Business & Finance
Business and Finance
Business and Finance
Thu, December 9, 2010
Wed, December 8, 2010 Discover Financial Services, Visa, Inc., Mastercard Incorporated, Macya?s Inc. and J. C. Penney Company
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Discover Financial Services (NYSE: [ DFS ]), Visa, Inc. (NYSE: [ V ]), Mastercard Incorporated (NYSE: [ MA ]), Macya™s Inc. (MYSE: [ M ]) and J. C. Penney Company Inc. (NYSE: [ JCP ]).
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Here are highlights from Tuesdaya™s Analyst Blog:
Lawsuit Slams Discover Bank
Discover Bank, a unit of Discover Financial Services (NYSE: [ DFS ]) has been accused by the Minnesota attorney general of keeping customers uninformed about their buying decisions pertaining to the companya™s services. The lawsuit was filed in the Hennepin County District Court.
According to the lawsuit, Discover makes deceptive telemarketing calls to consumers offering them its several optional products, including an identity-theft protection, a credit-score tracker and a payment protection plan, which would free customers from making further monthly credit-card payments in case of job loss or disability.
However, Discover initially informs consumers about its cash-back rewards program, but then they use misleading and confusing terms, read scripts quickly, and also omit disclosures related to the product, leaving consumers confused and misguided.
The lawsuit urges the court to order Discover to stop such fraud telemarketing practices and reimburse customers who bought services they don't want. However, the amount of civil penalties is not yet specified.
Discover has declined the allegations and stated that it believes in selling a product that enhances its relationship with the card members. Moreover, Discover has members who benefit from its protection products.
In addition, Discover and other credit-card companies like Visa, Inc. (NYSE: [ V ]) and Mastercard Incorporated (NYSE: [ MA ]) have been making profits by selling such credit-related products to customers. In 2009, such products generated profits of $295 million for Discover, an 18% increase over the previous year.
We believe that credit-card companies have been selling such products through telemarketing for years. But recently with the imposition of the CARD Act regulation, Discover and other companies are under even more pressure to generate revenue from such services, as the new law restricts certain practices that helped generate substantial profits in the past.
However, fundamentally Discover is poised to grow significantly with its well-diversified business model and a more favorable operating environment. Moreover, the companya™s extensive network, sound capital position and cost containment initiatives will help accentuate growth once the markets rebound to its historical highs.
Going forward, we expect healthy growth opportunities with limited downside for the stock, which also justifies the recent upgrade in the recommendation to Outperform from Neutral. Hence, we are maintaining a Zacks #2 Rank, which translates to a short-term Buy recommendation. Our long-term recommendation for the stock is upgraded to Outperform.
Macya™s Sales Up, Lifts Outlook
Macya™s Inc. (MYSE: [ M ]) recently posted better-than-expected sales results for the four-week period ended November 27, 2010, driven by robust online and Black Friday sales. Consequently, the company has lifted its outlook.
Macya™s comparable-store sales for November 2010 rose 6.1%, following an increase of 2.5% registered in October 2010 and reflecting a sharp improvement from a decline of 6.1% witnessed in November 2009.
Cincinnati, Ohio-based Macya™s pointed out that year-to-date comparable-store sales grew by 4.9%.
Macya™s said that total sales for November jumped 7.8% to $2,344 million from $2,174 million in the same month last year. Year-to-date, sales were up 7.1% to $19,078 million from $17,814 million in the comparable year-ago period.
Online sales, which include macys.com and bloomingdales.com, continued their growth momentum in November and soared 31.8% for the month under review, and were up 28.9% year-to-date. Macya™s is seeking to expand both the Macy's and Bloomingdale's brands.
Buoyed by November results, Macya™s lifted its sales and earnings guidance. The company now expects comparable-store sales for fourth-quarter 2010 between 3.5% and 4.5%, up from 3% to 4% previously anticipated. Management hinted at fourth-quarter earnings in the range of $1.44 to $1.49 per share compared with $1.42 to $1.47 forecasted earlier, which would translate into fiscal 2010 earnings between $1.96 and $2.01.
The current Zacks Consensus Estimates for the fourth quarter and fiscal 2010 are $1.50 and $2.00, respectively.
Macya™s department stores sell a wide range of merchandise. Macya™s products include mena™s, womena™s, and childrena™s apparel and accessories, cosmetics, home furnishings and other consumer goods.
Macya™s, which competes with J. C. Penney Company Inc. (NYSE: [ JCP ]), currently operates approximately 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.
The company is taking steps to increase sales, profitability and cash flows, which include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic Macya™s continues to focus on price optimization, inventory management and merchandise planning. However, intense competition and higher debt-to-capitalization ratio remain concerns.
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