Monthly Archives: November 2016

Sotheby’s: Zacks’ Bear of the Day Play

There is a reason that esteemed fine arts auction house Sotheby’s Holdings (BIDFree Report) shares have gone sideways for five years, still stuck under $40 like they were in 2012.

That reason is earnings, or the lack of earnings growth I should say. Thus the stock has spent considerable time in and out of the Zacks #5 Rank cellar as earnings estimates start out the year overly-optimistic, only to be brought back down to earth.

And this is probably the third time I have chosen to write about BID as the Bear of the Day.

The most recent analyst estimate revisions that hit Sotheby’s followed their big Q3 earnings miss earlier this month. Analysts quickly took down this year’s full-year consensus 30% from $2.24 to $1.57, representing -24% EPS growth.

This disappointment followed a surprisingly good Q2 when the company reported a 45% EPS beat in August. Clearly, the lumpiness in the business continues to haunt long-term investors, like activist Dan Loeb of Third Point Capital.

To help you visualize the year-after-year pattern of earnings estimates for this company, we can do no better than the Zacks proprietary Price & Consensus chart which plots the stock price against full-year EPS estimates as they evolve over time…

As you can see, estimates typically start out with high visions of growth. This is not unusual for most companies. It’s how the analysts on Wall Street tend to do their work.

What makes BID a standout thought is how the estimates haven’t gotten any traction in the past 5 years. This year and last’s EPS come in well under the $2 earned in 2013.

Until the earnings picture turns around for BID, put your paddle down. The Zacks Rank will let you know when a quarterly portrait worth your time and money is on the block.

So Where Are the Profitable Trades?

Be sure to short or avoid this Bear Stock of the Day. Now would you like to see Zacks’ recommendations that have the best profit potential? Starting today, for the next month, you can follow all our private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we’ve called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for all Zacks trades >>”

In-Depth Zacks Research for the Tickers Above

SOTHEBYS (BID) – FREE report >>

Advertisements

NVIDIA: Zacks’ Bull of the Day Play

I last wrote about NVIDIA (NVDAFree Report) as the Bull of the Day in mid-August when you could still scoop shares near $60. Before that, I was recommending shares under $30 in January when its emerging earnings momentum made it a compelling combination of growth and value in technology.

Since then, the specialty semiconductor graphics company delivered another blowout quarter of results that have driven shares above $90, and reinstalled the stock as a fixture in the top tier of the Zacks Rank as a #1 Strong Buy.

Earnings Stunner

On November 10, NVIDIA reported record quarterly revenue of $2 billion, up 54% from a year ago, and up 40% from $1.43 billion in the previous quarter.

The company also delivered record GAAP EPS of $0.83, up 89 percent from a year ago. This was over 45% better than the Zacks/Wall Street consensus.

In response to these results and optimistic company guidance, analysts scrambled to raise estimates yet again. Full-year EPS projections for the current fiscal year ending in January 2017 rose 33% from $1.86 to $2.48.

And next year’s consensus profit estimate surged 43.5% from $1.93 to $2.77. And even after a fantastic year where NVIDIA is projected to hit $6.84 billion on the top line for 36%+ sales growth, next year’s consensus is for 14.5% revenue growth to $7.84.

Firing On All Frontiers

NVIDIA designs, develops and markets a top-to-bottom family of award-winning 3D graphics processors, graphics processing units and related software that set the standard for performance, quality and features for every type of desktop personal computer user, from professional workstations to low-cost computers.

NVIDIA’s 3D graphics processors are well known in the video game industry, but the company has been steadily making inroads into virtual reality, education applications and machine learning technology like that for autonomous driving.

Here’s what the founder and CEO had to say about their growth…

“We had a breakout quarter – record revenue, record margins and record earnings were driven by strength across all product lines,” said Jen-Hsun Huang, founder and chief executive officer, NVIDIA. “Our new Pascal GPUs are fully ramped and enjoying great success in gaming, VR, self-driving cars and datacenter AI computing.

“We have invested years of work and billions of dollars to advance deep learning. Our GPU deep learning platform runs every AI framework, and is available in cloud services from Amazon (AMZNFree Report) , IBM, Microsoft and Alibaba (BABAFree Report) , and in servers from every OEM. GPU deep learning has sparked a wave of innovations that will usher in the next era of computing,” he said.

Driving Innovation

Of note in the quarter were four developments in the automotive segment:

1) The company announced that its NVIDIA DRIVE PX 2 platform will power a new AutoPilot system in all of Tesla Motors‘ (TSLAFree Report) factory produced vehicles – the Model S, Model X and upcoming Model 3.

2) NVIDIA unveiled its next-generation Tegra processor, codenamed Xavier, an AI supercomputer on a chip for self-driving cars.

3) Partnered with China’s Baidu (BIDUFree Report) to develop a self-driving, artificially intelligent car and mapping system.

4) Announced an AI partnership with Europe’s TomTom to create a cloud-to-car mapping system for self-driving cars using NVIDIA DRIVE PX 2.

While the stock seems richly valued now, trading at over 33X next year’s $2.77 estimate, this is the kind of company, well-positioned in several tech growth markets, that can probably continue to command such a multiple.

My advice is to make a plan to buy the pullbacks into the $80s.

Confidential from Zacks

Beyond this Bull of the Day, would you like to see Zacks’ best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now >>.

EPAM Systems: Zacks’ Bear of the Day Play

EPAM Systems (EPAMFree Report) recently beat the Zacks Consensus Estimate but is now a Zacks Rank #5 (Strong Sell) and is the Bear of the Day. Let’s take a look at why this is the case.

Description

EPAM Systems, Inc. provides software engineering solutions and technology consulting services worldwide. The company was founded in 1993 and is headquartered in Newtown, Pennsylvania.

Recent Earnings

EPAM beat the Zacks Consensus Estimate of $0.54 by $0.02 for a positive earnings surprise of 3.7%. Revenue came in at $298M while the Zacks Consensus Estimate was looking for $297M.

Along with the beat came news of the CFO leaving. This is the second CFO to leave the company in the last few years, something that Wall Street doesn’t like to see.

Estimates

The Zacks Consensus Estimate has been falling over the last few months. The FY16 estimate stood at $2.19 in April and then fell to $2.09 in September. The estimate currently states at $2.06.

The move lower was mainly due to lowered guidance on the most recent earnings release.

The decline in estimates is the main reason this is a Zacks Rank #5 (Strong Sell) and the Bear of the Day.

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 #5 (Strong Sell) we see that estimates are moving higher.

EPAM SYSTEMS Price, Consensus and EPS Surprise

EPAM SYSTEMS Price, Consensus and EPS Surprise | EPAM SYSTEMS Quote

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today’s Zacks “Strong Sells” absolutely free >>.

Follow Brian Bolan on twitter at @BBolan1

In-Depth Zacks Research for the Tickers Above

EPAM SYSTEMS (EPAM) – FREE report >>

Container Store: Zacks’ Bull of the Day Play

The Container Store (TCSFree Report) is a retailer that opened 10 new stores in 2015 but pulled back on new openings for 2016. The company is also looking at smaller square foot stores in 2017. Investors like to see growing stores and growing store size to drive sales ever higher, but this stock was able to post an excellent beat and raise quarter. TCS is Zacks Rank #1 (Strong Buy) and is Bull of the Day.

Why I Like It

This is a small-cap stock, and small caps have been running lately.

A good recent earnings history when compared to the Zacks Consensus Estimate.

Recent jump higher in earnings estimates.

The company posted a beat and raise quarter on November 9.

Follow Brian Bolan on twitter at @BBolan1 and on StockTwits at the same address.

The Recent Numbers

I like to do a review of the most recent quarter for stocks that I highlight as Bulls of the Day. TCS reported the September 2016 quarter on November 9 and beat on the bottom then guided higher.

The company posted EPS of $0.07 when the Zacks Consensus Estimate was calling for $0.04. Revenue came in $1M below expectations for a 0.7% negative revenue surprise. As a result, the stock was bid up by more than 4.3% in the session following the report.

The company issued guidance for EPS of $0.20-$0.30 when the Zacks Consensus Estimate was calling for $0.23. At the time, the Wall Street estimate was calling for $0.19.

Description

The Container Store is a retailer of storage and organization products in the United States. As of May 9, 2016, it operated 79 store locations with an average of 25,000 square feet each. The Container Store was founded in 1978 and is headquartered in Coppell, Texas.

Earnings History

The company has a good history of beating the Zacks Consensus Estimate. There have been two miss in the last two years.

CONTAINER STORE Price and EPS Surprise

CONTAINER STORE Price and EPS Surprise | CONTAINER STORE Quote

Estimates

The estimate picture looks really good, with the Zacks Consensus Estimate for FY17 moving from $0.23 in October to $0.27 in November. The estimate for FY18 moved from $0.25 to $0.33 over the same time.

CONTAINER STORE 12 Month EPS

CONTAINER STORE 12 Month EPS | CONTAINER STORE Quote

Valuation

The valuation for TCS is one that I really like to see. The forward PE of 22x is well below the industry average of 27x. The company trades below the industry average for price to book (1.4x compared to 4.2x) and price to sales (0.4x compared to 3x).

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 line 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.

CONTAINER STORE Price, Consensus and EPS Surprise

CONTAINER STORE Price, Consensus and EPS Surprise | CONTAINER STORE Quote

Confidential from Zacks

This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today’s Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public. Simply click here >> (https://www.zacks.com/registration/confidential/welcome/eoffer/2fe 7/?adid=ZCOM_ZC_BULLOFDAY_7BEST_112916&icid=EOAC- BullArticleCampaign-tx-ZC01-112916).

Follow Brian Bolan on twitter at @BBolan1

In-Depth Zacks Research for the Tickers Above

CONTAINER STORE (TCS) – FREE report >>

Capital Senior Living Corp: Zacks’ Bear of the Day Play

Uncontrollable outside forces can have huge impacts on a company without much notice, and the subsequent aftershocks can last for longer periods of time than expected.  This is the case of our Zacks Bear of the Day: Capital Senior Living (CSUResearch Report) , who saw occupancy rates decline, and experienced higher than expected healthcare claims which caused their margins to contract.

This Zacks Rank #5 (Strong Sell) company is one of the largest providers of senior living services in the United States. The Company currently owns interests in and/or operates 33 communities in 17 states with a capacity of approximately 5,000 residents, including 17 communities in which it owns interests, 15 communities that it manages for third parties. The Company also operates one home health care agency.

Recent Earnings Results

On November 1, management released Q3 16 results where they missed both the Zacks consensus earnings and revenue estimates.  On the positive, management reported that year over year revenues increase by +6.7%, and the average monthly rent for the company’s consolidated communities rose by $106 per occupied unit, or +3.2%.  On the negative, occupancy for the company’s consolidated communities fell by 50 basis points when compared to Q2 16.  The reason for the decline was due to a higher attrition rate (9.5%) during the quarter.  This -9.5% decline significantly outpaced the +5.4% move in rate.  Further, this occupancy decline is expected to spill into the fourth quarter 2016.  Lastly, higher healthcare claims expenses were a drag on the company’s margins.

Management’s Take

According to Lawrence Cohen, CEO, “We made steady progress in the third quarter on important operational and corporate objectives related to positioning the Company for sustained solid growth, including the announcement of the pending strategic purchase of four communities we currently lease, as we look to continue to increase our real estate ownership.  The Company’s third quarter results were impacted by two non-controllable items, attrition and healthcare claims. We experienced very strong demand at our communities in the third quarter of 2016, with same-community move-ins increasing 5.4% over the third quarter of 2015; however, same-community attrition increased an unusually high 9.5% during the quarter, which impacted our occupancy and revenue. We also experienced an unusual spike in healthcare claims in the third quarter, resulting in a significant increase in the Company’s G&A expense.”

Price and Consensus Graph

As you can see in the price and earnings consensus graph below, the company’s stock price has been trending downwards since 2015, and future estimates are below the current stock price as well.

CAPITAL SR LIVG Price and Consensus

CAPITAL SR LIVG Price and Consensus | CAPITAL SR LIVG Quote

Declining Estimates

Over the past 30 days, earnings estimates have declined for Q4 16, Q1 17, FY 16, and FY 17; Q4 16 fell from $0.01 to -$0.17, Q1 17 dropped from -$0.01 to -$0.14, FY 16 slipped from -$0.03 to -$0.22, and FY 17 plummeted from $0.06 to -$0.44.

Bottom Line

The decline in occupancy is the major concern for both management and investors.  While this was unexpected, and unusually high, management stated that it is a non-controllable item.  One of the biggest headwinds facing the company is the recent unprecedented levels of new unit supplies.  Therefore, it might be a while before the occupancy issue is resolved.

If you are inclined to invest in the Medical-Nursing Homes segment, you would be best served by looking into Genesis Healthcare (GENResearch Report) , and orTeam Health Holdings (TMHResearch Report) , both of which currently carry a Zacks Rank #2 (Buy).

So Where Are the Profitable Trades?

Be sure to short or avoid this Bear Stock of the Day. Now would you like to see Zacks’ recommendations that have the best profit potential? Starting today, for the next month, you can follow all our private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we’ve called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.  Click here for all Zacks trades >>

Sunrun Inc: Zacks’ Bull of the Day Play

There have been some in the solar community who believed that a Donald Trump presidency would spell doom for the sector, but this concern has begun to fade as of late.  It is now perceived that President Trump will not repeal the Federal Solar Investment Tax Credit (ITC), and that the continued job growth in the sector will detour the new president from negatively impacting the industry.  These are some of the factors in the decision to make Sunrun Inc. (RUNResearch Report) the Zacks Bull of the Day.

This Zacks Ranked #1 (Strong Buy) company owns, manages and sells residential solar energy systems. The Company provides solar service offerings through channels consists of direct-to-consumer channel, solar partner channel and strategic partnership channel. It also develops and sells mounting structures through the installation and distribution operations under the SnapNrack brand. The Company operates primarily in Arizona, California, Delaware, Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania and South Carolina, as well as the District of Columbia. Sunrun Inc. is headquartered in San Francisco, California.

Recent Earnings Report

On November 11th, management posted Q3 16 results where they crushed the Zacks consensus earnings estimate, and came in just short of the consensus revenue estimate.  Specifically, the company posted a +137.2% positive earnings surprise, by beating the -$0.43 estimate with a +$0.16 actual EPS.   Highlights of the quarter included; Total deployments of 80 MW (megawatts) an increase of 43% on a year over year basis, Net present value created of $76 million an increase of 53% on a year over year basis, and Creation cost per watt improved by $0.38 up 10% on a year over year basis.  Further, during their conference call, management increased guidance for Q4 and FY 2016; management now expects to deploy approximately 80 MW, up from 77 MW in Q4, and for FY 2016 the company expects to deploy approximately 285 MW up from the range of 270-280 MW.

Management’s Take

According to Lynn Jurich, CEO, “We are pleased to deliver Q3 results that beat targets on customer installations, net present value and cost improvements, and to raise guidance slightly for the full year. We have achieved these targets by consistently executing our strategy of delivering the industry’s most valuable and satisfied customer base, aligning our product offerings with customer demand and taking share in attractive markets. We are proud to partner with our growing base of customers to lead a transition to clean energy that will grow for decades to come.”

Price and Consensus Graph

As you can see from the graph below, estimates for 2016, and 2017 are well above the current stock price.

SUNRUN INC Price and Consensus

SUNRUN INC Price and Consensus | SUNRUN INC Quote

Increasing Estimates

Due to the strong earnings and upgraded guidance, earnings estimates for Q4 16, FY 16 and FY 17 have risen over the past 7 days; Q4 earnings improved from -$0.04 to $0.12, FY 16 jumped up from $0.12 to $0.72, and FY 17 rose from -$0.35 to -$0.28.

Bottom Line

With the fears of President Trump’s new policies abating, the segment has a much brighter future outlook.  Finally, Sunrun remains a top pick in the sector because of management’s corporate strategy, and the expansion of their strong customer base.

Now see our private trades

Today’s Bull of the Day is a promising buy that we’re sharing with the public. Now would you like to look behind the curtain and view all our private portfolios? Starting today, for the next month, you can follow them in real time from value to momentum . . . from stocks under $10 to ETF and option plays . . . from insider trades to companies that are about to report positive earnings surprises (we’ve called them with 80%+ accuracy). You can even be privy to portfolios so exclusive that they are normally closed to new investors. Click here for all Zacks moves >>

In-Depth Zacks Research for the Tickers Above

SUNRUN INC (RUN) – FREE report >>

Acadia Healthcare: Zacks’ Bear of the Day Play

While the surprise election of Donald Trump rocked a number of market sectors, few were hit as hard as the hospital/health facility market. That is largely because a Republican clean sweep this year arguably puts the Affordable Care Act—also known as Obamacare— on the chopping block, something that could undo years of gains for the hospital/health facility market in particular.

Why this area? Well, these companies have benefited tremendously from the ACA, as it has put millions of new insurance-covered customers in their systems, boosting profits in the process. And with this likely taken away in the near future, it could be a very rough period for this space. And while most investors have been focused on HCA Holdings (HCAFree Report) as the poster child for this new world, those looking for a more promising short candidate might want to go beyond the traditional hospital space and investigate Acadia Healthcare (ACHCFree Report) instead.

ACHC in Focus

Acadia, an operator of behavioral health services and facilities across the nation (and now with a UK presence as well), saw its share price peak long before the prospect of Trump winning the election was on anyone’s mind, in August of 2015. Since then, shares have been on a sharp downward trajectory, with prices falling by more than 25% in the past three months alone.

And while shares have actually done reasonably well since the election, the outlook for the sector at-large remains poor, while there are still plenty of concerns over ACHC’s health in the near term. As evidence for this, consider some of the recent earnings estimates for ACHC stock.

Recent Estimates

Analyst opinion of the stock’s earnings potential in recent weeks has gone almost straight down, and now the company is expected to see earnings contract year-over-year for the current quarter. The full year and next figures are arguably even worse, as we have seen seven analyst estimates go lower in the past thirty days for the full year, and then nine estimates go lower for the next year time frame too.

The impact of these analyst revisions has pushed the consensus estimate down by about 20% in the past few months for the current quarter, and then down 8.7% for the full year and down 13.9% for the following full year. Add in a so-so history in recent earnings reports and it becomes a rough outlook for the company in the near term.

But that isn’t all, as the company is actually in an industry that is in the bottom 10% overall, without a single company that is ranked as a ‘buy’ or ‘strong buy’ right now. No wonder shares of ACHC have a Zacks Rank #5 (Strong Sell) and why we are looking for more underperformance from the company in the weeks ahead.

 

 

Other Picks

Clearly, ACHC is probably not a good choice for investors right now, and investors need to look to other companies. The hospital space is completely devoid of ‘buy’ rank stocks though, so it might be a good idea to look elsewhere for gains.

One promising segment right now is the biotech world, as the political risks are far lower, while growth potential is far higher as well. The segment actually has more than 50 buy ranked stocks in its group, so check out the list of top ranked biotech stocks for a closer look at this market segment, and definitely consider these over the hospital/health facility market for now.
More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today’s Zacks “Strong Sells” absolutely free >>

Simpson Manufacturing: Zacks’Bull of the Day Play

Thanks to ongoing speculation over a coming construction and building boom, a number of big name stocks in these markets have been soaring since the election. Double digit percentage moves aren’t uncommon in this sector, and there definitely seems to be potential for more gains here as well.

However, while many investors have focused on the big, brand-name companies in this market, there are several small caps that could be well-positioned too. Take Simpson Manufacturing (SSDResearch Report) for example. This $2.2 billion maker of construction products has been on the move since the election, and it could be poised for more gains in the near term as well, at least if we look to some recent earnings estimates on the stock.

Recent Estimates

Analysts have been sharply increasing their expectations for Simpson earnings, including a move in the consensus from 33 cents per share 30 days ago to 40 cents per share today, an increase of over 21%. The full year estimate and the next year estimate have also increased in the past month, moving higher by about 7% each.

Thanks to these moves, the company is now expected to see double digit earnings growth for this year and the next, including a nearly 37% rate of earnings growth for this year. And considering there has been complete agreement among analysts about the short and long term nature of the company—no analysts have reduced their earnings estimates in the past sixty days for any of the periods we study—it is hard not to be a believer in the company right now.

Earnings History

But sometimes, companies seem to have difficulty in living up to lofty expectations like this, as these can be too high for some stocks, leading to poor performances. That really hasn’t been the case for SSD in the past though, as the company clearly knows how to manage earnings expectations.

SSD has seen an average earnings surprise of about 18.8% over the last four quarters, and it hasn’t missed estimates in the last year either. No wonder the stock is a Zacks Rank #1 (Strong Buy), and why we are looking for more outperformance from this company in the near term.

   

SIMPSON MFG INC Price, Consensus and EPS Surprise

                   SIMPSON MFG INC Price, Consensus and EPS Surprise | SIMPSON MFG INC Quote

Bottom Line

There are some strong macro tailwinds for SSD and other companies like it, as spending on infrastructure and construction is likely to surge over the next few years. For this reason alone, companies like SSD might be worth a closer look.

However, there are plenty of other reasons to like Simpson Manufacturing these days, including its strong history in earnings season, as well as its rising earnings estimates which suggest that better days are ahead for this company, no matter what happens in Washington.

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, you may want to consider removing them immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>

In-Depth Zacks Research for the Tickers Above

SIMPSON MFG INC (SSD) – FREE report >>

BJs Restaurants: Zacks’ Bear of the Day Play

Founded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants (BJRIFree Report) owns and operates a chain of 186 high-end casual dining restaurants in 24 states. Their signature menu items include deep dish pizza, craft beer and “pizookie” dessert. They call their positioning “contemporary, high-quality, casual plus”.

Results Disappoint

The company reported lackluster Q3 results, missing both on the top and bottom lines. Adjusted earnings of $0.30 per share fell short of the Zacks Consensus Estimate of $0.32 by 6.3%.

Revenues increased 1.9% year over year to $233.7 million but were below the Zacks Consensus Estimate of $239 million by 2.2%.

Did the Presidential Election Impact Results?

According to the management, “businesses dependent on consumer discretionary spending were challenged by a variety of macro factors including the timing of the Summer Olympics as well as the current economic uncertainty arising from the political elections.”

The CEO Greg Trojan said the election had created “a nearly unprecedented level of negativity and doubt in the minds of everyday American citizens.”

Falling Estimates

Analysts have slashed their estimates for the company after disappointing results.  Zacks Consensus Estimates for the current and the next fiscal year have fallen to $1.75 per share and $1.95 per share respectively, from $1.82 and $2.10, 30 days ago. Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).

The Bottom-Line

While the company has taken a number of positive steps in recent years, including introduction of a new menu in February 2014, simplifying kitchen processes under project Q and cost control initiatives, a challenging sales environment continues to pose headwinds.

Further the Zacks Industry Rank of 192 out of 265 (bottom 28%) also indicates chances of underperformance in the short-term.

According to the latest MillerPulse survey, same-store sales fell 0.6% in October in the worst performance for the restaurant industry in more than three years. Traffic at the restaurants continued to decline as investors remained reluctant to spend.

But there are a handful of companies in the industry that have reported strong results despite industry headwinds. Investors should take a look at Domino’s Pizza (DPZ), which currently enjoys a Zacks Rank #1 (Strong Buy).

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today’s Zacks “”Strong Sells”” absolutely free >>.

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

In-Depth Zacks Research for the Tickers Above

BJ’S RESTAURANT (BJRI) – FREE report >>

New Oriental Education & Technology: Zacks’ Bull of the Day Play

China’s largest private education provider delivered another strong quarter. Analysts have been raising their price and earnings estimates after solid results, sending the stock back to a Zacks rank #1 (Strong Buy).

About the Company

Founded in 1993, New Oriental Education & Technology Group (EDU) is the largest provider of private educational services in China with over 26.6 million student enrollments. The company IPO’d on the NYSE in September 2006.

Headquartered in Beijing, New Oriental group currently has a network of 771 schools/learning centers and over 19,700 teachers in 56 cities. Additionally, it has a large online network with over 14.2 million users.

They provide a comprehensive range of educational products for students of all ages, including POP kids programs, summer camps, private schools, after school tutoring, adult English as well as domestic and overseas entrance tests preparation.

Excellent Quarterly Results

The company reported its Q1 FY 2017 (ended August 31) results on October 25.  Revenue for the quarter increased 16.5% year-over-year to $534.1 million. Net income increased 9.7% year-over-year to $141.1 million.

Strong growth was mainly attributable to 31.2% increase in total enrollments. Their K-12 all-subjects after-school tutoring business continued to perform well, with revenue up 28% year over year and enrollment up 46% year over year.

Strong Guidance

The management expects net revenues in the second quarter of fiscal year 2017 (ending November 31, 2016) to be in the range of $324.6 million to $335.1 million, representing year-over-year growth in the range of 17% to 21%.

Rising Estimates

After strong results, analysts have been raising their estimates for the company. Zacks Consensus Estimates for current and the next fiscal year have gone up to $1.76 per share and $2.29 per share respectively, from $1.75 and $2.18, before the results. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).

The Bottom Line

The company has a recognized brand name and a leadership position in areas like overseas test prep, English language tutoring, overseas study consulting and K-12 after school tutoring. Private education industry in China has been growing rapidly thanks mainly to rising incomes of the expanding middle class in the country. Strong brand awareness and pricing power will continue to drive profits going forward.

New Oriental group is also a pioneer in the online education industry in China. Of late, they have increased their spending on their online education platform, which is expected to boost revenues in the coming years.

Confidential from Zacks

Beyond this Bull of the Day, would you like to see Zacks’ best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now >>.

In-Depth Zacks Research for the Tickers Above

NEW ORIENTAL ED (EDU) – FREE report >>