Science & Technology 
Science and Technology
Science and Technology 
Thu, January 22, 2009
Zacks Bull & Bear of the Day Highlights: IBM, Halliburton, Rite Aid, Wal-Mart and Amdocs
CHICAGO--([ BUSINESS WIRE ])--Zacks Equity Research picks IBM Corp. (NYSE: [ IBM ]) as Bull of the Day and Halliburton Company (NYSE: [ HAL ]) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on Rite Aid Corporation (NYSE: [ RAD ]), Wal-Mart (NYSE: [ WMT ]) and Amdocs Ltd. (NYSE: [ DOX ]).
Full analysis of all these stocks is available at: [ http://at.zacks.com/?id=2678 ]
Bull of the Day
On January 20, 2008, IBM Corp. (NYSE: [ IBM ]) announced its fiscal 2008 4th quarter results that were mixed, with revenue coming in below expectations but pro forma EPS beating our expectation. Net income from continuing operations were $4.4 billion versus $4.0 billion in the same quarter last year. With aggressive cost-cutting, diluted earnings from continuing operations for the quarter reached $3.28, up 17.1% from $2.80 in the prior-year quarter.
Total revenue of $27.0 billion was down 6.4% (down 1.0% when adjusted for currency) from $28.9 billion in the year-ago quarter. Earnings were boosted by a reduction in the tax rate in the 4th quarter.
We were ahead of the Street in our expectations for the 4th quarter and for full-year 2009.
Given strong performance in the 4th quarter, IBM provided its EPS outlook for fiscal 2009. It expects full-year EPS of at least $9.20, which is a growth rate of 3.0% over 2008 reported EPS. IBM also expects its full-year 2009 tax rate to be sustained at approximately 26.5%.
Bear of the Day
We are downgrading Halliburton Company (NYSE: [ HAL ]) shares to Sell from Buy to reflect our growing concerns about the weakening outlook for the domestic natural gas market, where the company enjoys a strong leverage through its premier position in the pressure pumping business.
Demand for pressure pumping closely tracks the overall rig count, which in turn reflects spending plans by E&P players. Pressure pumping is an umbrella term used to describe a number of vital services performed on new and existing (producing) wells.
While the current U.S. rig count is already down roughly 24% from its all-time peak in August 2008, we see significant room for further declines in the coming months before the market stabilizes. This expected drop in activity levels will weigh on the outlook for pressure pumping even after the resumption of normal activity levels towards the end of 2009, in our view.
Recent Analysis from the Analyst Blog
Rite Aid Feels Wal-Mart Pressure
Management at Rite Aid Corporation (NYSE: [ RAD ]) was executing a turnaround strategy centered on increasing the profitability of the existing store base. However, management acquired Brooks Eckerd prior to a convincing turnaround in profitability and increased the debt burden of the company.
Moreover, Wal-Mart's (NYSE: [ WMT ]) entrance into the retail generic drug market began pressuring the company's pharmacy margin.
Given the weakness of front-end sales, especially in the latest reported quarter, and management's continual lowering of EPS guidance (for larger net losses), the stock's rating is a Sell.
Amdocs Buy Rec Reiterated
Amdocs Ltd. (NYSE: [ DOX ]), a leading provider of CRM and billing software for communications service providers, continues to perform in line with our expectations, supported by its industry-leading technology integration products for large-scale transformational projects and managed services.
Long-term fundamentals remain firm as a result of global telecom carriers' transition to converged and consolidated solutions. In addition, the company maintains a strong financial position with a healthy order backlog. Management indicated caution with respect to near-term business performance based on global economic uncertainties which may generate some fluctuations in its near-term results. We confirm our Buy recommendation on the shares.
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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.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
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