to $27.8 million compared to $14.7 million in the second quarter of 2007. It also exceeded our estimate of $24.9 million. Net loss was $4.1 million in the second quarter of 2008, compared to $7.2 million in the second quarter of 2007. Our estimate of net loss was $6.2 million.
Newfield Exploration Company (NYSE: NFX)
We are reiterating our Buy rating on Newfield shares following its second-quarter outperformance, driven by volume gains and cost discipline. Production of 57.6 Bcfe [billion cubic feet equivalent] was above the upper-end of the company’s guidance range, reflecting robust output from the Woodford Shale and Monument Butte plays. Volumes are expected to grow approximately 24% this year, aided by contributions from development projects currently underway.
We have raised our earnings estimates to reflect recent operational successes and a higher commodity-price deck. Our new 2008 and 2009 EPS estimates are $4.37 and $6.38, up from $3.33 and $3.57 before, respectively.
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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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