The Zacks Analyst Blog Highlights: Nokia, Apple, Google, Microsoft and Caterpillar
CHICAGO, June 19, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Nokia Corporation (NYSE:NOK), Apple Inc. (Nasdaq:AAPL), Google Inc. (Nasdaq:GOOG), Microsoft Corporation (Nasdaq:MSFT) and Caterpillar Inc. (NYSE:CAT).
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Here are highlights from Monday's Analyst Blog:
Nokia Downgraded to Junk
Ailing Finnish handset manufacturer Nokia Corporation (NYSE:NOK) continues its dismal run as Moody's Rating Agency has downgraded it to "junk" status. We believe that the disappointing profit outlook posted by the company, coupled with its higher-than-expected cash outflow, are the primary reasons for the pessimistic view.
Moody's has lowered Nokia's long-term credit rating to "Ba1" from "Baa3" – the second ratings downgrade suffered by the company in three months. Moody's is the third rating agency to reduce Nokia to non-investment grade status following Fitch and Standard & Poor's in April. Relegation to "junk" status implies that Nokia's creditability is doubtful and the company will not be favored by financial institutions.
Nokia is currently engulfed with problems and has been losing market share to Apple Inc.'s (Nasdaq:AAPL) iPhone and a gamut of smartphones that run on Google Inc.'s (Nasdaq:GOOG) Android operating system. The company also faces stiff competition in the low-end segment from Chinese manufacturer ZTE.
According to IDC, once the world's largest handset manufacturer, Nokia has recently been overtaken by Korean giant Samsung Electronics in sales.
In an effort to improve its falling smartphone market share, the company ditched its Symbian operating system and teamed up with Microsoft Corporation (Nasdaq:MSFT) to develop Windows based smartphones. However, the recently launched Lumia is not expected to be a hit right away, as the company sold only 12 million handsets in the first quarter compared to Apple's 35 million and Samsung's 44.5 million.
In order to withstand this problem, Nokia has initiated several restructuring measures like retrenching 10,000 employees, shutting down its production and research and development units as well as divesting its 90% stake in its premium handset division Vertu. Additionally, Nokia plans to trim its huge patent portfolio which is being viewed as a desperate move to improve its fading cash position.
Nokia is skeptical that the fierce competitive landscape could negatively impact its device and service business. The company expects its second quarter operating margin to be broader than negative 3.0% in the first quarter. Furthermore, the company stated that it might have to shell out more money, if the Nokia-Siemens joint venture continues to escalate its operating cash flow.
Despite the comprehensive restructuring initiatives undertaken by the cell phone maker, the above mentioned issues are believed to be the primary reasons for Nokia's rating downslide.
Recommendation:
We retain our long-term Underperform recommendation on Nokia. Currently, Nokia has a Zacks #3 Rank, implying a short-term Hold rating.
Caterpillar Hikes Dividend
Caterpillar Inc. (NYSE:CAT) upped its quarterly dividend by 6 cents to 52 cents to boost shareholder value. The hike translates to a 13% increase from the prior dividend of 46 cents, marking the highest percentage increase in the dividend since the financial crisis of 2008.
The increased dividend will be paid on August 20, 2012, to stockholders of record on July 20, 2012. Caterpillar has been a consistent payer of quarterly dividends since its formation in 1925. The current dividend hike comes exactly after a year. The last dividend hike of 5% from 44 cents to 46 cents was announced in June 2011.
Prior to the recession, the company had increased its dividend by 17% to 42 cents. During the recession Caterpillar had refrained from hiking dividends. After a hiatus of two years, Caterpillar had resumed its trend of increasing the dividend in June 2010. The dividend was then raised by 2 cents or 5% to 44 cents.
Caterpillar's strategy is to deliver Total Stockholder Return in the upper 25% of the S&P 500. The current hike represents its continued commitment to providing value to stockholders. During the past 10 years, Caterpillar's total stockholder return has been 322%, which is in the top 25% of the S&P 500.
Meanwhile Caterpillar continues to focus on strengthening its balance sheet and improving cash flow. Caterpillar had cash and short-term investments of $2.8 billion as of March 31, 2012. Total debt-to-capital ratio improved to 67% as of March 31, 2012 from 69% as of December 31, 2011. The debt-to-capital ratio at Machinery & Power Systems improved to 40.5% at the end of the first quarter of fiscal 2012 from 42.7% at the end of fiscal year-end 2011.
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