Zacks Bull and Bear of the Day Highlights: Thoratec, J. C. Penney, Flextronics
International, Google and Apple
CHICAGO, Dec. 14, 2012
CHICAGO, Dec. 14, 2012 /PRNewswire/ --Zacks Equity Research highlights
Thoratec Corp. (Nasdaq:THOR) as the Bull of the Day and J. C. Penney
(NYSE:JCP) as the Bear of the Day. In addition, Zacks Equity Research provides
analysis on Flextronics International Ltd. (Nasdaq:FLEX), Google (Nasdaq:GOOG)
and Apple Inc. (Nasdaq:AAPL).
Full analysis of all these stocks is available at
Here is a synopsis of all five stocks:
Bull of the Day:
We maintain our recommendation for Thoratec Corp. (Nasdaq:THOR) at Outperform.
Its earnings per share of $0.44 in the third quarter beat the Zacks Consensus
Estimate. The company achieved 27% unit growth for HeartMate II in the third
Thoratec's competitor HeartWare has gotten approval, in November 2012, from
the FDA for its Ventricular Assist System as a bridge to transplantation.
However, there is no imminent competitive threat from HeartWare in the DT
segment, as its product is not expected to be launched till 2015. We believe
that the DT condition will account for the major part of growth in the
Ventricular Assist Device (VAD) market.
Despite less visibility, Thoratec has expertise in product development. The
company continues to do well in overseas markets despite economic turmoil in
Europe. We maintain our recommendation on the stock with a price target of
$44.00, based on a P/E of 27.5x our 2012 EPS estimate.
Bear of the Day:
J. C. Penney (NYSE:JCP) posted a third-quarter 2012 loss of $0.93 per share
that fared worse than the earnings of $0.18 in the year-ago quarter and the
Zacks Consensus Estimate of loss of $0.08. The company has missed the Zacks
Consensus Estimate in the last four quarters by an average of 328.2%. Total
revenue also fell 26.6%, whereas comp sales slid 26.1%.
We observe that despite a well-diversified supplier base, the company has been
struggling against other retail chains. Its dismal results dashed those hopes
at least for the near term. Moreover, erratic consumer behavior and a sluggish
economic recovery still remain matters of concern.
Currently, we maintain our Underperform recommendation on the stock. Our
target price of $26.00 is based on a price-to-cash-flow multiple of 4.8X.
Latest Posts on the Zacks Analyst Blog:
Flextronics to Buy Motorola Assets
Electronic product contract manufacturer, Flextronics International Ltd.
(Nasdaq:FLEX) recently announced an agreement with Motorola Mobility LLC to
acquire the latter's manufacturing facility and equipment in Tianjin, China
and related equipment in Jaguariuna, Brazil for an undisclosed amount. The
deal is expected to be completed by the end of first half of calendar year
In May 2012, Google (Nasdaq:GOOG) acquired Motorola Mobility for approximately
$12.5 billion. The current deal reflects Google's strategy of downsizing
Motorola's existing operations in order to save cost. The deal will make
Flextronics Motorola's biggest outsourcing partner.
Currently, Flextronics serves both Google and Apple Inc. (Nasdaq:AAPL). We
believe that Flextronics is well positioned to benefit from the growing
rivalry between these two companies over the long term.
Flextronics expects the deal to be accretive on both operating income and
earnings per share basis for fiscal year 2014. Revenue potential is expected
to be of several billions and operating margin remains within the target range
for its High Velocity Business segment. The company expects to earn a return
on invested capital ("ROIC") of 20% going forward.
Flextronics announced that the two facilities, along with equipment and assets
are worth approximately $75.0 million and the company is not paying any
premium for these items. Moreover, Flextronics will acquire a highly trained
and skilled ready-to-deploy employee group, which will save it a lot of time
and training money, in our view.
We believe that the deal will be significantly beneficial for Flextronics as
it will help in expanding the company's manufacturing capacity in the low cost
regions of China and Brazil. Notably, in August this year Nokia Siemens
Network signed a contract with Flextronics to open an assembly line in Brazil.
Acquisitions have been an integral part of Flextronics' growth story. Although
most of the acquisitions were that of start-ups and small companies, they
helped Flextronics to expand its presence in the communications, medical,
infrastructure and automotive sectors. We believe that the Motorola facility
acquisition will further drive its growth prospects over the long term.
However, Google's intentions regarding the Motorola hardware operations are
not very clear. The search giant has already announced its intentions of
exiting the entry-level low-margin handset business and focusing on high-end
smartphones, where Motorola used to have minimum presence.
We believe that this uncertainty related to Google's motive over Motorola's
handset manufacturing business will be a significant headwind for Flextronics
going forward. If Google suddenly decides to wind up the whole business, both
the current facilities will become idle (currently they will only manufacture
Motorola handsets), which will hurt Flextronics' top-line growth going
Moreover, macro-economic concerns and weak end-market demand are the other
major concerns in the near term.
We have an Underperform recommendation on Flextronics over the long term.
Currently, Flextronics has a Zacks #4 Rank (Sell).
Get the full analysis of all these stocks by going to
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
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