Chicago, IL – December 15, 2015– Zacks Equity Research highlights Campbell Soup (CPB) as the Bull of the Day and Morgan Stanley (MS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onDuPont (DD) and Dow Chemical (DOW). Here is a synopsis of all four stocks: Bull of the Day: Markets have become extremely volatile lately as investors await news from the Fed regarding an interest rate decision. This has led to big market sell-offs and it has forced investors to reconsider safe haven securities once more. One such stock that has come back into focus thanks to this shift is Campbell Soup (CPB). After all, what could be safer than a soup stock in today’s market environment? CPB has a beta of just 0.47 while roughly 80% of the company’s sales come from the domestic market, leaving it with relatively low exposure levels to foreign woes which could be very important today given all the trouble overseas. But this relative safety isn’t the only reason to like CPB today, as the stock has also seen some pretty impressive growth characteristics when compared to its peers, while it also in a great position if you look to recent earnings estimate revisions as well. Recent Estimates While soup might have a reputation as a boring business, CPB actually is sporting a pretty robust growth rate. In fact, current rates suggest 14% earnings growth this year including nearly 10% growth for this quarter (when compared to the year ago period). These lofty growth projections have certainly been assisted by recent earnings estimate revisions as these changes from analysts have bumped up expectations. In just the past month, the current year EPS consensus has gone from $2.60/share to $2.81/share as nine estimates have moved higher compared to zero lower. We see similar trends of agreement in other time periods too, suggesting that most analysts are getting more bullish on the Campbell story. Bear of the Day : Rough trading has led to sluggish performances for a number of key investment houses as of late, including Morgan Stanley ( MS). The well-known investment firm has seen its shares tumble by over 7.5% in the past month, while it has plummeted 20% in the past six months as well. But what’s behind this intense selling pressure, besides the overall weak trading environment? Well the idea that the federal government won’t step in during the next crisis isn’t exactly a plus for MS investors, but there are definitely other issues for Morgan Stanley right now. Recently, the company announced a nearly quarter of a billion dollar settlement to settle MBS claims from the financial crisis, while it also recently cut 1,200 jobs in its FICC (fixed-income, currencies and commodities) unit. The job cuts are also expected to result in $150 million in charges for Q4, adding to Morgan Stanley’s woes. But the real problem remains the toxic trading environment and the impact this will have on the MS bottom line. We already saw this in the previous quarter’s earnings announcement which easily missed expectations, and with recent worries in the markets there is plenty of reason to believe a similar situation will happen this quarter too. This may be especially true if you look to analysts and their recent earnings estimates for Morgan Stanley stock. Recent Estimates Analysts have actually been racing to slash their estimates for MS stock lately as not a single estimate has gone higher for the current year, next year, or current quarter in the past sixty days. Instead we have seen a huge level of agreement among covering analysts that recent earnings expectations are just too high relative to what MS is likely to produce in the near term. Current year estimates have fallen from $3.03/share to $2.54/share in the past 90 days, while the current quarter estimate has slumped from $0.64/share to $0.50/share in the same time frame. And the most accurate estimates we have are even worse, with the current quarter seeing a 12% decline from even this low consensus. All of this is pretty awful news for MS investors and especially when you consider that Morgan Stanley has a hard time in living up to expectations on a regular basis. In the past four quarters the company has missed estimates in two of them pushing MS to an average surprise of -12% over the past four quarters. Additional content: Will Regulators Bless the Dow-DuPont Merger? Chemical behemoths DuPont (DD) and Dow Chemical ( DOW) made it official last Friday that they plan on combining their businesses to create a chemical powerhouse dubbed “DowDuPont” with a combined market value of around $130 billion, before eventually breaking up into three independent companies. The two iconic American firms – both reeling under the effects of the commodity price slump, weak demand for agricultural chemicals and headwinds from a stronger greenback – have agreed to merge in an all-stock deal that has been unanimously cleared by the boards of both companies.
A Monster Merger
The proposed merger, which has been the talk of Wall Street since its announcement, will see the marriage of two of the America’s oldest companies with more than three centuries of combined history. Apart from being the largest deal ever in the chemical space, it also ranks among the biggest mergers and acquisitions (M&A) deals announced this year.
Under the deal terms, shareholders of Dow and DuPont will each own about a half of DowDuPont, excluding preferred shares. Dow shareholders will get one share of DowDuPont for each Dow share, while shareholders of DuPont will receive 1.282 shares in the new company for each DuPont share they hold.
DuPont’s Chair and CEO Edward Breen will retain his title at the new company. Dow’s CEO Andrew N. Liveris will be the Executive Chairman of the combined company. Board of DowDuPont is expected to have 16 directors, consisting of 8 incumbent DuPont directors and 8 current Dow directors.
The planned merger, however, would be followed by a breakup of the integrated company into three independent, publicly traded companies through tax-free spin-offs. The combined company would split into pure-play agricultural, material science and specialty products businesses that will be leading players in their respective fields: The “Agriculture Company” (combined adjusted sales of around $19 billion in 2014) will unite Dow's and DuPont’s seed and crop protection businesses. The “Material Science Company” (combined adjusted sales of around $51 billion in 2014) will consist of DuPont's Performance Materials segment and Dow's Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions, and Consumer Solutions (excluding the Electronic Materials business) divisions. The “Specialty Products Company” (combined adjusted sales of around $13 billion in 2014) will include DuPont's Nutrition & Health, Industrial Biosciences, Safety & Protection and Electronics & Communications units and Dow’s Electronic Materials business.
Advisory Committees will be set up for each of these three businesses. Breen will lead the Agriculture and Specialty Products committees while Liveris will head the Material Science committee.
The breakup is expected to take place 18-24 months after the completion of the deal, which is expected in second-half 2016, subject to regulatory and shareholder clearance. Following the transaction closure, DowDuPont will be dual headquartered in Midland, MI and Wilmington, DE. Klein and Company, Lazard, and Morgan Stanley & Co. LLC are serving as Dow's financial advisors for the transaction while Evercore and Goldman, Sachs & Co. are DuPont's financial advisors. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> 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. About the Analyst Blog Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets. About Zacks Equity Research Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons. Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today. Find out What is happening in the stock market today on zacks.com.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CAMPBELL SOUP (CPB): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
|