CHICAGO, April 1, 2011 /PRNewswire/ -- Zacks Equity
Research highlights: Whole Foods Market, Inc. (Nasdaq: WFMI)
as the Bull of the Day and StanCorp Financial (NYSE: SFG) as
the Bear of the Day. In addition, Zacks Equity Research provides
analysis Humana, Inc. (NYSE: HUM), Wal-Mart Stores
Inc. (NYSE: WMT) and UnitedHealth Group Inc. (NYSE:
UNH).
(Logo:
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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:
Whole Foods Market, Inc. (Nasdaq: WFMI), with a strong
brand image, offers investors one of the strongest growth profiles
in the industry, and the stock is poised to surge as the demand for
natural and organic products improves. The company is also
revamping its pricing strategy and concentrating more on value
offerings, while maintaining healthy margins.
Stringent cost-control measures, effective inventory management
and improved store-level performance are driving earnings growth.
The company, in the wake of better-than-expected first-quarter 2011
results, now expects sales growth in a range of 10.7% to 12.8% and
a bottom-line increase from 23% to 26% in fiscal 2011.
We have a long-term Outperform recommendation on the stock. Our
target price of $70.00, 38.7X 2011
EPS, reflects this view.
Bear of the Day:
We are downgrading StanCorp Financial (NYSE: SFG) to
Underperform as we expect delinquencies on commercial mortgage
loans to remain modestly high in the foreseeable future. Moreover,
we suspect organic growth will remain restricted in the near term,
given the sluggish economic environment and challenging labor
market conditions.
Also, the earnings results lagged the Zacks Consensus Estimate
as well as the year-ago results. Higher premiums in the Insurance
Services segment, improved earnings in the Asset Management segment
and a positive favorable impact of share buybacks were more than
offset by lower favorable claims in the Insurance Services
segment.
Our six-month target price of $42.00 equates to 8.4x our earnings estimate for
2011. Combined with the annual dividend of $0.86 per share, this target price implies a
negative return of about 7.2% over that period. This is consistent
with our Underperform recommendation on the shares.
Latest Posts on the Zacks Analyst Blog:
Humana Upped to Outperform
On the back of strong fourth quarter results, we recently
upgraded Humana, Inc. (NYSE: HUM) to Outperform.
The company reported a strong fourth quarter on the heels of
improved performance in its operations, lower commercial
medical cost trends and surplus cash flow generation in 2010, which
also resulted in share buybacks.
Results outshone the Zacks Consensus Estimate by 85 cents.
Humana recently completed the acquisition of Concentra Inc. for
$790 million in cash on December 22, 2010. Consequently, Humana expects
an increase in its consolidated revenue for 2011.
Concentra produces approximately $800
million of revenues annually from 240 workplace health-care
facilities and more than 300 medical centers in 42 states.
Moreover, the acquisition will provide access to Humana's medical
members in certain geographical areas.
With the closure of the acquisition of Concentra, Humana had
raised its earnings per share guidance for 2011, and sees
earnings per share in the range of $5.45–$5.65, from the previous outlook of
$5.35–$5.55.
Additionally, Humana's better-than-expected result was
attributable to higher average Medicare Advantage membership, which
also increased the revenues from premium and administrative
services.
At the end of the fourth quarter, Humana's Medicare Advantage
membership jumped nearly 16.8% from the prior-year quarter.
However, the increase was partially offset by lower average medical
membership in the stand-alone Prescription Drug Plan (PDP) and
commercial fully-insured group plans.
Looking forward, we believe that the Medicare Advantage and PDP
membership growth estimates for 2011 are expected to increase on
strong sales of 2010. Moreover, this also led to the increase in
Humana's 2011 outlook, coupled with the stand-alone Prescription
Drug Plan (PDP) offerings during the recently completed 2011 open
enrollment period.
Humana now anticipates EPS for the year ending December 31, 2011 (FY11) in the range of
$5.70 to $5.90 versus its previous
estimate of $5.45 to $5.65. This
increase in FY11 EPS guidance primarily reflects
better-than-expected sales for the company's Medicare Advantage and
stand-alone PDP offerings during the recently completed 2011 open
enrollment period as well as an increase in expected Commercial
Segment earnings.
Further, with the launch of a Medicare Part D PDP in
collaboration with Wal-Mart Stores Inc. (NYSE: WMT) on
October 1, 2010, Humana will now be
able to provide Medicare beneficiaries including seniors and
disabled citizens to save more than $450 on average in 2011 on premiums, prescription
medication co-payments and cost-shares than the drug plans in
2010.
Apart from this, Humana has surplus cash equivalents and
investment securities, which have grown drastically by 18% year
over year in 2007 and 26% in both 2008 and 2009, although growth
moderated at 10.0% in 2010. The company has utilized its excess
cash to repurchase shares or for other corporate purposes.
During 2010, Humana repurchased shares worth $100 million, leaving approximately $150 million that can be repurchased by the end
of 2011. Going ahead, the strong cash position and capital leverage
should help Humana to add to shareholders' value and confidence in
the stock.
Recently, the U.S. Department of Defense (DoD) has awarded its
Tricare contract to Humana to administer health benefits to
soldiers and their families in the 10-state South region. However,
it was initially awarded to a division of Minnesota-based UnitedHealth Group Inc.
(NYSE: UNH), but after continuous protests by Humana, DoD reviewed
their decision and awarded the $23.5
billion 5-year contract to Humana on February 25, 2010.
As a result of winning the contract, management further upgraded
its earnings guidance for 2011 to reflect the extinguishment of
expenses of approximately $0.25 per
share, which would have been otherwise incurred for the loss of
contract in early 2012. Humana's 2011 earnings guidance was further
raised to $5.95 to $6.15 per share,
from previous estimates of $5.70 to
$5.90 per share.
The quantitative Zacks #1 Rank (short term Strong Buy rating) on
the stock indicates strong upward pressure on the shares over the
near term.
Headquartered in Louisville,
Kentucky, Humana Inc. is one of the largest health care plan
providers in the United States.
Humana provides health insurance benefits under Health Maintenance
Organization (HMO), Private Fee-For-Service (PFFS) and Preferred Provider
Organization (PPO) plans. The company also provides other benefits
with specialty products including dental, vision and other
supplementary benefits.
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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