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General Motors, Ford Motor Co., Target Corporation, Dennya?s Corporation and Buffalo Wild Wings

^{Published on 2010-11-18 07:11:59 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: General Motors (OTC: [ MTLQQ ]), Ford Motor Co. (NYSE: [ F ]), Target Corporation (NYSE: [ TGT ]), Dennya™s Corporation (Nasdaq: [ DENN ]) and Buffalo Wild Wings Inc. (Nasdaq: [ BWLD ]).

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Here are highlights from Wednesdaya™s Analyst Blog:

GM to Expand IPO by 31%

General Motors (OTC: [ MTLQQ ]), a.k.a. GM, has expanded its initial public offering (IPO) of common stock, to be held in November 18, 2010, by 31% to 478 million shares from 365 million shares due to strong demand from the investors. The targeted stock price has also been raised to $33 per share from the earlier projection of $26a"$29 per share.

Given the new stock price, the expansion of IPO will help the U.S. government recover about half of its unpaid loans to GM. Of the $52 billion in loans extended to the automaker by the government in exchange of a 61% ownership, $6.7 billion has been repaid in April this year. GM intends to repay the remaining $45.3 billion to the U.S. government through the IPO.

If the government sells 478 million shares at $33 each, it would earn about $15.8 billion. In addition, bankers handling the IPO will exercise an option to sell another 72 million shares, which would be valued at $2.4 billion. This would lead to 550 million common shares for sale in the IPO valuing $18.2 billion.

Meanwhile, the company itself will sell $4 billion worth of preferred shares, which will be converted to common stock in 2013. Thus, including the preferred shares, the IPO will be valued at $22.2 billion, about half of the remaining loan amount to be paid to the U.S. government. Over and above this, GM has stated that it would repay $9.5 billion to the government this year, excluding the fund raised from the IPO.

Once the IPO begins, GM will be listed in the New York Stock Exchange (NYSE). While filing the IPO in August this year, GM revealed its plan to list the shares on the NYSE under the ticker aGM,a the symbol under which it traded before entering bankruptcy last year. The automaker also plans to list the shares in Canada on the Toronto Stock Exchange, but the ticker symbol has not yet been determined.

GMa™s IPO has been awaited for a long time. The company was desperate to shed its government ownership, which has been hurting its public image. However, the U.S. government would continue to own a third of GM subsequent to the IPO.

In the third quarter of the year, GM has topped both its hometown rivals, Ford Motor Co. (NYSE: [ F ]) and Chrysler LLC, by showing a profit of $2.16 billion or $1.20 per share in sharp contrast to a loss of $858 million or 73 cents per share in the year-ago quarter. Operating income was $1.85 billion versus a loss of $1 billion a year ago.

Target Beats Estimate

Target Corporation (NYSE: [ TGT ]), the operator of general merchandise and food discount stores in the United States, recently posted third-quarter 2010 results. The quarterly earnings of 74 cents a share beat the Zacks Consensus Estimate of 68 cents, and rose 28.5% from 58 cents delivered in the prior-year quarter.

The Zacks Consensus Estimate for the quarter was stable prior to the earnings announcement with 2 out of 23 analysts covering the stock raising their estimates and 2 analysts lowering their projections in the last 30 days, thereby neutralizing the effect.

The increase in quarterly earnings was driven by effective cost management and improved profitability at retail and credit card segments that overshadowed lower-than-expected sales.

Total revenue for the quarter climbed 2.2% to $15,605 million from the prior-year quarter but fell short of the Zacks Consensus Revenue Estimate of $15,610 million. Retail sales grew 3% to $15,226 million as shoppers are gradually opening up their wallets.

The Minneapolis, Minnesota based company said that comparable-store sales for the quarter grew 1.6%, an improvement over a decline of 1.6% registered in the prior-year quarter. The number of transactions rose to 2.1%, whereas the average transaction amount dropped marginally by 0.5% in the quarter.

Management now expects fourth-quarter 2010 comparable-store sales to be the best in the last three years based on efficient marketing and merchandise plans, remodel program and a 5% RED card rewards program.

Dennya™s Enters Fast Casual Market

Dennya™s Corporation (Nasdaq: [ DENN ]), one of Americaa™s largest full-service family restaurant chains, opened its first Dennya™s Caf© on November 12. The new Caf© marks Dennya™s first fast-casual restaurant.

Based in Orange, California, the new Caf© is expected to offer the same family restaurant experience of the traditional Dennya™s brand in a faster casual format. Apart from the core traditional menu, the Caf© will concentrate on "$2 $4 $6 $8" value offerings.

Denny's plans to open a handful of company-operated caf© test locations over the next several months. This Caf© concept will be implemented in urban settings where footprints will be approximately 25% less than traditional Denny's restaurants in order to access more streamlined menu and counter service ordering. Dennya™s is expected to open its second caf© in Livermore, California in December 2010.

Both these cafes are company-owned with an area of 3,000 square feet, accommodating guests in the range of 75 to 90.Besides, Denny's fast-casual Caf© test units are expected to cost approximately $800,000 each.

From an investment perspective, this fast-casual concept is envisaged to garner attractive rates of return by leveraging lower capital and lower labor requirements, for e.g. this limited service concept will enable guests to order at the counter.

Spartanburg-based Dennya™s recently delivered mixed third-quarter results and reaffirmed its company-operated same-store sales outlook for 2010. Although the companya™s earnings and revenue topped expectation, its same-stores sales fell both at company-owned and franchised level.

However, the company is trying to turn around with its expansion plan and various strategic initiatives. In terms of stores, Dennya™s plans to open 24 new company units compared with the previous guidance of 11 units. However, new franchise units are expected to rise to 102 from the earlier projection of 100.

Dennya™s is focused on a franchise-driven operating model and its Franchise Growth Initiative continues to convert company-owned stores to franchisees and spur additional unit growth. Once the fast-casual restaurant concept gains momentum, the companya™s franchisees are anticipated to open vast majority of Caf© units in the coming years.

Most of the companya™s peers such as Buffalo Wild Wings Inc. (Nasdaq: [ BWLD ]) are on a modest expansion mode this year. Dennya™s currently retains a Zacks #3 Rank (short-term Hold recommendation) on the shares.

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