Monthly Archives: September 2015

Halliburton: Zacks’ Bear of the Day Play

When I’m looking for a stock to be my “Bear of the Day” I look for weak stocks in a weak industry. So you see it’s easy for me to look at a Zacks Rank #5 (Strong Sell) in an industry that ranks in the bottom 18% of the 265 industries we rank with our Zacks Industry Rank, and find myself a bearish idea. But when that stock also happens to be in the energy business that’s taken the biggest hit this year, I almost feel like I’m making it too obvious.

Falling crude prices have put pressure on companies across the energy sector. Today’s “Bear of the Day” Halliburton (HALAnalyst Report) is one of the world’s largest providers of products and services to the energy industry. The company serves the upstream oil and gas industry throughout the lifecycle of the reservoir. It’s no wonder that business would be struggling as oil is becoming cheaper and cheaper as more is brought to market.

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You don’t have to take my word for it. Recently, ten analysts have revised their earnings estimates to the downside for the current year, while eleven have done so for next year. Most of that bearish change took place between thirty and sixty days ago. But in the last week, another round of negative revisions have come through, dropping the Zacks Consensus Estimates even further. Currently, the consensus for the current year has gone from $1.68 to $1.60, while next year’s number has fallen from $1.95 to $1.71.

It’s no wonder why shares have dropped from nearly $74 to $36 over the last couple of years. This year actually started off bullish for shares of HAL, until the stock ran out of momentum just shy of $50 in May. From there the slide has been very consistent. The 52-week low on August 24th still sits over 15% away from where shares currently trade.

Investors looking for other ideas in the oil services industry should look at Zacks Rank #2 (Buy) stocks CHC Group (HELISnapshot Report) and Exterran Holdings (EXHSnapshot Report).

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, editor of the Momentum Trader and Home Run Investor, and host of “Trending Stocks”

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Ryanair: Zacks’ Bull of the Day Play

I’m not going to lie to you, it’s very hard to sit up here and choose a “Bull of the Day” when it seems like it’s hitting the fan from every direction right now. First it was energy, then China, then biotech, now healthcare. There seems to be nowhere to hide in this market right now, other than under the desk. Well I’m a big guy and it’s not too spacious down there so I propose an alternate solution; search for the strength.

The airline industry is in the top 9% of the 265 industries we rank with our Zacks Industry Rank. Among the Zacks Rank #1 (Strong Buy) stocks to choose from is our “Bull of the Day” Ryanair Holdings (RYAAYSnapshot Report). Ryanair operates an ultra-low cost, scheduled airline serving short-haul, point-to-point routes between Ireland, the United Kingdom, Continental Europe and Morocco. The company’s principle fleet consists of Boeing 737-800 aircraft.

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Over the last thirty days, three analysts have upped their earnings estimates for the current year and next year. The bullish attitude has pushed up the Zacks Consensus estimate to $4.77 from $3.85 for the current year and up from $4.34 to $5.41 for next year. Those upward revisions are a big reason for the Zacks Rank #1 (Strong Buy). This stock also happens to be blessed with a Zacks Momentum Style Score of “A” making it very attractive at these levels.

With the market seeming to crumble around it, shares of Ryanair has remained resilient. A great earnings report last October was the catalyst that started the uptrend that began in the mid-$50s and has gone through to the low $80s. The last few rocky trading days have sent shares retreating from the highs but the fall from grace hasn’t been too harsh. Shares found buyers stepping back in at the $78 level. The commodity channel index has come down from an extremely overbought level over 200 to cross below the zero line. It may be best to wait for the CCI to dip below -100 then come back a bit before jumping in headfirst.

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, editor of the Momentum Trader and Home Run Investor, and host of “Trending Stocks”

World Fuel Services: Zacks’ Bear of the Day Play

Headquartered in Miami, Florida, World Fuel Services (INTSnapshot Report) provides downstream marketing and financing of aviation, marine and land fuel products and related services. They deliver fuel solutions and logistics at more than 8,000 locations around the world. The company operates through three segments—Aviation, Marine and Land.

Disappointing Results and Outlook

The company reported second quarter results on August 3. Consolidated revenue for the quarter was $8.5 billion down 25% year-over-year, with Aviation segment revenue down 28%, Marine segment revenue down 21%, and Land segment revenue down 26%.  All of these year-over-year declines were due to lower oil prices, partly offset by increased volumes.

Operating earnings for the quarter came in at $0.49 per share, significantly below the Zacks Consensus Estimate of $0.72 per share. Per management, results were significantly impacted by seasonality in Watson Fuels and low prices coupled with reduced volatility in Marine.

The management said that conditions in overall marine marketplace remain quite poor, specifically in the offshore, dry bulk and container markets. They added that the fuel market remains oversupplied, with weak demand and record high inventory levels.

Downward Revisions

Due to poor results and weak outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year are now $2.67 per share and $3.10 per share respectively, down sharply from $3.32 per share and $3.60 per share, before the results. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).

The Bottom Line

Downturn in energy prices has badly impacted all companies in the fuel supply industry. While this company is financially stronger than many other players in the business, it is safer to avoid the stock for the time being in view of the cloudy outlook for the market. Further, looking at the entire spectrum of energy players, companies will significant downstream operations are likely to see more pain in the coming months.

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Bob Evans Farms: Zacks’ Bull of the Day Play

With an improving economy, tightening labor market and low gas prices, consumers have been spending more on eating out. The outlook for the Restaurant industry remains positive for the coming months as well as we approach the holiday season, when people tend to dine out more.

About the Company

Head quartered in New Albany, Ohio, Bob Evans Farms (BOBE) currently owns and operates more than 550 full-service family restaurants in 19 states, primarily in the Midwest, Mid-Atlantic and Southeast regions. Their grocery segment offers a wide variety of home-style food products, including sausage and bacon products, as well refrigerated and frozen convenience foods. These products are sold at more than 30,000 retail locations across US and Canada.

Excellent Quarterly Results and Improved Guidance

The company reported its fiscal 2016 first quarter results on September 1. Operating income was $0.51 per share, up from $0.10 per share in the prior-year quarter and significantly beating the Zacks Consensus Estimate of $0.30 per share. The company has beaten Zacks Consensus Estimates in three out of last four quarters, with an average quarterly surprise of 23%.

Restaurants operating income was up 21% from the same quarter last year while Food segment profit surged 327%. The management said that they are currently implementing the strategy of improving the quality of food offering while significantly lowering discounts that were earlier utilized to drive transactions, Same-store sales declined by 0.3% thanks mainly to reduced discounts but sales were more profitable with cost controls.

The management raised their fiscal 2016 EPS guidance to $1.85 to $2.00 from the previous guidance of $1.75 to $1.95.

Rising Estimates

After a strong quarterly report and upgraded guidance, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.94 per share and $2.22 per share respectively, up from $01.87 per share and $2.05 per share, 30 days ago.

Turnaround Remains on Track

The company remains focused on executing its turnaround plan, which includes improving the brand experience for customers; increasing sales; reducing costs particularly at the corporate level; and allocating capital efficiently.

They also continue to make progress on their “Best-in-Class Breakfast” initiative with continued menu innovation and food quality improvements planned throughout remainder of year.

During the quarter, the management completed a review of their owned restaurant properties and decided a sale leaseback transaction of up to $200 million would further enhance shareholder value. They expect net proceeds of $165 million to $170 million from such a transaction.

Returning Cash to Shareholders

The company has been consistently increasing its dividend. They repurchased more than $60 million of stock during the reported quarter and expect to complete the remainder of the current $150 million authorization during the balance of fiscal 2016. The company also plans to use the proceeds from real estate monetization transaction for buying back shares in addition to paying down debt.

The Bottom Line

Thanks to favorable industry trend and successful execution of several strategic and operating turnaround initiatives, the company is moving in the right direction. The Restaurant industry is currently ranked 62 out of 265 Zacks industries (top 23%), indicating further upside potential for this hot industry. Further, in addition to top Zacks stock rank, the stock also has favorable Style Score Rank of “B” each in Growth, Value and Momentum.

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Greenbrier: Zacks’ Bear of the Day Play

Despite a booming rail transport cycle, analysts can’t seem to downgrade Greenbrier (GBXSnapshot Report) often enough lately, largely after institutions have buried the shares by half since the spring.

It seems they are trying to get ahead of what they see on the horizon: a decline in industrial manufacturing and oil transport trends that Greenbrier rail cars have banked on for the past 5 years.

While a 7% miss on earnings last quarter didn’t help the outlook, what is amazing is how even reduced EPS estimates still have GBX trading at under 6X next year’s projected $6. Here are the detailed Zacks EPS tables showing the downward revision trend of the past 90 days…

Bottom line: GBX shares appear to be an incredible value, but that doesn’t mean the downward earnings momentum has stopped. Until it does, it’s best to wait for a different mode of transport. The Zacks Rank will let you know.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

Medivation: Zacks’ Bull of the Day Play

After a mid-year slump in revenues and a 35% drop in the stock price, Medivation (MDVNAnalyst Report) appears to have the odds in its favor for a turnaround.

A solid Q2 earnings report, including raised sales guidance, and a key drug acquisition from BioMarin (BMRNAnalyst Report) have made analysts more positive about the maker of the number one prostate cancer drug in the world, Xtandi.

With Astellas, its Japanese “big brother” pharma partner, Medivation is expected to share in $2 billion in global sales in 2015 and projections for peak global sales of Xtandi approaching $7.5 billion in the next decade.

And the company continues to drive R&D to expand Xtandi for the treatment of breast cancer.

In its early August quarterly report, the company said that unit demand for Xtandi increased by roughly 13% sequentially. Importantly, as Xtandi gains market share in the treatment of prostate cancer from Johnson & Johnson‘s (JNJAnalyst Report) Zytiga, Medivation reported significant growth in prescriptions written by both oncologists and urologists following Xtandi’s approval for the chemo-naïve indication.

Moreover, while most of the Xtandi scrips are written by oncologists, there was significant growth in the number of urologists writing Xtandi. The company said that about 20% of scrips are now in urology.

Analyst Reaction

On September 8, UBS analysts put out a research note explaining their renewed optimism for the Medivation growth story. The firm reiterated a Buy rating and $74 price target on Medivation as shares continued to drop. The firm believes that shares are now at a 60% discount to the peer group, versus near-parity in April-May 2015. Analyst Matthew Roden noted…

MDVN shares have been in free fall since ASCO, and are now at a whopping 60% discount to the peer group, versus near-parity in April-May 2015. We think the fear is mostly centered on the risk that US demand for Xtandi could dry up at any minute and trigger downward revisions (as was seen with BIIB’s Tecfidera at 2Q).

In contrast, our fundamental view that Xtandi has the potential to be a $3bn+ (US sales) drug prior to early stage prostate label expansion remains unchanged, based on our new analysis of the current underlying growth trends.

Further we acknowledge the market needs more data before believing in Xtandi in breast cancer, the PARP, or pidilizumab, but our point from the risk-reward standpoint is that neither of these program are reflected in the multiple, and hence represent potential upside drivers.

And it was on August 25 that the same analyst had initially raised his price target to $74 following Medivation’s acquisition of a breast cancer drug from BioMarin. The drug, talazoparib, is an oral PARP inhibitor, belonging to a group of pharmacological inhibitors of the enzyme poly ADP ribose polymerase (PARP). Roden said that the acquisition diversifies the revenue stream and adds to pipeline optionality. He further noted…

“Medivation’s acquisition of world-wide rights to Biomarin’s talazoparib (BMN 673), an oral PARP inhibitor is a fundamental positive, in our view, as it diversifies the revenue stream and adds to pipeline optionality. We spoke with management, who pointed to the literature on talazoparib that suggests it is a best-in-class PARP and may be effective in multiple high-value indications beyond breast cancer, including in prostate (potentially in combo w Xtandi) and lung. The macro selloff aside, we believe a higher multiple is warranted fundamentally (intraday 18x our new 2016e and 12x ’17e) given the steep earnings ramp, multiple revenue growth opportunities, and revenue diversification.”

In other analyst actions, on September 15, Nomura Securities initiated coverage of Medivation with a Buy rating and a price target of $70. Also last week, William Blair analysts put out a fresh research note reiterating their Outperform rating and $83 price target. The Blair analysts stated…

“We believe Medivation is building an industry-leading oncology portfolio with strong fundamentals for sales growth and scientific rationales for future growth, in particular through combination therapies.”

Medivation Q2 Institutional Action

Accumulation of MDVN shares in Q2 was steady. Yes, there were some sellers in July with a big 8 million share down day on the 29th. But the stock has since seen a capitulation in price (on lighter volume) and the analyst reaction since Q2 earnings and the key drug acquisition created a big turn in sentiment to drive price above the July 29 selling levels, prior to the Hillary Clinton tweet that tanked the whole Biotech complex on September 21.

Plus, we have a very clear picture of the big guys and gals buying on the way down from $65 to $55 in Q2. I don’t think these very smart and successful players were plunking down this kind of dough here to run away between $40 and $50 now. Data courtesy of Nasdaq.com…

As long as these great stock investors are still accumulating shares of this emerging Biotech powerhouse, I will be as well — regardless of what Hillary tweets.

Disclosure: I own MDVN shares for the Zacks FTM Trader.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

Exxon Mobil: Zacks’ Bear of the Day Play

Exxon Mobil (XOMAnalyst Report) missed the Zacks Consensus Estimate last quarter, but the slumping price of oil has made analysts rethink their estimates for the coming quarter. Today the stocks is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.

Company Description

Exxon Mobil’s principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacturing of petroleum products and transportation and sale of crude oil, natural gas and petroleum products.

Estimates

Earnings estimate revisions, which is the primary component of the Zacks Rank, have fallen over the course of the year. The Zacks Consensus Estimate was at $4.27 at the start of this year, but is now $4.01. That is a good sized drop in the 2015 Zacks Consensus Estimate.

The thing that seems to be keeping the stock with the lowest Zacks Rank is that estimates for 2016 are falling even more. That number started the year at $5.40 and is now down to $4.23.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represent analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #5 (Strong Sell) we see that estimates are moving lower.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Amazon: Zacks’ Bull of the Day Play

Amazon (AMZNAnalyst Report) isn’t priced like a normal stock, and that has a lot to do with the fact that it is not a normal company. There have been a few negative stories of late in the news about the e-commerce giant, but there are a lot of positives as we approach the end of the third quarter. Analysts have recently increased their earnings estimates and that has helped push the stock to a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.Recent Analyst Action

I like to think that price targets are not really that important as an analyst can really make that number fit any slot he or she wants. All they have to do is note in the report how they derived the price target and there is no set means of doing so. Often times, they will take an earnings estimate for a future year and then apply a “multiple” for it to reach a nice round number.

The two most recent recommendation changes were both upgrades, as Raymond James moved the stock to Strong Buy from Outperform on August 27. Just before that, and frankly maybe a just a few after the most recent earnings report on July 23, Stifel upgraded the stock to Buy from Hold and slapped a $700 price target on the stock as of July 29.

That $700 number isn’t the highest price target out there, but it matched the number that Credit Suisse placed on the stock the day after 2Q15 earnings. It was quite a move up from $480 and it ranks as the highest price target increase in dollar terms. The biggest bull on Wall Street is Morgan Stanley who increased their price target to $740 from $520 while maintaining an overweight recommendation.

Needless to say, the price targets are pretty lofty so let’s take a look at why they are up so high and how to think about earnings that are just about one month away.

Description

Amazon.com operates as an online retailer and serves developers and enterprises through Amazon Web Services that provides compute, storage, database, analytics, applications. Amazon.com was founded in 1994 and is headquartered in Seattle, Washington.

The Big Driver

Of late, the driving force behind strong earnings from AMZN has been the Amazon Web Services (AWS). Amid dozens of price drops, the company has still be able to push a meaningful portion of those sale dollars to the bottom line.

This quarter will also see the benefit of Prime Day. On July 15, the company held a sale that was billed as being bigger than Black Friday. There were some 34 million orders via Amazon Prime ( a service that offers free 2 day shipping on select items as well as music and video services as well) and the company has noted that Prime members spend more.

Earnings History

The last three quarters have been solid beats of the Zacks Consensus Estimate. That said, AMZN has only topped that mark in 4 of the last seven quarters with every report in the calendar year 2014 saw the stock fall in session following the report. This year has seen a solid reversal of fortune with.

The December 2014 quarter, which was reported in January of this year saw an 87% positive earnings surprise and that helped the stock launch higher by $50.62 per share, a move of 16.6%. That was followed up by a one cent beat in the next quarter which was reported in April. The 7% positive earnings surprise and new data from AWS made Wall Street almost blush as the stock moved higher by $55 or 14% in the session following the report.

Finally the most recent quarter, reported back in July was a huge 226% positive earnings surprise that included the company posting a gain ($0.19) when the Zacks Consensus Estimate was calling for a loss (-$0.15). The stock moved higher by $41.15 the next day, but was up as much as $75 intra-day.

Earnings Estimates

Estimate have been moving higher for AMZN.

The table above show that the current quarter has seen the loss per share move from $0.59 to just $0.12 over the last 90 days. After that, we have the all important fourth quarter, which is huge to retail stocks.

I should also point out that this year and next have seen dramatic increases as well. The question becomes, are expectations built too high for 3Q15?

Last Quarter

I don’t think its a secret that last quarter I was long calls for AMZN. With the Prime Day results fully reflected in this quarter I decided to get long again, this time I got in a little earlier.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brady Corp: Zacks’ Bear of the Day Play

Currently, outside of the New England area, the name Brady is looked upon with a bit of disdain and envy, but we are talking about the Brady Corporation here, not Tom Brady.  While both have had a difficult past several months, Tom looks to have rebounded while The Brady Corp is going to be in a difficult spot for the foreseeable future.  Today, the Brady Corporation (BRCSnapshot Report), is the Zacks Bear of the Day.

This Zacks Ranked #5 (Strong Sell) company manufactures and supplies identification solutions, specialty materials, and workplace safety products that identify and protect premises, products, and people in the United States and internationally. It operates through two segments, Identification Solutions and Workplace Safety. The Identification Solutions segment offers safety signs, pipe markers, labeling systems, spill control products, and lockout/tagout devices for facility identification. The Workplace Safety segment provides workplace safety and compliance products, such as informational signs, tags, security, safety and traffic compliance, first aid supplies, material handling, asset identification, safety and facility identification, and workplace regulatory products for process industries.

While Tom Brady has been dealing with deflated footballs, the Brady Corp has been dealing with deflating earnings and revenues for the past three quarters.  Specifically, BRC’s Q4 15 revenues declined in both segments; Identification Solutions -0.3%, and Workplace Safety -3.2%.  Further, organic revenues declined -1.2%, and sales fell -8.9% q/q. On an annual basis, sales decreased -4.4%.

According to President and CEO J. Michael Nauman, “Our fourth quarter financial results did not meet our expectations. We realized an organic sales decline in our Identification Solutions business, and our gross profit margin deteriorated more than anticipated. We completed the facility consolidations this quarter, but we continue to face operational inefficiencies.” These inefficiencies caused management to adjust their 2016 guidance to between $1.10 and $1.30, where the street was expecting $1.63.

Decreasing Estimates

As you can see in the Price and Consensus graph below, estimates for the first two fiscal quarters of 2016, FY 2016, and FY 2017 have all declined.

Overall, over the past 30 days, estimates for Q1 16, Q2 16, FY 16, and FY 17 have all decreased.  Q1 16 fell from $0.41 to $0.28, Q2 16 dropped from $0.36 to $0.21, FY 16 plummeted from $1.52 to $1.14, and FY 17 decreased from $1.80 to $1.40.

Bottom Line

The ID solutions segment’s biggest area of weakness was Brazil where operating margins declined because of operational issues due to facility consolidation in the Americas, and the Workplace Safety segment experienced weakness in US digital sales, and across the board weakness in Australia.

While management has some plans in place to combat this negative trend, there seems to be no short term solution to fix the issues facing the Brady Corporation.

If you are inclined to invest in the Protection and Safety segment, we would suggest looking into Lakeland Industries (LAKESnapshot Report), which carries a Zacks Rank #1, or NAPCO Security (NSSCSnapshot Report), which carries a Zacks Rank #2.

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ERA Group Inc.: Zacks’ Bull of the Day Play

While the price of oil has been a hot topic of late, not much attention has been paid to support services for the oil and gas industry.  This segment has been under pressure as of late, but stringent cost cutting, and the addition of new contracts has one such service poised for a breakout in late 2015 and into 2016.  Due to these factors, Era Group Inc. (ERASnapshot Report) is the Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) company provides helicopter transportation services primarily to the oil and gas exploration, development, and production companies. The company’s helicopter services include emergency search and rescue services; air medical services; utility services, including support of firefighting, mining, power line, and pipeline survey services.

This Houston Texas based company recently had their grand opening of its 35-acre base in Houma, Louisiana which is considered the premier helicopter facility in the Gulf Coast area.  This massive base will contain more than 30 aircraft, and will be able to service about 15,000 passengers per month for Gulf Coast offshore oil and gas installations.  This new capacity will come in handy when later this year (and through 2016) their new contracts in the Gulf of Mexico, and Petrobras in Brazil take effect.

Moreover, according to Chris Bradshaw, President, CFO, and CEO, “We are also pleased to announce entry into the Colombian market via the acquisition of Sicher Helicopters SAS. While Colombia has historically been an onshore oil and gas market, the acquisition of Sicher’s air operator certificate and existing operations should allow us to capitalize on the growing demand for new generation helicopters, operated with the highest safety standards, to support the international oil and gas companies who are exploring and developing Colombia’s promising offshore blocks.”

To facilitate this new capacity, the company took on some added expenses via, S92 heavy helicopters, Sicher Helicopters SAS, and base expansion for the Houma Louisiana project.  Yet, these new expenses were taken on in order to better position itself for future growth.  While the company secured two new contracts, the company has placed several other bids to place their excess helicopters under future contracts.  The combination of existing contracts and the potential for further contracts has increased the potential value of the company for the next few quarters.

Increasing Estimates

As you can see in the Price and Consensus graph below, expectations for this company have significantly improved for 2015 and 2016.

Due to the positive steps management is taking to ensure future growth, estimates over the past 7 days has increased for Q3 15, FY 15 and FY 16;  Q3 15 rose from $0.18 to $0.22, FY 15 improved from $0.61 to $0.66, and FY 16 jumped from $0.85 to $0.95.

Bottom Line

While the oil and gas industry is under pressure, people still need to get out to the rigs, and home from the rigs.  Further, with the increased attention paid to base expansion and contract gains, Era Group is positioning itself as the premier support service company to the oil and gas industry for 2015 and beyond.

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