Zacks Bull and Bear of the Day Highlights: Caterpillar, Cost Plus, Inc., Gap Inc., J.M. Smucker Company and Stone Energy Corporation

Zacks Equity Research highlights Caterpillar (NYSE: CAT) as the Bull of the Day and Cost Plus, Inc. (Nasdaq: CPWM) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Gap Inc. (NYSE: GPS), J.M. Smucker Company (NYSE: SJM) and Stone Energy Corporation (NYSE: SGY).

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:

Caterpillar (NYSE: CAT) is a market leader in construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. With its strong brand name, pricing power and global dealer network, we believe Caterpillar is well positioned to take advantage of the growing need for infrastructure development globally.

Though the company expects 2009 sales to decline more than 35% year-over-year, it anticipates an improvement in its top-line in 2010. The company forecasts a 10% to 25% increase in sales for 2010, compared to the midpoint of the 2009 outlook range.

Asserting its optimistic outlook, the company recently announced plans to increase its machinery prices by 2% effective January 2010. We are upgrading the stock to Outperform.

Bear of the Day:

Specialty retailer Cost Plus, Inc. (Nasdaq: CPWM) is closing stores, cutting costs, and trying to preserve cash, but those moves will do little to reverse its weak sales trends and merchandise margins.

In addition, management's guidance for the third quarter cautioned investors to prepare for more weakness. Cost Plus expects same-store sales to decrease 6%-11% and a pre-tax loss from continuing operations of $19-$24 million.

Cost Plus is scheduled to report third quarter results on December 3. We have an Underperform rating on CPWM shares. Our six-month target price is $0.50.

Latest Posts on the Zacks Analyst Blog:

Gap’s Earnings Improve

Gap Inc. (NYSE: GPS), a premier international specialty retailer, has reported healthy third quarter results despite challenging market conditions. The company reported net income of $307 million or 44 cents per share during the quarter compared to $246 million or 35 cents per share in the year-earlier quarter.

The robust earnings were primarily driven by strong sales at its low-price Old Navy segment and the highest third quarter operating margins in a decade. Net sales during the quarter were $3.59 billion compared to $3.56 billion in the year-ago quarter, largely due to a 10% increase in comparable sales across 1,060 Old Navy stores that account for about 40% of the total sales.

The Old Navy chain has benefited from the increasing preference among U.S. shoppers for lower-price and discount stores due to the continued challenging macroeconomic environment. Gross margins increased 380 basis points year-over-year to 42.5%. Operating margins during the quarter increased to 13.9% from 11.1% in the year-ago quarter due to effective cost-control measures and prudent inventory management policies.

Smucker’s Beats, Raises Guidance

J.M. Smucker Company (NYSE: SJM) reported second quarter results with earnings of $1.22 per share, which was well above the Zacks Consensus Estimate of 99 cents. Quarterly earnings were up 21% compared to $1.01 reported in the prior-year quarter.

Net sales for the quarter grew 51.7% year-over-year, primarily due to the addition of the Folgers coffee business. Excluding Folgers, volumes increased 1%, driven by Pillsbury, Crisco oils, Jif peanut butter and Hungry Jack brands. These were partially offset by declines in canned milk, fruit spreads, foodservices and natural foods.

On a segment basis -- the U.S. retail coffee market segment posted $445.1 million in sales during the quarter. Volume also increased by approximately 5%. The continued expansion of the Dunkin' Donuts brand in the gourmet category and strong growth in traditional roast and ground coffee led to the improvement.

Stone Energy Outdoes Estimates

Stone Energy Corporation (NYSE: SGY) reported third-quarter 2009 earnings of $1.06 per share, beating the Zacks Consensus Estimate of 66 cents and the year-earlier earnings of $1.04. The robust results were driven by increased production volumes and reduced costs.

Production during the quarter averaged 239 million cubic feet of gas equivalent per day (MMcfe/d), compared to average daily production of 209 MMcfe/d in the prior quarter and 129 MMcfe/d in the year-ago quarter. This increase was primarily due to the company’s successful execution of its hydraulic rig work over program, reduced cycle time and optimization of individual well rates.

Stone expects net daily production to average 225-235 MMcfe in the fourth quarter and 210-220 MMcfe in 2009.

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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