The deal, subject to regulatory approvals and other customary closing conditions, is anticipated to close in the second quarter of 2012. Terms of the deal were, however, not disclosed.

The purchase is expected to strengthen its energy banking business. BNP Paribas’ energy business is established and well-managed, and is based in Houston. It has nearly $9.5 billion of loan commitments and about $3.9 billion in loans outstanding. Approximately 90% of the portfolio is based in U.S. and the rest are primarily in Canada. Notably, the Wells Fargo Energy group is trying to increase its market share in the Canada market.

Earlier in February, Wells Fargo announced that it has accomplished the purchase of Burdale Financial Holdings Limited (Burdale) and the portfolio of Burdale Capital Finance Inc. from Bank of Ireland (IRE). The acquisition was part of the company’s effort to broaden its international commercial finance capabilities.

Headquartered in London, Burdale is a leading provider of comprehensive asset-based lending and operates in and across the UK marketplace. The deal is a strategic fit for Wells Fargo. It would enable the company to broaden its horizon and expand its asset-based lending business into the UK. This would in turn help the company to serve its US-based customers doing business in the UK.

Going forward, we believe that strategic acquisitions will help expand Wells Fargo’s business and improve its profitability. Its solid business model, strong capital position and expanded business through the Wachovia acquisition and its integration, expected expense management and improved credit quality will also support its profit figures. Yet a sluggish economic recovery and its impact on revenue might limit its growth to some extent.

Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

 
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For 2011, the Zacks Consensus Estimate for earnings per share is $1.47, reflecting an estimated decline of 15.81%.

Foster Wheeler’ earnings were below of the Zacks Consensus Estimate by 11 cents in the last quarter and above estimate by 18 cents in the second quarter of 2011. It had underperformed in the first quarter of 2011 and in the fourth quarter of 2010, with an average negative surprise of 0.07%.

Third Quarter Highlights

Foster Wheeler reported third-quarter 2011 earnings per share from continuing operations of 33 cents compared with 40 cents in the prior-year quarter. The company underperformed the Zacks Consensus Estimate of 44 cents.

Consolidated operating revenue in the quarter was $1.13 billion compared with $904.7 million in the prior-year period.

Global Engineering and Construction (E&C) Group’s operating revenue was $417.8 million compared with $380.6 million in the prior-year period. Global Power Group (GPG) operating revenue decreased to $247.4 million from $249.0 million in the prior-year period as volume of boiler work increased.

Agreement of Estimate Revisions  

In the last 30 days, of the analysts providing estimates on the stock, one analyst decreased its estimates for the fourth quarter and full-year 2011. Three analysts lowered their estimates while one increased the same for full-year 2012. None of the analysts revised their estimate for the first quarter of 2012.

In the last 7 days, none of the analysts changed their estimates for fourth-quarter 2011, full-year 2011, first-quarter 2012 or full-year 2012.

Magnitude of Estimate Revisions  

In the last 30 days and 7 days, the earnings estimates for fourth quarter, full year 2011 and first quarter 2012 remained unchanged.  For full-year 2012, the consensus estimate decreased from $1.90 to $1.86 in the last 30 days and from $1.86 to $1.85 in the last 7 days.

Our Take

Foster Wheeler is witnessing a growing need for capacity additions in a number of developing countries. There is often a preference for solid fuel boilers in these countries. The company’s CFB technology continues to be its preferred solid fuel technology when a client has a hard-to-burn fuel or needs flexibility in fuel type.

In third-quarter 2011, the company has witnessed a recovery in demand for its services and received a number of contracts. The increased activity reflects Foster’s strong position in a wide range of market across both business lines and geographies. Though the company delivered robust operating performance during the third quarter of 2011, its net income and EBITDA declined. This decline resulted from prevailing weak market conditions.

Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton NJ USA. The majority of Foster’s revenues and new businesses originate from outside the United States.  The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance. Major competitors of Foster Wheeler are Fluor Corporation (FLR) and Jacobs Engineering Group Inc. (JEC).

We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

 
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TWC is the producer of the 2012 Oscar nominated movie “The Artist”. The recent deal will also allow Netflix to stream this critically acclaimed movie before its cable or pay television release. Further, Netflix will also stream some of TWC’s best productions including Oscar nominated documentary “Undefeated," French language movies “Sarah’s key”, “The Intouchables”, famed singer Madonna’s directorial venture “W.E”, Shakespearean adaptation “Coriolanus” and another documentary “Bully”.

Amid increasing competition from streaming providers such as HBO, Amazon.com Inc. (AMZN), Hulu as well as newly launched services from  cable and media companies such as Comcast Corp. (CMCSA), Dish Network Corp. (DISH) and Verizon Communications (VZ), Netflix remains focused on boosting its streaming portfolio with varied content. We believe that TWC’s fresh and diverse content will enhance Netflix’s streaming portfolio going forward.

Over the years, Netflix has made a name for itself by offering new and exclusive content to its subscribers compared to the traditional content provided by some of its closest peers. Apart from recent movies and documentaries, Netflix is also boosting its original content portfolio. Over the last few months, the company has acquired the rights to a number of original series such as the comedy series “Orange Is the New Black”, and the political drama “House of Cards” in 2011. Netflix is expected to stream five original series within the first half of 2013.

Netflix is also picking up exclusive distribution rights to third party productions, such as “Lilyhammer” (premiered on February 6). The company is also reviving Fox’s canceled series “Arrested Development”, which is expected to be streamed in the first half of 2013. According to Bloomberg, Netflix is also in talks to secure the rights to the horror drama “Hemlock Grove”, a series produced by Gaumont International Television.

In comparison, the recently launched Xfinity Streampix service from Comcast will provide old movies and shows to its existing subscribers.

Operating income amounted to $50.8 million, up from $37.4 million in the fourth quarter of 2010. Operating income in the reported quarter excludes the impact of non-recurring items such as transaction costs and integration expenses related to the Walgreens Health Initiatives Inc. (“WHI”) acquisition and intangible asset amortization related to acquisitions. Including the non-recurring items, operating income amounts to $32.3 million.

The year-over-year upsurge was owing to strong prescription volume growth, which supported the top line and improved operational performance. Besides, the acquisition of WHI was significant and provided meaningful earnings growth. The acquisition further led to additional expenses thereby partially mitigating earnings growth.

Net income reported by Catalyst Health was $19.1 million or 39 cents per share, down from $22.6 million or 51cents in the prior-year quarter. Revenues for the reported quarter climbed 38% year over year to $1.54 billion from prior year earnings of $1.12 billion. The rise is attributable to higher prescription volume and higher drug prices, which were partly offset by the impact of increased generic utilization.

Additionally, total prescription volume excluding administrative services only (ASO) claims rose to 32.1 million from 24.6 million in the prior-year quarter. The growth of new clients along with the impact of the WHI acquisition resulted in the increase in prescription volume. Meanwhile, ASO claims increased to $21.1 million from $0.12 million in the year-ago quarter due to the impact of the WHI acquisition.

Generic utilization climbed to 75% from 73% in the fourth quarter of 2010, while gross profit rose to $92.6 million from $66.1 million in the year-ago quarter. Gross profit of the reported quarter includes the effect of amortization of intangible assets of acquired companies to the tune of $5.6 million.

For full-year 2011, the company posted adjusted earnings of $1.11 a share, surpassing the Zacks Consensus Estimate of 54 cents. Results also saw an almost twofold growth from the year-earlier profit of 56 cents a share.

Fourth quarter 2011 total revenue of $348 million was ahead of our $313 million projection and up 21% year over year. The full-year revenue improved 16% year over year to $1,282.6 million, and exceeded the Zacks Consensus Estimate of $1,143 million.

Operational Performance

The fourth quarter production volume of 625.1 million cubic feet equivalent per day (MMcfe/d) jumped nearly 16% from the year-earlier level. Of the total production volume, natural gas accounted for more than 78%.

Production for full-year 2011 climbed 12% compared to the 14% increase in 2010, and averaged 554 MMcfe/d. Despite the sale of Barnett assets in April 2011, Range saw the eighth consecutive year of double-digit production growth of 12%. Adjusting for the sale of the Barnett properties, production growth would have been 36%.

Natural gas and NGLs output surged 19.8% and 3.8%, respectively. However, oil production dropped 2% year over year.

The average realized gas price was $4.09 per Mcf, down 6.6% from the prior-year quarter. NGLs were sold at $54.31 a barrel (up 29% year over year) and oil at $83.71 a barrel (up 15.6%). Range Resources’ total price realization for the quarter averaged $5.41 per Mcfe, up 1.5% year over year.

Financials

At the end of the quarter, long-term debt was $1,975 million, representing a debt-to-capitalization ratio of 45.2%.

Hedging

For two consecutive quarters starting first quarter 2012, Range has hedged 189,641 million British thermal units per day (MMbtu/d) of natural gas production at an average floor price of $5.43. For the third and fourth quarters of 2012, the company has hedged 279,641 MMbtu/d of natural gas production at an average floor price of $4.

The coalition will guarantee Cintas the security of medical records by converting the paper charts into electronic formats, backed-up on secure servers.  The searchable data fields will make the task of searching the patient’s records easier. The PDF files will simplify the navigation process, thus saving time. Alongside, the solution will also save the cost and space required for maintaining the paper charts and files.

The alliance with ScanMD has helped Cintas in curtailing the cost and labor of transforming the healthcare information and records to EMR program. Moreover, Cintas is also able to stay ahead of the future legislative regulations of utilizing EMR programs.

ScanMD specializes in converting paper medical charts to electronic formats. It integrates paper charts to EMR and safeguards them, fulfilling the norms of Health Insurance Portability and Accountability Act (HIPAA). The system also diminishes the risk of HIPAA issues by reducing the number of lost or inaccessible files.

In the recently reported quarterly results, Cintas’ earnings increased 50% to 57 cents per share from 38 cents in the year-ago-quarter. Total revenue increased 9% year over year to $1.02 billion. The Zacks Consensus Estimate for the third quarter of the year 2012 is 52 cents.

Cintas continues to deliver margin expansion through better sales productivity and cost efficiencies, offsetting the rising headwinds from higher energy and other input costs. During the second quarter of fiscal 2012, gross margin increased 50 basis points to 42.2% and in operating margin there was an impressive 200 basis point expansion to 13%; this happens to be the fourth consecutive quarter of strong operating margin expansion after several years of decline.

This performance was commendable considering the ongoing headwinds from higher energy and garment material prices. There is scope for further gross margin expansion as the company has unutilized capacity in facilities that it can leverage. Furthermore, due to a weak labor outlook, much of the growth over the last few quarters has been driven by new business sales rather than existing customers adding more employees, which is more profitable. Any increase in hiring at existing customers will boost margin expansion.

Currently, the shares of Cintas maintain a Zacks #2 (short-term “Buy” recommendation) Rank. It competes with the likes of G&K Services Inc. (GKSR) and privately held Alsco Inc. and ARAMARK Corporation.

Based in Cincinnati, Ohio, Cintas Corporation (CTAS) provides specialized services to businesses of all types throughout North America. The company designs, manufactures, implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for approximately 800,000 businesses. Cintas operates under two operating segments, Rental Uniforms and Ancillary Products and Other Services.

 
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In 2011, adjusted Non-GAAP earnings came in at 83 cents per share versus 92 cents per share in 2010. This was above the Zacks Consensus Estimate of 65 cents per share.

Total Revenue

Total revenue for the quarter was $1.51 billion, rising 36.0% y/y and 20.8% sequentially. In 2011, revenues came in at $4.6 billion, increasing 18.0% from 2010. Consolidated backlog at the end of 2011 was a record $7.2 billion compared with $6.3 billion at the end of 2010.

Segment Details

Electric Power revenue in the quarter was $973.5 million, up 63.5% y/y and 18.3% sequentially. Natural Gas and Pipeline revenue came in at $379.3 million, down 5.1% y/y but up 46.4% sequentially, Telecommunications revenue was $130.8 million, rising 56.8% y/y but down 7.0% sequentially and Fiber Optic Licensing revenue was $29.6 million, up 1.1% y/y and 3.9% sequentially.

Segment wise, total backlog for 2011 came in at $5.0 billion, $1.35 billion, $529.6 million and $402.0 million in Electric Power, Natural Gas and Pipeline, Telecommunications and Fiber Optic Licensing segment, respectively.

Margins

Operating margin for the quarter was 6.1% compared to 4.9% in the prior-year quarter and 7.5% in the previous quarter. SG&A expense came at $99.5 million, rising 12.7% in the comparable quarter last year.

Segment operating margins were 13.4%, 11.9% and 49.4% in Electric Power, Telecommunications and Fiber Optic Licensing segment, respectively. Natural Gas and Pipeline segment reported an operating loss of $36.3 million during the quarter.

In 2011, gross margin came in at 13.4% versus 16.1% in the previous year. Operating margin was 4.7% versus 6.5% in 2010.

Balance Sheet

The company ended the year with cash and cash equivalents of $315.4 million, up from $539.2 million at the end of the previous year. Net accounts receivable came in at $1.1 billion, rising from $766.4 million at the end of the previous year.                                           

As of December 31, 2011, accounts payable and accrued expenses were $618.9 million, up from $416.0 million at the end of the previous year.

Outlook

Quanta expects revenues for the first quarter of fiscal 2012 to range between $1.25 billion and $1.35 billion and adjusted diluted EPS (Non-GAAP) is expected to be 19 cents to 21 cents.

For 2012, Quanta expects revenues to be in the range of $4.9 billion and $5.3 billion with adjusted diluted EPS (Non-GAAP) to fall within $1.08 and $1.28.

We continue to maintain a Neutral rating on Quanta Services, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

 
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Yet high yielding equities probably aren’t the solution for everyone, especially for investors approaching retirement or those with a low risk tolerance. Stocks can move violently in a short period of time in a way that bonds seldom do, suggesting that some may be better off in fixed income in order to protect against volatility or principal loss. For these investors there are several options that are still out there that can boost yields back up to respectable levels. Two increasingly popular choices are in the emerging market and junk bond segments. These two sectors often crush the competition in terms of yields and have been opened up to the average investor thanks to ETFs (read Go Local With Emerging Market Bond ETFs).

While either is certainly an intriguing pick, many investors are put-off by the higher risks in the space as junk bonds are more susceptible to defaults (historically) and emerging market bonds tend to see more uncertainty than more stable and developed nations.  Luckily for investors who are seeking yield but are still looking to keep overall risk low in the bond space, there are several choices available at this time (see The Best Bond ETF You Have Never Heard Of). While their yields may not be as high as their emerging market or junk bond counterparts, the payouts are still far higher than comparable Treasury bonds and the risk are much lower than junk bonds. Thanks to this, the following three ETFs could make for a nice middle ground for those investors seeking to stay in bonds but boost current income levels in this yield starved environment:

PowerShares Insured National Muni Bond Fund (PZA)

In the high quality municipal market, yields often times tilt in favor of the Build America Bond (BAB for short) segment.

The fiscal 2011 earnings of 44 cents also surpassed the prior-year earnings of 19 cents per share and the Zacks Consensus Estimate of 38 cents.

The results were driven by robust operating performance, strong same-store sales growth and gross margin expansion. In addition, Saks continued its focus on expense control, leveraging SG&A while making targeted investments in areas such as Saks Direct, its omni-channel initiatives, and marketing.

Including one-time items of 4 cents per share in the current quarter and 1 cent in the last quarter, Saks generated earnings of 21 cents a share in the fourth quarter 2011 versus 14 cents per share in the prior-year quarter. Including 1 cent of one-time item in fiscal 2011 and 11 cents in the fiscal year 2010, Saks generated earnings of 45 cents a share in the fiscal quarter 2011 versus 30 cents per share in the prior-year period.

Revenue and Margins

Net sales for the quarter grew 6.8% to $925.1 million from $866.3 million in the year-ago quarter, mainly due to a robust 7.7% growth in same-store sales. Sales exceeded the Zacks Consensus Revenue Estimate of $923.0 million. In fiscal 2011, net sales grew 8.2% to $3.014 billion, owing to a 9.5% growth in same-store sales. Sales slightly exceeded the Zacks Consensus Revenue Estimate of $3.009 billion.

The company’s stores and operations comprise Saks Fifth Avenue (these are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls), Saks Fifth Avenue OFF 5Th  (these stores primarily target the value-conscious customers) and Saks Fifth Avenue e-commerce operations known as Saks Direct.

During the quarter, the company’s Saks Fifth Avenue stores saw strong sales growth, particularly in women’s and men’s apparel, handbags, fine jewelry, fragrances, and men’s accessories. The New York City flagship store sales were in line with the company’s total comparable store sales.

Saks Direct reported an approximately 21% and 28% increase in comparable same stores during the quarter and year, respectively. Though Saks Fifth Avenue OFF 5Th’s comparable store sales were positive, it was below the company’s aggregate comparable store sales performance for both the fourth quarter and the year.

With respect to earnings surprises over the trailing four quarters, DISH has outperformed the Zacks Consensus Estimate in two of the four quarters. The average earnings surprise was a positive 1.89%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter Highlights

On November 7, 2011, DISH reported its third quarter 2011 financial results. Quarterly GAAP net income was $447.7 million or 71 cents per share compared with of $446.3 million or 55 cents per share in the prior-year quarter. Reported EPS of 71 cents in the quarter missed the Zacks Consensus Estimate by a penny.

Quarterly total revenue increased 12.3% to $3,602.7 million from $3,207.7 million in the year-ago quarter. This was mainly due to an increase in subscriber related revenue and contribution from Blockbuster. Total revenue in the quarter also surpassed the Zacks Consensus Estimate of $3,582 million

Average monthly subscriber churn rate in the third quarter of 2011 was 1.83% compared with 1.98% in the year-ago quarter. Average revenue per user (ARPU) in the reported quarter was $76.99 compared with $74.36 in the prior-year quarter.

Agreement of Estimate Revisions

In the last 30 days, out of the 14 analysts covering the stock for the fourth of 2011, none revised their EPS estimates. Similarly, out of the 14 analysts covering the stock, none increased or decreased the estimate for the first quarter of fiscal 2012

For fiscal 2011, over the last 30 days, out of the 10 analysts covering the stock, none revised their EPS estimates. However, for fiscal 2012, one out of the 14 analysts covering the stock slashed the EPS estimates.

Magnitude of Estimate Revisions

During the last 30 days, the current Zacks Consensus Estimate was in line with the previous estimate of 61 cents for the fourth quarter of 2011. However, for the first quarter of 2012, the current Zacks Consensus Estimate was just a penny below the current estimate of 70 cents. For fiscal 2011, during the last 30 days, the current Zacks Consensus Estimate was at par with the prior estimate of $3.30. Likewise, for fiscal 2012, the Zacks Consensus Estimate was just a penny shy of the current estimate of $2.72.

Earning Surprises

In the previous quarter, DISH Network reported EPS of 71 cents, which missed the Zacks Consensus Estimate by a penny. The current Zacks Consensus Estimates for the ongoing contains a 0.00% upside potential while for the first quarter of fiscal 2012 reflects a 7.14% downside potential (essentially a proxy for future earning surprises). Similarly, for fiscal 2011, the Zacks Consensus Estimate reflects 0.00% upside potentials. However, fiscal 2012 contain a downside risk potential of 9.23%.

Our Recommendation

Availability of higher unutilized spectrum assets and higher marketing expenditure will act as catalysts for DISH Network going forward. Moreover, the acquisition of Blockbuster will enable DISH Network to offer several movie streaming services over the Internet, thus allowing them to counter the competitive threats from cheap online movie distribution companies like Netflix, Inc. (NFLX) and Hulu.

We maintain our long-term Neutral recommendation onDISH Network. Currently, DISH Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

 
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Full-year 2011 adjusted earnings declined more than 5% to $2.80 per share from last year’s profit level of $2.95. The full-year earnings also missed the Zacks Consensus Estimate by a penny.

Total revenue increased 38% year over year to $2,727 million in the fourth quarter from $1,975 million in the comparable quarter last year. However, total revenue missed the Zacks Consensus Estimate of $3,082 million.

Full-year 2011 total revenue increased more than 24% to $11,635 million from the year-earlier level of $9,366 million but failed to match up to our expectation of $12,072 million.

Operational Performance

Chesapeake’s average daily production in the quarter increased more than 23% year over year to 3,596 million cubic feet equivalent (MMcfe), of which natural gas accounted for 82%. The percentage of natural gas production to total volume decreased 7% on an annualized basis. However, natural gas production grew marginally to 2,959 million cubic feet (Mcf) from 2,558 Mcf, while oil production expanded 76% from the year-ago level.

Natural gas equivalent realized price in the reported quarter was $5.08 per thousand cubic feet equivalent (Mcfe) versus $5.87 in the year-earlier quarter. Average realizations for natural gas were $3.87 per Mcf compared with $5.22 per Mcf in the year-earlier quarter. Liquids were sold at $64.12 per barrel, up from the year-ago price level of $62.62 per barrel.

On the cost front, production expenses decreased more than 2% from the year-earlier level to 88 cents per Mcfe.

Financials

At the end of the quarter, Chesapeake had a cash balance of $351 million. Debt balance stood at $10,626 million, representing a debt-to-capitalization ratio of 39.0% (versus 41.9% in the preceding quarter). Operating cash flow decreased 4.

Net earnings per share on a GAAP basis was 42 cents, which was substantially higher than the year-ago level of 17 cents.

The better-than-expected results were aided by an active pipeline for both litigation and management consulting businesses and cost-containment initiatives, which led to double-digit growth in operating margin for the third time in two years.

Adjusted total revenue grew 5.3% on sequential basis but fell 1.9% on year-over-year basis to $73.1 million. The sequential revenue growth was driven by solid performance of both Litigation and Management Consulting businesses and solid contribution from international operations. 

In 2011, the company reported adjusted earnings of $1.60 versus 87 cents in the prior year. Adjusted total revenue also climbed 6% to $299.1 million in 2011.

Quarter Performance 

CRA International generated 24% of the total revenue from the international market.

During the reported quarter, CRA International achieved a utilization rate of 74% based on broad-based improvement in demand for services.  

CRA International witnessed a sequential increase of more than 200 bps in gross margin to 35.4% while adjusted operating margin expanded to 10.0%, based on ongoing expense management initiatives and revenue growth.

Financial Position

As of December 31, 2011, cash and cash equivalents and short-term investments were $76.1 million compared with $87.5 million as of January 1, 2011. Shareholders' equity at the end of 2011 was $268.4 million compared with $255.4 million in the year-ago quarter. At the end of 2011, the company had no long-term debt liability. The company also has a credit facility of $60 million in place.

Outlook

For 2012, CRA International anticipates revenue growth of 6%, utilization rate in the range of low to mid 70’s and adjusted operating margin of 11%.

Our Take

Litigation and management consulting related areas continues to perform remarkably and we believe the company’s growth initiatives, new business wins and healthy cash balance will help drive positive results in the long term. Moreover, we expect the estimates to go up based on better-than-expected quarterly results and management’s expectation of significant upside going forward.

However, management remains cautious regarding slow consumer spending and ongoing economic uncertainty in Europe.

The Zacks Consensus EPS estimates for 2012 and 2013 are pegged at $1.73 and $1.85, respectively.

One of CRA International’s prime competitors, FTI Consulting Inc (FCN) will release its fourth quarter earnings on February 24, 2012.

 
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Greece’s bond swap with its private creditors will help bring down its debt load by €107 billion. This is accomplished by forcing bond holders to accept a 53.5% loss on the face value of their holdings. This bond swap, coupled with a tough new austerity package that the country had to agree to implement as a price for a second bailout, will reduce its level of indebtedness from the current 164% of GDP to around 120% by 2020. But many in the market are justifiably skeptical of these estimates from IMF, which is a party to the bailout.

In addition to a host of assumptions about privatization proceeds and the direction of interest rates, the IMF forecast for 2020 depends on the Greek economy growing at over 2% annually over the next seven years after staying flat this year. Please keep in mind that Greek economy has been in a recession over the last four years that has resulted in the economy shrinking in excess of a cumulative 16% in that time period. Given the severity of the new austerity measures that accompanied the latest bailout deal, the economy is more likely to remain in the red for quite some time. 

On the earnings front, luxury homebuilder Toll Brothers (TOL) came out with weaker than expected results this morning. Dell (DELL) came modestly short of EPS expectations after the close on Tuesday and also provided weak guidance for the current quarter. Brocade Communications (BRCD) came out with better than expected results. Hewlett-Packard (HP) reports after the close today.

Existing Home Sales are scheduled for release today at 10:00 AM EST. Our consensus estimate shows this indicator is expected to increase to 5 million from the annual pace of 4.61 million reported in December.

 
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For the year, earnings of $3.54 a share missed the Zacks Consensus Estimate by a penny while surpassing the year-ago earnings of $3.25. Profit (attributable to the company) climbed 9% year over year to $1,071 million.

Revenue Analysis

Net revenues rose 5% (up 6% at constant currency) year over year to $3,323 million, but missed the Zacks Consensus Estimate of $3,382 million. Organic revenue growth was 3% on a global basis. For the full year, revenues rose 6% year over year to $12,795 million, also below the Zacks Consensus Estimate of $12,871 million.

Geographically, revenues from the North American markets crept up 1% to $2,096 million in the fourth quarter while overseas revenues jumped 12% (up 14% at constant currency) to $1,223 million.

International sales were boosted by double-digit growth in dialysis product and services revenues while domestic revenues were hurt by the negative impact of the implementation of the new Medicare end-stage renal disease prospective payment system (the “bundled rate” system), which resulted in lower reimbursement.

Dialysis services revenues nudged up 3% year over year to $2,435 million with domestic and international sales rising 1% and 13%, respectively, to $1,882 million and $553 million. Average revenue per treatment for domestic clinics declined to $351 from $355 a year ago, impacted by reduced Medicare reimbursement.

Consolidated dialysis product revenues spiked 9% year over year to $888 million. Dialysis product sales in domestic markets grew just 2% to $214 million as higher sales of hemodialysis products were, in part, neutralized by pricing cuts on renal drugs.

International dialysis product sales jumped 11% to $669 million, boosted by higher sales of peritoneal dialysis products, dialyzers, dialysis machines and products for acute care treatments.

Operating Statistics

Fresenius operated a network of 2,898 dialysis clinics (up 6% year over year) across North America and the overseas markets at the end of 2011.

The Dow Jones Industrial Average ended the day at 12,965.69, after gaining a mere 0.1%. The Standard & Poor 500 (S&P 500) closed yesterday’s trading session mostly unchanged at 1,362.21, which is just a 0.1% improvement from the prior trading day. The tech-laden Nasdaq Composite Index closed in the red, losing 0.1% to finish at 2,948.57.The fear-gauge CBOE Volatility Index (VIX) gained 2.3% to settle at 18.19. Consolidated volumes on the New York Stock Exchange, NYSE Amex and Nasdaq were 6.7 billion shares, somewhat lower than the daily average of 7 billion. Decliners were marginally ahead of the advancers on the NYSE, as for 49% of the stocks that declined, 48% of the stocks moved up. The remaining stocks were left unchanged.

Investors had hoped for Dow would cross the 13, 000 mark and it did not disappoint. The benchmark had been moving closer to this pre-recessionary level over the last couple of days. However, the blue-chip index could not remain above this level for long. Two hours into the day’s trading session, the Dow broke the 13, 000 mark, but it survived at those levels for only 30 seconds. Later during noon and at 1:30 P.M., the Dow scaled similar heights, but it could never sustain the level.

The big news for the day was euro-zone finance ministers granting Greece much-needed bailout funds. The $172 billion worth of financial aid came in after weeks of doldrums. The country’s ministers finalized steps to reduce Greece's debt to 120.5% of its gross domestic product by 2020 after a meeting lasting for 13 long hours. Following the decision on the bailout fund, Greece will not have to default on its debt or make an exit from euro.

There is growing unease in the market that while the latest deal may have averted the possibility of a disruptive near-term default it is not expected to provide the last word on the country’s struggles to stay within the union, either.

Greece’s bond swap with its private creditors will help bring down its debt load by €107 billion. This is accomplished by forcing bond holders to accept a 53.5% loss on the face value of their holdings. This bond swap, coupled with a tough new austerity package that the country had to agree to implement as a price for a second bailout, will reduce its level of indebtedness from the current 164% of GDP to around 120% by 2020. But many in the market are justifiably skeptical of these estimates from the IMF, which is a party to the bailout.

In addition to a host of assumptions about privatization proceeds and the direction of interest rates, the IMF forecast for 2020 depends on the Greek economy growing at over 2% annually over the next seven years after staying flat this year. Please keep in mind that Greek economy has been in a recession over the last four years that has resulted in the economy shrinking in excess of a cumulative 16% in that time period. Given the severity of the new austerity measures that accompanied the latest bailout deal, the economy is more likely to remain in the red for quite some time.

On the earnings front, luxury homebuilder Toll Brothers (TOL) came out with weaker than expected results this morning. Dell (DELL) came modestly short of EPS expectations after the close on Tuesday and also provided weak guidance for the current quarter. Brocade Communications (BRCD) came out with better than expected results. Hewlett-Packard (HP) reports after the close today.

 
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•    Canada’s Fortis Inc. revealed that its plans to purchase CH Energy Group Inc. (NYSE:CHG) for $66 per share. Following this development, shares of CH Energy surged 12.68% to end the day at $66.22

•    Shares of oil exploration company Cobalt International Energy Inc. (NSYE:CIE) slid 6.05% following the company's decision to sell 47 million shares in order to fund capital expenditures

•    Share prices of silver producer Hecla Mining Co. (NYSE:HL) advanced 9.16% to close at $5.48 after the company posted record sales and profits for 2011

•    Mexican company Genomma Lab offered to buy Prestige Brands Holdings Inc. (NYSE:PBH) for $16.60 per share. Prestige Brands is a manufacturer of healthcare and housing cleaning products

•    Pharmaceutical company Corcept Therapeutics Inc. (NASDAQ:CORT) said it had received approval from the U.S. Food and Drug Administration for its treatment for high blood sugar

 
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Revenue

Intuit reported revenues of $1.02 billion in the second quarter, up 16.1% from $878.0 million in the prior-year quarter. Reported revenue was in line with the higher end of management’s guidance range of $1.0 billion to $1.02 billion and slightly above the Zacks Consensus Estimate of $1.01 billion.

Product revenues decreased 2.6% year over year to $419.0 million, while Services and Other revenues climbed 33.9% from the prior-year quarter to $600.0 million.

Segment-wise, the company’s Small Business Group posted a 9.0% year-over-year growth based on the strength of the group’s sub-segments. Financial Management Solutions revenue increased 6.0%, driven by higher subscription for QuickBooks Online and QuickBooks Enterprise. Employee Management Solutions revenue was up 9.0%, led by growth in Intuit Online Payroll and Enhanced Payroll subscribers and improved adoption of direct deposit services. Online payroll subscribers grew 22.0%. Payment Solutions revenue increased 17.0%, with 11.0% growth in merchant customers.

Consumer Tax, being the best performing segment during the quarter, posted 44.0% revenue growth. Apart from seasonality, lower revenue recognized in the comparable quarter last year due to a problem in IRS (Internal Revenue Service) favored the comps.

The Financial Services revenue increased 9.0% driven by the growing popularity of Intuit’s online and mobile solutions. Accounting Professionals segment revenue increased 8.0%. Other Businesses revenue declined 5.0% due to lower Quicken revenue. Intuit’s global business grew revenue 8.0%.

Operating Results

Reported gross margin fell 10 basis points (bps) from the year-ago quarter to 79.4%.

Operating margin in the quarter jumped 620 bps year over year to 18.8% on better cost management. Though total operating expenses increased 5.1%, the percentage on total revenue contracted.

GAAP net income was $118.0 million or 39 cents per share, compared with $73.0 million or 23 cents per share delivered in the year-ago quarter. Excluding amortization expenses but including stock-based compensation expenses, the adjusted net income in the quarter stood at $127.

Stocks will likely struggle for direction given the absence of any positive catalysts that can push them to new highs. Greece will remain in the news, as the country suffered a credit rating downgrade from Fitch following the release of details about the private sector debt swap. There is growing unease in the market that while the latest deal may have averted the possibility of a disruptive near-term default, but it is not expected to provide the last word on the country’s struggles to stay within the union either.

Greece’s bond swap with its private creditors will help bring down its debt load by €107 billion. This is accomplished by forcing bond holders to accept a 53.5% loss on the face value of their holdings. This bond swap, coupled with a tough new austerity package that the country had to agree to implement as a price for a second bailout, will reduce its level of indebtedness from the current 164% of GDP to around 120% by 2020. But many in the market are justifiably skeptical of these estimates from IMF, which is a party to the bailout.

In addition to a host of assumptions about privatization proceeds and the direction of interest rates, the IMF forecast for 2020 depends on the Greek economy growing at over 2% annually over the next seven years after staying flat this year. Please keep in mind that Greek economy has been in a recession over the last four years that has resulted in the economy shrinking in excess of a cumulative 16% in that time period. Given the severity of the new austerity measures that accompanied the latest bailout deal, the economy is more likely to remain in the red for quite some time. 

On the earnings front, luxury homebuilder Toll Brothers (TOL) came out with weaker than expected results this morning. Dell (DELL) came modestly short of EPS expectations after the close on Tuesday and also provided weak guidance for the current quarter. Brocade Communications (BRCD) came out with better than expected results. Hewlett-Packard (HP) reports after the close today.

Sheraz Mian

Director of Research

 
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Revenue

Quarterly sales were $2.03 billion, up 28% from $1.58 billion in the prior-year quarter. The number of metal tons sold started off slow in the quarter and gradually picked up leading to a solid demand environment.

For full-year 2011, sales increased 29% to $8.13 billion. In the year, the company experienced slow but steady improvement in demand. Energy, agriculture and mining, aerospace, semiconductor and electronics, and toll processing businesses, experienced significant improvements over 2010. The non-residential construction showed marginal improvement, but significantly lagged compared to other markets.

Financial Position

Cash and cash equivalents were $84.6 million as of December 31, 2011 compared with $72.9 as of December 31, 2010. Net debt-to-total capital ratio was 28.4% as of December 31, 2011 compared with 23.5% as of December 31, 2010. The company has excess capital to expand its existing operations as well as acquisition opportunities. Reliance Steel had $645 million outstanding on its $1.5 billion credit facility as of December 31, 2011.

Dividend

On February 14, 2012, the company’s board of directors declared a regular quarterly cash dividend of 15 cents per share of common stock, representing an increase of 25% in the company’s regular dividend rate. The dividend is payable on March 23, 2012 to shareholders of record as of March 2, 2012.

Acquisitions

Continental Alloys & Services, Inc., acquired in August 2011, contributed $205 million sales for the five months ended December 31, 2011.  Further, Reliance Steel acquired McKey Perforating Co., Inc., and its subsidiary McKey Perforated Products Co. Inc., whose net sales were approximately $18 million, in February 2012.

Outlook

The prices of most of the metals that the company sells increased during the fourth quarter and the company expects overall pricing to remain relatively strong throughout the first quarter of 2012. Further, Reliance Steel expects prices to remain volatile through 2012 with scrap, other raw material input costs and imports playing a major role in pricing trends.

The company believes that demand will continue to improve slowly, but steadily except for the energy aerospace, heavy equipment and auto industries, where it anticipates higher than average growth. Based on these expectations, earnings per share in 2012 are expected to be higher than 2011. Further, the company estimates earnings per share in the range of $1.15 to $1.25 for the first quarter of 2012.

Reliance Steel has tremendous earnings capacity with its broad and diversified product base, along with wide geographic footprint that position it well in the industry. The company continues to evaluate and execute additional growth projects, given the economic conditions and outlook.

Reliance Steel retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) “Hold” rating. We have recommended the shares of the company as “Outperform” for the long term (more than 6 months). Reliance Steel faces stiff competition from Metals USA Holdings Corp. (MUSA) and Worthington Industries Inc. (WOR).

 
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