Monthly Archives: January 2017

Franklin Covey Co: Zacks’ Bear of the Day Play

Cyclical companies tend to make the bulk of their revenues in a single quarter, or even a half of a year.  This business model has been successful for many companies, think toy companies, or retail merchants.  But when the “off peak” quarters are worse than expected, and when management states they now expect their cyclical heights to be more back-ended than expected, warning signals start going off. This is the case for our Zacks Bear of the Day, Franklin Covey (FCFree Report) .

This Zacks Rank #5 (Strong Sell) company is an international learning and performance solutions company dedicated to increasing the effectiveness of individuals and organizations. They provide consulting services, training and education programs, educational materials, publications, assessment and measurement tools, implementation processes, application tools and products designed to empower individuals and organizations to become more effective.

Recent Earnings Results

On December 23rd, management made a Q1 17 pre-earnings announcement where they stated that Q1 adjusted EBITDA would show a loss of -$2.5 million, compared to a profit of $3.4 million in the year ago quarter.  Management cited increased business investments, timing delays, and their business model shift towards an all-access subscription sales for customers as reasons for the losses.

Then on January 5th, management posted Q1 17 results where they missed both the Zacks consensus earnings and revenue estimates for the fourth consecutive quarter.  On a year over year basis, the company reported losses in the following categories; Net revenues -12%, Gross profits -16%, EBITDA -206%, Operating income -405%, Net income -601%, and Adjusted earnings per diluted share -694%.  Management also saw general and administrative expenses rise by 10% during the same time frame.

Management’s Take

According to Bob Whitman, Chairman and CEO, “Our fiscal first quarter is an important staging quarter in which we make significant investments in growing our sales and delivery forces, marketing, developing new offerings, and building strong sales pipelines that form the basis for growth through the balance of the year. We were very pleased to have achieved significant year-over-year growth in the amount of All Access Passes invoiced during the first quarter, including a very high renewal rate for those All Access Passes sold in last year’s first quarter. We were also pleased that our sales pipelines grew significantly during the quarter, and that a significant start to the conversion of those pipelines began in December. As a result of the foundation laid the first quarter, we expect our results for fiscal 2017 to fall within our previously provided guidance range, specifically, that the sum of reported Adjusted EBITDA plus the change in deferred revenue, less certain costs, will fall between $35 million and $38 million.”

Price and Earnings Consensus Graph

As you can see in the graph below, the stock price has recently dipped, and 2017 expectations have plummeted.

Franklin Covey Company Price and Consensus

Franklin Covey Company Price and Consensus | Franklin Covey Company Quote

Declining Future Earnings Estimates

Due to the poor earnings results, and weaker than expected outlook earnings estimates for Q2 17, Q3 17, FY 17, and FY 18 have all seen large revisions over the past 7 days; Q2 17 fell from -$0.10 to -$0.17, Q3 17 dropped from -$0.07 to -$0.08, FY 17 plunged from $0.18 to -$0.03, and FY 18 was trimmed from $0.63 to $0.35.

Moreover, as you can see in the table below, estimates have been significantly declining over the past 90 days.

Bottom Line

Currently, management expects second quarter 2017 to be weak like their Q1 results, and that positive earnings will be more back-end loaded than normal.  The company’s shift towards all-access subscription sales model, has created a lot of noise within their financials, which has in turn created some uncertainty about overall growth.

Given the questions surrounding the company, it would be wise to look elsewhere in the near term.  So if you are inclined to invest in the Consulting Services sector, you would be best served by looking into Gartner Inc. (ITFree Report) , and or NV5 Global Inc. (NVEEFree Report) , both of which carry a Zacks Rank #2 (Buy).

Long-Term Buys You Won’t See in the News

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Pier 1 Imports: Zacks’ Bull of the Day Play

The consumer retail environment is extremely cutthroat, and has been facing competitive headwinds (think Amazon), deterioration store traffic trends, and higher costs correlated with the growth of e-commerce adaptations.  But one retail company has seen a positive turnaround from their investments in e-commerce, inventory control, and improved marketing.  This company is Pier 1 Imports (PIRFree Report) , and they are the Zacks Bull of the Day.

This Zacks Rank #2 (Buy) company consists of a chain of retail stores operating under the names Pier 1 Imports and The Pier, selling a wide variety of furniture, decorative home furnishings, dining and kitchen goods, accessories and other specialty items for the home. Additionally, the company, through certain subsidiaries, operates stores in the United Kingdom under the name The Pier. The company supplies merchandise and licenses the Pier 1 name to Sears Mexico and Sears Puerto Rico.

Recent Earnings Data

In the middle of December, management posted Q3 16 results where they easily beat both the Zacks consensus earnings and revenue estimates.  The company saw year over year gains in the following; comparable sales +1.8%, e-commerce sales +28% (now accounting for about 20% of net sales), gross profit +6.7%, and EPS +30.7%.

Management’s Take

According to Alex W. Smith, President and CEO, “Sales trends rebounded in the second half of November, following the election, which enabled us to deliver third quarter results well ahead of our forecast. Specifically, we had positive company comparable sales and higher than planned profits in the third quarter. We are making progress on our strategies to deliver shareholder value through our merchandising, marketing, supply chain and real estate initiatives. Our seasonal assortments are resonating with customers and we’re seeing strength across nearly all our product categories. As always, we’re pleased with how our teams and associates are executing against our holiday plans.  We have a great deal of confidence in our brand positioning and long-term financial outlook.  Pier 1 Imports has always been known for inspirational merchandise, great value and outstanding customer service. Layering our omni-channel capabilities on top of that foundation makes Pier 1 Imports a formidable force in the home furnishings space. Our teams are focused on continually enhancing our business model to ensure that we thrive in today’s era of retailing and well into the future.”

Price and Earnings Consensus Graph

As you can see from the graph below, Pier 1’s stock price and earnings estimates had been falling since the middle of 2013, but the recent earnings report and positive sales trends have caused the stock price and future earnings estimates to rise as of late.

Pier 1 Imports, Inc. Price and Consensus

Pier 1 Imports, Inc. Price and Consensus | Pier 1 Imports, Inc. Quote

Increasing Earnings Estimates

Over the past 30 days earnings estimates for Q4 16, Q1 17, FY 16, and FY 17 have all seen significant upgrades; Q4 16 rose from $0.27 to $0.30, Q1 17 improved from -$0.03 to -$0.01, FY 16 jumped up from $0.25 to $0.38, and FY 17 advanced from $0.32 to $0.45.

Bottom Line

Going into 2017, as part of their cost containment strategy, management announced that they will close about 15 stores.  Further, due to their strong cash flows, the Board of Directors recently declared a $0.07 per share cash dividend to shareholders as of January 18, 2017, and PIR has $36.6 million remaining in their stock repurchase program.

Lastly, December trends remained strong enough that after the impressive Q3 results management increased guidance for Q4 16 adjusted EPS and company comps; adjusted EPS range improved from $0.24-$0.32 to $0.37-$0.41, and total company comps are now expected to be down 2% to flat, above the previous expectation of a decline between 4-2%.

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, they should be removed 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 >>.

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Rexnord: Zacks’ Bear of the Day Play

Rexnord Corporation (RXNFree Report) is an industrial company that is still seeing declining earnings. This Zacks Rank #5 (Strong Sell) is expected to see a double digit earnings decline in fiscal 2017.

Rexnord is an industrial manufacturer in two areas: Process & Motion Control and Water Management. It makes engineered drive systems, seals, couplings and conveyor systems which you would find in the mining, energy and food & beverage industries. It also makes valves, fittings, faucets and drains for the construction industry and municipalities.

Rexnord is headquartered in Milwaukee and has 8,000 employees worldwide.

Moving Some Jobs to Mexico

If Rexnord sounds familiar to you, that’s because it was recently in the news because it decided to close a bearings-making plant in Indianapolis that employed 300 workers and move the business to Mexico. The plant was located just a mile from the Carrier plant which was the subject of tweets in 2016 by Donald Trump.

But these jobs, apparently, won’t be saved.

In December 2016, the union and the company reached a severance agreement which will pay $2,000 plus one week of salary for every year they spent at the company. Workers will also get free health insurance for 6 months.

A Public Offering to Raise Cash

After the election results, shares of Rexnord moved sharply higher as investors bought up all the industrial names they thought could benefit from Republican policies.

Rexnord decided to take advantage of this move. On Dec 1, Rexnord announced the pricing of a public offering of 7 million shares.

The company raised $390.1 million which it intends to use to pay a portion of its outstanding term loan indebtedness and for general corporate purposes.

Lowered Full Year Guidance

On Nov 2, Rexnord reported fiscal second quarter results and met on the Zacks Consensus Estimate of $0.38.

Net sales were only up 1% year over year to $491 million. Core sales fell 2%.

It described the demand environment as “challenging.”

Rexnord lowered its fiscal year 2017 EPS to a range of $1.32 to $1.38 due to ongoing deceleration of project schedules in the Middle East water infrastructure markets and a more conservative outlook for growth in the nonresidential construction and process industry end markets.

As a result, the analysts have been cutting estimates.

4 were cut for fiscal 2017 in the last 60 days which pushed the Zacks Consensus Estimate down to $1.32 from $1.52 in the last 3 months.

One analyst, however, recently got a bit more bullish and actually raised the estimate in the last week. But that wasn’t enough to change the consensus estimate.

Analysts still see a 10.4% earnings decline in fiscal 2017.

2018 is looking a little better with earnings growth of 6.6%, but analysts have also been cutting those estimates so it remains to be seen if the growth will hold.

Getting Ahead of Themselves?

Shares are up 6.8% in the last 3 months as investors jumped into these industrial names after the election.

But the earnings story hasn’t yet changed and it could be 12 to 24 months before any infrastructure or other stimulus or tax cuts really show up in the fundamentals.

While the shares have attractive valuations, they aren’t dirt cheap either. They have a forward P/E of 15.5.

If you really want to invest in this industry, you might want to consider AO Smith (AOSFree Report) or Eaton Corporation (ETNFree Report) as both have better Zacks Ranks. AOS is a Zacks Rank #2 (Buy) and ETN is a Zacks Rank #3 (Hold).

So Where Are the Profitable Trades?

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Expedia: Zacks’ Bull of the Day Play

Expedia, Inc. (EXPEFree Report) continues to cash in on strong demand for travel and one-stop online travel buying. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth again in 2017.

Expedia is the world’s largest online travel company encompassing many brands including Expedia.com, Hotels.com, Orbitz Worldwide, trivago, HomeAway, Egencia, Travelocity, Hotwire.com, Wotif Group, Classic Vacations, CarRentals.com, Venere, Expedia CruiseShipCenters and AirAsia Expedia.

Expedia acquired Orbitz in September 2015 and HomeAway in December 2015.

Big Growth in Q3 of 2016

On Oct 27, Expedia reported third quarter results and met the Zacks Consensus of $2.24.

Gross bookings rose 21% to $18.6 billion while revenue increased 33% to $2.6 billion from the 2015 quarter.

It had other strong growth metrics including a 17% year-over-year increase in room nights stayed, with growth of 11% if you exclude Orbitz Worldwide.

It gained 14,000 properties during the quarter to 321,000 worldwide.

Expansion on Amazon Alexa

Expedia has been pushing the boundaries in terms of how to get services to customers for some time.

On Nov 30, 2016, it announced travelers could ask Amazon’s Alexa devices such as the Echo and Echo Dot to give it travel updates on hotels, real-time flight status and updates on gate changes and delays, book or confirm car reservations and more.

Joins Instant Booking on TripAdvisor

On Dec 20, TripAdvisor (TRIPFree Report) announced it had an agreement with Expedia to include Expedia brands on its instant booking platform. Initially, only the US properties will be available.

Customers can click the “Book Now” button to actually book the hotel reservation instead of leaving the TripAdvisor site and opening up a separate booking website.

It’s further access to the millions of travelers who use TripAdvisor to research their travel options.

Big Growth Expected in 2017

The analysts are bullish about Expedia in 2017.

The Zacks Consensus Estimate for 2017 is $5.21 which is earnings growth of 46.6% compared to the consensus for 2016 of $3.55.

It is expected to report fourth quarter earnings on Feb 9.

A Buying Opportunity?

Shares haven’t really done much in the last year. They were up only 5.1% in that time period and are off their 2016 highs.

That is under performing the major stock indexes.

You’re paying for the growth though as the shares are trading with a forward P/E of 22.5. That’s not cheap.

But is it time to jump in?

As the global economy heats up, consumers will continue to book travel. Expedia is one of the leading names in the group.

If you’re looking for a high growth name as a play on the consumer, then Expedia is one to keep on your short list.

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G-III Apparel: Zacks’ Bear of the Day Play

G-III Apparel Group, Ltd. (GIIIFree Report) warned on 2017 earnings again as the apparel industry continues to struggle. This Zacks Rank #5 (Strong Buy) is expected to see a 40% decline in earnings this year.

G-III Apparel owns and distributes apparel and accessories under some of the most iconic brands in the fashion industry including Donna Karan, DKNY, Vilebrequin, Bass, Weejuns, Eliza J and Jessica Howard. It has licenses with other well-known brands including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld, Kenneth Cole, Jones New York, Jessica Simpson and others.

It addition to its wholesale business it operates retail stores under the Donna Karan, Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names.

Warned Again on Full Year Earnings

On Jan 5, G-III Apparel updated its fourth quarter and full year 2017 outlook, lowering its prior guidance.

Unseasonably warm weather in the first part of the quarter, as November was warm throughout the Midwest and East coast, meant slower coat sales even though a polar blast did finally descend on the country in December. But it was too late to save the quarter, apparently.

Also, the retail side of the business at Wilsons and G.H. Bass was worse than expected as mall and outlet mall traffic remained depressed. It had been anticipating positive comparable sales increases of the low single digits for both of those chains but instead, G-III now sees the comparables down low-double digits for Wilsons and down mid-single digits for G.H. Bass.

That’s a huge swing in the course of only a few weeks.

As a result, earnings will be impacted by $0.20 per share.

Its outlook for the wholesale business remains unchanged.

G-III now sees fiscal 2017 in the range of $1.21 to $1.31, down from its prior guidance of $1.41 to $1.51.

Earnings Estimates Slashed Again

G-III has already lowered full year guidance in previous quarters so this is more bad news on top of bad news. It doesn’t look like it has hit bottom yet in terms of a turnaround in the business.

The analysts have cut estimates to be within the range, pushing the Zacks Consensus Estimate down to $1.44 from $2.13 just 90 days ago.

There’s not even a reason to talk about fiscal 2018 yet because 2017 is just so bad.

Are the Shares Cheap?

Shares sold off on the news but didn’t retest previous lows.

It would be one thing if the shares were cheap. It might be considered a value play then. But G-III trades with a forward P/E of 17.1. I wouldn’t consider it truly a bargain until its P/E dropped to around 10 to 12x.

If you really must be in the apparel stocks, you might want to consider its partner on some of its licenses, PVH Corporation (PVHFree Report) . It’s a Zacks Rank #3 (Hold) right now but there are no guarantees on its quarter either.

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Constellation Brands: Zacks’ Bull of the Day Play

Constellation Brands, Inc. (STZFree Report) isn’t having any troubles selling beer and wine. This Zacks Rank #1 (Strong Buy) has already reported earnings and raised full year guidance.

Constellation Brandsis one of the largest beer, wine and spirits makers in the world with operations in the US, Canada, Mexico, New Zealand and Italy. It has 100 brands and 40 facilities worldwide.

It’s the No. 3 beer company in the US with popular imported brands such as Corona Extra, Corona Light and Modelo Especial.

It also owns popular wine brands including Robert Mondavi, Clos du Bois, Kim Crawford, Mark West and the Franciscan Estate and the premium spirits of SVEDKA Vodka, Casa Noble Tequila and High West Whiskey.

Beat Again in the Fiscal Third Quarter

On Jan 5, Constellation Brands reported its fiscal third quarter results and beat the Zacks Consensus Estimate by 24 cents. Earnings came in at $1.96 versus the consensus of $.172.

Constellation Brands has a great earnings surprise history. It hasn’t missed since 2014.

Net sales rose 10% in the quarter boosted by the beer business. Organic net sales growth in beer was 12%.

“Our beer business delivered double-digit sales and profit growth for the third quarter, and gained significant market share of the high-end of the U.S. beer category, as the #1 contributor to growth, with our key brands growing across all market channels,” said Rob Sands, CEO.

Raised Full Year Guidance

Given the big beat in the third quarter, it’s not surprising that the company raised full year fiscal 2017 guidance.

In response, the analysts also raised their full year estimates.

The 2017 Zacks Consensus Estimate jumped to $6.64 from $6.45 before the earnings report. That’s earnings growth of 22.2%.

5 estimates were also raised for fiscal 2018. That pushed the 2018 Zacks Consensus Estimate to $7.54 from $7.49. That’s another 13.6% earnings growth.

Shareholder Friendly

Constellation pays a dividend, which is currently yielding 1.1%. But it also has a $1 billion share repurchase program. In the third fiscal quarter it repurchased 2.4 million shares for $367 million.

Worries About Import Tariffs a Buying Opportunity?

Everything sounds great at the company. So why have the shares sunk over the last 2 months?

Because it’s such a big importer of tequilla and Corona beer from Mexico, investors are worried about tariffs impacting the business under a Trump Administration.

In response to these worries, the company has been increasing its investments in America craft whiskey companies.

But the weakness in the shares may present a buying opportunity.

Even with the recent sell off, the shares aren’t cheap. They still trade at 23x forward earnings. But this is cheaper than where they were at 2 months ago.

For investors looking for a high quality name in the wine and beer industry, and who are willing to take a risk on the Mexican business side of it, Constellation Brands is one to have on your short list.

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Opus Bank: Zacks’ Bear of the Day Play

Among top beneficiaries of the Trump rotation following Election Day are regional banking stocks. These smaller banks benefit for a few reasons. First, there’s the belief that rates will rise next year. Some think that under a Trump Presidency they will rise at a faster rate than they would have under Hillary Clinton. Higher rates are great for banks because they help their net interest margin, which is the difference between what they pay customers in interest and what they make on their lending and other banking actions.

The other big boost for banks is hope in the underlying American economy. People believe that increased GDP growth will generally benefit financial institutions. Another reason is more specific to these smaller banks. They are often the lender of choice for small business in America. If President Trump makes good on his promise spend big money on American infrastructure projects then small businesses will expand, borrowing money, and again helping the smaller regional banks.

That being said, I don’t believe you should go out there and buy every regional bank you lay your eyes on. You need to do a little bit of research on the banks you invest in if you are in fact buying individual names. Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Opus Bank (OPBFree Report) .

Opus Bank provides various banking products, services, and solutions for small to mid-sized companies, entrepreneurs, real estate investors, professionals, and high net worth individuals. It offers demand deposits, checking accounts, money market accounts, savings accounts, and certificates of deposit. The company also provides multifamily residential loans, commercial real estate loans, commercial business loans, small business administration loans, construction loans, and single-family residential and consumer loans; and loans and lines for working capital, expansion, acquisitions, consolidation, and transition. As of December 6, 2016, it operated 56 banking offices, including 32 in California, 21 in the Seattle/Puget Sound region in Washington, 2 in the Phoenix metropolitan area of Arizona, and 1 in Portland, Oregon.

The stock took a frightening tumble during the month of October, diving from $35 to $18 in less than two weeks. Since that dip shares have recovered most of the move, getting back near $30 with the post-election rally.

The reason for the Zacks Rank #5 (Strong Sell) is the drastic cut in earnings estimates the stock has seen from analysts. Over the last ninety days, analysts have dropped their estimates for the current year and next year. The bearish sentiment has cut our Zacks Consensus Estimate for the current year from $2.26 to $1.32 while slashing next year’s number from $3.13 to $1.94.

Investors looking for other regional banking options should investigate BOK Financial (BOKFFree Report) and BancFirst (BANFFree Report) . Both of these stocks are Zacks Rank #2 (Buy) stocks right now.

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?

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EMCORE: Zacks’ Bull of the Day Play

After a stellar end to 2016 for chip stocks it’s easy to believe the rally is a bit long in the tooth. While these stocks have historically higher beta than the rest of the market, they’re not exactly at the cornerstone of the post-Election Trump rally. In fact, lots of these companies could be threatened under the new administration’s policies, especially if anything resembling a trade war with China develops.

However, new technologies and changes in internet infrastructure have fueled the fire for chip stocks. Specifically, I’m talking about the shift to 4k, 100Gb switches, and anything having to do with increasing bandwidth. Today’s Bull of the Day is a company that offers a broad portfolio of compound semiconductor-based products for the broadband, fiber optic, satellite and terrestrial solar power markets.

EMCORE (EMKRFree Report) is a Zacks Rank #1 (Strong Buy) with a Momentum Style Score of B in an industry that ranks in the Top 8% of our Zacks Industry Rank. A big reason for the favorable rank is the recent bullish moves analysts have made with regards to their earnings estimates for the current quarter, next quarter and the current year. Four analysts have increased their estimates for the current quarter, while three have done so for the current year. The moves have pushed our current quarter Zacks Consensus Estimate from 5 cents to 10 cents and have increased our current year number from 23 cents to 34 cents.

It was these estimates along with a fantastic quarterly report that set EMKR off on huge spike higher. Shares went from below $6.75 to nearly $8.75 in the first session following their last report where earnings came in at 8 cents versus expectations calling for 4 cents. The stock rallied in the days following the report, eventually hitting a fresh 52-week high of $9.50 before beginning to retreat. Now the stock has pulled back as the Commodity Channel Index (CCI) has dipped below oversold territory under -100 at -152. I’m looking for the CCI to reverse a little bit and push up through the zero line before adding to an existing long position in one of the portfolios I run here at Zacks.

Zacks’ best stocks under $10

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Cooper Companies: Zacks’ Bear of the Day Play

Cooper Companies (COOResearch 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

The Cooper Companies, Inc., through its principal subsidiaries, develops, manufactures and markets healthcare products. CooperVision markets a range of contact lenses to correct visual defects, specializing in toric lenses that correct astigmatism. The company also markets conventional toric and spherical lenses and lenses for patients with more complex vision disorders. CooperSurgical markets diagnostic products, surgical instruments and accessories to the women’s healthcare market.

Recent Earnings

COO beat the Zacks Consensus Estimate of $2.24 by four cents in the most recent report. Revenue came in just a shade ahead of the Zacks Consensus Estimate at $519M compared to $505M.

The stock moved higher following the report, but guidance was lighter than expected and estimates have started to move lower.

Estimates

The Zacks Consensus Estimate has been falling over the last few months. The FY17 estimate stood at $9.74 in October and then fell to $9.69 in November and tumbled down to $9.19 in December. The estimate currently states at $9.19.

FY18 estimates also saw a sharp move lower, from $10.72 in November to $10.27 in December.

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.

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 >>

Follow Brian Bolan on twitter at @BBolan1

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Arotech Corp: Zacks’ Bull of the Day Play

Arotech Corp (ARTXResearch Report) posted a huge 700% positive earnings surprise on its most recent earnings release. Expectations continue to move higher and the stock is a Zacks Rank #1 (Strong Buy). Let’s take a look at the fundamentals of this stock and explore why it is a Zacks Rank #1 (Strong Buy) and the Bull of the Day.

Why I Like It

This is a small cap and will likely outperform if small caps remain in favor.

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

This is a perfect “Trump Play” as it fits with what the new Administration wants.

Recent management change should bring stability at the top.

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. ARTX reported the September 2016 quarter back in early November.

The most recent quarter was a beat on top and bottom. The company posted EPS of $0.06 when the Zacks Consensus Estimate was calling for a loss of $0.01. That translates into a positive earnings surprise of 700%.

Revenue came in at $24M which was good for a 1.25% positive revenue surprise. As a result, the stock was bid up by more than 16% in the session following the report.

Description

Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security markets, including multimedia interactive simulators/trainers and advanced zinc-air and lithium batteries and chargers. Arotech operates two major business divisions: Training and Simulation, and Power Systems.

Earnings History

The company has a decent history of beating the Zacks Consensus Estimate. There were two misses over the last five quarters. The rest of the reports were all beats.

Estimates

The estimate picture looks really good, with the Zacks Consensus Estimate for 2016 moving from a loss of $0.09 in October to loss of one cent in November. The Zacks Consensus Estimate for 2016 has not moved since that time.

The 2017 number moved from $0.02 in October to the current level of $0.08.

One More Chart

Let’s take a look at one the great features of the Zacks website, you can find this function for every stock on the “Financial Overview” section. You can chart all sorts of things against, well all sorts of things but I like to chart them against the stock price.

For ARTX I thought it would be helpful to look at margins as compared to the stock price over the last few years.

This chart tells me that as margins improve, the stock tends to move right along with them.

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