Macquarie: Zacks’ Bear of the Day Play

For today’s Bear of the Day I wanted to do something different. Rather than find a company with a poor Zacks Rank that’s been beaten down, I thought I would experiment a bit. Today I ran a screen with the same criteria I use to find great momentum stocks, only I flipped it on its head a bit. While I kept the technical parts of the screen the same, I flipped the other parts on the head. The goal of this is to find a stock that has seen its price has run up while estimates have come down. I want a stock within earshot of a fresh 52-week high that is also a Zacks Rank #5 (Strong Sell) and perhaps may be running out of gas. I’m not here to tell you it’s time to short, I’m here to warn you just in case you’re long and don’t have your risk parameters in place.

Today’s Bear of the Day is Macquarie Infrastructure Company (MICSnapshot Report). Macquarie is a Zacks Rank #5 (Strong Sell) that owns, operates, and invests in a diversified group of infrastructure businesses in the United States. This infrastructure includes one of the largest bulk liquid terminals businesses, an airport service business, a gas processing and distribution business, and a portfolio of contracted power and energy facilities.

MIC’s airport services business, Atlantic Aviation, provides fuel and fuel-related services, as well as terminal and hangar operations to businesses and individuals in the private jet segment of general non-commercial aviation. Their bulk liquid terminals business is the largest independent bulk liquid business the US. Operating under International-Matex Tank Terminals, the company owns and operates 12 terminals and provides storage and logistics services including more than 45 million barrels of liquid petroleum, chemical and agricultural product tankage. Through Hawai’iGAS the company operates the only utility pipeline gas distribution on the Hawaiian Islands while their contracted power and energy segment invests in solar and wind facilities in the US Southwest.

With businesses like that, it’s easy to see why the market is bullish. However, analysts have had a different opinion of the company. For the current quarter, analysts have dropped estimates from 69 cents all the way down to 32 cents over the last 60 days. For next year’s numbers, three analysts have slashed estimates from $2.52 all the way down to $2.17.

The estimate revisions to the downside come on the heels of two very disappointing quarterly earnings reports. Q2 2014 earnings came in at 19 cents versus consensus expectations for 28 cents. Q3 the disappointment deepened with a 50 cent loss coming for the company in the face of expectations for a 45 cent gain.

The stock has held up considerably well during this year. The rally started early in the year with the stock trading in the low $50s in March. Off those lows the stock ran up to a fresh 52 high of $73.47 in July. But after some huge volume days in the summer it seems like the buying was exhausted. A short consolidation during August was met with a fresh leg lower, taking the stock to an October low of $62.58.

One more rally saw the stock retest the 52-week high. But the rally ran out of buyers and in November the stock struggled before opening December with yet another leg lower. With the stochastics near 80 in overbought territory and the stock trading right on the 20 day moving average it looks like this thing may be rolling over again. A failure here puts the October low as a short-term target for the stock, with the bottom of the July gap near $61 highly likely.

Investors looking to buy other companies within the diversified operations industry can look at Zacks Rank #1 (Strong Buy) Fed Signal (FSSSnapshot Report) or Zacks Rank #2 (Buy) Carlisle (CSLSnapshot Report).

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