CHICAGO, Jan. 13, 2011 /PRNewswire/ -- Zacks Equity Research highlights: Wynn Resorts, Ltd. (Nasdaq: WYNN) as the Bull of the Day and Skechers U.S.A. (NYSE: SKX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on RadioShack Corp. (NYSE: RSH), Wal-Mart Store Inc (NYSE: WMT) and Target Corp. (NYSE: TGT).
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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:
Wynn Resorts, Ltd. (Nasdaq: WYNN) third quarter 2010 earnings results improved on a year-over-year basis, primarily driven by higher-than-expected top-line growth.
With the global economy showing a gradual recovery, the company is experiencing an increase in demand. Its Las Vegas business is also rebounding with increased room rates and conventional bookings. Additionally, with strong momentum in Macau we expect the earnings of the company to increase, going forward.
Moreover, we remain encouraged with the company's strong brand name, healthy balance sheet, strong cash flow position, relatively low capital requirements, future growth driver in Cotai and its ability to execute in a difficult operating environment. Thus, we are upgrading the stock from Neutral to Outperform.
Skechers U.S.A. (NYSE: SKX) third-quarter 2010 results missed the Zacks expectations for the top and bottom lines, reflecting sluggish sales trends and order cancellations. Consequently, total inventories increased 70.3% to $326.7 million over the prior-year quarter.
Management hinted that extended delivery times also led to the inventory pile-up. However, Skechers indicated that it would try to lower its inventory level over the next two quarters, while generating reasonable margins. We believe that international business should act as a catalyst to normalize the inventory level.
Currently, we are maintaining our Underperform recommendation on the stock, until we find any catalyst triggering a change in our opinion. Our target price of $19.00, 6.5X 2010 EPS, reflects this view.
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RadioShack to Underperform
We downgrade our recommendation on RadioShack Corp. (NYSE: RSH) to Underperform. The decrease in rating is attributable to the company's profitability, which may suffer in 2011 due to several reasons.
The transition of Kiosks businesses from Wal-Mart Store Inc's (NYSE: WMT) Sam's Club to Target stores will result in huge loss in operating profit. Management predicted that pressure on gross margin will continue in near future since the company is working hard to revamp its struggling electronics accessories segment and deploying wireless kiosks inside Target Corp. (NYSE: TGT) stores. Precipitous fall in demand for the non-wireless category products remain a serious concern for the company.
Recently, RadioShack announced that its operating income from the Kiosks segment will decline by $10 million - $15 million in 2011 due to closure of wireless kiosks at Wal-Mart's Sam's Club locations. The existing contract with Sam's Club will come to an end as of March 31, 2011, with the transition period ending on June 30, 2011. By mid-2011, all the Sam's Club Kiosks will move to Target stores.
While Sam's Club Kiosks are well established business centers of RadioShack, the newly developed Target store Kiosks are yet to reach maturity and required promotional activities. At present, Target stores Kiosks generates an EBIT margin of hardly 4% compared with huge 12% of the Sam's Club Kiosks. We believe RadioShack's full year 2011 profitability will be adversely affected.
A major near-term concern for RadioShack is the significant decline of its gross margin. In the third quarter of 2010, gross margin was 45.4% compared with 47.6% in the prior-year quarter and 47.5% in the previous quarter.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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