Published On: Mon, Sep 12th, 2016

Equities Research Analysts’ Upgrades for September, 12th (ATU, AZO, CCL, DRI, GIS, HRB, HSIC, JLL, KO, LAMR)

Equities Research Analysts’ upgrades for Monday, September 12th:
Actuant Corp. (NYSE:ATU) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Actuant is boosting its financial fundamentals benefiting from its robust Hydratight business, increased liquidity, business diversification, strategic innovations and inorganic expansions. Such bullish aspects helped the company report better-than-expected results in third-quarter fiscal 2016. However, fragile macroeconomic environment due to factors like weak energy resource prices, U.K.'s Brexit vote and slow domestic demand of emerging markets has been weighing over the demand for manufacturing and industrial companies like Actaunt. Moreover, other issues such as appreciation of U.S. dollar, extensive industry rivalry and input price fluctuations also remain major causes of worry for the company. Over the last 60 days, Zacks Consensus Estimate for the company has not changed for both fiscal 2016 and 2017.”
AutoZone (NYSE:AZO) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “AutoZone is focused on increasing sales through store expansion and boosting earnings via aggressive share repurchases. Moreover, the rising average age of cars on U.S. roads is leading to higher demand for auto parts. AutoZone expects its capital and operating expenses to rise over the next three years due to its plans to open new distribution centers. The company is also increasing the frequency of deliveries to its stores. While AutoZone expects this strategy to be advantageous in the long term, its implementation is leading to gross margin headwinds of around 20 basis points every quarter due to higher supply chain costs. AutoZone’s estimates have been stable lately ahead of the company’s fourth quarter earnings release. The company has a mostly positive record of earnings surprises in recent quarters, although it missed estimates in the last quarter.”

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Carnival Corp. (NYSE:CCL) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Carnival is well positioned as a global leader in the cruise industry backed by solid prospects. The company’s brand building efforts along with other promotional activities are driving bookings. Meanwhile, its strategy to tap into the fast growing Asian market and commencing of sailing to Cuba bode particularly well. Additionally, improved consumer spending power, new onboard product offerings coupled with various strategic initiatives are expected to drive onboard yield gains. Notably, estimates have been mostly stable lately ahead of Carnival’s third-quarter 2016 earnings release. Meanwhile, the company has positive record of earnings surprises in recent quarters. However, negative currency translation and macroeconomic issues and increased marketing expenses remain potent headwinds. Nonetheless, efforts to lower fuel consumption and costs should drive earnings as fuel is a major component for cruise companies.”
Darden Restaurants (NYSE:DRI) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Most of Darden’s brands have been witnessing growth over the past few quarters on the back of sales initiatives like simplifying kitchen systems, menu innovation and technology-driven moves. Also, the company’s efforts to check costs are commendable. Backed by these initiatives, Darden’s fiscal fourth-quarter 2016 earnings beat the Zacks Consensus Estimate for the seventh consecutive quarter. Meanwhile, estimates have been mostly stable lately ahead of Darden’s first-quarter fiscal 2017 earnings release. However, Darden provided a weak guidance for fiscal 2017 earnings. Also, though the company posted positive comps across all brands in the fiscal fourth quarter, the figures compared unfavorably with the prior-quarter comps. Going forward, Darden’s rising labor costs and a non-franchised business model might dampen profits, while a soft consumer spending environment could pressurize comps.”
General Mills (NYSE:GIS) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Robust restructuring savings are making up for slower revenue growth at General Mills. At the fourth quarter conference call, the company upped its cost savings target for fiscal 2018 as it accelerates its margin expansion efforts over the next two years. However, sales and profits in General Mills’ U.S. Retail segment, contributing 60% to its sales, have been soft due to lower demand amid changing consumer food preferences. Though consumer-focused innovation and marketing as well as greater distribution of natural and organic product portfolio helped improve top-line momentum on many businesses in segments like cereals and snacks in fiscal 2016 , we believe a material improvement though will take time.”
H&R Block (NYSE:HRB) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “H&R Block has intensified focus on its core operations and has divested its non-core operations. The company has chalked up a capital plan to ensure enough liquidity and enhance shareholder value. It also remains focused on boosting client base and lower costs, which in turn, will drive strong free cash flows. However, the divestiture of the bank unit involves certain one-time charges and also led to revenue decline and margin contraction. Unfavorable foreign currency translation is another headwind. The company projects long-term EBITDA guidance between 28% and 32%. With respect to its earnings performance, the tax preparer has posted negative surprise in three of the last four quarters owing to the seasonality of its tax business. However, there were no earnings momentum for fiscal 2017 over the last 30 days though for the fiscal 2018, the Zacks Consensus Estimate moved south by a couple of cents.”
Henry Schein (NASDAQ:HSIC) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Henry Schein ended second quarter of 2016 on an impressive note, squarely beating the Zacks Consensus Estimate. The company’s strong share gains in both North American and overseas markets along with strong revenues raise optimism. However, we are disappointed with management lowering the upper end of the previously provided EPS guidance range for 2016; despite each segments posting strong sales growth. The year-over-year deterioration in Henry Schein’s gross margin figure on account of higher cost of sales also depresses us. While the company’s weakness in North American Dental sales was less than expectation, its recent investment in Custom Automated Prosthetics – a U.S. digital laboratory supply company offering CAD/CAM equipment and zirconia materials, buoys optimism. Meanwhile, foreign currency fluctuations and competitive headwinds continue to impede the company’s business.”
Jones Lang LaSalle (NYSE:JLL) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “JLL recently announced the appointment of Christian Ulbrich, the president of the company, as the new chief executive officer (CEO), with effect from Oct 1. Christian Ulbrich will replace the retiring CEO Colin Dyer, who was at the helm of the company since past 12 years. Notably, over the past 7 days, JLL’s current quarter and full year 2016 earnings estimate remained stable. Going forward, JLL’s diversified product & services range, huge knowledge of domestic & international real estate markets and a spate of strategic investment activities have the capability to drive its bottom line. But, the June-end referendum by the Britons to stay out of the EU is likely to hit its business adversely as it has large exposure to that region. Further, unfavorable foreign currency movements and stiff competition from international, regional and local players are concerns before it.”
Coca-Cola (NYSE:KO) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Coca-Cola’s increased marketing investments are supporting improved volume growth in stable markets like North America. Moreover, the accelerated re-franchising efforts should drive greater returns.  Also, Coca-Cola’s new revenue platforms should drive growth over the long term. However, the top line needs to show sustained improvement. Though markets like North America, Japan and India remain strong, continued weakness in some emerging markets like China, Russia and Brazil is holding back significant sales acceleration. At the second quarter conference call, it lowered its 2016 sales outlook due to weakening demand in some large emerging/developing markets. Furthermore, weak sparkling beverage volumes as well as currency and structural headwinds over the next couple of years pose threats. “
Lamar Advertising (NASDAQ:LAMR) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Lamar’s current quarter funds from operations (FFO) per share estimate remained stable over the past 30 days. The company enjoys a diversified tenant base. Further, its impressive national footprint, solid growth opportunities in the outdoor advertising industry and healthy balance sheet bode well for the long term. Recent hike in quarterly dividend payout is also encouraging. However, increased capital expenditures and higher expenses related to the acquired outdoor advertising assets could reduce free cash flow and strain its margins. Further, stiff competition and any rise in the interest rate pose challenges for Lamar.”
Omnicom Group (NYSE:OMC) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “A competitive and fragmented communications services industry coupled with high susceptibility to concentration risks pose a threat to Omnicom’s profitability. As it expands internationally to fuel its growth momentum, the company is highly exposed to risks from foreign exchange and uncertainty from monetary devaluation, mostly after the Brexit referendum. Brexit could further result in higher tariff and non-tariff barriers to trade, lowering productivity. Nevertheless, it has a positive earnings history in the trailing four quarters. Earnings estimates have remained steady over the last month. The increasing demand for media services, speedy growth of technologies and massive proliferation of channels are likely to encourage future growth for Omnicom. The company is also moving into new service areas and building upon its digital and analytical capabilities for further growth in key markets.”
Sohu.com (NASDAQ:SOHU) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Sohu.com's business has been impacted by sluggish macroeconomic conditions in China. Specifically, its brand advertising business has remained sluggish because of the lower spending levels. Furthermore, the company has been cutting down its spending levels, which will make market share gain more difficult in the near term due to stiffening competition from peers. Nonetheless, the company’s strength in search and mobile businesses is a positive. The online video business also has some decent growth potential.”
Watsco (NYSE:WSO) was upgraded by analysts at Zacks Investment Research from a sell rating to a hold rating. According to Zacks, “Watsco will benefit from the expansion of product offering as well as logistical and productivity improvements, and growth potential in the replacement market. Further, the company aims to reduce infrastructure costs, which will provide it with the opportunity to increase operating margins. Focus on increasing dividends also remains tailwind. However, Watsco remains concerned on demand for the third quarter, as momentum of softer seasonal condition will continue. Its performance will be hurt by foreign currency headwinds and the lack of acquisitions. The company will also face unit volume issue in Canada due to unstable economic conditions in the country. Moreover, variable weather patterns and enhanced technology spending remain headwinds for Watsco. The company has a negative record of earnings surprises in recent quarters.”

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