CHICAGO, March 14, 2011 /PRNewswire/ -- Zacks Equity Research highlights: WPP Group, Plc - ADS (Nasdaq: WPPGY) as the Bull of the Day and Avon Products (NYSE: AVP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on American International Group Inc. (NYSE: AIG), MetLife Inc. (NYSE: MET) and Boeing Co. (NYSE: BA).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
WPP Group, Plc - ADS (Nasdaq: WPPGY) is focused on new markets, new media and consumer insights. As WPP has a dominant market share in many areas, we believe it has the pricing power to improve margins and sustain future growth in profit.
WPP Group continues to be in a good position to benefit from the key industry trends. The TNS acquisition represents a major competitive advantage for its consumer insight business and the group. Its gross synergies from the acquisition in the fiscal year 2010 were approximately GBP60 million, versus original commitment of GBP52 million.
Encouraging results in fiscal year 2010 with a top-line increase of 7% and net earnings improvement of 28%, together with management's guidance are all very positive. Thus, we maintain our Outperform recommendation on the ADS.
We have downgraded our long-term recommendation on Avon Products (NYSE: AVP) to Underperform following the weak quarterly performance in the fourth quarter of 2010. The quarterly earnings of $0.59 per share fell short of the Zacks Consensus Estimate of $0.67 and dipped 13.2% from the year-ago quarter, battered by increased product costs.
The North American market remained sluggish throughout fiscal 2010. Moreover, the company's initiatives to change the product mix and reposition the business in the U.S. market will require significant expenditure to support increased advertising and promotional activities, which may dent its margins.
Furthermore, Avon is highly leveraged, which limits its financial flexibility for future growth. Additionally, the company faces stiff competition from other established players and has significant exposure to foreign currency translations.
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AIG Set to Buy Back RMBS
American International Group Inc. (NYSE: AIG) took another step to liberate itself from the government debt by offering cash repayment of the $15.7 billion outstanding loan on Maiden II, which is a special-purpose investment vehicle comprising residential mortgage-backed securities (RMBS), thereby helping the US government to earn about $1.5 billion from the company's bailout loan.
Accordingly, AIG has offered repurchase about 800 RMBS at about 50 cents on the dollar. The company is expected to use the cash generated from its insurance operations in order to buy back the RMBS. When AIG was formed in December 2008, it had about $20.5 billion of RMBS under Maiden II, which has now declined to $15.9 billion.
Earlier this week, AIG also repaid a $6.9 billion loan to the government from the proceeds of ALICO sale to MetLife Inc. (NYSE: MET). The repayment of Maiden II loan will further reduce AIG's loan obligations toward the US government to about $26 billion from about $39 billion at 2010 end and the initial debt chunk of about $182 billion in 2008. This appears to be quite an impressive progress.
The government's $26 billion comprises preferred interests in AIA Group worth $11.3 billion held by the Treasury, a different Maiden Lane III vehicle that holds interests in collateralized debt obligations, and an undrawn line of credit.
As for AIG, the RMBS have improved with the current economic revival and hence, the buy back at this point would prove to be a lucrative investment. Besides, the debt repayment can help ease the process of public offering of 92% stake of Treasury in AIG, which is expected by May this year.
AIG's ongoing capital restructuring process over the past several quarters has started showing positive results. While asset disposals and repayment of a chunk of debt increase operating efficiencies, the execution of the recapitalization program also appears favorable for the book value growth. We expect the company to benefit from its scale of operations with a recovery of the economy in 2011 and beyond.
Meanwhile, most of AIG's core businesses are also showing up given the unique operational focus and management discipline. While SunAmerica helped in the modest growth of assets under management during the fourth quarter of 2010, losses at ILFC are also waning and aiding in the expansion of its aircraft portfolio through the recent order of 33 737-800 jets from Boeing Co. (NYSE: BA), worth $2.6 billion at list prices.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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