Zacks Bull and Bear of the Day Highlights: Cumulus Media, Gerdau S.A., Tesoro and United Parcel Service

Business Wire, Feb 4, 2008

CHICAGO -- Zacks Equity Research highlights Cumulus Media (Nasdaq: CMLS) as the Bull of the Day and Gerdau S.A. (NYSE: GGB) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesoro (NYSE: TSO) and United Parcel Service, Inc. (NYSE: UPS). 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 Cumulus Media (Nasdaq: CMLS). Rising credit risk premiums and collapsing valuations have left the market skeptical about the viability of the July 2007, $1.3 billion management buyout offer for Cumulus. Led by CEO Lew Dickey and Merrill Lynch Global Private Equity, the deal calls for $11.75 per share plus the assumption of roughly $738.2 million in debt, equating to an EV of 12.3x 2008E EBITDA. The stock has fallen 50% since the deal was announced and now trades at 9x 2008 EV/EBITDA, in line with the peer group multiple, which has contracted by 2x. In our view, the deal will likely get done but at a lower price. A takeout price near $10 represents a 69% premium to the current price and equates to a more reasonable 10x 2008E EBITDA and 8x debt/EBITDA (down from the very steep level of 9.5x).

Bear of the Day:

Our Bear of the Day recommendation is for Gerdau S.A. (NYSE: GGB). We are changing our recommendation on Gerdau S.A., from Hold to Sell. The company has been posting good results. However, the international economic environment for steel stocks is deteriorating, mainly in the U.S. construction sector. Lower economic growth and a possible recession in the U.S., the continued strength of the Brazilian real, and the company's strategy to grow through acquisitions based on debt are all contributing to the negative news.

Analyst Blog:

Tesoro (NYSE: TSO) reported weaker-than-expected fourth-quarter results, reflecting the unplanned outage at the Hawaii refinery and the very weak refining margin environment in all regions of the country, particularly in Tesoro's core of the West Coast region. The company's realized margin during the quarter was down roughly 35% from the year-earlier level as high feedstock costs and relatively moderate product demand ate into margins. We believe that high feedstock and operating costs will continue to weigh on earnings through the first half of 2008. We are lowering our 2008 estimate ($5.10 vs. $5.95) and introducing 2009 estimate at $5.95.

We are continuing our Buy on United Parcel Service, Inc. (NYSE: UPS), as well as our $80 target price, as we continue to believe the stock is undervalued. UPS reported fourth quarter diluted EPS of $1.13, $0.01 above consensus, but below our $1.16 estimate, due to higher fuel costs than estimated. We are cutting our 2008 EPS estimate from $4.50 to $4.45, near the high end of company guidance for a 3-8% gain in EPS to $4.30-4.50. While the weaker US economy, slowing US volume growth, increased fuel costs, and higher interest expense related to a $6.1 billion pension payment will be earnings drags, rate hikes, expansion into China, recent acquisitions, and share repurchases should propel EPS growth. In January, UPS instituted a $10 billion share repurchase program, to be spent over the next 24 months, and announced a 7% increase in the dividend.

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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