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Discover Financial Services, Wilmington Trust, Family Dollar Stores, Wal-Mart Stores and Dollar General Corporation

^{Published on 2010-09-30 14:05:47 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights: Discover Financial Services (NYSE: [ DFS ]) as the Bull of the Day and Wilmington Trust (NYSE: [ WL ]) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Family Dollar Stores, Inc. (NYSE: [ FDO ]), Wal-Mart Stores Inc. (NYSE: [ WMT ]) and Dollar General Corporation (NYSE: [ DG ]).

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 Discover Financial Services (NYSE: [ DFS ]) to Outperform based on the forthcoming Student Loan Corp. acquisition that should enhance its already strong student loan portfolio. Moreover, third quarter earnings were substantially ahead of the Zacks Consensus Estimate.

Higher margin payment service volumes, lower loan loss provisions, higher interest yield, improvement in credit card usage with reduced defaults, and gains from the direct-to-consumer deposit business were partially offset by increased interest expenses and tax rate. Although the CARD Act regulations continued to hurt net interest margin, the company is trending upward and will be able to overcome significant losses.

Overall, the company's extensive network, sound capital position and cost containment initiatives will help accentuate growth once the markets rebound. Our current target price is $20 per share.

[ Bear of the Day ]:

We have downgrading our long-term recommendation on Wilmington Trust (NYSE: [ WL ]) to Underperform based on deteriorating credit quality and its exposure to risky construction loans. Wilmington's second quarter 2010 loss was substantially higher than the Zacks Consensus Estimate.

Results were hurt primarily by higher loan loss provisions, increased non-interest expense and weakness in the commercial construction portfolio. However, strong growth in Corporate Client Services segment, improvement in core deposits and growing assets under management were among the positives.

That said, Wilmington has been severely marred by the ongoing volatility in the economy, which has reduced client activity and increased the credit and other cost of operations.

Latest Posts on the Zacks [ Analyst Blog ]:

Family Dollar Outperforms

Family Dollar Stores, Inc. (NYSE: [ FDO ]) posted better-than-expected fourth-quarter 2010 results due to healthy sales witnessed in the Consumables categories, sending the stock up 5.1% to $45.56 in pre-market trading.

The quarterly earnings of 56 cents a share beats the Zacks Consensus Estimate of 51 cents, and jumped 30.2% from 43 cents earned in the prior-year quarter. Management now expects first-quarter 2011 earnings between 55 cents and 60 cents, and fiscal 2011 earnings between $2.95 and $3.15.

The current Zacks Consensus Estimates for the first quarter and fiscal 2011 are 57 cents and $2.96 per share. We observe that Family Dollara™s strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines.

The operator of self-service retail discount store chains posted an 8% year-over-year increase in revenues to $1,956.8 million, which remained in line with the Zacks Consensus Estimate, and reflects sales growth registered across Consumables categories (up 9.8%), Seasonal and Electronics (up 5.7%), Home Products (up 4.9%) and Apparel and Accessories (up 3%).

Family Dollar, which faces stiff competition from Wal-Mart Stores Inc. (NYSE: [ WMT ]) and Dollar General Corporation (NYSE: [ DG ]), forecast fiscal 2011 sales to jump by 8% to 10%. We believe effective price management, cost containment, tighter inventory control, private label offering, expanded operating hours and merchandise initiatives should drive sales and margin trends.

Gross margin expanded 20 basis points to 34.7%, whereas operating margin increased 80 basis points to 5.9%. Management expects operating margin to increase in fiscal 2011, based upon flat gross margin and lower SG&A expenses.

The companya™s point-of-sale technology and store realignment initiatives better position it to drive traffic, meet customer-oriented demand and improve in-store shopping experience. Consumers with lower disposable income are now prioritizing their purchases and looking for low-priced options. The company trades in merchandise generally priced under $10.

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.

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