CHICAGO, Oct. 17, 2011 /PRNewswire/ -- Zacks Equity Research highlights Monsanto Company (NYSE: MON) as the Bull of the Day and Kirkland's, Inc. (Nasdaq: KIRK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Gannett Company, Inc. (NYSE: GCI), News Corporation (Nasdaq: NWSA) and The New York Times Company (NYSE: NYT).
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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:
We maintain our Outperform recommendation on Monsanto Company (NYSE: MON) based on the optimism of the company's continued product development through biotechnology and breeding research. Monsanto's future contracts and hedging mechanism look encouraging toward ensuring uninterrupted seed supply throughout all seasons.
Management noted that that the company improved in its core U.S. business on the strength of new corn and soybean products and seems to have captured global growth opportunities, most notably in Latin America. This, in turn, should bode well for future growth.
Monsanto's current trailing 12-month earnings multiple is 25.1x compared with 16.2x for the industry average and 16.3x for S&P 500. Our $88.00 target price, 25.7x 2012 EPS, reflects our Outperform recommendation.
We have downgraded our recommendation on Kirkland's, Inc. (Nasdaq: KIRK) to Underperform from Neutral following the company's second-quarter 2011 results, which posted a loss of $0.02 per share compared with earnings of $0.16 in the prior-year period. Kirkland's also missed the Zacks Consensus Estimate earnings of $0.02 per share as cost of sales grew coupled with increased operating expenses.
The company however anticipates total sales and margins to be sequentially higher but may be offset by the impact from higher expenses related to store openings. Consequently, Kirkland's expects sales and earnings in third-quarter 2011 to be similar to those reported in second-quarter 2011.
Moreover, we believe that the current business trends and the uncertain economic outlook in the U.S. will negatively impact the company's future performance. Our six-month target price of $9.50 per share equates to about 12.2x our earnings estimate for 2012. With no cash dividend, the target price implies an expected total return of negative 8.3% over that period.
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Earnings Preview: Gannett
Gannett Company, Inc. (NYSE: GCI), the publisher of the one of the largest-selling daily newspapers - USA Today in the nation, is scheduled to report its third-quarter 2011 financial results before the bell on Monday, October 17, 2011. The current Zacks Consensus Estimate for the quarter is 45 cents a share. The Zacks Consensus estimates revenue at $1,271 million for the second quarter.
Third-Quarter 2011 Consensus
The analysts surveyed by Zacks, expect Gannett to post third-quarter 2011 earnings of 45 cents a share. The current Zacks Consensus Estimate compares with 52 cents a share earned in the year-ago quarter. The estimates in the current Zacks Consensus for the quarter range from a low of 43 cents to a high of 47 cents.
Zacks Agreement & Magnitude
Of the 7 analysts following the stock, two analysts revised their estimates downward in the last 30 days, resulting in a penny decrease in the Zacks Consensus Estimate to 45 cents. In the last 7 days, none of the analysts revised their estimates thereby keeping the Zacks Consensus Estimate unchanged.
Mixed Earnings Surprise History
With respect to earnings surprises, Gannett has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 2.4% to positive 6.1%. The average remained at positive 2.0%. This suggests that Gannett has beaten the Zacks Consensus Estimate by an average of 2.0% in the trailing four quarters.
Our Take
The current economic turmoil is taking its toll on publishing companies, and Gannett is no exception. However, the companies are exploring new revenue generating avenues.
Advertising, which remains a significant source of revenue for the company, in turn depends upon the global financial health. We observe that Gannett's publishing advertising revenue fell 6.5% during the second quarter of 2011, following a 7.3% drop in the first quarter. Tough macroeconomic conditions along with softness in advertising demand impacted the results.
Advertisers are shying away from making any upfront commitments, in an environment where the fear of another possible recession looms.
Gannett is taking initiatives to diversify its business model and shielding itself against any economic onslaught by adding new revenue streams. The company is also adapting to the changing face of the multiplatform media universe, which currently includes Internet, mobile, social media networks and outdoor video advertising in its fold.
To curb shrinking advertising revenue and seek new revenue avenues, the publishing companies contemplated charging readers for online content. Despite hiccups in the economy, it still promises revenue generation. News International, the subsidiary of News Corporation (Nasdaq: NWSA) started charging readers for online content of The Times of London and Sunday Times of London from June 2010.
In March, The New York Times Company (NYSE: NYT) launched a pricing system similar to that of the Financial Times' metered system, whereby after browsing a certain number of free articles, readers will be asked to subscribe to enjoy full access to its articles on phones, tablet computers and the Internet.
Given the pros and cons, we prefer to maintain our long-term "Neutral" rating on Gannett. However, going by the current pulse of the economy and waning advertising revenue, we prefer to have a short-term 'Sell' recommendation on the stock, which is well defined by our Zacks #4 Rank.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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