CHICAGO, Sept. 12, 2011 /PRNewswire/ -- Zacks Equity
Research highlights Valero Energy (NYSE: VLO) as the Bull of
the Day and McDermott International (NYSE: MDR) as the Bear
of the Day. In addition, Zacks Equity Research provides analysis
McDonald's (NYSE: MCD), Texas Instruments (NYSE: TXN)
and Bank of America (NYSE: BAC).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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:
Valero Energy's (NYSE: VLO) second quarter earnings
climbed more than 39% year over year. The growth was backed by the
overall improvement in the refining environment and higher
feedstock discounts. Valero Energy remains enthusiastic about the
third quarter and is consistently reviewing its refining portfolio
and enhancing the asset base by acquiring refinery assets that
enhance its operating performance.
We expect Valero's 2011 and 2012 earnings to benefit from
improving U.S. and global economies, higher refining margins, wider
crude discounts, increased operating rates and continued cost
saving initiatives. Therefore, we are maintaining our
recommendation at Outperform.
Valero remains our favored stock in the refining space for its
sound balance sheet, good liquidity and solid assets base. Our
$26 price objective reflects a P/E of
6.25 on our 2011 EPS estimate.
Bear of the Day:
Following a second quarter earnings miss, we are downgrading
McDermott International (NYSE: MDR) shares to Underperform
from Neutral. The company recently reported lower-than-expected EPS
for the June quarter, adversely affected by a less favorable
geographic mix and weak margins in the Middle East.
Near-term bookings remain lumpy at McDermott, as the current
uncertain environment has hurt the economics of building new oil
and gas infrastructure. Additionally, the transfer of the power
generation and government operations has left McDermott with a less
diversified business, thereby heightening its risk profile.
These factors are reflected in our downgrade of the company's
shares. Our $12 price objective
reflects a 2011 P/E multiple of 10.1x.
Latest Posts on the Zacks Analyst Blog:
The President's Jobs Proposal
With nothing else on the economic calendar, the market will be
focused on evaluating the president's much-anticipated jobs speech
Thursday evening. The day's other speech, from Fed Chair
Ben Bernanke, had turned out be
somewhat of a disappointment relative to what the market was
looking for. It appears now that whatever the Fed will be doing
will be at its two-day meeting later this month.
The president laid out quite an ambitious plan, at least in
terms of its size. More than half of the $447 billion plan provides for tax cuts for
employees and employers, while the rest targets infrastructure
spending and extension of unemployment benefits. The bulk of the
tax cut is an extension and expansion of the payroll tax cut that
is already in place and set to expire at the end of this year.
Given the concern in Congress over deficits and debt, the president
asked the 'Super Committee' to look for additional cuts to pay for
this package.
The plan is quite front-loaded, with more than 70% of the amount
getting used up in 2012. Estimates for its impact on the economy's
growth momentum vary, but range generally in the 1.5% to 2.5%
vicinity. Those growth numbers are attractive and timely, given the
current fears in the market of an impending recessionary downturn
for the economy.
But we all know that the entire package has no hope of getting
enacted in its present shape. The best that can happen would be for
the tax cuts to pass Congress. Even that would be no mean
achievement given what we saw during the debt ceiling debate.
As Bernanke rightly pointed in his Jackson Hole speech some time
back, the economy needs fiscal initiatives at this stage to put it
back on the growth trajectory. The Fed has done effectively all it
it could under the circumstances. Bernanke reiterated in his speech
yesterday that they have policy tools at their disposal that they
stand ready to deploy should the need arise.
But it is reasonable to question the effectiveness of measures
like 'Operation Twist,' aimed at bringing long-term interest rates
down, in the current already-low interest rate environment. This
leaves the president's plan effectively the only game in town. It
doesn't go far enough in its scope and reach. One desirable
provision left out of the plan concerns the repatriation of
corporate profits -- a targeted tax holiday on that front would
have been a very good addition to this plan.
In corporate news, McDonald's (NYSE: MCD) August
same-store sales came out weaker than expected. We also had
Texas Instruments (NYSE: TXN) provide a downbeat outlook for
the third quarter after the close on Thursday, citing soft demand
conditions. And Bank of America (NYSE: BAC) is reportedly
considering cutting as many as 40,000 jobs as part of its
restructuring efforts, media reports indicate.
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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Updated throughout every trading day, the Analyst Blog provides
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events impacting stocks and the financial markets.
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