Zacks Equity Research highlights: Superior Industries (NYSE: SUP) as the Bull of the Day and Novatel Wireless (Nasdaq: NVTL) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Verizon Communications Inc. (NYSE: VZ), Terremark Worldwide Inc. (Nasdaq: TMRK) and AT&T Inc. (NYSE: T).
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:
Superior Industries (NYSE: SUP) has a wide customer base. Moreover, its long-term business agreements with clients have helped maintain financial stability. With its competent management, strategic acquisitions, divestments and production efficiencies, the company is well positioned to take full advantage of the globally expanding automotive industry.
In addition, Superior Industries has no long-term debt obligations. Its fourth quarter results were strong, with earnings outperforming the Zacks Consensus Estimate by $0.45 per share.
Given these conditions, we have maintained our Outperform recommendation on shares of the company and set a target price of $29.
Bear of the Day:
We reaffirm our long-term Underperform recommendation on Novatel Wireless (Nasdaq: NVTL) following its fourth quarter 2010 financial results, which fell well below the Zacks Consensus Estimate. Novatel provided a very weak first quarter 2011 financial outlook.
The company cited lower sales of its 3G products and ongoing customer transition to next-generation 4G products are the primary reasons for this poor guidance. The recent trend of the 3G USB modem industry is indicating a glut of inventory on the part of the wireless carriers. Several industry sources predicted that Verizon, an important customer of Novatel for its MiFi intelligent hotspot, may generate lukewarm demand in the first quarter of 2011 attributable to its huge modem inventory.
Novatel is now facing increasing competitive pressure from Asian equipment developers. We do not find any immediate catalyst for Novatel and expects the company to continue to lose money in 2011.
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Verizon Issues Debt
For now, still the largest wireless carrier in the North America, Verizon Communications Inc. (NYSE: VZ), announced a debt issuance of $6.25 billion. The issue will spread over five tranches of $1 billion three-year floating-rate notes, $1.5 billion three-year fixed-rate notes, $1.25 billion five-year fixed-rate bonds, $1.5 billion 10-year fixed-rate bonds and $1 billion of 30-year fixed-rate debt.
Verizon’s debt sale represents its first debt sale since 2009 (issued $2.75 billion of 10 and 30 year debts in March 2009) and the second largest deal after the second-largest dollar-denominated debt sale in 2011.
The company expects to use the proceeds out of the issue to pay commercial paper debt as well as for general corporate purposes. Currently, the company has $3.7 billion of commercial paper outstanding, bearing interest at an average rate of 0.40%. Further, Verizon expects to sell up to $14 billion in common stock, preferred shares and debt.
Verizon exhibits a strong balance sheet with $2 billion in cash and a reduced long-term debt of $45.3 billion from 46.1 billion in 2009. Currently, the company has net debt-to-EBITDA ratio of about 1.3 times.
Given the strong financial position, Verizon is further set to acquire information-technology and cloud-computing specialist Terremark Worldwide Inc. (Nasdaq: TMRK) for $1.4 billion as reported in January and expects the deal to be completed by month end. Given the on going acquisition, the company has positioned itself for growth in cloud services.
The acquisition represents Verizon’s enthusiasm to rapidly enter the cloud computing market that delivers corporate IT services over the Internet rather than an in-house IT department. The deal is expected to support Verizon’s growth initiatives in remote or cloud computing, an area in which it has been lagging competitors like AT&T Inc. (NYSE: T).
Currently, we maintain long-term Neutral recommendation on Verizon with a Zacks #3 Rank (Hold
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.
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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