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Capital One, Kroger Co., Walgreen Co., Micron Technology and Tiffany & Company

^{Published on 2009-12-28 04:35:30 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights Capital One (NYSE: [ COF ]) as the Bull of the Day and Kroger Co. (NYSE: [ KR ]) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Walgreen Co. (NYSE: [ WAG ]), Micron Technology (NYSE: [ MU ]) and Tiffany & Company (NYSE: [ TIF ]).

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 ]:

We are upgrading our recommendation on Capital One (NYSE: [ COF ]) to Outperform. The company's third quarter earnings were substantially ahead of the Zacks Consensus Estimate, driven primarily by higher-than-expected revenue and almost stable expenses.

However, increased provisions and decrease in average deposits were on the downside. Nevertheless, we anticipate continued synergies from the company's geographic diversification and expense management initiatives. Additionally, the repayment of the bailout money and the warrants sell-off by the Treasury augur well for investors, as the company is now free from government intervention and pay restrictions.

[ Bear of the Day ]:

Kroger Co. (NYSE: [ KR ]) is not immune to the tough economic environment. The intensifying price war among grocery stores to lure budget-constrained consumers has compelled Kroger to cut prices, hurting its sales and margins.

The company reported lower-than-expected third-quarter 2009 results. The quarterly earnings of 27 cents per share missed the Zacks Consensus Estimate of 36 cents, and fell 25% year-on-year. Consequently, Kroger trimmed its full-year 2009 earnings forecast.

The company's conservative outlook underlines the raging competition. Kroger's debt-to-capitalization ratio is also substantially higher, which could adversely affect its credit worthiness making it more susceptible to the economic downturn and competitive pressures.

Latest Posts on the Zacks [ Analyst Blog ]:

Walgreens Beats Estimates

Walgreen Co. (NYSE: [ WAG ]) began fiscal 2010 with a strong first quarter. Walgreens reported earnings of 52 cents per share, which were slightly above the Zacks Consensus Estimate of 48 cents and 41 cents in the comparable prior-year quarter. Net sales for the quarter increased 9.5% year-over-year to $16.4 billion driven by 4.9% same store sales (those open for more than a year) growth. Front-end same store sales increased 2.7% while prescription same store sales increased 6.1% in the quarter.

Gross margin for the quarter at 27.6% declined by 10 bps compared to the corresponding period last year primarily on account of non-retail businesses, front-end product mix and restructuring costs.

Walgreens generated $1.2 billion for the quarter in cash flow from operations, an increase of about 275% driven by strong drugstore performance and improved working capital. At the end of the first quarter, Walgreens had $2.5 billion in cash and cash equivalents.

Walgreens uses the strong cash balance for suitable acquisitions as well as rewarding its shareholders with generous dividend payments and share repurchases. As a part of Walgreens' $2 billion stock repurchase program announced in October, the company bought back shares worth $150 million during the quarter.

In order to make best use of the available funds, Walgreens has scaled down its plan of opening stores till 2011. This is evident from the decline in the opening of new stores during the quarter. During the first quarter, the company opened 172 new drugstores compared with 212 in the year-ago quarter. We believe this decision will benefit the company as new stores take 2-3 years to become profitable. As of Nov 30, the company operates 7649 stores in 50 states, the District of Columbia and Puerto Rico.

Micron Swings to Profit

Micron Technology (NYSE: [ MU ]), one of the largest memory companies, reported first quarter of fiscal year 2010 earnings that beat consensus estimates by 15 cents. Revenue beat the consensus by 8.7%.

Total revenue was $1.74 billion, up 33.6% sequentially and 24.1% year over year. The company saw broad-based strength across all served end-markets, with computing growing the strongest (up over 80% sequentially), followed by mobile (up over 60%), networking (up around 30%) and server (up 25%). Memory generated 94% of Q1 revenue, with the balance coming from Imaging.

Tiffany Contracts with Gem

Tiffany & Company (NYSE: [ TIF ]), a high-end jewelry designer, manufacturer and retailer, recently signed a deal with Kimberley Diamond Co., a unit of Gem Diamonds Ltd, whereby the latter will supply fancy yellow diamonds to the former for five years. However, the terms of the agreement were not disclosed.

Gem Diamonds through its Ellendale mine in Western Australia will supply the diamonds to Laurelton Diamonds Inc, the Tiffany's diamond sourcing and polishing unit. Tiffany has entered into a contract to purchase all the fancy yellow diamonds to be mined throughout the economic life of Ellendale mine, which is expected to be five years.

Tiffany will pay the full market price for the diamonds, which will be reviewed after every six months.

The jewelry market has been hit hard by the global meltdown, as consumers affected by lower discretionary income have been prioritizing their purchases. This has led many other retailers to shut stores or wind-up operations. The elimination of stiff competition had helped big players like Tiffany, which holds a significant position in the world jewelry market and is poised to benefit from its increased geographic reach when the economy rebounds. To weather the downturn, it has been concentrating more on smaller size store formats that offer selected collections of lower priced higher-margin products.

Get the full analysis of all these stocks by going to [ http://at.zacks.com/?id=2649 ].

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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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