Monthly Archives: January 2017

TiVo: Zacks’ Bear of the Day Play

I have a family member who still has an AOL email address. He used their ISP until the bitter end. I’m pretty sure he was using a 56k modem well after most of us got rid of our landlines. He’s made the move to Netflix but hasn’t yet made the move to streaming. One in the mailbox and one on the way. Not to make fun of him or anything, he’s just an old school kind of guy. I respect that.

The only reason I know that today’sBear of the Day still has a product available is him. He’s still got his TiVo (TIVOFree Report) . When TiVo dropped it was awesome. It was a smart way to record your favorite TV shows and play them back at your leisure, on-demand. It also had a neat feature that would suggest shows you should check out and recorded them for you so you could watch them. Kind of likePandora (PFree Report) and their “Music genome project” only for TV shows. But something happened that derailed TiVo from have a strong hold on TV sets across the world. Streaming on-demand became a much bigger thing.

Analysts have taken note of TiVo’s demise. They have come out and dropped their earnings estimates for the current year and next year to reflect their bearish sentiment. Our Zacks Consensus Estimate for the current year has dropped from $2.10 to $1.23. Next year’s numbers have gone from $2.04 down to $1.39. Those are a couple of major hair-cuts and a big drag on the stock price.

After a fantastic late summer rally that took shares from $15 to over $23, TiVo has struggled to find direction. Chopping sideways after retreating to the high teens, shares have been capped at $22. In early January the stock dipped below its 50-day moving average and in the following weeks had retested the bottom end of the consolidation range that started in September. If shares dip below $18.80 they could freefall to the June lows near $15. What’s also troubling is volume has been drying up along the dip. It appears that there is no bid as shares dip.

We’ve got TiVo as part of the Internet – Services industry that ranks in the Top 49% of our Zacks Industry Rank. If you’re looking for other stock ideas in the same industry you should check out Zacks Rank #1 (Strong Buy) Bridgeline Digital (BLINFree Report) or Zacks Rank #2 (Buy) Health Stream (HTSM).
Zacks’ Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn’t? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>

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TiVo Corporation (TIVO) – free report >>

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Bridgeline Digital, Inc. (BLIN) – free report >>

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Kronos: Zacks’ Bull of the Day Play

The rally since Election Day has brought some interesting industries into light. Most of the time when I’m talking about rallies I’m talking about higher beta industries on the move. After all, industries that are higher beta, by definition move more than the rest of the market, so it’s logical to think these higher beta industries would do better during a rally. When I think high beta I’m usually thinking about tech or biopharma. We are going to have to change our definition to include chemicals as long as this rally keeps moving.

Today’s Bull of the Day Kronos Worldwide (KROFree Report) is a higher beta stock on its own with a beta of 2.35. It’s in the diversified chemicals industry that we have in the Top 30% of our Zacks Industry Rank. Kronos is a global producer and marketer of value-added titanium dioxide pigments. The company along with its distributors and agents sells and provides technical services for its products to over 4,000 customers in 100 countries around the world, with the bulk of its sales coming in Europe and North America. I know titanium dioxide doesn’t sound the wave of the future but it’s used to color things like paint and sunscreen.

I don’t expect to turn you all (or myself) into PhDs in Chemistry in this short article but we don’t have to be experts to see the effect on the numbers here for the stock. Analysts have gone bullish recently, increasing their earnings estimates for the current year and next year. Our current year Zacks Consensus Estimate has gone from 13 cents to 21 cents over the last sixty days. Next year’s number has gone from 25 cents to 36 cents. That 11 cents may not sound like a lot but when you’re talking about a stock that’s trading at 36 times forward P/E, that amounts to almost $4 on a stock that’s trading in the $13s.

Investors have certainly got the memo. Shares of KRO rallied from under $8 on Election Day. Most of the spike up took place in the first two weeks. Since mid-November the stock has chopped sideways a bit with a slight bullish tilt. What’s so timely now is the Commodity Channel Index behavior. The CCI dipped to -88 last week before the stock rallied sharply higher, sending it up through the zero line. Normally, you want the CCI to get to -100, then back over the zero line to give a “Buy” signal. I think you could play this one for the breakout, buying a breakout from the high on heavy volume. Due to the near signal, there is a chance the stock could retreat first.

Zacks’ Top 10 Stocks for 2017

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Anheuser Busch: Zacks’ Bear of the Day Play

There’s an old saying that goes, “If you can’t beat em, join em.” When it comes to today’s Bear of the Day this company put a different spin on the old saying. “If you can’t beat em, buy em” or something along those lines.

I’m having a tough time finding a beer that isn’t owned by Anheuser Busch Inbev (BUDFree Report) . Remember the good old days when it was Bud versus Miller? Well that was before Belgian giant Inbev starting merging big beer companies together. It wasn’t enough to swallow up Anheuser Busch. Then the new company went and got SAB Miller, which was also the result of a big beer merger. Now they’re all bubbling around in the same keg.

It’s not that I’m hating on the beer company for being so large. I’m looking at the estimate revisions analysts have made recently and I don’t like what I see. Four analysts have dropped their earnings number for the current year and next year. The overall impact to the consensus estimate has been decidedly negative. This year’s number has gone down from $4.19 to $3.74 while next year’s number has dropped from $5.28 to $4.94. The good news is there is still plenty of growth in those numbers, a function of the merger activity no doubt. The bad news is all this negativity has dropped the stock down to a Zacks Rank #5 (Strong Sell). It’s also in a sector that is dead last in our Zacks Sector Rank.

Shares of BUD have come under pressure, breaking down from the bottom end of an extended consolidation. Shares bounced between $120 and $135 from April through the end of October. The bears finally won the battle, forcing shares down to new lows to start December. While the rest of the market was enjoying the spoils of the post-Election Day rally, BUD struggled mightily.

The stock has found some support here to start the year and is trading above its 20-day moving average. One negative though, the commodity channel index has come down from an overbought condition over 100 and through the zero line, giving a fresh “Sell” signal.

Investors looking for other stocks in the same industry should check out Zacks Rank #2 (Buy) stocks Carlsberg (CABGYFree Report) and Constellation Brands (STZFree Report)

Zacks’ Top 10 Stocks for 2017

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Anheuser Busch Inbev SA (BUD) – free report >>

Halliburton: Zacks’ Bull of the Day Play

One of the bright spots about being at Zacks is I get to see EPS trends develop before most other people. My boss keeps a meticulous database of EPS estimates and clues us in to moves as they develop. The big story heading into Q4 earnings has been the Trump rotation and the rally we’ve seen since Election Day. Hiding behind those headlines is 4.7% EPS growth on the S&P 500. If you dig a little deeper, you’ll see that the energy sector is set for 7.4% EPS growth. This bucks the trend of 8 consecutive quarters of contraction.

Further, onshore oil exploration and production expenditures have been estimated to increase by as much as 45% by some analysts. Nobody has gained more market share in this business than today’s Bull of the DayHalliburton (HALFree Report) . Halliburton is currently a Zacks Rank #1 (Strong Buy) in a sector that ranks in the Top 13% of our Zacks Sector Rank.

A big reason for the bullish Zacks Rank is the recent earnings estimate revisions to the upside from analysts. Five analysts have increased their estimates for the current quarter while eight have done so for next year. The most dramatic increase can be seen in next year’s consensus number. Sixty days ago, analysts were expecting 96 cents per share. Now they are expecting to see $1.12.

This underlying bullish sentiment can be seen in the stock chart which has rallied sharply off the lows of 2016. Increasing estimates have allowed the stock to make two distinct moves this year. The first was a bounce off a double bottom near $27 in February. That move took shares to $46.69 before running out of steam in June. A consolidation period developed from then until October when speculation of an OPEC deal helped boost oil prices. A second wave of optimism pushed shares through the top end of the consolidation range and on to a fresh 52-week high just shy of $57.

The stock appears to be in another consolidation here ahead of earnings due out Monday January 23rd before the market opens. With the commodity channel index coming down from an overbought condition over 100 and crossing over the zero line, a short term “Sell” signal was given. However, often times breakouts ignore this signal if there’s not follow through from the CCI lower and push higher. I’m bullish heading into the report.

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Ethan Allen: Zacks’ Bear of the Day Play

Ethan Allen Interiors, Inc. (ETHFree Report) isn’t feeling the optimism in 2017. This Zacks Rank #5 (Strong Sell) recently warned on its fiscal second quarter results.

Ethan Allen operates 300 Design Centers in the United States and abroad that sell home furnishings. It also operates 9 manufacturing facilities including 6 manufacturing plans and 1 sawmill in the United States and one plant each in Mexico and Honduras.

About 70% of its products are made in its North American plants.

A Challenging Retail Environment

On Jan 11, Ethan Allen commented on its results for the fiscal second quarter.

It described the second quarter retail environment, which ended Dec 31, as “challenging”.

Written retail orders fell 3.6% compared to a record increase of 15.3% in the year ago quarter. Delivered sales fell 6.2% as well.

As a result, its adjusted operating income is projected to be about 8.8% of sales compared to 12.2% of sales in the prior year’s quarter.

Earnings per share are also expected in the range of $0.38 to $0.39.

That was well under the Zacks Consensus Estimate of $0.59. It made $0.55 in the year ago quarter.

Estimates Cut for the Quarter, Fiscal 2017 and Fiscal 2018

As a result, the analysts cut estimates across the board.

Given the new guidance, the second quarter estimates were cut to $0.38, which is the low end of the company’s new guidance.

Full year fiscal 2017 was also dut to $1.92 from $2.05. That means flat earnings growth compared with last year.

But even fiscal 2018 estimates were cut. The Zacks Consensus Estimate is now $2.20, down from $2.33 just 7 days ago.

Ethan Allen said they are freshening their offerings and increasing their marketing in both digital and traditional mediums in the third quarter.

Shares Sink

Not surprisingly, the shares sold off on the news.

But are they a bargain?

Ethan Allen is still trading with a forward P/E of 16.6. And it’s not even at its 52-week low.

If you really must buy a home furnishing company right now, check out Pier 1 Imports Inc. (PIRFree Report) . It’s the only company in this group to have a Zacks Rank of #1 (Strong Buy).

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Movado: Zacks’ Bull of the Day Play

Movado Group, Inc. (MOVFree Report) has struggled to find itself as watches went out of favor and wearables came in. But is this Zacks Rank #1 (Strong Buy) finally finding its groove?

Movado Group makes watches in its Switzerland manufacturing facilities under the brands Movado, Ebel, Concord, ESQ Movado, Coach, Tommy Hilfiger, Hugo Boss, Juicy Couture, Lacoste and Ferrari. It also operates about 38 Movado retail stores globally.

Big Third Quarter Beat

On Nov 22, 2016, Movado reported its fiscal third quarter results and surprised by 20 cents on the Zacks Consensus Estimate. Earnings were $0.91 versus the consensus of $0.71.

Net sales still fell, but only by 3.1% to $179.8 million from $185.6 million in the year ago period. Net sales on a constant dollar basis only fell 1.4%.

Gross profit, however, rose by 90 basis points to 54.8% of sales compared to 53.9% in the third quarter of fiscal 2016. The increase was primarily due to the result of the favorable impact of channel and product mix and some sourcing improvements.

Is the Worst Over?

Movado has been in the unfortunate position of not just being a watchmaker as watches are becoming less popular, but also a luxury watchmaker.

But in November, it maintained its outlook for fiscal 2017 with earnings expected to be between $1.40 and $1.55 per share.

The Zacks Consensus Estimate has actually risen in the last 30 days to $1.55 from $1.51, which is the high end of the company’s range. That indicates the analyst is more bullish on the holiday quarter.

While that is a still a 25% earnings decline from fiscal 2016, the analyst is more bullish about fiscal 2018. Earnings are expected to be $1.69 which is a 9% increase over fiscal 2017.

Dividend and Share Buy Back

Movado pays a dividend, which is currently yielding a healthy 1.9%.

It also has been repurchasing shares. It repurchased about 18,000 shares during the fiscal third quarter. As of Oct 31, 2016, it still had $46.7 million of the $50 million share repurchase authorization in place.

Shares Get Election Bounce

Shares of Movado took off at the end of 2016 but have since pulled back off their highs.

They aren’t overly expensive. They are trading with a forward P/E of 17.1.

But is it too risky to buy a watchmaker in 2017?

I last wrote about Movado as a Bull of the Day in April 2014. In the interim, it was Bear of the Day twice in 2016.

But the rise in the earnings estimates for fiscal 2018 look promising. Despite all the talk that watches will only be found in museums going forward, there is still a contingent of consumers who wants an old-fashioned watch.

If you’re looking for an accessory retailer, then Movado is one to keep on your short list.

Zacks’ Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn’t? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank.

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Kohl’s: Zacks’ Bear of the Day Play

Headquartered in Menomonee Falls, WI, Kohl’s Corp (KSSFree Report) operates about 1,100 stores across 49 states and an e-commerce site. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).

 Weak Guidance Reflects Rising Challenges

Earlier this month, the retailer reported that their comparable sales decreased 2.1% year-over-year in the months of November and December 2016 combined.

“Sales were volatile throughout the holiday season. Strong sales on Black Friday and during the week before Christmas were offset by softness in early November and December,” said the CEO.

They also cut their FY 2016 earnings guidance to $2.92 to $2.97 per share from $3.12 to $3.32 per share. The stock plunged about 19% after the report.

The guidance reflected rising challenges for the industry that is struggling with dwindling foot traffic at stores and continuing transition to online shopping.

Falling Estimates

Analysts have slashed their estimates for the company after weak guidance.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $3.64 per share and $3.84 per share from $3.93 and $4.21 respectively, before the report.

Kohl’s Corporation Price, Consensus and EPS Surprise

The Bottom Line

In addition to disappointing mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, wage pressure has also started hurting retailers. It remains to be seen whether retailers like Kohl’s will be able to reorganize their operations and improve their profitability going forward.

Further, the industry “Retail – Regional Department Stores” is currently ranked 245 out of 265 Zacks industries (bottom 8%), suggesting potential underperformance in the short-to-medium term. There is no Zacks Rank #1 or #2 stock in the industry. It would be better for investors to stay away from this stock and the industry in view of rising challenges.

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B&G Foods: Zacks’ Bull of the Day Play

B&G Foods (BGS) is a food products company with a huge portfolio of well-known brands. They manufacture and market processed and packaged foods across the United States and Canada.

Solid Third Quarter Results

The company reported their Q3 results on Oct 27, 2016.Net sales for the quarter surged 49.2%, thanks mainly to the acquisition of Green Giant.

Gross profit as a percentage of net sales increased to 36.3% from 33.6% in Q3 2015, primarily driven by the acquisition of Green Giant.

Adjusted net income came in at $36.7 million, or $0.56 per share, beating the Zacks Consensus Estimate of $0.52 per share. This was the third consecutive quarterly beat for the company. In the past four quarters, they have posted an average positive quarterly surprise of 12.16%.

Rising Estimates

After better than expected results and revised guidance, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year are now $2.18 per share and $2.43 per share respectively, up from $2.17 and $2.31, before the results.

The following chart shows earnings and price momentum:

B&G Foods, Inc. Price and Consensus

Growth through Acquisitions

The company continues to grow organically and through acquisitions. In the past 20 years, they have acquired more than 40 brands. They have an excellent record of turning around such heritage brands after acquiring them.

The company completed two acquisitions late last year.

Last month, the company acquired Victoria Fine Foods, the maker of variety of premium pasta and specialty sauces for approximately $70.0 million.

Earlier in November, they completed the acquisition of the spices and seasonings business of ACH Food for $365 million. They expect both the acquisitions to be immediately accretive to earnings and free cash flow.

Returning Cash to Shareholders

The stock has a very juicy dividend yield of 4.2% as of now. In November last year, they increased the dividend rate by 10.7% from $0.42 per share to $0.465 per share.

This is the 49th consecutive quarterly dividend declared since their IPO in October 2004.

The Bottom Line

While shares are not cheap after the run-up last year, the company has a much higher growth potential compared to most peers. Further, in the current uncertain environment, it makes sense to increase portfolio allocation to defensive industries like food.

Zacks’ Top 10 Stocks for 2017

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Barrick Gold: Zacks’ Bear of the Day Play

The last time I picked on a gold miner was January 5 when my target wasRandgold (GOLDFree Report) . Today it’s Barrick Gold (ABXFree Report) whose 2017 EPS estimates have fallen 10% in the past 60 days from $1.02 to $0.91, pushing the stock into the cellar of the Zacks Rank.

And only two weeks ago the Zacks Industry Rank for the gold miners was in the bottom 24% at #201 out of 265. Today, that industry rank has dropped to the bottom 11% at #239, with other names like Newmont Mining (NEMFree Report) , Goldcorp(GGFree Report) , and Anglogold Ashanti (AUFree Report) joining the chorus of Zacks #5 Rank Strong Sells.

As I wrote in early January…

It’s no surprise that gold miner earnings and shares should have taken a breather from their terrific rally in the first half of 2016 as the price of the yellow metal, as measured by the SPDR Gold Shares ETF (GLD), started topping this summer and dropping this autumn.

What may be a surprise for gold investors is if the drop continues as interest rates rise and the dollar pushes higher.

But longer term, gold may not have fully lost its luster. If gold prices stabilize around $1200, as many investment bank forecasts project, then demand for the barbarous relic could remain steady as a store of diversification, if not value, and a hedge against any given currency.

Several miners will eventually be in demand themselves in this case as their costs of production are much lower than $1200. For some, gross margins are in the high double digits.

The Rank Is Short-Term

If gold cannot recover the $1200 level, this will continue to be reflected in the Zacks Rank for the miners as their EPS estimates should continue to fall.

So if you are in the market for gold’s diggers, watch their costs and their earnings trajectory. The Zacks Rank will keep you informed on the latter.

Zacks’ Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn’t? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>

Charles Schwab: Zacks’ Bull of the Day Play

The Charles Schwab Corporation (SCHWFree Report) is a $55 billion investment services firm with $2.73 trillion in client assets. The firm’s evolution from a discount broker to a full-service wealth management institution explains that enormous asset base.

Schwab looks poised for 26% EPS growth this year based on rising analysts earnings estimates. And the 15.6% revenue growth estimate fueling those projected profits is probably a big part of the reason shares are pushing highs not seen since the year 2000.

Wall Street analysts are forecasting that the broker to hit a record $8.66 billion on the top line this year. That math is driven by three factors: interest rates, deregulation, and the natural climb in trading accounts and volume in a strong bull market.

Financial Sector Takes Flight

The financial sector definitely got a face lift since the election for two obvious reasons. First, the yield curve steepened as long-term Treasuries sold off fast and furious.

And this rise in interest rates is generally good for banks and other financial institutions who benefit from a greater net interest margin on their borrowing and lending activities.

Second, there was the overwhelming sense that the new administration would do serious damage to financial regulations like Dodd-Frank, thus clearing the way for unencumbered dealings between investment banking and commercial banking, as well as the removal of other shackles.

Since the election, while the broad S&P 500 index is up just over 6%, the financial sector as represented by the SPDR ETF (XLFFree Report) is up nearly 18%.

Banks big and small have lead the charge for the most part for the two benefits mentioned.

Brokers Make Bank

But did you know that investment broker-dealers also benefit from rising yields? That’s because in addition to income from stock lending and margin interest, they hold lots of assets in customer cash balances that they can earn interest on every night.

For the brokers, it also helps that the strong bull market is making new all-time highs and driving more stock trading commissions and newly funded accounts.

For all these reasons, Wall Street earnings estimates have been rising for brokers like Schwab and TD Ameritrade (AMTDFree Report) , as well as for investment banks like Goldman Sachs (GSFree Report) and Morgan Stanley (MSFree Report) . The industry group comprising all these names has climbed to #8 out of 265 industry groups.

The Economy and Inflation Expectations

The big underlying drivers for the big move in interest rates — the 10-year Treasury yield surged from 1.8% to 2.6% in just 5 weeks after the election — was a combination of the building economic momentum of the second half of 2016 with renewed optimism about the GOP sweep of the Presidency as well as regaining both houses of Congress.

After the election, it was as if the inflation genie had suddenly been released after years in captivity.

So the perception among financial elites is that all kinds of prices will continue rising from Wall Street to Main Street, thereby fueling inflation and the revenues and profits of financial intermediaries.

Value investor Mario Gabelli, founder and CEO of Gamco Investors, shared his top stock picks and market views in an exclusive interview with CNBC’s Scott Wapner on Tuesday January 10.

Specifically commenting on Goldman Sachs, he said “I don’t see any reason to not think it will do quite well over the next five years. The investment banks and commercial banks … fundamentals are terrific. The underpinnings are great.”

Gabelli believes the financial sector will continue to perform well in 2017 as economic growth improves, wages rise, and lending increases.

All of these factors create solid conditions for brokers going forward. Your game plan should be to buy solid Zacks Rank financial stocks on the dips.

Zacks’ best stocks under $10

As a Zacks Rank #1 Strong Buy, today’s Bull of the Day has a short-term 1 to 3-month profit zone. But the Zacks Rank system also leads to longer-term investments. Starting today, you can look inside our lowest-priced stocks with 2X and 3X profit potential plus other private portfolios. Simply click here >>