Chicago, IL – November 6, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: The DIRECTV Group, Inc. (DTV), AT&T (T), Comcast Corporation (CMCSA), Dish Network Corp. (DISH) and Time Warner Cable Inc. (TWC).

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Here are highlights from Thursday’s AnalystBlog:

DIRECTV Falls Short of Estimates

The DIRECTV Group, Inc. (DTV) reported revenues of $5.47 billion in the third quarter of 2009.

On a geographical basis, revenues from United States grew 9% to $4.7 billion due to solid subscriber and average revenue per unit (ARPU) growth. The company added 136,000 net subscribers to its customer base in the United States primarily due to the addition of AT&T (T) as a marketing partner and record demand for company’s premium services. ARPU of $85.32 increased 2.1% as programming package price increases, as well as higher service fees for certain services, were partially offset by more competitive promotions for both new and existing customers.

The company’s business in Latin America also demonstrated solid performance, posting a 16% increase in revenues and expanding its customer base to 162,000. This was driven by continued subscriber growth throughout the region, which more than offset the unfavorable impact related to weaker currencies in countries such as Brazil and Argentina.

Operating margin came in at 12.5% compared to 13.2% in the year-ago quarter. Net income came in at $366 million, essentially flat with the year-ago quarter. Earnings per share (EPS) came in at 37 cents, falling short of the Zacks Consensus Estimate of 39 cents, but up from 33 cents reported in the year-ago quarter due to a 12% reduction in average shares outstanding. These were the result of share repurchases made over the last year.

During the quarter, the company repurchased shares worth $943 million. The company also issued $2 billion of additional debt after retiring $583 million of existing debt and paying down $30 million under DIRECTV’s senior secured credit facility. The remaining outstanding $327 million of senior notes was repurchased in October 2009.

The company generated cash $1.1 billion of cash from operations. Free cash flow came in at $643 million. As of September 30, 2009, the company has cash and equivalents of $3.3 billion and long-term debt of $7.1 billion.

The DIRECTV Group is the world’s leading provider of digital television entertainment services. The company provides digital television service to more than 18.4 million customers in the United States and over 6.1 million customers in Latin America. DirecTV has subsidiaries in Brazil, Mexico and other countries in Latin America. Primary competitors for the company include Comcast Corporation (CMCSA), Dish Network Corp. (DISH) and Time Warner Cable Inc. (TWC).

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Net income from continuing operations was $1.14 per share, higher than the Zacks Consensus Estimate of $1.08. However, net income in the quarter was lower than the $2.77 per share reported in the same period last year.

Daily oil and gas sales volumes increased 6.8%, averaging 628,000 barrels of oil equivalent (BOE) during the reported quarter, compared with 588,000 BOE sold in the third quarter of 2008. Volumes increased by approximately 6% domestically, mainly from California and the Permian, and by about 15% in the Middle East/North Africa, largely in Oman and Dolphin. This was offset by a 6% decline in Latin America, mostly due to a labor strike in Argentina. Increased California volumes resulted largely from the new exploration discoveries in Kern County.

Revenue decreased 41.9% to $4,104 million in the third quarter, compared to $7,060 million a year ago. The decline was due to lower crude oil and natural gas prices during the quarter. Occidental's average realized crude oil and natural gas prices declined in the quarter by 39% and 67%, respectively.

The company continues to maintain its financial flexibility with net debt of $2.8 billion and total debt-to-capitalization of 9% at the end of third quarter 2009. Capital spending for the quarter was $746 million.

The company will test run its 4G LTE network in six countries across Europe and Latin America. The outcome of the trials will help Telefonica to chalk out its next phase of network deployment strategy.

Telefonica will conduct 4G LTE trials during the next six months in multiple European countries such as Czech Republic, Germany, Spain and the UK, while the Latin American trials will be staged in Brazil and Argentina. The company has already conducted its first LTE trial in Madrid in April 2009, which has demonstrated encouraging throughput levels.

Telefonica has also announced network infrastructure and equipment vendors to facilitate the field testing. It has reportedly selected six technology providers: Alcatel-Lucent (ALU), Ericsson (ERIC), Huawei, NEC, Nokia Siemens Networks and ZTE.

Leading carriers across the world have adopted LTE as the base technology standard for 4G network upgrade initiatives due to its fast data transfer capability. LTE offers rapid downlink and uplink speeds that averages 100 megabits per second (Mbps) and 50 Mbps, respectively, which is competitive or faster than other leading 4G standards, including WiMax.

Telefonica has recently expanded its strategic alliance with the second-largest Chinese carrier China Unicom (CHU). This extended collaboration is expected to offer significant technological and operational synergies. Additionally, the companies are likely to collaborate in future technology upgrades, such as the development of 4G LTE technology.

By moving to the 4G LTE network, Telefonica will offer its customers super-fast mobile broadband experience, representing an encouraging opportunity to improve customer retention. The company hopes to offer peak network speed of up to 340 Mbps in ideal conditions. Moreover, the ultra high-bandwidth multimedia data applications fostered by the 4G LTE network will boost revenue per user through increased minutes of use.

Based in Vancouver, Canada, Silver Wheaton is the world's only silver trading company. It does not own or operate mines but buys silver at below-market prices through long-term contracts with five major silver producers, including Goldcorp Inc. (GG), Lunding Mining, Hellas Gold and Glencore, and then reselling it to major industrial customers at a mark-up.

The deal gives Barrick funds for the construction of the Pascua-Lama mining project and significantly boosts the size of Silver Wheaton. Silver Wheaton has already made an initial payment of $212.5 million and will pay another $137.5 million annually for the next three years.

Barrick will receive $3.90 for each ounce of silver delivered under the agreement, which covers the life of the mining project, expected to be about 25 years. For Silver Wheaton, the deal will generate 9 million ounces of silver annually over the first 5 years at the Pascua-Lama mine, raising its output to 40 million ounces by 2013. Barrick expects production at Pascua-Lama in the range of 750,000 ounces to 800,000 ounces of gold and 35 million ounces of silver in the first 5 years.

Located on the Chile–Argentina border, Pascua-Lama is one of the richest deposits of precious metals in the world. It is expected to be one of the world's largest and lowest-cost gold mines and has one of the biggest global silver deposits. Barrick started the project in May this year.

Until Pascua-Lama begins production sometime in 2014, Silver Wheaton will receive 100% of silver produced from three other Barrick mines – the Lagunas Norte and Pierina mines in Peru and the Veladero mine in the south of Pascua-Lama in Argentina. 

Barrick will retain total control of gold production at all mines and 75% of the silver at Pascua-Lama. While the deal provides Barrick with a source for financing its Pascua-Lama project, it significantly expands Silver Wheaton’s reserves.

Company Description

RockTenn manufactures packaging products, bleached and recycled paperboard and merchandising displays. The company has over 200 facilities located in 26 states, Canada, Mexico, Chile and Argentina.

Analysts Bullish on Fiscal Fourth Quarter

The company recently exhibited some pricing power after saying in late July that the paperboard and container board pricing had stabilized in the prior weeks. On Aug 10 it announced a $40 per ton price increase on all grades of coated and uncoated recycled paperboard effective Sep 10.

Since the third quarter report in July, which saw the company report record earnings, the fourth quarter Zacks Consensus Estimate has jumped 40% to $1.19 from 85 cents.

The full-year 2009 Zacks Consensus Estimate climbed 88 cents to $4.61 per share in the last two months.

RockTenn is scheduled to report fiscal fourth quarter 2009 earnings on Nov 10.

RockTenn Posted Record Earnings Per Share in the Third Quarter

On July 27, RockTenn reported fiscal third quarter earnings that surprised on the Zacks Consensus Estimate by 61.80%. Earnings per share were $1.44 compared to the Zacks Consensus Estimate of 89 cents. This also easily bested last year's third quarter earnings of 70 cents.

Sales fell 8.7% to $703.9 million from $771 million in the third quarter of 2008.

However, the company saw improvement quarter over quarter as total tons shipped rose 5.7% compared to the second quarter. Consumer and corrugated packaging operations performed better than expected.

Value Fundamentals

RockTenn is a Zacks #1 Rank (strong buy) stock. The stock is attractively valued, with a forward P/E of 10.71. It is trading with a price-to-book ratio of 2.45.

The company also has a solid 5-year average return on equity (ROE) of 11.65%. As an added bonus, the company also pays a dividend with a current yield of 0.80%.

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Along with its exploration partner Italy's Eni SPA (E), Repsol estimates that the discovery could hold between 7 and 8 trillion cubic feet of gas. This equals to more than five years of gas consumption in Spain.

While the two companies will have a 32.5% interest each in all future productions, Venezuela's state-owned oil company Petroleos de Venezuela SA would hold a 35% stake.

Repsol is targeting stable production growth driven by pipeline projects in Venezuela, Trinidad and Tobago, Libya, Bolivia, Argentina and Ecuador. Long-term growth is expected to come from opportunities in Trinidad and Tobago, Algeria, the US Gulf of Mexico, Libya and Saudi Arabia.

However, a challenging operating and contractual environment in Venezuela may create obstacles for developing new gas reserves. The Venezuelan government also maintains that any new gas development should be directed to heavily subsidized prices in the domestic market. This could have a negative impact on Repsol’s earnings visibility.

Apart from this, we are also concerned about the company’s declining reserves, very low reserve lives and rising costs. Consequently, we maintain our Neutral recommendation.

Based in Vancouver, Canada, Silver Wheaton is the world's only silver trading company. It does not own or operate mines, but buys silver at below-market prices through long-term contracts with five major silver producers including Goldcorp Inc. (GG), Lunding Mining, Hellas Gold and Glencore and then reselling it to major industrial customers at a markup.

Barrick will receive $3.90 for each ounce of silver delivered under the agreement, which covers the life of the mining project, expected to be about 25 years. For Silver Wheaton, the deal will generate 9 million ounces of silver annually over the first 5 years at the Pascua-Lama mine, which will raise the company's output to 40 million ounces by 2013. Barrick expects production at Pascua-Lama in the range of 750,000 ounces to 800,000 ounces of gold and 35 million ounces of silver in the first 5 years.

Located on the Chile–Argentina border, Pascua-Lama is one of the richest deposits of precious metals in the world. It is expected to be one of the world's largest and lowest-cost gold mines and has one of the biggest global silver deposits. Barrick started the project in May this year.

Until Pascua-Lama begins production sometime in 2014, Silver Wheaton will receive 100% of silver produced from three other Barrick mines – the Lagunas Norte and Pierina mines in Peru and the Veladero mine in the south of Pascua-Lama in Argentina. Barrick will retain 100% of the gold production at all mines and 75% of the silver at Pascua-Lama. While the deal provides Barrick with a source for financing its Pascua-Lama project, it significantly expands Silver Wheaton’s reserves.

Increase of Equity Offer

Separately, Barrick Gold raised its equity offering by $500 million. The Canadian gold mining company increased its offering to about $3.5 billion, or to 94.8 million shares, at $36.95 each, from a previous offering of $3 billion, or 81.2 million shares. The company also stated that the offering could surge to $4 billion if an overallotment is exercised.

Barrick plans to use $1.9 billion of proceeds to eliminate fixed priced gold contracts and $1.5 billion to eliminate a portion of its floating spot price contracts. It will record a third-quarter charge of $5.6 billion due to a change in accounting treatment for the contracts. We maintain our Neutral recommendation on the stock.

Domestic passenger traffic in Chile, Argentina, Peru and Ecuador rose 10.2% and international passenger traffic rose 2.1%. International capacity was mainly driven by a spike in operations to Europe and the South Pacific, which was partially offset by a decrease in certain regional routes.

Cargo traffic fell 4.2% mainly due to the slowdown in import and export markets in Latin America, partially offset by an increase in exports from Peru to the United States, as well as by an increase in operations to and from Europe after addition of two new B777F.

LAN’s near-term outlook is not as bright as it was few months ago primarily due to the international economic crisis. However, we believe Chile will perform reasonably during 2009.

In fact, the Chilean Government has already announced a $4 billion economic stimulus package that represents 2.8% of the country's GDP. The plan will be funded by the country's sovereign wealth fund. As the most organized and developed economy in Latin America, Chile is now capable of pursuing a truly anti-cyclical policy.

LAN accounts for more than one half of Chile’s international passenger traffic and nearly three-quarters of its domestic traffic. Moreover, consistent positive results and solid financial and liquidity positions will enable LAN to move ahead with a number of long-term initiatives.

The new facility will maintain, monitor and support computer hardware, software and manage IT services for IBM's clients. The new center joins an extensive network of more than 80 IBM delivery centers worldwide.

For the new facility, IBM intends to hire up to 1,300 people by the end of 2010.

With an investment of $300 million in 2008, IBM built 13 Business Resilience service delivery centers in 10 countries, increasing its ability to address surging demand from businesses and governments from around the world seeking to keep their operations safe from disruption. IBM also plans to open a new collocation data center at its Greenock facility in Scotland and three new global delivery centers in Argentina.

To further bolster its presence in India, the company earlier opened a new Global Delivery Center (GDC) in Pune, India, which will act as the regional hub for IBM Tivoli service management software and strategy, and will provide clients with business consulting and application services.

We expect these centers to help increase revenue going forward. While IBM's initiative to expand its footprint in both domestic and international markets has helped it to win a number of IT deals, the IT services business is becoming increasingly competitive. In particular, IBM is facing pricing pressure from Hewlett-Packard (HPQ), Sun Microsystems (JAVA), Intel Corporation (INTC) and Dell (DELL).

Despite this, we believe IBM's new IT initiatives position the company for long term growth. Thus we maintain our Outperform rating on the stock.

Company Description

Bunge is an agribusiness and food company with operations in over 30 countries.

The company, founded in 1818 and headquartered in New York, manufactures fertilizers, originates oilseeds and grains, crushes oilseeds to make food for the livestock industry, produces bottled oils, mayonnaise, margarines and other food products, and mills wheat and corn for food processors, bakeries and other commercial customers.

Bunge has large operations in Brazil and Argentina as it operates 40 fertilizer facilities, including mines and blending plants, in the two countries.

Bunge Beat by 213.24% in the Second Quarter

On July 23, Bunge reported second-quarter results that surprised on the Zacks Consensus Estimate by $1.45 per share. Earnings per share were $2.13 compared to the Zacks Consensus Estimate of 68 cents.

Sales fell 23% to $10.994 billion from $14.365 billion in the year ago quarter. There was weakness across all segments compared to a year ago, with the largest segment, Agribusiness, declining 27% year over year. However, compared to the prior three quarters, the agribusiness segment saw improvement.

The Edible Oil Products segment also saw improvement due to better results in Europe and North America that more than offset lower volumes and margins in Brazil.

Bunge is expecting a solid second half of the year.

"Lower soybean production in South America has limited oilseed processing utilization in Argentina," said Alberto Weisser, Chairman and Chief Executive Officer.

"While challenging locally, this should continue to support crush margins on a global level. A large North American harvest, which according to early indicators is likely, should provide us with ample volumes for our agribusiness operations in that region."

The fertilizer segment remains challenging because of remaining high cost raw material inventory but the company is expecting good demand and improved phosphate pricing to boost the bottom line.

Reaffirmed 2009 Guidance

Because of the anticipation of a strong second half, the company maintained its prior guidance of $4.90 to $5.40 per share.

Mixed Movement for Zacks Consensus Estimates

Give the company's beat on the second quarter and its outlook for the remainder of the year, the 2009 Zacks Consensus Estimate jumped 15% to $5.15 from $4.48 in the last month with 3 out of 5 covering analysts raising.

Analysts aren't so bullish on the third quarter, however, as the Zacks Consensus Estimate fell 70 cents to $1.83 in the last 30 days.

Value Fundamentals

Bunge is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 1.05. The company has a solid 5-year return on equity of 13.01%. Additionally, the company pays a dividend with a current yield of 1.20%.

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During the quarter, consolidated sales volume reached 99.7 million unit cases, up 3.7% from the year-ago quarter driven mainly by the Brazilian operation. Soft drinks increased 4.1% while juices, water and beer together remained stable. Net Sales amounted to US$301.3 million, down 3.6% in US dollar mainly due to currency-conversation losses.

EBITDA was down 1.4% while operating income was up 1.1%. Net income was down 32.9% to US$22.5 million. Quarterly EPADR reached US$0.18, down from US$0.26 in the year-ago period. Andina continues to keep a sound balance sheet with a net cash position of US$54.8 million at the end of June 30, 2009.

Despite a dominant position in Chile, Andina faces intense competition in Brazil and Argentina from major international companies such as AmBev (ABV), the largest brewer in Latin America which sells Pepsi products, local brands with flavors such as Guaraná and proprietary beers, Fomento Economic Mexicano (FMX), the largest Latin American beverage company by sales and low-cost beverages (or “B" brands).

The company also competes against other beverages such as water, fruit juice and sport drinks. Although the weak economic situation throughout the world is a source of concern, we are optimistic about Andina’s future as it makes low-cost, daily use products and focuses on domestic markets.

We are also encouraged by its strong presence in the Latin American soft drink business, which is one of the most attractive areas for industry driven by positive demographics.

We believe that the company’s geographic diversification, strong balance sheet and the nature of its product will help the company tide over the current economic crisis. We are reiterating our Buy rating on Embotelladora Andina.

Unit retail sales of lower horsepower tractors were down due to weakness in the landscaping, residential construction, and dairy sectors. This weakness is expected to continue for the remainder of the year.
 
In the EAME region, quarterly sales were down 28.0% due to lower volumes in Eastern and Central Europe, Russia, Scandinavia and Spain, partially offset by volume gains in Germany and France. The company experienced major demand weakness from the diary and livestock sectors.

For the remainder of the year, the company expects weak industry demand in Europe resulting from lower income across the entire farming sector. Demand weakness is expected to be severe in Eastern and Central Europe and Russia due to tighter credit markets.
 
Sales from the South American region were down 40.5% due to significant volume declines in Brazil and Argentina and a shift in sales mix towards lower horsepower tractors in Brazil. The company expects industry retail volumes to be significantly down in South America due to dry weather conditions and the impact of tightened credit on planted acreage and car production.
 
We concur with the company that the demand for farm equipment is not expected to recover in the next couple of quarters. As a result, AGCO lowered its full year revenue guidance marginally to $6.5–$6.8 billion from the previous guidance of $6.7–$7.0 billion.

In response to weak demand, the company is planning to cut its tractors and combines production by about 20 to 25% from the previous year’s levels. We expect the company to post full year sales at the low end of its guidance range.
 
Also, the company lowered the high end of its EPS guidance range. The company now forecasts EPS in the range of to $2.00–$2.25, compared to previous guidance of $2.00–$2.50.

Early this morning, Rio Tinto Plc (RTP) agreed to sell its Alcan Packaging Food Americas division to U.S.-based food and beverage packaging firm Bemis Co. Inc. for $1.2 billion. Out of the total consideration, Bemis might pay $200 million in form of shares.

Headquartered in Chicago, Alcan Packaging Food Americas has approximately 4,600 employees at 23 locations in the US, Canada, Mexico, Brazil, Argentina and New Zealand. Alcan Packaging Food Americas generated revenues of $1.5 billion in 2008, accounting for 23% of the unit's total revenues. The sale of the Food Americas division is Rio's first significant step towards reducing the asset portfolio it acquired with Alcan.

This deal is the latest in Rio's ongoing divestment program aimed at reducing its debt. Rio had incurred significant debt when it acquired Alcan Inc. in 2007. Since then, the company has been on a drive to reduce its hefty debt.

During 2008, the company generated $3 billion by divesting its interests in Cortez, Greens Creek and Kintyre uranium assets. So far this year, Rio has announced asset sales of about $3.7 billion, including interest in the Ningxia aluminum smelter in China, Corumba mine in Brazil, the company's potash assets, and the Jacobs Ranch coal mine in the U.S. The company said that the divestment program is on course for other assets identified for sale, including the remainder of Alcan Packaging and Alcan Engineered Products.

Apart from divestments, Rio raised additional capital through its recently completed $15.2 billion rights issue. The company has $8.9 billion of debt maturing in 2009, $9.1 billion maturing in 2010, and another $10.0 billion in 2012.

Looking forward, we believe it is very important for the company to realize attractive prices for its assets in order to pay down debt. But if the company ends up selling non-core assets at distressed prices, meeting its debt reduction targets might be difficult.

In another reduction of alternative indexes that use different valuations and business fundamentals to weight companies, Claymore Advisors is seeking to switch an existing exchange-traded fund to a more traditional market-cap size weighted benchmark.

But that isn't all.

In a filing dated May 21, the trust for the Claymore/Great Companies Large-Cap Growth ETF (NYSE: XGC) is asking the Securities & Exchange Commission to let it invest in much smaller companies. And while listed largely on U.S. exchanges, they'd be foreign-based businesses.

The new fund would be called the Claymore/BNY Mellon International Small Cap ETF.

The document notes that the new ETF's "investment objective is not fundamental" in nature. It clearly states the change will revert to a strictly passive indexing approach. (See filing here.)

The request to regulators by Claymore comes on the heels of PowerShares' decision to close 19 of its ETFs, a dozen of which were based on fundamental indexes created by Rob Arnott's Research Affiliates. (See related story here.)

While the existing XGC also follows an index, it's based on an investment approach by Great Companies Inc., a Tampa Bay, Fla.-based money management firm. Its managers rank companies by such factors as price-earnings growth rates, or PEG ratios, and various debt measures for assessing profitability.

Great Companies uses computers to crunch fundamental data to compare value characteristics against growth metrics for domestic large-cap names. Stocks are ranked and added to the ETF's underlying index according to the adviser's composite scoring system.

When it was launched in April 2007, XGC came with an expense ratio of 0.60%. It hasn't changed since then and it had slightly more than $3.7 million in assets through Tuesday.

Higher Price Tag 

When it was first coming to market, a Great Companies' portfolio manager acknowledged that XGC's price tag was higher than rival large-cap funds such as Vanguard and iShares. "But we're providing more of a managed-account product than a classic index-fund product," he said in a MarketWatch.com story at the time. (You can read the story here).

The new small-cap international ETF would face stiff competition as several newcomers have jumped into the asset class in the past few years. But one bone of contention for U.S.-based investors in often illiquid foreign waters is that it can be difficult to follow small-cap names held by their funds.

The new Claymore offering would address that concern by predominately investing in overseas firms with listings on major U.S. exchanges. The fund would hold mainly companies with American depositary receipts or global depositary receipts and market caps of $250 million to $2 billion.

At the end of March, such a makeup gave the underlying index a definite slant to emerging markets. The BNY/Mellon benchmark consisted of 92 stocks. The weightings by country then were: Brazil 21.37%; China 19.20%; India 7.28%; United Kingdom 6.88%; Chile 5.59%; Mexico 4.19%; Russia 3.64%; Japan 3.40%; Israel 3.10%; Netherlands 2.78%; Greece 2.64%; South Africa 2.57%; Italy 2.14%; Argentina 1.98%; Switzerland 1.96%; France 1.89%; Korea 1.79%; Australia 1.68%; Ireland 1.61%; Colombia 1.51%; Hungary 1.00%; U.S. 0.82%; Indonesia 0.50%; Hong Kong 0.46%; Denmark 0.45% and Germany 0.41%.

No expense ratio is listed in the filing. But if the new fund were in the same neighborhood as XGC's, it would seem to have a better fighting chance when competing in the small-cap international arena.

Prices for rival ETFs range from around 0.40% and up. For example, the group's granddaddy is the WisdomTree International SmallCap Dividend Fund (NYSE: DLS). Meanwhile, Vanguard entered the field in March with an ETF charging 0.38%. (For a more complete breakdown on competing international small-cap ETFs, see stories here and here.)

-- This report was submitted by IndexUniverse.com's Murray Coleman.