Zacks Equity Research highlights HCP, Inc. (NYSE: HCP) as the Bull of the Day and TIM Participações S.A. (NYSE: TSU) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on iPass, Inc. (Nasdaq: IPAS), HealthSouth Corp. (NYSE: HLS) and Cabot Oil & Gas (NYSE: COG).
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: HCP, Inc. (NYSE: HCP)
The company had a solid 1st quarter, with FFO per share increasing 12% (excluding charges) over the year earlier quarter. Operations are holding up in the company’s core portfolio and the company has completed or is close to completing most of its planned 2008 asset sales. HCP was a heavy acquirer in 2007, making $4.7 billion of investments. High debt levels are the main negative for HCP, although, the company has brought down debt levels ahead of schedule. Despite recent share price increases, partly due to the company’s inclusion in the S&P in March, HCP is still valued below its peer group (P/FFO).
We think health care will continue to outperform other sectors in 2008. Health care is a good, defensive sector in a weakening economy that could put pressure on other commercial real estate sectors.
Bear of the Day: TIM Participações S.A. (NYSE: TSU)
We are changing our current recommendation on TIM Participações from Hold to Sell. First quarter 2008 results were lower than expected, including higher operating expenses, weak cash flow and a considerable net loss. The competitive environment for the Brazilian wireless sector remains a problem, and it is the main reason why the company has been unable to translate competitive advantages into profits. Finally, a less benign monetary policy in Brazil is also a short-term concern.
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iPass, Inc. (Nasdaq: IPAS)
iPass has been gaining traction on subscription-based initiatives and broadband has grown to comprise the bulk of access revenue. Although we believe iPass will be able to generate strong broadband revenue growth, until the company is able to generate meaningful revenue and profit growth from software, we believe margins will remain under pressure.
The company exited the first quarter with $70 million in cash and short-term investments compared to $75.2 million in the fourth quarter of 2007. The overall decrease in cash balance was related to the repurchase of approximately $3.2 million of common stock and a cash outflow of about $1 million to purchase source code from a third party vendor to enable iPass manage the cost of and increase the capacity for 3G network integrations.
HealthSouth Corp. (NYSE: HLS)
HealthSouth is the nation's largest provider of inpatient rehabilitation services with inpatient facilities located in 26 states. On an adjusted basis, excluding nonrecurring items (accelerated depreciation and professional fees), HLS reported 1Q08 EPS of $0.15, compared with consensus EPS forecasts of $0.11.
A highlight of its results was a 7.7% year-over-year [y/y] increase inpatient hospital revenue, due primarily to an increase in Medicare reimbursement and a 2.7% y/y increase in discharges. Cash flow from operations was solid at $41M, buoyed by lower G&A expenses y/y. We are encouraged by the progress of current operational initiatives and maintain our Hold recommendation at current levels.
Cabot Oil & Gas (NYSE: COG)
Cabot’s robust first-quarter 2008 results were driven by volume gains as well as higher commodity prices. Production during the period was up 6% from the year-earlier level, with the full-year growth expected to be in the 10% to 13% range. The company's improved results and outlook highlight the gains that Cabot has made in the recent past.
The stock has responded positively to management's asset repositioning program over the last couple of years that has transformed it into a relatively lower risk onshore player with longer-lived reserves. We, however, believe that the stock's premium valuation relative to peer group already reflects all these positives and therefore see limited upside from current levels. Our Hold recommendation remains unchanged.
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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.
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