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Sanofi-Aventis, Republic Services, Citigroup, American International and General Motors

^{Published on 2010-12-13 07:05:42 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights: Sanofi-Aventis (NYSE: [ SNY ]) as the Bull of the Day and Republic Services Inc. (NYSE: [ RSG ]) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Citigroup Inc. (NYSE: [ C ]), American International Group (NYSE: [ AIG ]) and General Motors (NYSE: [ GM ]).

Full analysis of all these stocks is available at [ http://at.zacks.com/?id=2678 ].

Here is a synopsis of all five stocks:

[ Bull of the Day ]:

Sanofi-Aventis' (NYSE: [ SNY ]) third quarter EPADS of $1.22 was above the Zacks Consensus Estimate of $1.17 but a couple of cents below the year-ago earnings.

We are encouraged to see Sanofi's progress with its pipeline. While new product launches should make significant revenue contributions in the early part of the decade, we expect Sanofi to continue looking to contain operating costs in order to grow earnings in the face of weakening sales of some of its biggest products. We also expect the company to look to grow revenue through additional partnering deals and acquisitions.

We believe the current share price represents an attractive entry point for long-term investors and are upgrading the stock to Outperform. Emerging markets, contributions from new products, continued strong performance of the diabetes and generics segments should help drive results.

[ Bear of the Day ]:

Republic Services Inc. (NYSE: [ RSG ]) became the second largest player in the non-hazardous solid waste industry in the U.S. after its merger with Allied Waste.

Even after a slight decrease in revenues during the third quarter, the company reiterated its dividend at $0.20 per share. The company also reduced its debt sharply by 58% to $2.8 billion in the third-quarter. However, compared with its peers, the company is recovering at a slower-than-expected rate, with revenue hovering around $2.06 billion over the past two quarters.

We have downgraded Republic Services from Neutral to Underperform and set a target price of $26.00. Our target price is $26.00, or 15.3x 2010 EPS.

Latest Posts on the Zacks [ Analyst Blog ]:

The aGreater Gooda of TARP

The income increased primarily due to the government's ongoing sale of the Citigroup Inc. (NYSE: [ C ]) stock. Earlier this week, the Treasury announced the fifth and final sale of its remaining 7% stake or 2.4 billion shares of Citi. The latest sell-off is expected to generate proceeds of $10.68 billion on the basis of the proposed offering price of $4.45 per share. The Treasurya™s acquisition price of the Citi stake was $3.25 per share.

Citi received a total of $45 billion in bailout funds from the Treasury in 2008. As a result, the government stake in Citi stood at 36%. However, it had repaid $20 billion of its debt in 2009, while another $25 billion was converted to 7.7 billion common shares held by the Treasury.

The Treasury has been selling off its stake in tranches since April 2010.Altogether, the Treasury ended up with a profit of $12 billion on its $45 billion investment.

There was also another source of income. Though many financial institutions failed to pay the compulsory dividend related to the TARP funds they had taken from the Treasury, a significant amount came from dividend payments from other institutions. Finally, the income from TARP increased 17% over the prior month in November, according to The Associated Press.

More Cost Efficient Than Anticipated?

Another major success of TARP is its lower-than-anticipated cost to taxpayers. The estimates of its overall cost have been continuously decreasing.

According to an estimate released by the Congressional Budget Office (CBO) last month, the cost related to TARP is expected to drop to $25 billion from its previous estimate of $66 billion in August. The cost is even lower than the Treasurya™s estimate of $50 billion in October, as against its $91 billion estimate during its mid-session review in August 2010. The present estimate by CBO is a quantum drop from the Treasurya™s initial estimate of $350 billion.

Cost Components

The assistance to American International Group (NYSE: [ AIG ]), support to automakers and efforts to prevent foreclosures are the primary components of the cost. Together, these actions are expected to cost about $45 billion. However, a net gain of $20 billion is expected from other transactions.

With the recovery of bailed-out firms, government spending to support the financial system will lessen. AIG and General Motors (NYSE: [ GM ]) have significantly restructured their financial obligations under TARP, making it easy for the government to recoup the TARP loans. Both the income from TARP and the lower estimated cost follows much flak and many doubts about its efficiency.

A Better Future Ahead?

The final success of TARP is probably still to be seen. Many of the banks are yet to repay the funds they had borrowed as part of their participation in the program, though most major financial institutions have repaid their TARP loans in full. Also, more than 600 banks still hold $65 billion in TARP funds.

Though a substantial part of the TARP fund is expected to be lost in the Home Affordable Modification Program (HAMP), the Treasury is in the process of recovering as much as possible. The Treasury is also working with the regulators and defaulting institutions to recover the money at the earliest. As a result, there is high possibility of further profit and cost reduction in future, driving more success.

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

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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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