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Centene, Alaska Air Group, Micron Technology and FedEx highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – Dec 20, 2017 – Zacks Equity Research highlights Centene (CNC - Free Report) as the Bull of the Day and Alaska Air Group (ALK - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Micron Technology (MU - Free Report) and FedEx (FDX - Free Report) .
Centene is one of the largest managed care providers in the US, serving over 12 million people in 14 states.
In addition to being the largest Medicaid Managed Care Organization in the country, Centene is also the largest carrier on the Health Insurance Marketplace and a national leader in managed long-term services and supports.
The company held its annual Investor Day on December 15 and several analysts came away increasingly bullish on the stock. Here's was the word from investment bank Piper Jaffray where their price target on CNC was boosted from $112 to $134 (courtesy of TheFly.com)...
Piper Jaffray analyst Sarah James raised her price target for Centene to $134 saying the company's investor day "did not disappoint with a material guidance boost." Despite rallying 68% year-to-date, Centene is still the best buying opportunity in the group with potential for earnings upside and multiple expansion "once the market moves past the worst case scenario on reform," James tells investors in a research note. The analyst sees large scale reform as unlikely and the impact of block grants, which she views as likely, as being a "significant positive" for Centene and managed Medicaid.
Guidance Raised
At the event, Centene provided a 2018 outlook with adjusted EPS of $5.47 to $5.87, vs a Wall Street consensus $5.50 to $5.55. The company sees 2018 revenue of $60.0 to $60.8 billion, vs the consensus of $54.95 billion.
Management also provided an update on their recent $3.75 billion acquisition of Fidelis Care which gave the company significant new exposure to the New York market. Since the deal has not yet closed, analysts must speculate on the impact of new revenues and synergies.
As it stands, if the Fidelis acquisition closing date and related financing would have been assumed to be January 1, 2018, both the top and bottom end of the adjusted EPS guidance ranges would increase by 23c per diluted share, respectively. Additionally, the top and bottom end of the total revenue guidance range would increase by approximately $2.8 billion.
Based on this outlook, as of December 18 the Zacks Consensus EPS for 2018 climbed from $5.49 to $5.62. This has moved Centene to a Zacks #2 Rank, but more upward estimate revisions could be in the pipe.
Alaska Air Group was spotted by the Zacks Rank for its weak earnings momentum in mid-October, right before an earnings miss on 10/25 that took the stock down 17% in the following two days.
Alaska Air Group is the holding company of Alaska Airlines, which, together with its partner regional airlines, serves more than 100 cities through North America. The company is headquartered in Seattle, Washington.
ALK reported earnings of $2.24 per share in the third quarter (excluding 10 cents from non-recurring items). This result fell short of the Zacks Consensus Estimate of $2.25, while surpassing the year ago quarter by 1.8%.
Revenues came in at $2,120 million, lagging the Zacks Consensus Estimate of $2,166.2 million. The top line however grew 35.4% on a year-over-year basis.
The carrier reported a 4.2% decline in passenger unit revenues for the third quarter. In better news, ALK, which acquired Virgin America in December last year, announced a 9% increase in quarterly dividend to 30 cents per share.
The Earnings Decline
The Zacks Rank tracks earnings estimate revisions (EER) over a 60-day rolling window. And there were significant downward revisions in the past seven weeks since that earnings report to keep ALK in the cellar of the Rank.
But to give you an idea of the negative trend that the Zacks Rank spotted back in mid-October, here is the decline in "EER" over the past 90 days, going back to before that earnings report when analysts knew things were getting rough...
2017 Full Year Consensus: Down from $7.56 to $6.73
2018 Full Year Consensus: Down from $8.05 to $6.39
What did analysts see before the Oct 25 company report?
My colleague Ryan McQueeney had a few clues. Here's an excerpt from his report published on the morning of October 19...
There doesn't seem to be much positive momentum in the airline industry, and as mentioned, several hurricanes have devastated a handful of the biggest players. In fact, our “Transportation – Airline” group currently sits in the Bottom 6% of the Zacks Industry Rank. But what’s really interesting here is that Alaska Air is dealing with its own problems.
For one, a contractual dispute has led to a significant pay increase for pilots at the company’s Horizon Air subsidiary. Moreover, fuel cost per gallon in the third quarter is expected to come in nearly 12% higher than the year-ago period.
Alaska Air also recently released mixed September traffic results. The company’s total revenue passenger miles (RPMs) were up by nearly 8.4%, while its consolidated capacity gained 10.1%. What’s problematic is that load factor, or percentage of seats filled by passengers, fell nearly 1.5 percentage points year-over-year, underscoring the fact that capacity expansion has outpaced traffic growth.
(end of McQueeney excerpt)
This is the power of the Zacks Rank quantitative system. By aggregating all of Wall Street's analyst models, we can spot when their collective intelligence sees headwinds to a company's earnings.
In this case, the Rank alerted investors before what became a 21.5% drop from $79 on Oct 25 to $62 on Nov 14.
And now that shares have rallied back to $73, it's noting that little has changed in the downward trend.
Bottom line: It may still be time to stand aside this boarding gate for now until the earnings estimates stop going down, and start going back up. The Zacks Rank will let you know.
Additional Content:
FedEx, Micron Beat Estimates… and Guide Differently
Set aside from the plethora of quarterly earnings data during what's known as "earnings season," these past few trading days ahead of the Christmas holiday have shown some significant earnings results from some important companies in different industries, and today is no different. An infotech services major and a global logistics titan both put out fiscal Q2 2018 earnings results this afternoon, with somewhat different results.
Micron Technology soundly beat fiscal Q1 2018 estimates on both top and bottom lines after Tuesday's closing bell: $2.45 per share easily outpaced the $2.20 in the Zacks consensus, and quarterly revenues of $6.80 billion was far ahead of the $6.39 billion expected, up 71% year over year. Gross margins rose 55.1%, topping the 50% last quarter.
The Zacks Rank #2-ranked memory and storage solutions leader also posted massive upward revisions to guidance: for next quarter a range of $2.51-2.64 per share is well beyond the $1.95 Zacks consensus, with revenue guidance looking for $6.8-7.2 billion in fiscal Q2, well above the $6.08 billion we had expected earlier. For more info on MU's earnings results, click here.
Global delivery and logistics giant FedEx outperformed expectations on its bottom line as well, but offered lower full-year earnings guidance than was previously expected. Earnings of $3.18 per share beat both the $2.87 Zacks consensus as well as the year-ago's $2.77 per share. Revenues in the quarter of $16.3 billion topped the $15.67 billion our analysts were expecting, but full-year guidance of $11.45 - 12.05 per share is well behind the Zacks consensus estimate of $12.47, which we now expect will be revised downward.
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.Download it 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 »
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Centene, Alaska Air Group, Micron Technology and FedEx highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – Dec 20, 2017 – Zacks Equity Research highlights Centene (CNC - Free Report) as the Bull of the Day and Alaska Air Group (ALK - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Micron Technology (MU - Free Report) and FedEx (FDX - Free Report) .
Here is a synopsis of all four stocks:
Bull of the Day:
Centene is one of the largest managed care providers in the US, serving over 12 million people in 14 states.
In addition to being the largest Medicaid Managed Care Organization in the country, Centene is also the largest carrier on the Health Insurance Marketplace and a national leader in managed long-term services and supports.
The company held its annual Investor Day on December 15 and several analysts came away increasingly bullish on the stock. Here's was the word from investment bank Piper Jaffray where their price target on CNC was boosted from $112 to $134 (courtesy of TheFly.com)...
Piper Jaffray analyst Sarah James raised her price target for Centene to $134 saying the company's investor day "did not disappoint with a material guidance boost." Despite rallying 68% year-to-date, Centene is still the best buying opportunity in the group with potential for earnings upside and multiple expansion "once the market moves past the worst case scenario on reform," James tells investors in a research note. The analyst sees large scale reform as unlikely and the impact of block grants, which she views as likely, as being a "significant positive" for Centene and managed Medicaid.
Guidance Raised
At the event, Centene provided a 2018 outlook with adjusted EPS of $5.47 to $5.87, vs a Wall Street consensus $5.50 to $5.55. The company sees 2018 revenue of $60.0 to $60.8 billion, vs the consensus of $54.95 billion.
Management also provided an update on their recent $3.75 billion acquisition of Fidelis Care which gave the company significant new exposure to the New York market. Since the deal has not yet closed, analysts must speculate on the impact of new revenues and synergies.
As it stands, if the Fidelis acquisition closing date and related financing would have been assumed to be January 1, 2018, both the top and bottom end of the adjusted EPS guidance ranges would increase by 23c per diluted share, respectively. Additionally, the top and bottom end of the total revenue guidance range would increase by approximately $2.8 billion.
Based on this outlook, as of December 18 the Zacks Consensus EPS for 2018 climbed from $5.49 to $5.62. This has moved Centene to a Zacks #2 Rank, but more upward estimate revisions could be in the pipe.
Bear of the Day:
Alaska Air Group was spotted by the Zacks Rank for its weak earnings momentum in mid-October, right before an earnings miss on 10/25 that took the stock down 17% in the following two days.
Alaska Air Group is the holding company of Alaska Airlines, which, together with its partner regional airlines, serves more than 100 cities through North America. The company is headquartered in Seattle, Washington.
ALK reported earnings of $2.24 per share in the third quarter (excluding 10 cents from non-recurring items). This result fell short of the Zacks Consensus Estimate of $2.25, while surpassing the year ago quarter by 1.8%.
Revenues came in at $2,120 million, lagging the Zacks Consensus Estimate of $2,166.2 million. The top line however grew 35.4% on a year-over-year basis.
The carrier reported a 4.2% decline in passenger unit revenues for the third quarter. In better news, ALK, which acquired Virgin America in December last year, announced a 9% increase in quarterly dividend to 30 cents per share.
The Earnings Decline
The Zacks Rank tracks earnings estimate revisions (EER) over a 60-day rolling window. And there were significant downward revisions in the past seven weeks since that earnings report to keep ALK in the cellar of the Rank.
But to give you an idea of the negative trend that the Zacks Rank spotted back in mid-October, here is the decline in "EER" over the past 90 days, going back to before that earnings report when analysts knew things were getting rough...
2017 Full Year Consensus: Down from $7.56 to $6.73
2018 Full Year Consensus: Down from $8.05 to $6.39
What did analysts see before the Oct 25 company report?
My colleague Ryan McQueeney had a few clues. Here's an excerpt from his report published on the morning of October 19...
There doesn't seem to be much positive momentum in the airline industry, and as mentioned, several hurricanes have devastated a handful of the biggest players. In fact, our “Transportation – Airline” group currently sits in the Bottom 6% of the Zacks Industry Rank. But what’s really interesting here is that Alaska Air is dealing with its own problems.
For one, a contractual dispute has led to a significant pay increase for pilots at the company’s Horizon Air subsidiary. Moreover, fuel cost per gallon in the third quarter is expected to come in nearly 12% higher than the year-ago period.
Alaska Air also recently released mixed September traffic results. The company’s total revenue passenger miles (RPMs) were up by nearly 8.4%, while its consolidated capacity gained 10.1%. What’s problematic is that load factor, or percentage of seats filled by passengers, fell nearly 1.5 percentage points year-over-year, underscoring the fact that capacity expansion has outpaced traffic growth.
(end of McQueeney excerpt)
This is the power of the Zacks Rank quantitative system. By aggregating all of Wall Street's analyst models, we can spot when their collective intelligence sees headwinds to a company's earnings.
In this case, the Rank alerted investors before what became a 21.5% drop from $79 on Oct 25 to $62 on Nov 14.
And now that shares have rallied back to $73, it's noting that little has changed in the downward trend.
Bottom line: It may still be time to stand aside this boarding gate for now until the earnings estimates stop going down, and start going back up. The Zacks Rank will let you know.
Additional Content:
FedEx, Micron Beat Estimates… and Guide Differently
Set aside from the plethora of quarterly earnings data during what's known as "earnings season," these past few trading days ahead of the Christmas holiday have shown some significant earnings results from some important companies in different industries, and today is no different. An infotech services major and a global logistics titan both put out fiscal Q2 2018 earnings results this afternoon, with somewhat different results.
Micron Technology soundly beat fiscal Q1 2018 estimates on both top and bottom lines after Tuesday's closing bell: $2.45 per share easily outpaced the $2.20 in the Zacks consensus, and quarterly revenues of $6.80 billion was far ahead of the $6.39 billion expected, up 71% year over year. Gross margins rose 55.1%, topping the 50% last quarter.
The Zacks Rank #2-ranked memory and storage solutions leader also posted massive upward revisions to guidance: for next quarter a range of $2.51-2.64 per share is well beyond the $1.95 Zacks consensus, with revenue guidance looking for $6.8-7.2 billion in fiscal Q2, well above the $6.08 billion we had expected earlier. For more info on MU's earnings results, click here.
Global delivery and logistics giant FedEx outperformed expectations on its bottom line as well, but offered lower full-year earnings guidance than was previously expected. Earnings of $3.18 per share beat both the $2.87 Zacks consensus as well as the year-ago's $2.77 per share. Revenues in the quarter of $16.3 billion topped the $15.67 billion our analysts were expecting, but full-year guidance of $11.45 - 12.05 per share is well behind the Zacks consensus estimate of $12.47, which we now expect will be revised downward.
This marks only the 2nd positive earnings surprise for FedEx in the last 5 quarters. For more info on FDX's earnings results, click here.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.Download it 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 »
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.