The Zacks Analyst Blog Highlights: Safeway, Boeing, Textron, Lockheed Martin and Huntington Ingalls Industries

 The Zacks Analyst Blog Highlights: Safeway, Boeing, Textron, Lockheed Martin
                      and Huntington Ingalls Industries

PR Newswire

CHICAGO, June 14, 2013

CHICAGO, June 14, 2013 /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 Safeway Inc. (NYSE:SWY-Free
Report), The Boeing Company (NYSE:BA-Free Report), Textron Inc. (NYSE:TXT-Free
Report), Lockheed Martin Corp. (NYSE:LMT-Free Report) and Huntington Ingalls
Industries Inc. (NYSE:HII-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

Here are highlights from Thursday's Analyst Blog:

Safeway to Sell Canadian Ops for $5.68B

Finally, Safeway Inc. (NYSE:SWY-Free Report) has reached a conclusive decision
with respect to its Canadian operations. Share price of this food and drug
retailer climbed 29.68% (or $6.86) higher during the after-trading hours
following the company's announcement of an agreement to sell its Canadian
operations. The stock was also up 24.45% (or $5.64) before the opening bell on
Thursday.

Safeway inked a definitive agreement to divest its business operations in
Canada – Canada Safeway Limited to Canadian food retailer Sobeys Inc. for
$5.68 billion in cash (roughly $3.91 billion after taxes and expenses), plus
the assumption of certain liabilities. Empire Company Limited owns the Sobeys
supermarket chain.

Safeway is still liable for roughly $294 million of Canada Safeway's public
debt due Mar 2014. It will also retain cash and other receivables of a similar
amount.

Safeway's net asset sale to Sobeys include its 213 full grocery stores in
Western Canada, 199 in-store pharmacies, 62 co-located fuel stations, 10
liquor stores, 4 primary distribution centers and the related wholesale
business and 12 manufacturing facilities in Canada.

The transaction is expected to close in the fourth quarter of 2013, subject to
standard closing conditions. The company will report Canada Safeway as
discontinued operations from the second quarter of 2013.

Safeway plans to use the net proceeds to repay $2 billion of its debt. Until
the most recent quarter, the company continued to operate with a high debt
level of $5.3 billion. As reported earlier, the first-quarter debt level was
higher than the debt of $5.2 billion in the sequentially prior quarter.
Safeway's highly leveraged balance sheet was a cause of concern for investors.

According to the company, the bulk of the remainder will be used for share
repurchases. As reported earlier, Safeway did not repurchase any shares in the
last three quarters. Presently, the company is left with $0.8 billion of
authorization to buy back shares. Shareholders should look forward to
attractive returns in the form of share buybacks in the near future.

Going forward, Safeway's share buyback activity along with lower interest
expense, owing to reduced debt level, should further leverage earnings in the
upcoming quarters.

Our View

Although the company asserts that the divestment reflects a deft plan to
sharpen focus on the U.S. market, we remain apprehensive due to the lack of
clarity on management plans to gain momentum in the domestic market.

Notably, Safeway's Canadian operations have been more profitable than the U.S.
operations, as seen in the level of operating profit over the past few years.
In 2012, the company recorded operating profit of approximately 2% and 5.4% in
the U.S. and Canada, respectively.

Boeing, TXT Get V-22 Osprey Order

The Boeing Company (NYSE:BA-Free Report) and Bell Helicopter, a unit of
Textron Inc. (NYSE:TXT-Free Report), have received a five-year modification
contract worth $4.9 billion for the manufacture of 99 V-22 Osprey tiltrotor
aircraft.

Specifically, Bell-Boeing Joint Project Office will produce 92 MV-22 Osprey
aircraft for the U.S. Marine Corps, and seven carrier-variant CV-22s for the
U.S. Navy. The contract work is expected to be completed by Sep 2019.

Taking into account the $1.4 billion preliminary contract that the joint
venture received in Dec 2012, the value of the contract comes to $6.3 billion.
In Dec 2012, the joint venture had received a contract to produce 21 V-22
Osprey.

Boeing, in collaboration with Bell Helicopter, has built the V-22 aircraft.
The V-22 Osprey is a joint service multi-role combat aircraft that can fly as
fast as a plane and land like a helicopter. The aircraft has the capacity to
carry 24 combat troops, or up to 20,000 pounds of internal cargo or 15,000
pounds of external cargo.

Diversified network of both the companies negates any specific business risk.
Going forward, Textron's diversified presence across commercial, manufacturing
and industrial products, as well as financing operations and strong demand for
Boeing's defense products would keep them well-positioned. 

However, the adverse effects of sequestration cannot be ignored. In fact, in
April, the budget cuts from sequestration have reduced the number of contracts
awarded by the Department of Defense to major defense contractors. Defense
contractors, including Boeing, have not been spared from the negative impacts
of sequestration.

Even Lockheed Martin Corp. (NYSE:LMT-Free Report) and Huntington Ingalls
Industries Inc. (NYSE:HII-Free Report) are part of this $37 billion
sequestration cut made due to the automatic spending reduction that took
effect from Mar 1, 2013. In Feb 2013, the government had announced $1.2
trillion in automatic cuts by 2021. In accordance to sequestration, funding
for V-22s has experienced an $18 million reduction.

Boeing presently retains a Zacks Rank #3 (Hold) while Textron carries a Zacks
Rank #4 (Sell).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

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