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Zacks Bull and Bear of the Day Highlights: CSX Corp., Anheuser-Bush, Trimble Navigation, AvalonBay and Washington Federal

Zacks Equity Research highlights CSX Corporation (NYSE: CSX) as the Bull of the Day and Anheuser-Bush (NYSE: BUD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Trimble Navigation (Nasdaq: TRMB), AvalonBay Communities (NYSE: AVB) and Washington Federal, Inc. (Nasdaq: WFSL).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day: CSX Corporation (NYSE: CSX)

We are raising our rating on CSX Corp. to Buy from Hold, due to its improved earnings outlook. CSX recently increased 2008 EPS guidance to $3.65-$3.75 from $3.40-3.60. At the same time, CSX upped long-term growth estimates (through 2010) in operating income to 15-20% from 13-15% and in EPS to 20-25% from 18-21%, partly reflecting improved efficiency, with the operating ratio estimated to drop to the high 60s from the prior target of the low 70s.

We are increasing our EPS estimates from $3.55 to $3.70 for 2008, the midpoint of CSXs revised $3.65-3.75 guidance and to $4.40 from $4.20 for 2009. Improved efficiency, strong yields and share buybacks should offset weakening volumes from a slowing economy and higher fuel costs. CSX reported second quarter EPS of $0.89, up 26% year-over-year. We believe the dividend is safe.

On September 16, 2008, CSX announced that, in light of the September 15, 2008 decision by the Second Circuit Court of Appeals in New York that turned down CSX's attempt to block some of the TCI/3G votes for the company's board of directors, CSX has invited TCI Group nominees, Christopher Hohn and Timothy O'Toole, to join the board of directors. In July 2008, CSX seated two other TCI/3G board members.

Bear of the Day: Anheuser-Bush (NYSE: BUD)

Anheuser-Busch is benefiting from industry consolidation of production and a growing international beer presence from the managements astute acquisition strategy. Though there are concerns about higher commodity costs, especially energy, agricultural, and packaging costs, the results year-to-date demonstrate the managements ability to implement productivity programs to offset the negative inflationary effects.

The company has received a buyout proposal for $70 per share in cash. The stock has rallied to our target; therefore, the recommendation has been lowered to a Sell. Anheuser-Busch stock has traded in a P/E range of 16 to 27 over the last five years. The current P/E is 22.8. The target of $70 is based on the friendly takeover/merge price of $70 cash.

The companys business is seasonal. The warm weather months of April through September generate a substantial percentage of the companys revenues, approximately 55%. Therefore, both sales and margins can be affected by cool or inclement weather in key markets, inhibiting earnings progress.

Latest Posts on the Zacks Analyst Blog:

Trimble Navigation (Nasdaq: TRMB)

Trimble Navigation, Ltd.s forward guidance is for a 10-12% sequential decrease in Q3 and a 15-17% growth for the year. International markets will be the key to growth in 2008, as the weak macro situation is likely to have a continued negative impact on E&C [engineering and construction]. We believe the share price reflects the value. Consequently, we are reiterating our Hold rating on TRMB shares and a target price of $31.00 (19.9x P/E).

TRMB shares are currently trading at a 18.6x multiple of share price to our 2008 earnings estimate (P/E). International growth, with the exception of Europe, is likely to remain strong. Also, the company operates in markets where there are some large players, including the government, while the consumer exposure is very limited. This should lend some stability to the top line.

AvalonBay Communities (NYSE: AVB)

Shares of AvalonBay dropped nearly 9% on Monday due to a general sector sell-off brought on by the problems in the US financial sector. Operationally, the companys portfolio continues to perform well; AVB posted good results in the 2nd quarter with FFO [funds from operations] per share increasing 8% over the year-earlier period.

Results were $0.02 above consensus and $0.04 above our estimates. However, despite the sell-off, we still rate the shares a Hold due to a still-high comparative valuation and what could be worsening multi-family fundamentals. While new apartment construction is down, more unsold condos and homes are now being rented which adds competition to the companys high end rentals. Additionally, US job growth is falling rapidly, which will negatively affect high-end apartment demand.

Washington Federal, Inc. (Nasdaq: WFSL)

Washington Federal reported 3Q08 operating earnings of $0.34 per share, four cents short of our estimate.

The miss stemmed from a high increase in the provision expense, though the expansion in the interest margin was impressive, owing to WFSLs liability sensitivity. Credit quality significantly worsened during the quarter and we anticipate the deterioration in the credit quality to continue, in the coming quarters, resulting in higher credit costs, which will be partially offset by the growth in the interest rate spread. After reviewing the results, we are maintaining our Hold recommendation on the shares.

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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.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

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