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Zacks #1 Stocks on the Move 05/04/2016

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Analyst Blog

Q1 Earnings Season Rolls 'Em Out Fast: TSLA, WFM, FOXA & FIT

Posted Wed May 04, 06:35 pm ET

by Mark Vickery

After the closing bell on Wednesday, another large swath of companies reported Q1 earnings results. Among them are a few we've covered this afternoon -- Tesla Motors (TSLA), Whole Foods Market (WFM), 21st Century Fox (FOXA) and FitBit (FIT). Spanning a wide range of product producers, here are the results we found.

Tesla posted a big miss on the bottom line, but nobody cares about that. The electric car and battery manufacturer posted in-line results for auto deliveries and time-lines for its bigger projects like the Model 3 and Gigafactory: Tesla Up 5% Following Q1 Miss, In-Line Sales

Whole Foods Market beat its fiscal Q2 earnings estimate by 3 cents, but came in slightly lower on the revenue side. Nevertheless, late Wednesday trading saw shares moving up 3 1/2 percent: On Earnings Beat, Whole Foods Market Climbs Higher

21st Century Fox topped revenue estimates for its fiscal Q3 earnings report and met the earnings consensus. It would seem this so-far volatile election season has been good for Fox News' business: 21st Century Fox Q3 Earnings In-Line, Beats on Revenues

Finally fitness wearables company FitBit managed to outperform expectations on both top and bottom lines, yet the stock has traded down in the late market. Chalk this up to lowered guidance in Q2 for this Zacks Rank #2 (Buy) company: FitBit Tops EPS & Revenue Estimates, Shares Down on Weak Outlook

For more detail on how Q1 earnings season has unfolded so far, we invite you to read Sheraz Mian's comprehensive Earnings Trends article, published earlier today: Q1 Earnings: A Case of Lowered Expectations

Tesla (TSLA) Up 5% Following Q1 Miss, In-Line Sales

Posted Wed May 04, 05:42 pm ET

by Mark Vickery

Premier American electric car manufacturer Tesla Motors (TSLA) has released Q1 earnings after the bell Wednesday, with results largely in-line with what we've seen from the company's pre-guidance earlier. A bottom line of -$1.24 per share on sales (accounting for stock-based compensation and other BNRI) on $1.6 billion in the quarter compare with Zacks consensus expectations of -$0.78 and $1.59 billion, respectively. So the wider-than-expected loss is definitely a big miss, but Tesla is still all about forward sales.

The good news for Tesla this quarter came from its various outlooks: the company bumped up its 500K units-per-year goal from as of year 2020 to 2018 now. Deliveries for the very popular Model 3 (400K+ advanced orders) stay in line for deliveries beginning late 2017, and its Gigafactory remains on target to deliver its first batteries late this year. Model S deliveries were 45 percent higher year over year, again in-line with estimates.

Tesla's lowered guidance for Q1 deliveries of 14,820 (from 16K originally) nearly met the expectation but was short by 10 cars. Q2 deliveries are now expected to reach 17K instead of the earlier guidance of 19K. Much of this stems from supplier parts shortages for the Model X, which has since been resolved. Yet another reminder that Tesla is still a toddler in the auto-manufacturing game. But the Model X has grown substantially quarter over quarter, producing roughly 500 SUVs in Q4, but over 2600 in Q1.

Shares are up more than 5 percent following the mildly positive earnings results. (Tesla is one of those companies where actuals can swing wildly from estimates quarter to quarter, so an in-line report can be seen as something of a victory of steadiness.) This follows a big move down in regular Wednesday trading and a woeful -12 percent over the last 5 trading days, so we see traders sopping up some of the value here. The VIX ahead of the earnings report was +/- 9.4 percent.

The big stuff is still to come for this company -- Gigafactory production, Model 3 deliveries. If these bigger-scale projects manage to take hold in a meaningful way for Tesla, we may see new valuations unfold for this stock, which is currently at a Zacks Rank #3 (Hold).

5 Stocks with Solid Earnings Growth to Buy Now

Posted Wed May 04, 04:11 pm ET

by Zacks Equity Research

Earnings for a company are arrived at after subtracting the cost of production from revenues over a given period of time. This metric is arguably the most important one for an organization’s top brass. And why is this so? It’s because earnings, commonly referred to as the bottom line, is the ultimate indicator of profitability. It also determines how affluent the company’s shareholders are.

Earnings Estimates and Its Influence on Stock Prices

Not very often we have seen a company’s stock price declining after reporting earnings growth or for that matter a stock price surging following an earnings decline. But in some cases, the stocks move in the opposite direction of earnings if market expectations are not met.

So earnings estimates also come into play in moving the stock price. In fact, earnings estimate revision is a very important factor in driving stock prices. A change in earnings estimates indicates the health of various factors such as sales, demand, profit margins, expenses, etc.

During any earnings season, it is prudent to invest in stocks that not only have high historical earnings growth rate but are also seeing an increase in quarterly and annual earnings estimates.

Screening Parameters

In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we added the following parameters:

Zacks Rank equal to 1: Only Zacks' 'Strong Buys' allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.

5-Year Historical EPS Growth (%) greater than X-Industry: Stocks that possess strong EPS growth history

% Change EPS F(0)/F(-1) greater than or equal to 5: Companies that witnessed year-over-year earnings growth rate of 5% or more in the last reported fiscal year.

% Change Q1 Estimates over the last 4 weeks greater than zero: Stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks.

% Change F1 Estimates over the last 1 week greater than zero: Stocks that have seen their annual earnings estimates revised higher in the last 1 week.

% Change F1 Estimates over the last 4 weeks greater than zero: Stocks that have seen their annual earnings estimates revised higher in the last 4 weeks.

The above criteria narrowed down the universe of over 7,747 stocks to only 18. Here are the top 5 stocks:

Facebook, Inc. (FB)

Ingredion Incorporated (INGR)

Newell Brands Inc. (NWL)

Ellie Mae, Inc. (ELLI)

SkyWest Inc. (SKYW)

While backtesting over an almost two-year timeframe (May 02, 2014 to Apr 08, 2016), considering a four-week holding period, a portfolio following this strategy provided a total return of 19.2% compared with the S&P 500’s return of 7.6%. For investors with a reasonably high risk appetite, this strategy provides rich rewards.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial of the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance

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 »

What Awaits Puma Biotechnology (PBYI) in Q1 Earnings?

Posted Wed May 04, 03:58 pm ET

by Zacks Equity Research

Puma Biotechnology, Inc. PBYI is expected to report first-quarter 2016 results on May 9.

Puma Biotechnology’s track record has been disappointing so far. The company missed earnings estimates in three of the four trailing quarters and met the same in one, with an average negative earnings surprise of 17.51%.



Let’s see how things are shaping up for this quarter.

Factors at Play

With no approved product in its portfolio, Puma Biotechnology is not expected to generate any revenue in the first quarter, as was the case in the previous quarters.

Puma Biotechnology’s most advanced candidate, neratinib (PB272), a potent irreversible tyrosine kinase inhibitor, is being evaluated in two formulations – oral and intravenous. Currently, the company is focused on the development of the oral version of the candidate, for human epidermal growth factor receptor type 2 (HER2)-positive breast cancer, non-small cell lung cancer, and other solid tumors with a HER2 mutation.

The company expects to submit a New Drug Application (NDA) for neratinib for the treatment of extended adjuvant breast cancer, in patients who were previously treated with a regimen of Roche Holding AG’s RHHBY Herceptin (trastuzumab), in mid-2016.

Meanwhile, several phase II combination studies on neratinib are ongoing for HER2-positive metastatic breast cancer, and HER2-positive metastatic breast cancer that has metastasized to the brain.

Like any other development-stage biotechnology company, Puma Biotechnology is likely to see an increase in research and development expenses due to higher spending on pipeline development.

We expect investor focus to remain on further updates on the company’s pipeline.

What Our Model Indicates

Our proven model does not conclusively show that Puma Biotechnology is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely beat expectations. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of $1.86.

Zacks Rank: Puma Biotechnology currently carries a Zacks Rank #3. Although the company’s Zacks Rank #3 enhances the predictive power of the ESP, its 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Impax Laboratories Inc. IPXL is +8.89% and it carries a Zacks Rank #3. The company is scheduled to release results on May 10.

The Earnings ESP for Jazz Pharmaceuticals Public Limited Co. JAZZ is +6.11% and it carries a Zacks Rank #3. The company is scheduled to release results on May 10.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

5 Stocks with Exciting Price-to-Cash-Flow Ratios

Posted Wed May 04, 03:57 pm ET

by Zacks Equity Research

Value style is generally considered to be one of the best practices when it comes to stock picking. In value investing, investors pick stocks that are cheap but fundamentally strong. So the chance of these stocks allowing investors to book profit is high when the market moves higher. The concept is fairly straight forward; find stocks that are trading below their inherent worth.

There are a number of ratios to identify value stocks, but none of them can conclusively determine a stock’s inherent potential alone. Each ratio helps the investor to understand a particular aspect of the company’s business. One such ratio, Price to Cash Flow (or P/CF), can do wonders if used properly in picking stocks.

This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis. One of the important factors that gives P/CF an upper hand is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, reflecting the true financial health of the company.

However, an investment decision solely based on P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and take into account price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of “A” or “B” to your search criteria should give you even better results, as they eliminate the chance of falling into a value trap.

The Bargain Hunting Strategy

Let’s quickly go through the parameters for selecting true value stocks before running the screen.

P/CF less than or equal to X-Industry Medianremains our first parameter.

Price greater than or equal to 5:The stocks must all be trading at a minimum of $5 or higher.

Average 20-Day Volume greater than 100,000:A substantial trading volume ensures that the stock is easily tradable.

P/E using (F1) less than or equal to X-Industry Median:This parameter shortlists stocks that are trading at a discount or equal to their peers.

P/B less than or equal to X-Industry Median:A lower P/B compared with the industry average implies that there is enough room for the stock to gain.

P/S less than or equal to X-Industry Median: The P/S ratio determines how a stock price compares to the company’s sales, lower the ratio the more attractive the stock is.

PEG less than 1:The ratio is used to conclude a stock's value by taking the company's earnings growth into account. PEG ratio portrays a more complete picture than the P/E ratio. A value of less than 1 indicates that stock is undervalued and investors need to pay less for a stock that has robust earnings growth prospect.

Zacks Rank less than or equal to 2:Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with Zacks Rank #1 or 2 offer the best upside potential. 

Here are five of the 18 stocks that qualified the screening:

Kirkland's Inc. (KIRK)

JinkoSolar Holding Co., Ltd. (JKS)

General Motors Company (GM)

Ford Motor Co. (F)

Carnival plc (CUK)

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

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 »

Starbucks Long-Term Prospects Bright Despite Lackluster Q2

Posted Wed May 04, 03:56 pm ET

by Zacks Equity Research

We issued an updated research report on Starbucks Corporation SBUX on Apr 21.

On Jan 21, Starbucks reported second-quarter fiscal 2016 results. Adjusted second-quarter earnings of 39 cents per share came in line with the Zacks Consensus Estimate. However, sales fell short of expectations. On a year-over-year basis, earnings surged 18%, while sales rose 9%.

Higher sales in China and the U.S. offset a relatively softer performance in Europe. Comps grew 6%, less than 8% the previous quarter, due to declining global traffic trends. Global traffic rose 2% in the quarter, less than 4% increase in the previous quarter.

Though the second-quarter results were lackluster, Starbucks’s operating fundamentals remain strong and the company is poised for solid growth, going forward.

We believe that digital efforts like Mobile Order and Pay, delivery services and third-party loyalty partnerships, food and beverage innovation, lunch and evening programs, Starbucks Reserve premium coffees and Teavana teas should fuel stronger comps growth in the Americas in fiscal 2016.

The coffee giant’s latest digital initiative, Mobile Order and Pay, is witnessing increased usage and could prove to be a key growth driver in 2016 as adoption increases. This initiative allows customers to order before arriving at a Starbucks café and pick up the items at their preferred Starbucks outlet, thus saving time. The company currently processes over 8 million transactions every month. Mobile Order and Pay transactions represented approximately 4% of total transactions in the quarter, up 40% sequentially.

Starbucks started food and beverage delivery through its employees at New York’s Empire State building last October. The company also began testing food and beverage delivery in collaboration with on-demand delivery service, Postmates, in a few areas of Seattle last December. These initiatives are expected to quicken service, increase convenience and enhance customer loyalty, thereby driving mobile payment transactions and in turn, traffic.

Further, CPG growth across the world as well as international expansion will enhance value creation. Starbucks has entered into a new partnership agreement with Keurig. The agreement will make way for improved economics along with providing more flexibility to sell directly to several key alternative channels such as offices and hospitals.

Starbucks also plans to sell Starbucks-branded Nespresso compatible pods in Europe later this year. This should help the company in expanding its single-serve offering globally. The joint ventures in China with partner Tingyi and in Latin America with PepsiCo, Inc. PEP remain on track to launch ready-to-drink beverages later this year.

In terms of international expansion, Starbucks plans to enter new markets like Luxembourg and Italy in the EMEA (Europe, Middle East and Africa) region in 2016. In the CAP (China, Asia-Pacific) region, Starbucks plans a twofold increase in the CAP store count to roughly 10,000 and threefold increase in the CAP revenues to over $3 billion by 2019.

However, accelerated global employee and digital investments can keep fiscal 2016 profits under pressure. Over the past couple of quarters, higher employee expenses, mainly in the U.S., as well as digital investments put pressure on profits.

Starbucks’ employee investments in fiscal 2015 included higher pay rates for barista and shift supervisors, additional performance-based recognition programs, new food benefit policies and online college education program in collaboration with Arizona State University. In fiscal 2016, employee investments will include wage and benefit increases and even housing benefits in some countries. Moreover, the company will increase digital investments, both in the U.S. and its largest international markets.

In fiscal 2016, management expects employee and digital investments between $275 million and $300 million as against roughly $145 million a year ago. These investments are likely to erode fiscal 2016 earnings growth.

Zacks Rank and Stocks to Consider

Starbucks has a Zacks Rank #3 (Hold). Some better-ranked stocks in the restaurant sector include Dave & Buster's Entertainment, Inc. PLAY and Carrols Restaurant Group, Inc. TAST with a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days. Click to get this free report >>

Goldman's $272M RMBS Settlement Receives Judge Approval

Posted Wed May 04, 03:49 pm ET

by Zacks Equity Research

The Goldman Sachs Group, Inc.’s GS $272 million mortgage settlement received approval of the U.S. District Judge, Loretta Preska in Manhattan on Monday. The settlement puts an end to a prolonged legal battle stemming from the financial crisis.
 
According to the released court order, the settlement is “in all respects, fair, reasonable and adequate and in the best interest of the settlement class members.” Goldman, however, did not admit any wrongdoing.

Notably, last year Goldman agreed to settle the concerned lawsuit that accused it of misrepresenting facts pertaining to nearly $6 billion of residential mortgage-backed securities (“RMBS”).The class action lawsuit was filed by pension funds led by NECA-IBEW Health & Welfare Fund of Illinois. It alleged that Goldman gave false statements and/or omitted material facts in the registration statement representing the mortgage offerings.

The lawsuit accused the company of providing misleading information regarding the underwriting standards, appraisal of properties and credit quality of the underlying mortgage loans. Also, the plaintiffs stated that following the 2008 financial crisis, the prices of  RMBS plunged and their credit ratings collapsed to “triple-C” from “triple-A.”

Post crisis, the regulators have ramped up their efforts to penalize financial entities for wrongdoings and misrepresentation of facts while selling their investment products. Several major banking giants including Bank of America Corp. BAC, Citigroup Inc. C and JPMorgan Chase & Co. JPM, have settled numerous mortgage-related litigations. We believe all these settlements indicate the banks’ efforts to get past their legal headwinds and concentrate on improving operational efficiency.

Goldman currently carries a Zacks Rank #5 (Sell).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

GE Closes Sale of Aussie & Kiwi Commercial Lending Assets

Posted Wed May 04, 03:41 pm ET

by Supriyo Bose

Industrial goods manufacturer General Electric Company GE has recently completed the divesture of GE Capital’s Commercial Lending and Leasing assets in Australia and New Zealand. The assets were sold to Bain Capital Credit, a leading global credit specialist with approximately $30.1 billion in assets under management.

The transaction included about $1.2 billion in ending net investment (ENI) for General Electric. Since Apr 2015 till date, GE Capital has inked sale agreements worth approximately $166 billion in ENI, of which it has already completed deals worth $150 billion. The transactions are in conformity with the corporate strategy of building a manufacturing-based entity with emphasis on big-ticket items such as aviation engines, drilling machines, generators, medical equipment and scanners. With these restructuring initiatives, General Electric expects operating earnings from the industrial business to comprise over 90% of its total operating earnings by 2018, up from 58% in 2014.

General Electric is actively pursuing massive restructuring initiatives in order to create a simpler and nimbler firm. From a classic conglomerate with diversified business interests in financial services, media, industrial and technology-based operations, the company is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge.

During first-quarter 2016, General Electric sold its appliance business to Haier Group, a Chinese multinational consumer electronics manufacturing firm. The transaction, scheduled to be completed by the second quarter, unlocked incremental value by allocating more resources to high-growth core industrial businesses.

Other notable divestures during the quarter included the sale of Asset Management business to State Street Corporation for approximately $485 million, GE Capital’s Franchise Finance U.S. hotel business to Western Alliance Bank, and Canadian Franchise Finance business to an undisclosed buyer.

Also during the quarter, General Electric created GE Aviation Digital to bring digital expertise across the entire Aviation business under one platform. The new digital division increased productivity and minimized down time through effective utilization of cloud computing and analytics to augment revenues for the company.

In addition, the company launched a Digital Alliance Program, which is dedicated to building a digital industrial ecosystem across global systems integrators, independent software vendors, telecommunications service providers and technology providers. This industry-pioneering program will likely help General Electric to gain a competitive edge over peers, grow its customer base and generate higher revenues by expanding its IT portfolio.

We remain encouraged with the restructuring endeavors of this Zacks Rank #3 (Hold) stock. Some notable companies in the industry include Crane Co. CR, Carlisle Companies Inc. CSL and CLARCOR Inc. CLC, each carrying a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Delta Air Lines' (DAL) April Traffic Up, PRASM Down 4%

Posted Wed May 04, 03:32 pm ET

by Zacks Equity Research

Delta Air Lines Inc. DAL posted impressive air traffic data in the month of April. Traffic – measured in revenue passenger miles (RPMs) – was 17.34 billion, up 2.7% from 16.89 billion recorded a year ago.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 2.5% to 20.81 billion. Meanwhile, the load factor or percentage of seats filled by passengers decreased by 10 basis points to 83.3%.

At the end of the first four months of 2016, Delta generated RPMs of 65.05 billion (up 3.1% year over year) and ASMs of 78.95 billion (up 2.7% year over year). Load factor stood at 82.4% versus 82.1% recorded last April. Likewise, passenger count in the month grew 3.1% while that for the first four months of this year rose 4.3%.

However, Delta witnessed a 4% drop in PRASM (passenger revenue per available seat mile) in the month mainly impacted by volatile foreign currency exchange rates. Moreover, soft passenger yields (average fare paid per mile, per passenger) from domestic markets affected the PRASM figure.

The company’s significant route expansion plans, introduction of ancillary products, fleet revamping and customer service enhancement bode well. Further, the company has been reaping considerable benefits from its joint ventures and code share agreements.

Zacks Rank & Stocks to Consider

Delta currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include SkyWest Inc. SKYW, GOL Linhas Aereas Inteligentes S.A. GOL and Ryanair Holdings plc RYAAY. SkyWest sports a Zacks Rank #1 (Strong Buy) while the other two companies carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Major Banks Sued for ISDAfix Rigging, Settle Case for $324M

Posted Wed May 04, 03:30 pm ET

by Zacks Equity Research

Legal tussles seem never ending for big banks. Recently, seven major banks settled a private U.S. lawsuit in Manhattan federal court for a penalty amount of around $324 million, according to Reuters. The banks in question were accused for manipulation of ISDAfix rates, a benchmark used to appraise interest rate derivatives, commercial real estate mortgages and structured debt securities.

The banks – Bank of America Corp. BAC, Barclays PLC BCS, Citigroup Inc. C, Credit Suisse Group AG CS, Deutsche Bank AG DB, JPMorgan Chase & Co. JPM and The Royal Bank of Scotland Group plc RBS – are currently awaiting an approval from the court which will also settle the antitrust charges against the banks.

Notably, 14 banks were sued by numerous pension funds and municipalities for manipulating the ISDAfix benchmark for personal gains in the 2009–2012 period.

Meanwhile, under the latest settlement, JPMorgan will pay $52 million, Bank of America, Credit Suisse, RBS and Deutsche Bank will cough up $50 million each, while Citigroup will expend $42 million and Barclays will shell out $30 million.

The remaining banks under purview of investigation are BNP Paribas SA, The Goldman Sachs Group Inc. GS, HSBC Holdings Plc HSBC, Morgan Stanley MS, Nomura Holdings Inc. NMR, UBS Group AG UBS, Wells Fargo & Company WFC and U.K.-based ICAP Inc. – the former administrator for ISDAfix rates.

Per the allegations, the banks colluded to rig ISDAfix rates by rapidly executing trades just before the rate was supposed to be determined and delaying the processing of trades until it was fixed. This allowed the banks to manipulate the payments made to investors on derivative trades. Such action adversely impacted trillions of dollars of financial instruments tied to ISDAfix rates.

Previously, in Mar 2016, the attempts of the banks to steer clear of investors suffered a major setback after a federal judge in Manhattan rejected their bid to discard the abovementioned private lawsuit.

U.S. District Judge Jesse Furman permitted investors led by several pension funds and municipalities to pursue antitrust and breach-of-contract claims over ISDAfix rigging against most defendants. The Alaska Electrical Pension Fund and other investors raised “plausible allegations that a conspiracy among the defendants existed,” Furman stated.

Last year, Barclays agreed to pay a penalty of £74.2 million ($115 million) to the U.S. Commodity Futures Trading Commission to settle ISDAfix manipulation charges.

Notably, several major banks have been charged for manipulating the London Interbank Offered Rate (LIBOR). Notably, LIBOR is an important benchmark that financial institutions use to set interest rates in trillions of dollars worth of loans and investments.

Manipulation of benchmark interest rates by major financial institutions have triggered thorough investigations by regulatory bodies across Europe, Asia and America and claimed billions of dollars as settlements and fines. We look forward to the gradual resolution of such matters which will put long-drawn investigations to rest and bring reprieve to the banks. However, it is likely to deal a huge blow to their financials.

Meanwhile, regulatory authorities are thoroughly investigating issues related to the increasing occurrence of foreign exchange rate fixing and are determined to propose a landmark judgment to terminate such practices and bring justice to the wronged.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>

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