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The Zacks Analyst Blog Highlights: Citi Trends, IBM, Accenture, Hewlett-Packard and Microsoft

CHICAGO, July 10, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Citi Trends Inc. (Nasdaq:CTRN-Free Report), IBM Corp. (NYSE:IBM-Free Report), Accenture (NYSE:ACN-Free Report), Hewlett-Packard (NYSE:HPQ-Free Report) and Microsoft (Nasdaq:MSFT-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Citi Trends Kept at Underperform

On Jul 8, 2013, we reiterated our long-term recommendation on Citi Trends Inc. (Nasdaq:CTRN-Free Report) at Underperform with a target price of $14.00, based on the sluggish macroeconomic environment.

Why the Reiteration?

Operating in the consumer-driven retail industry, we believe Citi Trends remains significantly impacted by the macroeconomic issues, wherein its customers continue to feel the pinch of increased payroll tax, higher fuel prices, high unemployment rate and delayed tax refunds.

Moreover, the seasonal nature of the company's business exposes it to significant risks if the seasons fail to deliver the expected operating performance.

Additionally, the highly fragmented specialty retail sector compels Citi Trends to compete with larger off-price rivals, mass merchants as well as smaller specialty retailers on the basis of fashion, quality and service. To retain its existing market share, the company may have to reduce its sales prices, which could affect its margins.

These have been reflected in Citi Trends' performance as it saw negative earnings surprise for first-quarter fiscal 2013. The company reported first-quarter fiscal 2013 earnings per share of 42 cents, missing the Zacks Consensus Estimate of 57 cents and down 39.1% from 69 cents earned in the year-ago quarter.

Consequently, over the last 60 days, the Zacks Consensus Estimate for fiscal 2013 has moved down to a loss of 3 cents per share from a profit of 6 cents per share. Similarly, the Zacks Consensus Estimate of loss of 47 cents for the second quarter widened by a penny  over the same time frame.

However, prudent steps taken by Citi Trends such as store expansion strategy as well as endeavors to reduce inventory shrinkage can steadily improve the operational performance of this Zacks Rank #3 (Hold) stock in the future. Nevertheless, we believe that amid the absence of near-term growth catalysts and persistent unsettling economic issues, Citi Trends' performance is likely to remain strained in the near future.

IBM Strengthens Cloud Portfolio

IBM Corp.'s (NYSE:IBM-Free Report) latest acquisition of SoftLayer Technologies Inc. is expected to strengthen its cloud services portfolio. The acquisition will allow IBM to upsell and cross sell its cloud-based products and services to SoftLayer's customers while gaining new ones.

IBM will integrate SoftLayer into its new cloud services division – IBM SmartCloud – which provides a wide range of cloud-based products and services to business enterprises. The acquisition will also strengthen IBM's 100 strong software-as-a-service (SaaS) business solutions.

The combined services will provide the infrastructure for implementing cloud computing, but in a cost effective way. It will also accelerate the integration of public and private clouds. Moreover, it will provide customized privacy, data security and computing services to its clients.

IBM is seeing strong demand for its cloud-based solutions, which is indicated by the fact that its cloud revenues increased 80.0% in 2012. Buoyed by this robust demand, IBM expects to earn $7 billion in revenues from cloud-based services by 2015-end.

Moreover, IBM expects to spend about $20 billion on acquisitions through 2015. The company is looking for strategic acquisitions to remain competitive and gain from the increased spending on cloud-based services. Gartner expects global spending on public cloud services to grow at a CAGR of 17.7% (2011-2016). It also expects the total market to grow from $76.9 billion in 2010 to $210 billion in 2016.

Thus, we believe that the IT major remains well positioned for long-term growth based on its four key growth initiatives: smarter planet, growth markets, business analytics and cloud computing, which are expected to deliver at least $50 billion in revenues by fiscal 2015. We also believe that IBM's strong product pipeline, expansion into emerging markets and continuous acquisitions will help it to achieve its growth target, going forward.

However, we remain cautious on the overall IT spending environment and believe that macroeconomic concerns will continue to hurt IBM's growth in the near term. Increasing competition from Accenture (NYSE:ACN-Free Report), Hewlett-Packard (NYSE:HPQ-Free Report) and Microsoft (Nasdaq:MSFT-Free Report) is an additional headwind for the company.

Currently, IBM has a Zacks Rank #3 (Hold).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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