Zacks Bull and Bear of the Day Highlights: Honeywell International, AAR, Capital One Financial, HSBC Holdings Plc and ING Groep
Zacks Bull and Bear of the Day Highlights: Honeywell International, AAR, Capital One Financial, HSBC Holdings Plc and ING Groep NV PR Newswire CHICAGO, May 4, 2012 CHICAGO, May 4, 2012 /PRNewswire/ -- Zacks Equity Research highlights Honeywell International (NYSE: HON) as the Bull of the Day and AAR Corporation (NYSE: AIR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Capital One Financial Corporation (NYSE: COF),HSBC Holdings Plc (NYSE: HBC) and ING Groep NV (NYSE: ING). (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: We maintain our Outperform rating on Honeywell International (NYSE: HON) with a target price of $73.00. The company had a robust quarterly performance, outperforming its earnings expectations. Despite the challenging macro environment, the company's top-line growth was reasonably good. Sales growth in the US was a driving factor for the company. Commercial aerospace and UOP business performed well, and three out of four business segments posted revenue growth. The Transport segment was affected by lower European vehicle production and lower aftermarket sales volume. Short cycle businesses in Europe were also weak during the quarter. However, the company expects to deliver solid results in 2012, despite the macro uncertainty. Our long-term Outperform recommendation on the stock indicates that it will outperform the broader U.S. equity market over the next six-to-twelve months. Our target price is $73.00 or 16.2x 2012 EPS, which is well within the historical range. Bear of the Day: We had downgraded our recommendation on AAR Corporation (NYSE: AIR) from Neutral to Underperform. We have been witnessing an overcapacity in the aerospace market, aggravated by intense competition from the big and small industry players. Risk of lower military operations, delayed aircraft delivery and unscheduled maintenance inspections raise costs. In addition, inadequate debt financing, unfavorable aircraft lease agreement and currency fluctuations constrain profitability considerably. The company reported net income per diluted share of $0.50, beating the Zacks Consensus Estimate by a penny. However, our $15.00 target price, 8.2x 2012 EPS, reflects our downgrade in recommendation. Latest Posts on the Zacks Analyst Blog: Capital One Gets HSBC Credit Cards As per the regulatory filing on Tuesday, Capital One Financial Corporation (NYSE: COF) has wrapped up the HSBC Holdings Plc's (NYSE: HBC) U.S. credit card business deal, which was announced in August 2011. This divestiture was a part of HSBC's long-term strategy to reduce costs up to $3.5 billion by 2013 and cut back retail banking. As per the terms of the agreement, Capital One paid $31.3 billion in cash, including $2.5 billion premium for credit card receivables acquired, to HSBC. Following the acquisition, the company assumed $28.2 billion of credit card receivables and $0.6 billion in other net assets. The deal will likely bring high teens GAAP as well as operating earnings per share for Capital One in 2013. Also, an IRR of greater than 20%, return on invested capital of more than 25% and a 400 basis point improvement in return on tangible equity are expected to be the outcome of the transaction in 2013. HSBC's U.S. credit card business is a strategic fit for Capital One as it has a proven track record and generates more than half of its revenue from credit cards. The deal will definitely improve the credit card franchise of the company. Consequently, the company is expected to significantly gain from this transaction with low business execution risk. Moreover, the closing of the transaction will barely have any impact on the customers. As an added advantage, HSBC's credit card customers will now be able to have access to Capital One's ATM network, across the country. For Capital One, this would be the second-largest acquisition completed this year. In February, it closed the acquisition of ING Direct USA, the online banking unit of Amsterdam-based ING Groep NV (NYSE: ING), in a $9.0 billion stock-cum-cash deal. Our Viewpoint Capital One has been growing organically as well as through acquisitions. Since 2005, it has integrated three banks – Hibernia Corporation in 2005, North Fork Bancorporation in 2006, and Chevy Chase Bank in 2009. Moreover, given its sound capital position and stable balance sheet, the company will be able to further de-risk its balance sheet, and provide its customers with better access to banking services. Currently, Capital One retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock. 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. About Zacks Equity Research Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. 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