CHICAGO, June 5, 2012 /PRNewswire/ -- Zacks Equity Research highlights CBS Corporation (NYSE:CBS) as the Bull of the Day and Quality Systems, Inc. (Nasdaq:QSII) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onThe Procter & Gamble Company (NYSE:PG), Kellogg Company (NYSE:K) and PepsiCo, Inc. (NYSE:PEP).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Higher content licensing and distribution revenues facilitated CBS Corporation (NYSE:CBS) to post better-than-ever first-quarter 2012 results. The quarterly earnings of $0.54 per share surpassed the Zacks Consensus Estimate of $0.44 and surged 86% from $0.29 earned in the year-ago quarter. Revenues jumped 12% to $3,924 million.
The quarter saw a step up in both the advertising marketplace as well as profitable content deals. Management remains confident about continued growth momentum in fiscal 2012. However, the significant potential risk is CBS's high dependence on advertising revenue, which is driven by the health of the economy. To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles, which include retransmission fees, syndication sales and streaming deals.
CBS' substantial liquidity positions it to drive future growth and enhance shareholders return. Currently, we maintain our Outperform recommendation on the stock, which also has a Zacks #1 Rank (Strong Buy).
We downgrade our rating on Quality Systems, Inc. (Nasdaq:QSII) to Underperform with a target price of $27. The company reported earnings per share of $0.26 in fourth-quarter fiscal 2012, just missing the Zacks Consensus Estimate.
Quality Systems offers an electronic health record (EHR) product and is benefiting from the migration of ambulatory and inpatient practices to EHR under the federal stimulus. Of late, however, growth of its pipeline metric has been on a falling trend along with progressively lower number of signed deals on a quarterly basis. The company has made multiple acquisitions to bolster organic growth. Its acquisitions are expected to facilitate its entry in the small hospital segment.
We are concerned about execution risk emanating from Quality Systems entry into the rural inpatient market. Also, on the negative side, it competes in a fragmented market with larger competitors. The market is price sensitive and vulnerable to price cutting.
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Kellogg Closes Pringles Buy from P&G
Retail giant, The Procter & Gamble Company (NYSE:PG) recently announced that it has completed the sale of its snacks unit, which included the iconic potato snack Pringles, to the world's largest cereal maker Kellogg Company (NYSE:K) for $2.7 billion.
The Pringles workforce as well as the manufacturing plants at Jackson, Tennessee, and Mechelen, Belgium, will now be under the purview of Kellogg. The deal which was first announced in February this year will result in an after-tax gain in the range of $1.4 billion to $1.5 billion (approximately 47 cents to 50 cents per share) for P&G.
With the deal, Kellogg becomes a strong player in the savory snacks business, second only to PepsiCo, Inc. (NYSE:PEP). Further, we believe the Pringles buyout is likely to reduce Kellogg's dependence on its mainstay cereal business apart from adding an important brand to its already popular offerings of snacks like Keebler and Cheez-It.
The buyout is expected to strengthen sales in Europe and mark a forceful entry in Asia and Latin America. In North America, the addition is expected to boost revenues by more than $500 million. With the Pringles deal closed, the company is expected to generate more than $15 billion in annual sales and over $6 billion in snacks sales globally. The Pringles deal is expected to dilute Kellogg's 2012 earnings by 6–11 cents per share.
Our Recommendation
We currently have a Neutral recommendation on both Procter & Gamble and Kellogg. The Kellogg stock carries a Zacks #3 Rank (Hold rating) while P&G carries a Zacks #4 Rank (Sell rating) in the near term.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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