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AIG, GOL Linhas Aereas, Monsanto, General Mills and Zep

^{Published on 2010-07-01 15:00:34 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights American International Group (NYSE: [ AIG ]) as the Bull of the Day and GOL Linhas Aereas (NYSE: [ GOL ]) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Monsanto Company (NYSE: [ MON ]), General Mills (NYSE: [ GIS ]) and Zep Inc. (NYSE: [ ZEP ]).

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 are upgrading our recommendation on the shares of American International Group (NYSE: [ AIG ]). The company is poised to grow its top line on the back of the reviving economy and equity market appreciation in the upcoming quarters.

AIG's first quarter earnings were substantially ahead of the Zacks Consensus Estimate, primarily driven by the company's robust results in its insurance operations and significant improvement in its investment income. AIG also benefited from a recovery in the value of its investments and benefits, as well as its claims expense control.

As part of its effort to repay the bailout money, the company continues to implement several restructuring initiatives, including the disposal of assets and increase of operating efficiencies.

[ Bear of the Day ]:

We are downgrading our recommendation on GOL Linhas Aereas (NYSE: [ GOL ]) ADS from Neutral to Underperform based on poor results during the first quarter of 2010. Gyrating fuel prices was the primary reason behind this.

Moreover, we do not expect a significant recovery in the airline industry in 2010. Additionally, GOL operates in an intense competitive environment, which is going to further increase due to the emergence of new airlines in the region.

Over dependence on few clients such as Boeing and CFM International, and an increase in net debt is another reason for being wary of the stock. The company also faces infrastructure crisis in the Brazilian airports based on insufficient investments.

Latest Posts on the Zacks [ Analyst Blog ]:

Monsanto: A Penny Above Estimates

Monsanto Company (NYSE: [ MON ]) announced results for the third quarter of fiscal 2010. During the quarter, net income decreased to $384 million from $694 million in the same quarter of 2009.

EPS (excluding a restructuring expense) was 81 cents compared to $1.25 in the year-ago quarter. The decrease was due to a fall in revenues and gross margin. However, the reported EPS was a penny above the Zacks Consensus Estimate and the companya™s expectations of 80 cents.

Revenues declined 6.3% to $2,962 million from $3,161 million during the same period in the previous year. The decrease in revenues was attributable to a fall in prices of glyphosate-based herbicides produced by Monsanto.

Revenues in the Seeds and Genomics segment increased 5.1%, while Roundup and other glyphosate-based herbicides segmental revenue almost halved to $269 million from $614 million. Revenues from all other agricultural productivity products grew 10.7% year over year to $331 million.

Gross margin decreased from 58.0% to 47.0% in the reported quarter due to a decrease in prices of glyphosate-based herbicides, particularly the Roundup brand. As a percentage of revenues, selling, general and administrative expenses (SG&A) and research & development (R&D) expenses increased by 100 basis points each.

At the end of the third quarter, free cash flow was negative $1.15 billion from a negative $145 million at the end of the third quarter of fiscal 2009. One reason for the decrease was the huge fall in net income.

General Mills Q4 Earnings Drop

General Mills (NYSE: [ GIS ]) recently reported diminutive fourth quarter fiscal 2010 results. For the quarter, adjusted earnings dropped 4.6% to 41 cents a share compared with 43 cents in the year-ago period. For fiscal 2010, adjusted earnings jumped 16% to $2.30 per share compared with the year-ago earnings of $1.99.

Both the quarterly and yearly results were in line with the Zacks Consensus Estimate. However, the fiscal 2010 earnings results significantly surpassed the companya™s long-term growth target of high single-digits.

Management now expects fiscal 2011 earnings in the range of $2.46 - $2.48 a share. Excluding mark-to-market effects and the tax charge related to health care legislation, the fiscal 2011 earnings guidance reflects an annual growth of 7% a" 8%.

Total revenue for the reported quarter dipped 2% year over year to $3.6 billion. The quarter experienced positive currency translation, flat volume compared with the year-ago period, but unfavorable price and product mix. However, total revenue for fiscal 2010 grew 1% annually to $14.8 billion, benefiting from a price and product mix. Food retailer projects fiscal 2011 net sales to climb at a low single-digit rate.

Revenue for the U.S. Retail segment dropped 2% year-over-year to $2,438 million in the quarter, portraying a 1% contribution from volume (measured in pounds) growth offset by a 3% unfavorable price and product mix. However, revenue at the International segment jumped 4% year-over-year in the quarter to $673 million, reflecting a 2% volume (measured in pounds) growth, 3% favorable currency translation partly offset by a 1% unfavorable price and product mix. Compared with the year-ago period, the Bakeries and Foodservice segment revenue slipped by 12% to $459 million in fourth quarter 2010, demonstrating a 8% decline in volume (measured in pounds), which includes the impact of divestitures and one less week.

General Mills reported gross margin plunged 620 basis points (bps) to 36.2% in the quarter compared with the year-ago period, due to mark-to-market effects. However, reported gross margin for the fiscal year expanded 410 bps to 39.7% compared with fiscal 2009, reflecting improving operating efficiencies, successful cost-containment program and effective supply-chain management. General Mills anticipates supply-chain costs to inflate by 4% a" 5% in fiscal 2011.

Zep Beats Zacks Consensus

Zep Inc. (NYSE: [ ZEP ])reported fiscal 2010 third quarter results. The company posted a 3.2% reduction in GAAP net income to $5.2 million from $5.4 million in the prior year quarter. Excluding special items, pro forma earnings came in at 30 cents per share, which topped the Zacks Consensus Estimate by 4 cents or 15%.

Zep is a producer, marketer and service provider of cleaning and maintenance solutions for commercial, industrial, institutional and consumer end-markets. The company's product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor finishes, sanitizers, and pest and weed control products.

Sales grew 24.5% to $153.0 million from $123.0 million in the year-ago quarter. The growth was primarily driven by the acquisition of Amrep Inc., which contributed $29.3 million to overall sales. Zep acquired Amrep, a specialty chemical formulator and packager focused in the automotive aftermarket and the janitorial market, for approximately $63.5 million in January this year.

Zepa™s gross profit increased 14.0% year over year to $75.6 million, while gross margin dipped 460 basis points (bps) to 49.4%. The reduction in margin was primarily due to unfavorable product mix arising from the acquisition, partially offset by lower raw material costs.

Selling, Distribution and Administrative expenses, as a percentage of sales, decreased 460 bps to 42.1% primarily due to restructuring initiatives and cost synergies related to the integration of Amrep. However, operating margin reduced by 120 bps year over year to 6.0% as Zep recorded a $2.0 million restructuring charge, which was non-existent in the year-ago period.

Get the full analysis of all these stocks by going to [ http://at.zacks.com/?id=2649 ].

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