The Zacks Analyst Blog Highlights:JPMorgan Chase & Co., Bank of America
Corporation, Citigroup Inc., Wells Fargo & Company and the Dow Chemical
CHICAGO, Nov. 16, 2012
CHICAGO, Nov. 16, 2012 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include JPMorgan Chase & Co (JPM), Bank
of America Corporation (BAC), Citigroup Inc. (C), Wells Fargo & Company (WFC)
and theDow Chemical Company (DOW).
Today, Zacks is promoting its ''Buy'' stock recommendations. Four daily picks
are offered free.
Here are highlights from Friday's Analyst Blog:
Foreclosures Continue to Wane
Signaling the gradual recovery in the housing market, the foreclosure market
report released by RealtyTrac revealed a drop in the overall foreclosure
activity in October 2012 on an annual basis. As per this leading online
marketplace of foreclosure properties, foreclosure filings plummeted 19% from
the last-year month but rose 3% from the prior month. This brought the
aggregate number of properties receiving default, auction or repossession
notices to 186,455.
Further, foreclosure starts – default notices issued and foreclosure auctions
(depending on the state's foreclosure procedure) – declined 19% from October
2011 but inched up 2% from September 2012 to 89,209 properties in the reported
month. This was the 3rd straight monthly decline in foreclosure starts on a
year-over-year basis. Yet, bank repossessions (REOs) plummeted 21% from the
prior-year month and almost 1% from the last month to 53,478 properties,
marking the 24th straight monthly fall in REOs on an annual basis.
Moreover, in the reported month, the top 10 states with the highest
foreclosure rates were Florida, Nevada, Illinois, California, Arizona,
Georgia, Ohio, Colorado, South Carolina and Michigan. Further, the states with
largest annual rise in overall foreclosure activity included New Jersey, New
York, Connecticut, Maryland, Ohio and Illinois.
The recent decline in foreclosure activity is largely driven by the switching
of mortgage servicers and the government to other options – short sale,
refinancing of loans and loan modifications – to prevent foreclosures.
Moreover, gradually stabilizing housing sector and falling unemployment rate
are likely to aid homeowners to shun foreclosures in the near term.
However, we believe foreclosure activity will accelerate in judicial states
following a $25 billion deal signed between five mortgage servicers – JPMorgan
Chase & Co. (JPM), Bank of America Corporation (BAC), Citigroup Inc. (C), Ally
Financial Inc. and Wells Fargo & Company (WFC) – 49 states' attorneys general
and the regulators earlier this year. This could, in turn, lead to a rise in
the overall foreclosure activity going forward.
Further, in two separate announcements, JPMorgan and BofA have come up with
details related to fulfillment of their respective obligations related to the
above-mentioned deal. As of September 30, 2012, BofA has extended $15.8
billion in mortgage relief to 164,000 homeowners. In the same time-frame,
JPMorgan extended $7 billion in relief to 75,000 homeowners.
Now reverting to the main story, RealtyTrac anticipates the lenders to remain
on track to complete foreclosures on 650,000 properties by the end of this
year. This is lower than 800,000 foreclosures completed in 2011.
The rate at which properties are entering the foreclosure procedure is
expected to trend down gradually, thereby lifting the housing prices going
forward. Nevertheless, the decrease in foreclosures is expected to be at an
uneven pace, as processes that are being used in handling them vary from state
to state. Moreover, the housing market will get a chance to regain a solid
foothold if there are sufficient buyers for these properties.
Earnings Scorecard: Dow Chemical
U.S. chemical kingpin The Dow Chemical Company (DOW) posted mixed
third-quarter 2012 results and its profit slid on lower pricing across all
regions. The company saw weak demand for its products in the quarter, largely
stemming from the recessionary conditions in Europe.
Third Quarter Revisited
The Michigan-based company earned 42 cents a share in the third quarter, down
from 69 cents (or 62 cents excluding items) posted a year ago. That, however,
trumped the Zacks Consensus Estimate of 37 cents. Dow's profit slid 39% year
over year to $497 million as lower pricing dented its sales in the quarter.
Revenues dipped 9.7% (or 7% on an adjusted basis) year over year to $13,637
million, missing the Zacks Consensus Estimate of $14,130 million. Sales fell
across all segments except Agricultural Sciences, which was the only bright
spot in the quarter. Revenues in Europe slipped 10%, largely due to
unfavorable currency translation.
Volumes nudged down 1% year over year (up 2% on an adjusted basis) in the
quarter. On an adjusted basis, the company saw volume gains across all
geographic regions. Price fell 9% in the quarter with declines witnessed
across the globe, especially in Europe and China.
We have discussed the quarterly results at length here: Dow's 3Q Mixed,
Agreement – Estimate Revisions
Estimates for Dow have been inclined towards the negative side following the
company's third quarter results. Out of 13 analysts covering the stock, 9 have
slashed their estimates for the fourth quarter over the past 30 days with 2
moving in the opposite direction. No movement was witnessed over the past
For 2012, 8 (out of 18) analysts have trimmed their estimates over the past 30
days while 6 have raised the same. Similar to the fourth quarter, there were
no revisions in either direction over the last 7 days.
The bearishness appears to reflect the concerns about the U.S. and European
economies, slowdown in Asia and the weak pricing environment, which may
continue to be a drag on the company's results.
Magnitude – Consensus Estimate Trend
Given the directional pressure from a string of downward revisions, estimate
for the fourth quarter has gone down by 4 cents over the past month while
remaining stationary (at 33 cents a share) over the past week. For 2012, there
has been a decrease of a penny and 6 cents in the estimate over the past 7 and
30 days, respectively. The current Zacks Consensus Estimate for 2012 is $1.89
per share, representing an estimated decline of roughly 25%
Dow, in its third quarter call, noted that it will focus on maximizing
shareholder value and invest in areas which can deliver incremental margins.
The company will continue to pursue its cost reduction and efficiency programs
to cope with the sluggish macroeconomic environment.
The company, under a newly announced restructuring program, is trimming its
global headcount by 5% and shuttering 20 of its manufacturing plants. It
further plans to cut capital spending and investment on certain growth
programs that have low priority. When combined with the $1.5 billion existing
cost-cutting measures, the company's new actions are expected to collectively
deliver cost savings of $2.5 billion.
Dow is benefiting from strong fundamentals in agriculture and food markets. A
string of innovative products in its pipeline also adds to its strength. The
company's expanding technology pipeline is expected to fetch a $2 billion
opportunity by 2015.
Dow is targeting faster-growing geographies. The company earns two-thirds of
its income from outside the U.S. Growth in emerging economies has been
especially fast, contributing a meaningful portion of its sales.
Moreover, the company continues to focus on offering incremental returns to
its shareholders. It also continues debt repayments while making further
investments. Moreover, Dow is aggressively pursuing its cost-reduction
initiatives under the "Efficiency for Growth" program initiated in 2011.
Today, Zacks is promoting its ''Buy'' stock recommendations. Four daily picks
are offered free.
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