Zacks Equity Research highlights Natural Resource Partners (NYSE: NRP) as the Bull of the Day and CarMax, Inc. (NYSE: KMX) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Mid-America Apartments (NYSE: MAA), Anglo American, Plc. (Nasdaq: AAUK) and General Motors Corporation (NYSE: GM).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.
Here is a synopsis of all five stocks:
Bull of the Day: Natural Resource Partners (NYSE: NRP)
We are maintaining our Buy recommendation on Natural Resource Partners. The partnership looks to improve distributable cash flow next year as its lessees have locked in ‘09 coal production at prices above ’08 levels.
Its low CapEx requirements, strong cash flow profile and $250 MM of available liquidity should put the partnership in a strong position in 2009. The partnership will have the option to engage in several unitholder maximizing investments such as strategic acquisitions, further distribution increases and debt repayments.
Although the slowing global growth story will put some downward pressure on coal prices, continued supply issues should help offset decreases in demand for electricity and steel.
Bear of the Day: CarMax, Inc. (NYSE: KMX)
CarMax continues to face a difficult used-vehicle environment, largely due to aggressive incentives from new vehicle manufacturers. Declining used-car value due to the ongoing weakness in the overall economy and higher funding cost at the CarMax Auto Finance is eroding the margins of the company.
The current economic slowdown and reduced consumer spending had a negative impact on the company’s retail business. It is aggressively cutting prices on trucks and SUVs to reduce inventory.
A drop in earnings and a conservative guidance for 2009 along with a higher valuation make us apprehensive about the stock’s performance in the near term. Thus, we rate the stock a Sell and maintain our six-month target price of $6.50.
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Mid-America Apartments (NYSE: MAA)
Mid-America Apartment reported 3Q08 FFO [funds from operations] of $0.90 per share. Excluding $0.01 per share of hurricane charges, 3Q FFO came in $0.01 below our estimates. Occupancy noticeably dropped in the quarter, and the company will have a much more difficult time raising rents in the early part of 2009.
With job losses mounting, apartment rentals will suffer and we have lowered our 2009 FFO estimates by 6% in response. We still rate the company a Buy due to valuation, yield, and the company's strong balance sheet.
Anglo American, Plc. (Nasdaq: AAUK)
Headquartered in London, Anglo American is a global leader in mining and natural resource sectors. The company has operations in Africa, Europe, South and North America, and Australia. It operates under the following business segments: coal, gold, platinum, base metals, diamonds, industrial minerals, ferrous metals and industries.
We are maintaining a Hold recommendation on Anglo American. The company is benefiting from strong demand for commodities around the globe and an increase in production. However, risks to global economic growth remain, and as inflation moderates, the need to hedge against it using commodity stocks is less attractive.
General Motors Corporation (NYSE: GM)
General Motors is one of the largest automobile manufacturers in the world. We believe that the company should file for bankruptcy to rid itself of Unions, pension and healthcare issues.
As we regard Ford shares, the US government should provide $25-50B in aid which will act as DIP financing. Any aid should force the company to only make 35MPG+ vehicles. Management should be purged and outsiders brought in. Tariffs and quotas should be implemented for imported vehicles from overseas.
Consumers should be allowed to deduct their automotive interest. Lastly, global alliances should be forged among producers in North America, Europe and Asia. From an equity holder perspective, this compel us to rate the shares a Sell with a six-month target price of $0.00.
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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.
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