Zacks Equity Research highlights: Hormel Foods (NYSE: HRL) as the Bull of the Day and Vulcan Materials (NYSE: VMC) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase & Co. (NYSE: JPM), U.S. Bancorp (NYSE: USB) and BB&T Corporation (NYSE: BBT).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We upgrade our recommendation on Hormel Foods (NYSE: HRL) from Neutral to Outperform based on the expectations of an increase in market demand and food prices in future.
Hence, the first quarter and fiscal 2011 Zacks estimate went up by $0.09 and $0.15 per share, respectively. With several acquisitions including the recent Don Miguel, Hormel has been strengthening its position. Acquisitions are likely to be its key growth strategy in future combined with strong liquidity.
Although the food market is highly competitive, a greater share of value-added branded products in Hormel's product-mix will help it to strengthen its margins and reduce exposure to commodity prices in the long term.
Despite being the largest producer of construction aggregates and a leading producer of other construction materials, Vulcan Materials (NYSE: VMC) faces intense competition and a challenging environment.
The nearly stalled construction business has yet to show positive signs of recovery, jeopardizing the prospects of the building materials and other related products markets. In the most recent quarter, Vulcan failed to live up to the Zacks Consensus Estimate of $0.19 per share by posting a profit of only $0.08.
In addition, its cash position has also deteriorated. Based on the above conditions, we continue with our Underperform recommendation on the stock and set a target price of $36.00.
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A Happy New Year for U.S. Economy?
According to Center for American Progress, the tax-cut deal is expected to create about 3.1 million new jobs in total after adding up different provisions. The estimate is based on the Congressional Budget Office's estimate of one million new jobs for each 1% of GDP growth.
However, based on the same assumption, the Obama administration had previously claimed that the $787 billion American Recovery and Reinvestment Act would create 3.5 million jobs. But the unemployment rate stood at 9.8%. This is basically because the government is a bit reluctant to create jobs in the private sector directly by implementing rules or laws.
Though the government stimulus packages can increase GDP, most of the private sector firms are on the verge of recovering their financial conditions with cost savings by limiting recruitments. We don’t think the new tax-cut deal will be able to address the unemployment problem to a great extent, as many of the companies are still struggling with weak financials.
The recession continues to take its toll on banks. There have been 151 bank failures so far this year. With loan losses on commercial real estate on the rise, hundreds of more banks are likely to crash in the next few years.
The bank failures have resulted in a wave of consolidation in the industry. When Washington Mutual was in the red in 2008 and was deemed as the largest bank failure in the U.S. history, it was acquired by JPMorgan Chase & Co. (NYSE: JPM). The other major acquirers of failed institutions since 2008 include U.S. Bancorp (NYSE: USB) and BB&T Corporation (NYSE: BBT).
If the current pace of consolidation continues, we will see the emergence of a handful of large banks. As a result, the overall economy will not remain unscathed and job creation will become vulnerable.
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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