Business & Finance
Business and Finance
Business and Finance
Tue, December 14, 2010
Mon, December 13, 2010 Citigroup, U.S. Bancorp, Wells Fargo & Co., Family Dollar Stores and Wal-Mart Stores
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Citigroup Inc. (NYSE: [ C ]), U.S. Bancorp (NYSE: [ USB ]), Wells Fargo & Co. (NYSE: [ WFC ]), Family Dollar Stores Inc. (NYSE: [ FDO ]) and Wal-Mart Stores Inc. (NYSE: [ WMT ]).
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Here are highlights from Fridaya™s Analyst Blog:
Citi Back with a Bang
Following the wrap up sale of Citigroup Inc.a™s (NYSE: [ C ]) stake by the Treasury, Citi is back to its form. The company is now focused on inducting strategic initiatives to improve its profitability in the upcoming years.
Citia™s core business is progressing well and the international business is gaining momentum. Its wholly-owned subsidiary, Credicard, signed a binding agreement with U.S. Bancorpa™s (NYSE: USB) wholly-owned subsidiary, Elavon, in order to form a joint venture form a merchant services company offering payment solutions in Brazil.
Credicard has over 40 years of experience in the Brazilian market and manages Diners Club International, Visa and MasterCard labels. Elavon on the other hand provides end-to-end payment processing services to more than one million merchants in the United States, Europe, Canada, Mexico and Puerto Rico.
The deal therefore aims at leveraging Credicarda™s market expertise and brand recognition and strong processing platform of Elavon. In addition to this, Citi intends to increase its presence in China by tripling its branches and workforce in the next few years.
In another development, Citia™s consumer lending arm, CitiFinancial, has renamed its U.S. Full Service Network business. The business will begin operating under the new name aOneMain Financiala™ in the summer of 2011. The re-branding is to give the company an identity that better fits the companya™s image and activity. The company also said that the OneMain name reflects a localized business model and commitment to customers.
Citi was in bad shape during the financial crisis and had to sort to government bailout for its rescue. The company has been executing a number of strategic reengineering efforts. It has termed CitiCorp as its core operating unit and Citi Holdings as its non-core unit.
Citi intends to dispose of through sale and divestitures the non core operations and CitiFinancial happens to be a part of this non-core unit. Hence the change in name can be seen as a step towards achieving that, i.e. to prepare the unit for sale. Another biggie, Wells Fargo & Co. (NYSE: [ WFC ]) has also disposed of its non-bank consumer-finance network as a part of its restructuring initiatives.
Citi has already sold a number of its non-core operations such as the European credit card business, a number of its insurance business and the brokerage operations in Japan. However, the company is extending its core operations in the emerging economies such as China, India and Brazil.
The stake sale by Treasury is encouraging and this has attracted investors to the stock. While we believe that Citia™ core business theme is impressive and the Treasury stake sale removes the government overhang, a robust improvement in its top line will still remain elusive with recent reform Act and the shrinking of its revenue base.
Citi currently retains a Zacks #2 Rank, which translates into a short-term aBuya™ rating.
Bullish on Family Dollar Stores
Family Dollar Stores Inc.a™s (NYSE: [ FDO ]) strategic initiatives to improve the merchandising, marketing and store operations have resulted in sustained growth in the top and bottom lines. This is evident from the companya™s better-than-expected fourth-quarter 2010 results.
Family Dollar posted fourth-quarter earnings of 56 cents a share that beat the Zacks Consensus Estimate of 51 cents, and rose 30.2% from 43 cents earned in the prior-year quarter. The operator of self-service retail discount store chains posted an 8% year-over-year increase in revenue to $1,956.8 million, which remained in line with the Zacks Consensus Estimate.
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 have been prioritizing their purchases and looking for low-priced options. The company trades in merchandise generally priced under $10.
Management now expects a growth of 8% to 10% in net sales and an increase of 13% to 20% in earnings per share in fiscal 2011.
The effective price management, cost containment, tighter inventory control, private label offering, expanded operating hours and recent merchandise initiatives should drive sales and margin trends. Moreover, in order to enhance its market share, Family Dollar intends to focus on both consumable and discretionary categories.
We remain encouraged by the companya™s decision to expand its store base by about 300 stores with plans to remodel 600 to 800 stores in fiscal 2011. Moreover, Family Dollara™s share repurchase program of $750 million will also be accretive to earnings. The company also maintains a healthy balance sheet with cash and cash equivalents of $382.8 million and long-term debt of $250 million at the end of fiscal 2010.
In spite of intense competition from other established players such as Wal-Mart Stores Inc. (NYSE: [ WMT ]), erratic consumer spending pattern, we remain bullish on the stock. Family Dollar maintains a Zacks #2 Rank, which translates into a short-term aBuya™ rating. Moreover, our long-term recommendation on the stock remains Outperform.
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