Monthly Archives: August 2015

SeaWorld Entertainment: Zacks’ Bear of the Day Play

It has been a pretty solid time to be in the consumer discretionary market thanks to lower oil prices and strong confidence readings. This has helped companies ranging from restaurants to theme parks, but unfortunately for SeaWorld Entertainment (SEASSnapshot Report) other factors are keeping their stock underwater.

In fact, shares of SEAS have lost over 15% in the past three months, while they are down nearly 40% in the past two years as well. Both of these returns represent huge levels of underperformance when compared to the overall market, and while some might think this means that now is the time to jump in, there could actually be more pain ahead for SEAS in the near term, and especially if look to recent earnings for a guide.

Recent SEAS Earnings

In the most recent earnings report, SEAS was very far off from the consensus posting EPS of just 22 cents a share compared to an estimate of 40 cents a share. This is actually the third such miss out of four reports for SEAS so definitely not a good trend.

Plus, attendance declined 1.6% overall, though at least the average spend remained at a stable level for SeaWorld customers. However, this continued decline really speaks to the ongoing backlash from the ‘Blackfish’ documentary and its impact on SEAS’ business. That documentary detailed the issues of whales’ treatment in captivity and it has definitely hit the public’s perception of SeaWorld hard, leading to the continued decline in theme park attendance.

Earnings Estimates

Analysts also have little hope for a turnaround in SEAS EPS this year as many have been reducing their earnings estimates for the stock. Not a single estimate has gone higher for the current year or next year time frames on SEAS stock in the past 30 days, suggesting universal agreement about SeaWorld’s weak long term prospects.

The magnitude of these revisions has also been impressive as the current year estimate has fallen from $0.83/share to $0.77/share in the past month, while the next year figures have gone from $0.97/share to $0.90/share as well.

With these kind of figures, it shouldn’t be surprising to note that SEAS has earned itself a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance ahead. The company is actually ranked in the bottom 5% of all securities we cover, so it will be hard to find more than a handful of companies that are worse positioned right now in the consumer space.

Other Choices

If you are looking for better picks in the consumer space, there are obviously a lot of other choices out there. One that appears especially intriguing right now is Marcus Corp (MCS) which is a Zacks Rank #1 (Strong Buy) stock.

This security has done much better in earnings season over the past four quarters including a nearly 44% average, while it is seeing earnings estimates move higher too. So if you want to stay in the consumer space, make sure to give MCS a closer look instead of the still-in-trouble SEAS.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Advertisements

Cyber Ark Software: Zacks’ Bull of the Day Play

With a series of high profile breaches, it has been a very interesting time to be a cyber security company like Cyber Ark Software ( (CYBRSnapshot Report). This company in particular looks to protect against a variety of breaches, provide risk management, and help to identify threats too.

Companies like CYBR have moved into the spotlight and have been market darlings for much of 2015 as a result of the many cyber attacks, showing both investors and company managers how important proper cyber security protection is these days. This has translated into solid stock price gains too, as from the start of the year to mid-June, shares of CYBR has soared more than 80% at their highest point, confirming the stock’s role as a hot security for investors.

However, a bit of the wind has gone out of CYBR’s sails as of late as shares are down roughly 15% in the past three months. And while part of this can certainly be blamed on the general market downturn, there has also been some general profit taking for the cyber security industry as of late. This could be great news for new investors though, as it could mean that now is the perfect time to get in on this story stock at a relative discount, and especially if you look to recent earnings estimate revisions.

CYBR Earnings Estimates

Recent earnings estimates have been moving sharply higher for CYBR in recent session, pushing the estimate higher from $0.35/share for the full year 30 days ago to $0.51/share today. And for the next year, we see a similar trend with the estimate moving from 53 cents per share to 66 cents per share in the same time frame.

It is also important to note that CYBR has a history of thoroughly crushing earnings estimates as it has a nearly 1,000% average beat over the past four quarters. This includes two beats of over 1,500% so clearly the company is capable of strong performances at earnings season.

Ranking

For these reasons, we have assigned CYBR a Zacks Rank #1 (Strong Buy) and are looking for outperformance from the stock in the near term. We only give the top 5% of stocks a Zacks Rank #1, so CYBR is definitely in rare company right now.

And if that wasn’t enough, you should also note that CYBR has a Momentum Style Score of ‘A’ putting into good company on that front too. Indeed, the EPS estimate momentum is nearly unstoppable for CYBR with a 12.5% increase for this quarter in just the past month, compared to a decline for the industry, making Cyber Ark a stock you do not want to overlook in the space right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Power Solutions Intl: Zacks’ Bear of the Day Play

As oil prices continue to decline, many Oil and Gas complementary companies are anticipating lower revenues in the near and mid-term. This is the case for Power Solutions International (PSIXSnapshot Report), who had to lower their revenue guidance for FY 2015 and FY 2016. Further, challenges with recent acquisitions, and the news of their Perkins heavy-duty industrial engine program being delayed to 2016 have made this company the Zacks Bear of the Day.

This Zacks Rank #5 (Strong Sell) is engaged in producing and distributing power solutions for original equipment manufacturers of off-highway industrial equipment in the United States. The Company sells engines for stationary generators, oil and gas equipment, forklifts, aerial work platforms, industrial sweepers, arbor equipment, agricultural and turf equipment. It also offers low-emission standard fuel and hybrid power solutions, and diesel power systems. Power Solutions International, Inc. is based in Wood Dale, Illinois.

Due to the pricing issues facing the Oil and Gas industry, the near and long term outlook has declined, which has forced management to reduce revenue guidance for 2015 from a range of $500m to $520m to a range of $430m to $470m.  A rough estimate suggests that the decline is due to Oil & Gas (down $20m), the Perkins issue (down $25m), and the 3PI acquisition (down $15m).  Not only was revenue guidance reduced for 2015, it was also negatively adjusted for 2016; which is now down to a range of $500m to $520m from a range of $630m to $670 million.  Moreover, due to the lower oil and gas revenues, gross margins have been contracting and is expected to continue to contract in the near term.

Decreasing Estimates

As you can see in the table below, estimate revisions have all been in the negative for Q3 15, Q4 15, FY 15, and FY 16.

Over the past 30 days, estimates have fallen for Q3 15, Q4 15, FY 15, and FY 15; Q3 15 fell from $0.75 to $0.24, Q4 15 dropped from $1.10 to $0.51, FY 15 plummeted from $2.23 to $1.16, and FY 16 declined from $3.25 to $2.36.

Bottom Line

There are several headwinds facing this company over the near and long term.  From reduced engine sales expectations, acquisition issues, and the delay of the Perkins (heavy duty industrial engine program), all of which are negatively impacting the top and bottom lines.

Typically, I would suggest another stock holding a top Zacks rank within the segment, but this entire Engine/Internal Combustion group is facing tough headwinds.  Therefore, it would be wise to look to another segment in the near term for better results.

Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

YRC Worldwide: Zacks’ Bull of the Day Play

A bit over a year ago, YRC Worldwide’s (YRCWSnapshot Report) management team implemented a few new strategies to improve revenues and overall growth.  The main focus was executing a freight mix and yield improvement strategy, along with enhancing safety performance.  Also, as part of the strategy, the company continued to reinvest in their fleet, and invest in high return technology projects.  In Q2 15, the strategy started to boost operational improvements and generate substantial progress.  Specifically, operating income increased by 184.5% y/y, margins improved 320 basis points y/y, workers’ compensation expense declined by $7.8 million, and liability claims expense decreased by $6.7 million.  Due to these factors, YRC Worldwide is the Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) is the holding company for a portfolio of less-than-truckload (LTL) companies including YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn. Collectively, YRC Worldwide companies have one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities.

According to James Welch, CEO, “”During the second quarter of this year, we continued to see success in executing our freight mix and yield improvement strategy over market share and equally important improving our safety performance which in turn increased our operating income by $36.9 million to $56.9 million.” “Additionally, we continued to reinvest in our fleet, make incremental investments in high return technology projects and are nearing completion of the in-cab safety solutions pilot for our existing fleet. We are accomplishing all of this while improving our liquidity,” continued Welch. “However, as we move forward, we must continue to invest in our most valuable asset, our employees, through continuous training, employee engagement strategies and communication. We believe these investments will help drive productivity, service and quality improvements and allow us to continue to build on our current operating momentum and results,” concluded Welch.

Increasing Estimates

Over the past four quarters, YRC Worldwide, has beaten the Zacks Consensus Earnings Estimate three out of the four quarters with an average positive surprise of 142.6%. Further, the current Zacks Consensus Earnings Estimate for Q3 15 indicates a 1,716.7% y/y growth in EPS!

The 2 tables below show estimate revisions, and the change in overall estimates.  As you can see there have been significant upgrades for YRC Worldwide for the remaining quarters in 2015, and FY 16.  This is due to their new strategy and its positive impact it had on the company in Q2 15.

As you will notice, estimates for Q3 15, Q4 15, FY 15, and FY 16 have all significantly improved over the past 30 days.  Q3 15 improved from $0.32 to $0.49, Q4 15 rose from $0.22 to $0.31, FY 15 jumped from $0.24 to $1.04, and FY 16 surged from $1.34 to $1.92.

Bottom Line

As management’s strategy to enhance freight mix, and yield improvements over market share takes hold, operating income and margins are showing exceptional growth.  Further, this focus by management has caused earnings estimates to climb, which looks to deliver solid growth into 2016.

Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

Baidu: Zacks’ Bear of the Day Play

Baidu, Inc. (BIDUSnapshot Report), the Google of China, is taking it on the chin due to economic events in China and its decision to spend more on sales and marketing for its online-to-offline business. This Zacks Rank #5 (Strong Sell) is expected to see falling earnings this year.

Baidu is one of the top Chinese language Internet search providers.

Another Miss in the Second Quarter

On July 27, Baidu reported its second quarter results and missed on the Zacks Consensus Estimate for the third quarter in a row.

Earnings were $1.64 versus the consensus of $1.80.

On the conference call, the company said that it expected higher than previously disclosed sales and marketing expenses in the online-to-offline business. This was a surprise to the analysts.

Baidu is up against a very competitive space in the online-to-offline world, including some Alibaba affiliates. It is going to have to spend more to be competitive.

The spending appears to be a multi-year event.

Estimates Slashed

Given the nearly doubling of spending on marketing and sales, analysts have had to cut estimates sharply for 2015.

The Zacks Consensus Estimate has fallen to just $5.60 from $7.14 ninety days ago. That is actually an earnings decline of 6.8% from 2014.

While a rebound is expected in 2016, even those estimates had to be cut. 2016’s Zacks Consensus Estimate has fallen to $7.10 from $9.92 just 60 days ago.

Shares Sell Off

Shares were hit on the earnings miss and news about further spending.

In response, on July 30, Baidu announced a surprise $1 billion share buyback that it would do over the next 12 months.

But that hasn’t stopped the slide in the shares. Every time there is big news out of China about weakness in the economy, shares seem to sell off further. They are down 37% year to date.

With the sell-off, are shares now a value?

Even with the big pullback, they’re still trading with a forward P/E of 24. That’s not exactly cheap considering its negative earnings growth.

With all the stock market turmoil and government stimulus going on in China, it might be best to just steer clear of Chinese stocks altogether.

If you must own an Internet provider, why not just buy Google (GOOGLAnalyst Report)? It’s a Zacks Rank #2 (Buy) and is expected to grow earnings by 12% this year.

Want More of Our Best Recommendations?

Zacks’ Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

Carrols: Zacks’ Bull of the Day Play

You might not have ever heard of Carrols Restaurant Group, Inc. (TASTSnapshot Report) but you know its brand as its the largest Burger King franchisee in the United States. Burger King is back.

This Zacks Rank #1 (Strong Buy) has rising earnings estimates and is expected to grow earnings by the triple digits next year.

Carrols operates 657 in 15 states in the Midwest, the Mid-Atlantic and the Northeast. It has operated Burger King restaurants since 1976.

Big Beat in the Second Quarter

On Aug 4, Carrols reported its second quarter results and easily beat the Zacks Consensus by 10 cents. Earnings were $0.10 compared to the consensus of zero.

Comparable restaurant sales rose 10.3%, up from a decrease of 2% in the same quarter a year ago as new Burger King promotions and marketing drove sales and customer traffic.

Average check was 4.9% higher and customer traffic increased 5.4% from the prior year period. Burger King has been promoting new items like the Chicken Fingers which are boosting traffic and brand awareness.

It has also remodeled 350 restaurants over the past 3 years which is also driving sales growth.

Carrols added 127 Burger King’s in 2014 and 2015 so it is working on getting those up to the same level as its already-owned franchises.

The company also has $60 million cash on hand as of the end of the quarter so it has some firepower to continue with expansion, remodeling and improvement.

Raised Full Year Guidance

The future looks bright with falling gasoline prices and beef prices also declining.

Carrols expects its commodity costs to now decrease 1.5% to 2.5% for the year as beef costs remain low. It had been forecasting a commodities cost increase of 1% to 2%.

Total restaurant sales are expected to be $830 to $845 million, up from its previous guidance of $815 to $830 million.

With the strong second quarter, Carrols also raised comparable sales guidance to 5% to 7%, up from its prior forecast of 3% to 5%.

The analysts also like what they’re hearing as estimates for 2015 and 2016 have been rising.

2 estimates are higher for both years in the last 30 days. Earnings are expected to jump by 165% in 2016.

Shares Near 2-Year Highs

Shares were at 2-year highs until the recent stock market correction as restaurant stocks remain hot.

While they have a high forward P/E using 2016 numbers, the price-to-sales ratio is just 0.5. A P/S ratio under 1.0 usually indicates value.

For investors looking for a way to play the return of the consumer and lower gasoline prices, Carrols is a stock to add to the short list.

Want More of Our Best Recommendations?

Zacks’ Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

MercadoLibre: Zacks’ Bear of the Day Play

Shares of MercadoLibre (MELISnapshot Report) have fallen about 20% since I last wrote about the stock back on April 10. But the stock still does not look cheap. It trades at 36x forward earnings and sports a Zacks Value Style Score of ‘F’.

Additionally, consensus estimates have fallen sharply following a big earnings miss in Q2. It is a Zacks Rank #5 (Strong Sell) stock.

MercadoLibre operates an e-commerce ecosystem in Latin America that provides buyers and sellers an online trading environment. It operates in 13 countries including Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.

Second Quarter Results

MercadoLibre delivered disappointing second quarter results on August 5. Earnings per share came in at $0.44, missing the Zacks Consensus Estimate of $0.74 by 41%. It was a 39% drop from the same quarter last year.

Profit margins declined significantly. Gross profit fell from 72.4% of net revenue in the second quarter last year to 67.4%. This was due in part to foreign currency headwinds, along with a higher contribution from MercadoPago, which has lower margins. Operating income fell from 33.1% to 22.4% of net revenue, due in large part to forex.

The one bright spot was revenue. Net revenues rose 17% year-over-year to $154.3 million versus the consensus of $149 million. And excluding forex, net revenues rose 88%.

Estimates Falling

Following the Q2 miss, analysts revised their earnings estimates significantly lower for MercadoLibre. This sent the stock to a Zacks Rank #5 (Strong Sell), placing it in the bottom 5% of all companies that Zacks ranks based on earnings momentum.

The 2015 Zacks Consensus Estimate is currently $2.42, down from $2.80 before the report. The 2016 consensus has fallen from $3.53 to $3.07 over the same period.

As you can see below, consensus estimates have been falling steadily this year:

It’s anybody’s guess when estimates will finally bottom out. But given continued economic weakness in Latin America, I wouldn’t be surprised to see these estimates continue to fall.

Lofty Valuation

Shares of MercadoLibre have had a tough year, but the stock looks far from a bargain. The stock trades at 36x 12-month forward earnings and sports an enterprise value to EBITDA multiple of 21.

The Zacks Value Style Score for MELI is an ‘F’.

The Bottom Line

With continued headwinds in Latin America, negative earnings momentum and lofty valuation, MercadoLibre doesn’t offer much to like at the moment.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

Tempur Sealy: Zacks’ Bull of the Day Play

Tempur Sealy (TPXSnapshot Report) delivered the coveted “triple play” when it reported its second quarter results on July 30. The company (1) beat revenue expectations, (2) beat earnings expectations, and (3) management raised its full year guidance. This prompted a flurry of positive estimate revisions from analysts for both 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).

Tempur Sealy International, Inc. manufactures and markets mattresses, foundations, pillows and other products. Its brands include Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum and Stearns & Foster®.

Second Quarter Results

Tempur Sealy delivered better-than-expected second quarter results on July 30. Adjusted earnings per share came in at $0.53, beating the Zacks Consensus Estimate of $0.45. It was a 36% increase over the same quarter last year.

Net sales rose 7% to $764.4 million, ahead of the consensus of $750 million. Excluding foreign currency headwinds, net sales increased 11%, with double-digit growth in both the North America and International segments.

Profit margins expanded too. The adjusted gross profit margin expanded from 37.6% to 39.4% of net sales, due in large part to margin gains in its North America segment. Adjusted operating income jumped 26% year-over-year as the adjusted operating margin expanded from 7.8% to 9.2% of net sales.

Estimates Rising

Following strong Q2 results, management raised its full year guidance. The company now expects 2015 net sales between $3.125 billion and $3.175 billion, up from previous guidance of $3.100-$3.175 billion. It also expects adjusted EPS between $3.00 and $3.20, up from previous guidance of $2.80-$3.15.

This prompted analysts to revise their estimates significantly higher for both 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).

The 2015 Zacks Consensus Estimate is now $3.18, up from $3.06 before the report. The 2016 consensus is now $3.77, up from $3.60 over the same period.

Valuation

Shares of Tempur Sealy trade around 20x 12-month forward earnings, which is in-line with the industry median. Its enterprise value to EBITDA ratio is also around the industry multiple of 14.

The Bottom Line

With strong sales growth, expanding profit margins and rising earnings estimates, shares of Tempur Pedic offer attractive upside potential.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

Jazz Pharma: Zacks’ Bear of the Day Play

It’s easy to sit here and write a Bear of the Day today. Pretty much every stock on the board is down and the weak stocks are really catching a beat down. This is the type of event that only happens once every few years or so. The bad stocks in this market should be avoided like the plague. This is when the real stock pickers shine and the Vanguard guys get really quiet.

My pick today isn’t based on any personal vendetta or any highly researched dooming thesis. For this stock, it’s all about the Zacks Rank and the Momentum Style Score. Jazz Pharmaceuticals (JAZZAnalyst Report) is a Zacks Rank #5 (Strong Sell) stock that’s got a Momentum Style Score of “D” and a Value Score of “F.” That tells me you should probably look elsewhere in this market to pick up a few bucks.

Click “Follow the Author” for free weekly picks! Twitter @bartosiastics

Analysts have closed the door on this stock too. Over the last 30 days, estimates have plummeted for the current quarter, next quarter, current year and next year. The most dramatic drop has to be in the current year estimates. Our Zacks Consensus Estimate has dropped from $8.68 all the way down to $5.84. That’s more than next year’s drop where the numbers went from $10.72 to $8.84. While the growth may still be there, the big dip meant a big hit to the stock price.

Shares of Jazz have taken a tumble since reaching a high near $195 in early August. Since then, JAZZ broke down through the bottom end of its recent trading range at $170. Now the stock is bouncing along at $161 and change.

Investors looking for other stocks in the same industry, you can check out today’s Bull of the Day Alcobra (ADHDSnapshot Report) or Corcept Therapeutics (CORTAnalyst Report). The medical – drugs industry ranks in the Top 35% of our Zacks Industry Rank.

Be sure to click FOLLOW THE AUTHOR above to stay on top of all the hot momentum stocks at Zacks.com. David Bartosiak is the Momentum Stock Strategist with Zacks and editor of the Momentum Trader.Twitter @bartosiastics

Alcobra: Zacks’ Bull of the Day Play

On one hand, I’ve got to be crazy to run out here and give stock picks on a day like today. I mean, come on Dave, it’s “Black Monday” for crying out loud! Well as far as I can tell, we’re still four horseman short of the apocalypse so you can keep that “Black Monday” stuff. The only thing black about this Monday is the Retro VI’s on my feet. This is “Green Monday” as far as I’m concerned. If you had the courage to step in and buy the dip you’d be smiling all day.

I’m smiling now putting Alcobra (ADHDSnapshot Report) as my Bull of the Day. I’ll give you a chance to guess what kind of medication they make. Wait, what was I talking about again? Just kidding. Alcobra is a biopharmaceutical company that focuses on the development and commercialization of drugs to treat attention deficit hyperactivity disorder.

Click “Follow the Author” for free weekly picks! Twitter @bartosiastics

Analysts have become increasingly bullish on the stock over the last week. The bullish activity by three different analysts has increased the Zacks Consensus Estimate for the current quarter, next quarter, the current year and next year. The most dramatic move occurred in the current year numbers. The recent earnings estimate increases have pushed the Zacks Consensus Estimate from a $1.24 loss to a $1.15 loss.

Shares of ADHD took a tumble heading into the Fall last year. ADHD went from $18 to $3 in less than two months. From there, shares began to rebound, moving up slowly and butting up against resistance at $8. Good news for shareholders is in early August the stock finally broke through that resistance level. With the market selling off and the stock dipping into the $7s now may be a great time to jump on board ahead of the next leg higher.

Be sure to click FOLLOW THE AUTHOR above to stay on top of all the hot momentum stocks at Zacks.com. David Bartosiak is the Momentum Stock Strategist with Zacks and editor of the Momentum Trader.Twitter @bartosiastics