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Ford Motor Company, Kirkland's, Goldman Sachs Group, Royal Bank of Scotland Group and JPMorgan Chase

^{Published on 2010-09-13 14:10:51 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights: Ford Motor Company (NYSE: [ F ]) as the Bull of the Day and Kirkland's (Nasdaq: [ KIRK ]) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Goldman Sachs Group Inc. (NYSE: [ GS ]), Royal Bank of Scotland Group plc (NYSE: [ RBS ]) and JPMorgan Chase & Co. (NYSE: [ JPM ]).

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 ]:

Ford Motor Company (NYSE: [ F ]) looks forward to widening its market share through its accelerated product transformation plan: "One Ford."

Incorporating key objectives such as shifting focus from trucks to small cars, delivering more vehicles from fewer core platforms and implementing cost reduction efforts, the plan continues to have a favorable impact on the stock. In 2009, the plan already turned in a profit after 4 years. Furthermore, it helped the automaker gain market share in the U.S.

In addition, favorable net pricing and improved Ford Credit results are driving Ford's earnings. We also expect the company to benefit significantly from its focus on emerging markets. These factors have led us to continue with our Outperform recommendation on the stock with a target price of $14.

[ Bear of the Day ]:

Kirkland's (Nasdaq: [ KIRK ]) reported meager second-quarter 2010 results with earnings of $0.16, which was below the Zacks Consensus Estimate by $0.02. The company's susceptibility to the global economic downturn coupled with stiff competition, severely undermines the company's future growth prospects and profitability.

The global economic environment has been challenging for the past fifteen months. Declining real estate value, reduced lending by banks, solvency concerns of major financial institutions, increase in unemployment levels and significant volatility in the global financial markets have negatively impacted the level of consumer spending for discretionary items.

The company s sales are also highly dependent on its ability to anticipate and respond to changing merchandise trends and consumer demands in a timely manner. Any slackness in doing so would spoil the company's image with its customers thereby reducing customer traffic which in turn would finally affect revenues and margins.

Latest Posts on the Zacks [ Analyst Blog ]:

Goldman Fined $27M by UK Authority

Goldman Sachs Group Inc. (NYSE: [ GS ]) has been fined 17.5 million ($27 million) for its failure to comply with the principles of the U.K. Financial Services Authority (FSA).

FSA has fined Goldmana™s London-based unit Goldman Sachs International for not satisfying UK regulatory reporting obligations. Goldman Sachs International failed to disclose to the U.K. authorities about the scrutiny being carried out by the U.S. Securities and Exchange Commission (SEC) on one of its London-based executives in connection with the Abacus 2007-AC1 synthetic collateralized debt obligation (Abacus).

SEC Charges

SEC claimed that Goldman Sachs created an investment vehicle named Abacus 2007-AC1, comprising subprime mortgage-backed securities. It was created just at the onset of the housing bubble bursting.

The investors were informed by Goldman that the mortgage bonds would be selected by an independent manager. However, according to SEC charges, Goldman asked its client Paulson & Co. to select those mortgage bonds that they believed were most likely to decline in value.

Once the Abacus portfolios declined as they were bound to, European banks and other investors lost more than $1 billion, while Paulson made money from the bets against the mortgage bonds.

Companies like ABN Amro and IKB Deutsche Industriebank AG, a German bank, made huge investments in Abacus and incurred severe losses. Ultimately, IKB received a government support while Royal Bank of Scotland Group plc (NYSE: [ RBS ]) acquired ABN Amro.

The UK Connection

The Abacus product, though structured by Goldmana™s US affiliate, was partly marketed from UK by Goldman Sachs International to institutional investors. The executive in question, Fabrice Tourre, was a part of the US team that structured this product. He was later transferred to Goldmana™s UK unit in London and became an FSA-approved person in November 2008.

In August 2008, SEC started investigating Goldmana™s US unit over the Abacus and following its investigation, SEC served a Wells Notice to Goldmana™s US unit and Fabrice Tourre, alleging significant violations of the US securities law.

Typically a Wells notice is, in effect, an indication from the SEC staff that they intend to recommend that the SEC has filed an enforcement action against the person or entity to whom the notice is addressed.

However, despite the involvement of the UK unit and the FSA approved personnel Fabrice Tourre in the marketing of the product, this information regarding the Wells Notice was not shared with the FSA. As a result, Mr. Tourre continued working with the UK unit.

The FSA was rather disappointed with the omission despite the fact that a number of senior executives at Goldman Sachs International in London knew about Tourrea™s Wells notice.

SEC Settlement

In July, Goldman Sachs agreed to settle the SEC lawsuit for $550 million. The settlement involved a civil penalty of $535 million and required Goldman to pay $15 million of profits from the Abacus deal. However, Mr. Tourre has denied the allegations.

FSA Settlement

Finally, Goldman agreed to the 17.5 million ($27 million) settlement with the FSA. Since the FSA investigation did not find Goldmana™s UK unit to intentionally withhold any information and since the company had fully cooperated with the authority, agreeing for an early settlement, it was given a 30% discount from the maximum fine; otherwise, it would have had to pay 25 million.

FSA has intensified its regulatory scrutiny activities over the past couple of years following criticism over its role prior to the financial crisis. In June, JPMorgan Chase & Co. (NYSE: [ JPM ]) had been fined 33.3 million for mishandling clientsa™ money by not separating their funds securely from its own available liquidity.

Our Take

Such run-ins with financial authorities could shatter investorsa™ confidence, even when -- or especially when -- giants like Goldman are involved. Such issues are also likely to cast a shadow over the financials of the company.

However, Goldman maintains a well managed global franchise with a strong capital base and a leading position in investment banking, capital markets, trading and asset management business. We also believe that with the recovery of the U.S. economy, the company should experience improvements in credit spreads.

Goldman currently carries a Zacks #3 Rank (Hold), implying no clear directional pressure on the stocks over the next one to three months.

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

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