Just as your pulse is checked during a routine physical, free cash flow is used as an indicator of a company's health. It equals the cash brought in from operations minus the money needed to pay the bills. Think about leftover money in your checking account after you pay this month's bills.

Investors and analysts see this leftover money as a gauge of a company's ability to perform. It is available for transactions such as handing out dividends and working on new products.

Some argue free cash flow is wrongly overshadowed by the emphasis often placed on earnings. Earnings numbers can be manipulated and don't always tell the whole story -- and earnings don't mean much if there's nothing left over after a company pays its expenses. Even if you bring in a six-figure salary, but no money left after paying the bills, are you in great financial shape?

You don't have to be Einstein to figure out free cash flow. To calculate the number, subtract the company's expenditures and dividends from its operating cash flow.

If the free cash flow is written in red ink, it doesn't necessarily signal curtains. This is common for young companies looking to grow. It also could be a result of heavy investments, which in the long run could be worth a standing ovation.

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Friday, July 18, 2008

Zacks Bull and Bear of the Day Highlights: Royal Caribbean, Maguire Properties, Abbott Laboratories, Starwood Hotels and Telus Corp.

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CHICAGO, Jul 18, 2008 (BUSINESS WIRE) ----Zacks Equity Research highlights Royal Caribbean (NYSE: RCL) as the Bull of the Day and Maguire Properties (NYSE: MPG) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Abbott Laboratories, Inc. (NYSE: ABT), Starwood Hotels & Resorts (NYSE: HOT) and Telus Corp. (NYSE: TU). 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: Royal Caribbean (NYSE: RCL)

We maintain our Buy rating for Royal Caribbean, primarily due to valuation. The current top-line environment appears to be improving, and we consider RCL to be poised to strongly benefit given an increase in demand. While we expect higher fuel prices going forward to remain challenging, we believe that core operating growth will remain attractive.

With the shares currently trading at 7.1x our 2008 earnings estimate and at a 35% discount to its largest rival, we consider the current valuation to be attractive. The company is scheduled to report second-quarter financial results on July 22.

Bear of the Day: Maguire Properties (NYSE: MPG)

Operations are deteriorating and the company recently suspended the common dividend. Maguire is running a deficit to free cash flow as the company is saddled with a high debt load due to heavy acquisition activity in 2007.

MPG was put up for sale but found no buyer. Another offer, reportedly in excess of $20.00 per share was rejected. Most senior management has been replaced as MPG is scrambling to shore up operations. The share price has dropped nearly 75% over the past year and despite a heavily discounted valuation relative to NAV, we still rate the shares a sell. 2008

Latest Posts on the Zacks Analyst Blog:

Abbott Laboratories, Inc. (NYSE: ABT)

We believe Abbott Labs will deliver double-digit EPS growth through the end of 2012, driven by strong sales of the anti-inflammatory for rheumatoid arthritis and psoriasis, Humira, and the company's rapidly growing vascular business. Several new drug applications have recently been filed with the Food and Drug Administration (FDA), which should accelerate sales in the pharmaceutical business.

We believe ABT possesses a low-risk profile and will continue to trade at an industry premium. Accordingly, we reiterate our Buy recommendation with a price target of $65.

Starwood Hotels & Resorts (NYSE: HOT)

We maintain our Buy rating for Starwood Hotels. We consider the company's significant exposure to international markets and concentration in higher-end hotels to be a positive attributes that should help Starwood to weather the economic downturn in the U.S.

Starwood has a pipeline of 500 hotels with approximately 120,000 rooms. This pipeline represents growth of more than 40 percent over the company's current system-wide total, the largest such percentage in the industry. Importantly, approximately 70 percent of the rooms in the pipeline are in the upper upscale or luxury segments, and more than 50 percent of the rooms are located outside the United States.

Telus Corp. (NYSE: TU)

We maintain our Hold rating on Telus, the second largest telecommunications provider in Canada. Recent results demonstrate strong wireless data revenues and high-speed Internet subscriber growth, although increasing customer retention costs coupled with the introduction of Wireless Number Portability (WNP) related churn remain challenging.

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

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.

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.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2677.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

SOURCE: Zacks.com

Zacks.com Mark Vickery
   312-265-9380 Visit: www.zacks.com

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