Zacks Bull and Bear of the Day Highlights: Energy Conversion Devices, Cost Plus, General Mills and D.R. Horton

Business Wire, Nov 29, 2007

CHICAGO -- Zacks Equity Research highlights Energy Conversion Devices (Nasdaq: ENER) as the Bull of the Day and Cost Plus (Nasdaq: CPWM) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on General Mills (NYSE: GIS) and D.R. Horton, Inc. (NYSE: DHI). Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all four stocks:

Bull of the Day:

Our Bull of the Day recommendation is for Energy Conversion Devices (Nasdaq: ENER). We remain optimistic about the company's long-term potential success in the high growth alternative energy industry, given increased activity in solar power projects, and progress toward sustainable profitability in 2008. Nevertheless, we note the stocks high volatility, slow production ramp-up, and higher production costs at Auburn Hills 2. Additionally, despite increasing product revenue, internal restructuring process and several recently announced contracts, we question the profitability potential of licensing royalties. Accordingly, we maintain a speculative Buy recommendation on ENER common stock with a six-month target price of $33.00, representing 30% upside potential.

Bear of the Day:

Our Bear of the Day recommendation is for Cost Plus (Nasdaq: CPWM). Cost Plus is scheduled to report third quarter results on December 3. We expect the company to deliver another poor quarter, due to the difficult economic conditions facing retailers. Management expects net loss of $0.73 to $0.80 per share. We continue to believe that the company's turnaround efforts have failed to deliver any meaningful gains because of the difficult headwinds facing home furnishings retailers. More troubling, however, is that Cost Plus continues to increase its debt to finance its business. In our view, the company's balance sheet was already on shaky ground and increased leverage will put additional pressure on the company's declining profit margins. We believe the company should tighten its belt, stop expanding, and rationalize its business until the housing market shows signs of stabilizing. We rate the stock a Sell with a target price of $2.00.

Analyst Blog:

Productivity initiatives and new product introductions should help General Mills (NYSE: GIS) achieve high single-digit earnings growth in the long term. The company is in various stages of implementing a strategy to enhance shareholder value. Starting in fiscal 2005, cash flow was utilized to reduce debt, repurchase shares, and increase dividends going forward. However, recently, debt has been issued, raising the company's net debt position. In addition, increasing input commodity costs are impeding meaningful margin expansion. The stock is rated a Hold. During the last three years, a period of relatively stable and modest earnings growth, General Mills stock has traded in a narrow P/E range of 15 to 19.

D.R. Horton, Inc. (NYSE: DHI) reported fourth quarter EPS of $0.60, above our estimate of $0.23, due to higher-than-expected gross margins. Even though gross margins beat our expectations and were higher sequentially, this was driven by a lower-than-anticipated 7% decline in selling prices on closed homes. When looking at fourth quarter net sales orders that translate into home closings in the next couple of quarters, average selling prices fell 15.6%. Hence, we expect further price erosion and heightened incentive use to renew pressure on first quarter 2008 gross margins. Given DHI shares trade at 0.59 times book value, the stock appears to have priced in a worst case scenario. We reiterate our Hold recommendation on shares of DHI with a target price of $11.00 per share. D.R. Horton trades at a P/E multiple of 23.5x our depressed FY08 EPS estimate of $0.45 and at a book value of only 0.5.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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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