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Posted Thu Apr 17, 09:40 am ET
by Zacks Equity Research
Badger Meter Inc. (BMI) reported earnings per share of 32 cents for the first quarter of 2014, which marked a year-over-year rise of 60%. However, the reported figure lagged the Zacks Consensus Estimate of 44 cents.
Net sales increased 16% year over year to a record $83.5 million in the reported quarter, which was in line with the Zacks Consensus Estimate. Increased revenues from residential and commercial municipal water products as well as flow instrumentation products aided the sales growth.
Costs and Margins
Cost of sales increased 16.6% year over year to $54 million. Gross profit in the quarter was $28.9 million, up from $25 million in the prior-year quarter. Gross margin decreased by 20 basis points (bps) to 34.7% due to product mix.
Selling, engineering and administration expenses increased 4.6% year over year to $21.3 million due to costs related to due diligence and other transaction-related costs for acquisition. Operating income increased 62.7% to $7.7 million from $4.7 million in the year-earlier quarter. Consequently, operating margin rose 260 bps to 9.2%.
As of Mar 31, 2014, Badger Meter reported cash and cash equivalents of $6.4 million versus $7.2 million as of Dec 31, 2013. Receivables increased to $54.6 million as of Mar 31, 2014 from $50 million as of Dec 31, 2013. Inventories also went up to $63.9 million as of Mar 31, 2014 from $60.9 million as of Dec 31, 2013.
Badger Meter will continue to benefit from investment in research and development as well as the introduction of new products. Innovation in product offering has been a key growth driver for Badger Meter.
The company launched its new BEACON Advanced Metering Analytics (AMA) system in January, which made it the first major water meter company to provide water utilities with cost-effective cellular radio endpoints.
Recently, the company expanded its E-Series ultrasonic meters with a polymer version. It is a cost-effective alternative to the stainless steel version. During the first quarter, Badger Meter began the shipment of residential E-Series water meters and its ORION technology, as part of a contract with a water utility in the Middle East. The company also experienced increased sales of E-series meters in the North American market. Badger Meter claims that these E-Series meters continue to be widely accepted by customers outside North America as well.
Furthermore, the Elster business and the ongoing economic recovery will help to drive growth. Moreover, Badger Meter will benefit from improved volumes in both its municipal and industrial product lines.
Nevertheless, higher construction costs, labor shortage and the strained global economic scenario may affect the company’s performance going forward.
Headquartered in Milwaukee, WI, Badger Meter provides liquid flow measurement products and control technology. It also serves water and gas utilities, municipalities and industrial customers worldwide. The company’s products, which are developed both internally and in collaboration with other technology companies, are used in a wide variety of applications related to water, oil and chemicals.
At present, Badger Meter has a Zacks Rank #2 (Buy). Investors interested in the same industry could consider stocks like Newport Corp. (NEWP), Mettler-Toledo International Inc. (MTD) and Waters Corporation (WAT), all of which have the same Zacks Rank as Badger Meter.
Posted Thu Apr 17, 09:30 am ET
by Zacks Equity Research
Kinder Morgan Inc. (KMI) reported first quarter 2014 earnings of 28 cents a share from continuing operations, failing to meet the Zacks Consensus Estimate of 33 cents. However, the quarterly earnings remained unchanged from the year-earlier profit level.
Total revenue for the quarter increased 32.3% year over year to $4,047.0 million. The reported figure surpassed our expectation of $3,820.0 million.
Kinder Morgan boosted its quarterly dividend to 42 cents a share ($1.68 per share annualized), up 11% from 38 cents ($1.52 per share annualized) paid in the first quarter of 2013.
For 2014, management expects a hike of 8% in declared cash distributions per unit from 2013.
The company’s growth curve will be driven by its ownership of the general partners of Kinder Morgan Energy Partners, L.P. (KMP) and El Paso Pipeline Partners, L.P. (EPB). The natural gas assets acquired by Kinder Morgan through the El Paso Corporation will augment dividend growth.
Total expenses in the quarter were $2,900.0 million, representing a 41.9% increase from $2,043.0 million spent in the first quarter of 2013.
Operating income came in at $1,147.0 million, representing 12.8% growth from the comparable quarter a year ago. Operating margin was 28.3% compared with 33.2% in the year-ago quarter.
Cash available for dividend payments was $573.0 million in the first quarter of 2014, an increase of 12% from $513.0 million in the comparable quarter last year. As of Mar 31, 2014 Kinder Morgan reported $116 million of cash and cash equivalents, while long-term debt was $8,968 million.
Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. A focus on fee-based and diversified businesses has enabled the partnership to dilute its business risks. Kinder Morgan Inc., one of the largest mid-stream energy companies in the U.S., owns the partnership’s general partner interest.
Going forward, we believe the company will offer ample scope for growth with approximately $16.4 billion in expansion and joint venture investments. The company also anticipates significant demand for natural gas transportation capacity to increase transportation commitments with customers. Since Dec 1, 2013, it has entered into approximately 2.8 billion cubic feet per day of new firm transportation commitments with customers for terms averaging about 15 years. In Jan 2014, due in part to record cold weather in many parts of the country, Kinder Morgan’s natural gas pipelines transported on average about 33 billion cubic feet per day on average, representing approximately one-third of the U.S. market demand.
However, Kinder Morgan’s performance in 2014 is expected to be muted to some extent owing to the likely dropdown of certain assets to Kinder Morgan Energy Partners and El Paso Pipeline Partners. Kinder Morgan plans to drop down its 50% interest in Ruby Pipeline, its 50% interest in Gulf LNG and its 47.5% interest in Young Gas Storage to El Paso Pipeline Partners.
Kinder Morgan currently holds a Zacks #3 Rank (short-term Hold rating). Better-ranked energy player include Crescent Point Energy Corp. (CPG) which currently sport a Zacks Rank #1 (Strong Buy) and offer value.
Posted Thu Apr 17, 09:20 am ET
by Zacks Equity Research
International Business Machines Corp. (IBM) reported disappointing revenues in the first quarter of 2014, which missed the Zacks Consensus Estimate for the fifth straight quarter. However, earnings of $2.54 per share were in line with the Zacks Consensus Estimate.
Earnings per share declined 15.3% from the year-ago quarter and a massive 58.6% from the previous quarter due to lower revenue base and steep increase in total operating expenses.
The weaker-than-expected first-quarter results are expected to hurt IBM’s ability to achieve fiscal 2014 earnings target of $18.00 per share. Shares declined 4.2% ($8.20) in after-hours trading.
IBM’s first-quarter revenues of $22.48 billion declined 3.9% from the year-ago quarter and 18.8% on a sequential basis. On a constant currency (cc) basis, excluding the divested customer care business, revenues declined 1.0% from the year-ago quarter. In Sep 2013, IBM sold off its customer care business to Synnex Corp. (SNX) for $505.0 million.
Unfavorable foreign currency movement, particularly in yen, and devaluation of Venezuelan currency, had a negative impact on revenues.
Segment Revenue Details
Growth in revenues was primarily affected by lackluster performance from the hardware segment. Hardware revenues plunged 23.0% year over year and 43.9% quarter over quarter as IBM continued to face fundamental challenges related to Power Systems, storage and System X in the quarter.
Power Systems, System Z, System X and storage revenues plunged 22.0%, 40.0%, 18.0% and 23.0%, respectively. During the quarter, IBM agreed to sell its low-end server business to China-based Lenovo Group.
IBM’s new initiatives that include the expansion of OpenPOWER ecosystem and Linux capabilities through the launch of POWER8 processor are expected to drive growth in 2014.
Global services revenues declined 2.0% year over year and 5.8% sequentially. This was primarily due to sluggish revenue growth across both Global Technology Services and Global Business Services segments.
Global Technology Services revenues, excluding the customer care business, declined 2.9% (down 1.0% on cc) year over year and 5.9% quarter over quarter. On a year-over-year basis, GTS outsourcing revenues decreased 5.0% (down 3.0% on cc); partially offset by 2.0% (up 5.0% at cc) year-over-year growth in Integrated Technology services. Maintenance revenues declined 2.0% (flat at cc) from the year-ago quarter.
SoftLayer Technologies (acquired in 2013) contributed a point to GTS revenue growth in the reported quarter. In January this year, IBM announced a $1.2 billion investment aimed at building 15 data centers worldwide in addition to its already existing 25 data centers (including 13 SoftLayer data centers).
IBM will invest $1.0 billion in Watson group, which will focus on developing cloud delivered big-data services to the market. IBM also launched BlueMix, a platform-as-a service (PaaS), based on its open architecture. BlueMix runs on SoftLayer’s global cloud platform. The PaaS allows software developers to build and manage applications that cater to different verticals such as healthcare, retail and travel, in which IBM has low presence.
After integrating Power Systems into SoftLayer’s cloud to run Watson big data services, IBM is also making middleware offerings, such as WebSphere, available to SoftLayer. This move will enable software developers to build hybrid cloud apps.
GBS outsourcing revenues fell 10.0% (down 8.0% on cc) from the year-ago quarter. Consulting & Systems Integration revenues increased 3.0% (up 5.0% at cc) on a year-over-year basis. IBM will invest $100.0 million aimed at expanding its consulting services capability with 10 new IBM Interactive Labs.
Services backlog at the end of the first quarter was flat on a year-over-year basis (up 1.0% on cc) to $138.0 billion (excluding $3.8 billion for customer care divestiture). Outsourcing backlog decreased 5.0% year over year to $86.0 billion.
Total signings amounted to $11.2 billion during the quarter, down 34.0% on a year-over-year basis (down 33.0% on cc). Outsourcing signings plunged 49.0% year over year to $5.5 billion, while transactional decreased 9.0% from the year-ago quarter to $5.7 billion.
Software revenues increased 1.6% (up 2.0% on cc) year over year but plunged 30.5% from the previous quarter. The segment benefited from growth in key branded middleware (up 5.0% at cc) that comprises of WebSphere (up 12.0% at cc), Information Management (up 2.0% at cc), Tivoli (up 7.0% at cc) and Rational (up 2.0% at cc) partially offset by Workforce solutions (down 4.0% at cc).
IBM’s cloud revenues jumped 50.0% from the year-ago quarter. Software delivered as service (SaaS) revenues increased 25.0% year over year in the first quarter. Security offerings grew more than 20% year over year during the quarter. The company expects to spend $1.0 billion on cloud-based software development through 2015.
During the quarter, IBM also acquired database-as-a-service (DBaaS) provider Cloudant, which will run on SoftLayer platform. The acquisition expands IBM’s Big Data, Analytics and Cloud computing portfolio as its data management technology will help clients to quickly build, test, deploy and scale mobile, web as well as cloud apps..
IBM’s mobile business almost doubled on a year-over-year basis driven by strong portfolio of mobile software and services. The addition of Cloudant further expands IBM’s mobile portfolio. Cloudant enables Worklight developers quickly create flexible, reliable and scalable mobile apps that include a variety of structured and unstructured data.
Global Financing revenues were almost flat on a year-over-year basis but jumped 6.4% sequentially to $534.0 million in the reported quarter.
Geographic Revenue Details
Region-wise, revenues declined 4.0% year over year (down 2.0% at cc) in the Americas, due to weak growth in hardware in the United States. Revenues from Europe/Middle East/Africa increased 4.0% (up 1.0% at cc) from the year-ago quarter, driven by growth in Germany and Italy.
Revenues from Asia-Pacific declined 12.0% year over year (down 6.0% at cc). Revenues in China declined 20.0% in the reported quarter.
Revenues from IBM’s BRIC (Brazil, Russia, India & China) markets declined 11.0% (down 6.0% at cc). Revenues from growth markets decreased 11.0% (down 5.0% at cc) year over year in the reported quarter. Latin America reported high single-digit revenue growth, driven by strong performance in Brazil.
Revenues from major markets declined 2.0% from the year-ago quarter.
Gross margin (including adjustments related to acquisition and retirement) expanded 90 basis points (bps) from the year-ago quarter. The improvement in gross margin was primarily driven by favorable revenue mix and productivity improvements. On a sequential basis, gross margin expanded 500 bps due to lower revenue base.
Total operating expense & other income as percentage of revenues increased 360 bps from the year-ago quarter to 32.9%. The sharp rise was primarily due to higher selling, general & administrative expense (up 410 bps).
Sequentially, total operating expense & other income as percentage of revenues surged 710 bps primarily due to lower selling, general & administrative expense (down 620 bps).
Higher operating expense base negatively impacted segmental pre-tax income, which declined 17.4% from the year-ago quarter and 57.2% from the previous quarter to $3.30 billion.
Net income (including workforce rebalancing charge of $870.0 million and gain of $100.0 million) declined 21.7% from the year-ago quarter and 60.1% from the previous quarter to $2.64 billion.
Balance Sheet & Cash Flow Details
IBM ended the quarter with $9.70 billion in total cash and marketable securities, compared with $11.07 billion in the previous quarter. At the end of the first quarter, total debt was $43.98 billion compared with $37.49 billion in the prior quarter.
IBM reported cash flow from operations (excluding Global Financing receivables) of $1.52 billion versus $2.43 billion in the year-ago quarter. In the reported quarter, IBM generated free cash flow of $0.6 billion, significantly down from $1.70 billion in the year-ago quarter.
IBM paid dividends worth $1.00 billion and bought back shares worth $8.2 billion in the first quarter.
IBM forecasts fiscal 2014 operating earnings of at least $18.00 per share, an estimated 6.0% increase from $16.99 reported in 2013. Currently, the Zacks Consensus Estimate is pegged at $17.97 for 2014.
Despite consecutive revenue misses, IBM reiterated its 2014 earnings target of $18.00, which will be difficult to achieve unless there is a substantial improvement in revenue growth over the next three quarters.
IBM also reiterated its 2015 roadmap earnings target of $20.00, which reflects approximately 11.0% year-over-year growth over estimated earnings of $18.00 for 2014. We believe IBM needs to improve its revenue growth, particularly from growth markets, to achieve this target.
We continue to believe IBM’s strong backlog and the divestiture of low-margin customer care and server business unit will boost top line and profitability in 2014. Moreover, continuing investments in cloud computing, smarter planet initiative and analytics division will boost software and services revenues, going forward.
IBM’s acquisition of Cloudant and Aspera will improve its position in the cloud computing and Big Data market in 2014. However, fundamental challenges in the hardware segment will continue to hurt sales. Moreover, intensifying competition from the likes of Oracle (ORCL) and Hewlett-Packard (HPQ) remains the primary headwind.
Currently, IBM has a Zacks Rank #3 (Hold).
Posted Thu Apr 17, 09:10 am ET
by Zacks Equity Research
Leading contract drilling company, Noble Corporation (NE) reported first quarter 2014 earnings of 99 cents per share. The results surpassed the Zacks Consensus Estimate of 69 cents and improved from the year-ago earnings of 59 cents.
Total revenue in the quarter rose 28.9% to almost $1,251.2 million from $971.0 million in the comparable quarter last year. The top line also beat the Zacks Consensus Estimate of $1,207.0 million. Contract Drilling Services contributed $1,206.3 million to the total revenue, reflecting a year-over-year increase of 29.9% mainly on higher average dayrates. The decrease in operating downtime and higher bonus revenues aided the growth.
First Quarter Operating Highlights
Total operating income shot up 60.7% to $369.3 million from the year-ago level of $229.8 million. Operating income from the Contract Drilling segment rose 67.6% year over year to $383.9 million from $229.0 million.
Total rig utilization declined to 84% from the year-earlier level of 86%. The overall average dayrate surged 28.1% to $223,559 from $174,578 in the year-ago quarter.
The average dayrate for semisubmersible rigs registered about 22.3% year-over-year growth to $392,620. Average capacity utilization was 79% versus 84% in the year-ago period.
The average dayrate for Drillships rose about 25% year over year to $393,892. Average capacity utilization was 92% versus 83% in the year-ago period.
The average dayrate for the company's jackups was $124,962 compared with $105,559 in the year-ago quarter. Average capacity utilization fell to 86% from the year-ago level of 93%.
The company has 74% of all rig days committed for this year, including both floater and jackup units. For 2015, 47% of rig days are booked, comprising 62% of floater time and 39% of jackup rig days. Overall total backlog at the end of the first quarter was approximately $14.3 billion versus $15.4 billion as of year-end 2013.
At the end of the first quarter, the company had a cash balance of $114.7 million and long-term debt of $5,728.8 million, with debt-to-capitalization ratio of 38% (unchanged from year-end 2013). In the reported quarter, Noble invested $517 million in capital projects.
Noble holds a Zacks Rank #3 (Hold rating). There are other stocks in the oil and gas industry, like Range Resources Corporation (RRC), Unit Corporation (UNT) and Helmerich & Payne, Inc. (HP), which appear promising with a Zacks Rank #1 (Strong Buy).
Posted Thu Apr 17, 09:00 am ET
by Zacks Equity Research
Shares of SanDisk Corp. (SNDK) went up 5.8% in after-hours trading following better-than-expected results in the first quarter of 2014. The strong results were mainly attributable to strong client and enterprise solid state drive (SSD) sales, strength in retail businesses and favorable supply/demand metrics.
SanDisk’s first-quarter adjusted earnings of $1.32 per share came ahead of the Zacks Consensus Estimate of $1.17. Moreover, earnings per share increased 70.2% from the year-ago quarter. Adjusted earnings per share exclude amortization of acquisition-related intangible assets, convertible debt interest but include stock-based compensation expense.
Total revenue in the first quarter increased 12.7% on a year-over-year basis to $1.51 billion. It was not only toward the higher end of management’s guided range of $1.450 billion–$1.525 billion but also ahead of the Zacks Consensus Estimate of $1.49 billion. The year-over-year revenue growth was primarily attributed to strong demand in both client and enterprise SSDs. Notably, sales from the SSD jumped 61% on a year-over-year basis and comprised 28% of total revenue.
Furthermore, SanDisk’s prudent mix of high-margin embedded and client and enterprise class SSD solutions and products boosted Commercial revenues (65% of first-quarter revenues), which grew 18% year over year. However, mobile embedded revenues (part of commercial revenues) remained flat on a year-over-year basis, primarily due to strong demand from iNAND offerings, which offset a decline in custom embedded solutions. The decline was due to a shift by a customer to client SSD solutions.
Additionally, SanDisk’s revenues from retail channels (35% of first-quarter revenues) increased 4% year over year driven by growth in USBs, SSDs and mobile cards.
During the quarter, SanDisk unveiled the 128GB Ultra microSDXC UHS-I memory card. The newly-launched card that will be available worldwide is expected to improve the computing experience (especially on mobile devices). In a separate development, SanDisk also introduced an enhanced version of iNAND Extreme embedded flash drive (EFD).
SanDisk’s adjusted gross profit (including stock-based compensation but excluding other one-time items) for the quarter came in at $770.9 million, up 42.4% form the year-ago quarter. The year-over-year growth was primarily aided by higher SSD product mix, strong growth in branded retail channels and low revenues from custom embedded solutions.
SanDisk reported 17.8% year-over-year increase in adjusted operating expenses. As a percentage of revenues, operating expenses were up 92 basis points (bps) from the year-ago quarter. The increase was primarily due to higher research and development expenses, sales and marketing expenses and general and administrative expenses.
The company reported operating profit (including stock-based compensation but excluding other one-time items) of $446.4 million, up 67.8% from the year-ago quarter.
Excluding the amortization of acquisition-related intangible assets, convertible debt interest expense and related tax adjustments but including stock-based compensation expense, net income for the first quarter came in at $304.6 million or $1.32 per share compared with $191.5 million or 79 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Cash and short-term investments were $2.81 billion versus $2.91 billion in the previous quarter. Long-term marketable securities were $3.51 billion. SanDisk had $1.17 billion of convertible long-term debt in its balance sheet.
SanDisk generated $357.6 million in cash from operating activities compared with $616.8 million in the prior quarter. SanDisk repurchased stock worth $90 million and paid dividends amounting to $52.0 million.
SanDisk also declared a cash dividend of 22.5 cents per share for the second quarter of fiscal 2014, payable on May 27.
Management is positive about embedded solutions and enterprise SSD revenue growth, favorable product mix and better supply/demand metrics in 2014. SanDisk expects bit supply to remain unchanged in the range of 25% to 35%. Also, the company expects to increase its wafer capacity by approximately 5%.
SanDisk expects revenues for the second quarter to be between $1.550 billion–$1.625 billion while the Zacks Consensus Estimate for the same period is pegged at $1.580 billion.
SanDisk reiterated its fiscal 2014 revenue guidance in a range of $6.4 billion to $6.8 billion. The Zacks Consensus Estimate for the period is pegged at $6.676 billion.
The company expects its second quarter non-GAAP gross margin to be in the range 47.0%–49.0%. The company raised its fiscal 2014 gross margin forecast and expects it to range between 47% and 49% (previous guidance 45% to 48%).
SanDisk expects operating expenses in the range of $315 million to $325 million for the second quarter and $1.250 billion to $1.275 billion for full year 2014 (previous guidance $1.225 billion to $1.25 billion). Thus, non-GAAP operating margin is expected to range between 27% and 31% in 2014.
SanDisk posted solid first-quarter results, with both its top and bottom lines surpassing the Zacks Consensus Estimate. It also provided an encouraging guidance. Revenues from commercial and retail channels were strong, aided by higher mobile embedded and client and enterprise class SSD sales. Moreover, the acquisition of SMART Storage Systems is expected to expand SanDisk’s offerings in the Enterprise SSD segment.
Lackluster PC sales, competition from Micron Technology Inc. (MU) and currency fluctuations could hurt fundamentals to some extent. However, we remain positive on management’s commentary of a turnaround in the coming quarters and strong secular demand for its storage products.
It is also worth mentioning that Apple Inc. (AAPL) is currently a major customer of SanDisk. Hence, we believe that with price and cost benefits as well as a long-term NAND supply agreement with the likes of Apple will help SanDisk to outperform in the NAND market.
Currently, SanDisk has a Zacks Rank #2 (Buy). A better-ranked stock in the technology sector is Juniper Networks, Inc. (JNPR), sporting a Zacks Rank #1 (Strong Buy).
Posted Wed Apr 16, 07:30 pm ET
by Zacks Equity Research
On Apr 11, 2014, we issued an updated research report on Petroleo Brasileiro SA or Petrobras (PBR). Petrobras – the largest publicly-traded Latin American oil company − produces and refines almost the entire crude oil and natural gas of Brazil. However, we are concerned about Petrobras’ declining production trend.
In the 2030 Strategic Plan, Petrobras − a Zacks Rank #3 (Hold) stock − revealed its ambition to place itself among the top five integrated oil firms in the world by 2030. To support it, the company aims to increase daily oil production to 4.0 million barrels of oil per day (MMbpd) from 2020.
We appreciate the company's initiative to cut operating expenses through a cost optimization program which helped Petrobras slash operating costs considerably in 2013.
Petrobras has divested several non-core assets since the restructuring of its divestment program in 2012. The sales reflect the company’s intention to focus on properties that have greater potential to generate cash flow for its shareholders.
However, in 2006, Petrobras bought a refinery after paying considerably more than its actual worth. Notably, the company is justifying the buy stating that the refinery was bought judging the best interest of shareholders but the recession prevented the company from reaping the desired profits from the refinery.
Moreover, the Brazilian government, which is a majority shareholder in Petrobras, has interfered in Petrobras’ affairs, time and again. We do not expect any turnaround in this situation in the short- to medium-term. Consequently, this may impact the company’s performance since government interest might not coincide with that of minority shareholders.
Stocks That Warrant a Look
One can consider better-ranked players in the energy sector like Range Resources Corp. (RRC), Helmerich & Payne Inc. (HP) and Pioneer Energy Services Corp. (PES). These stocks all sport a Zacks Rank #1 (Strong Buy).
Posted Wed Apr 16, 07:20 pm ET
by Zacks Equity Research
TASER International Inc.’s (TASR) business unit – EVIDENCE.com – received a contract from the London Police Department, one of the world’s leading law enforcement agencies.This contract got a positive response from the market and TASER’s stock price increased 3.1% on Apr 15, 2014.
Per the latest contract, the company will supply 500 units of AXON body-worn video (BWV) camera, including the EVIDENCE.com digital video storage service for the devices, to police officers under a pilot program across nine London boroughs.
AXON BWV camera is an advanced and cost effective solution offered by the company. These small but highly visible cameras that run on a pocketsize battery pack, can be attached to sunglasses, caps, shirt collars or even a head mount.
In addition, it can capture a wide-angle and full-color view of what an officer is facing at the time of recording. The video will automatically be uploaded to EVIDENCE.com device. An end user cannot corrupt or delete the video files stored online or on the AXON video camera systems.
Looking forward, management expects that the company will be able to get more orders from the London Met Police if the pilot program is a success.
Apart from the overseas order, TASER continues to get several orders from the domestic market in the first quarter of 2014. Recently, the company received orders from different law enforcement state that are expected to yield strong returns on completion.
This Zacks Rank #2 (Buy) stock ended 2013 with solid earnings driven by higher sales. It surpassed the Zacks Consensus Estimate by 59.1% over the last four quarters in 2013.
Some stocks in the same sector looking equally good include TransDigm Group Inc. (TDG), Alliant Techsystems Inc. (ATK) and AeroVironment, Inc. (AVAV). While TransDigm Group sports a Zacks Rank #1 (Strong Buy), Alliant Techsystems and AeroVironment carry a Zacks Rank #2 (Buy).
Posted Wed Apr 16, 07:10 pm ET
by Zacks Equity Research
Recently, FLIR Systems, Inc. (FLIR) received a nod for a full-rate production decision for its integrated chemical, biological, radiological, nuclear and explosives (CBRNE) threat response system for the Dismounted Reconnaissance Sets, Kits and Outfits (DR SKO) program from the U.S. Department of Defence.
The DR SKO program is a joint service and an initiative from the Department of Defence, concentrating on CBRNE threat detection systems, primarily utilized by the Army, Navy, Air Force, Marines and Civil Support Teams. FLIR’s DR SKO system offers a comprehensive set of CBRNE detection, identification, sample collection, testing and personal safety kits that allow defense personnel to conduct site evaluation and carry out subsequent missions.
This program, which was originally called the Joint Nuclear Biological Chemical Reconnaissance System Increment II (JNBCRS2), is in the process of development since 2008.
This apart, FLIR also received a $12.3 million contract from the U.S. Army for the initial production of low-rate DR SKO systems along with a $5.8 million development contract for program management and logistics tasks associated with the program.
The U.S. Department of Defense has resumed efforts to strengthen its artillery after budgetary woes ebbed with the passing of Obama’s $1.1 trillion Omnibus spending measure in Jan 2014. The bill allows Pentagon to utilize as much as $93 billion for buying weapons and another $63 billion for advancing research and development in the sector. In an attempt to optimally utilize the funds, Pentagon has recently awarded 13 defence contracts aggregating to about $305 million.
FLIR Systems currently carries a Zacks Rank #4 (Sell).
Posted Wed Apr 16, 07:10 pm ET
by Zacks Equity Research
In an attempt to make a turnaround in its business, Canadian handset manufacturer BlackBerry Limited (BBRY) has invested in a privately held healthcare IT firm NantHealth. However, the financial details of the deal were not disclosed by the company.
BlackBerry is now working with NantHealth to manufacture a smartphone that caters to the needs of the healthcare sector. The smartphone is expected to be launched by the end of this year or the beginning of 2015.
This device will help doctors access immediate information about patients’ health from observing equipment. Doctors can also share patient information with other medical professionals and consult diagnostic and treatment resources of the top global institutions.
CA-based NantHealth’s cloud-based platform has already been installed in nearly 250 hospitals and connects over 16,000 medical devices. The platform also helps in collecting more than 3 billion important signs annually.
BlackBerry was once a leader in the smartphone industry. However, in the last few years, the company’s handset business has deteriorated drastically due to stiff competition from Apple Inc.’s (AAPL) iPhone and Google Inc.’(GOOG)-developed Android devices. Thus, to counter such cut-throat competition, BlackBerry is gradually shifting focus from its handset business to enterprise services. Also, the company’s decision to invest in IT firm NantHealth reflects the shift in focus.
Recently, BlackBerry reported mixed financial results for the fourth quarter of fiscal 2014. The bottom line significantly surpassed the Zacks Consensus Estimate but the top line missed. The improvement was mainly buoyed by recovery of inventory charges and continuous reduction in operating expenses.
BlackBerry currently has a Zacks Rank #2 (Buy). SK Telecom Co. Ltd. (SKM), with a Zacks Rank #1 (Strong Buy), is a better-ranked stock in the wireless industry that is worth considering.
Posted Wed Apr 16, 07:00 pm ET
by Zacks Equity Research
On April 16, 2014, we issued an updated research report on Genworth Financial Inc. (GNW).
After incurring losses over an extended period, the mortgage business of Genworth started reporting profits. For the sixth consecutive quarter now, the mortgage insurance segment has generated a profit, largely on the heels of substantial lower loss at U.S. Mortgage Insurance.
Gradual improvement in the U.S. housing market, strong loss mitigation programs and a growing private mortgage insurance market helped in increasing new insurance written and lower losses. This in turn helped the U.S. Mortgage Insurance business return to full-year profitability for the first time since 2007.
Further, total flow delinquencies declined 26% year over year, and new delinquencies 21% year over year, with new business remaining quite profitable. Delinquency level in 2013 was the lowest since 2008. Loss mitigation savings in 2013 were $563 million, well above the full-year target of $250 million to $350 million, as flow modifications remained strong.
Genworth is also progressing well with rate increases for its long-term care in force premium. As of Dec 31, 2013, it got approvals of approximately $195 to $200 million for the targeted premium increase from 41 states.
Genworth estimates about 84% of its policyholders agreeing to pay the approved rate increases. It has also started filing for 6% to 13% rate increases on long-term care products (issued in the beginning of 2003 and written through 2012). Current premiums on these policies are in the range of $800 million. The company received approvals from 4 states in 2013.
However, the introduction of new products and pricing changes in the U.S. Life Insurance Division, implemented over the past couple of years, have led to lower sales for Genworth. Genworth estimates long-term care sales to trend down in the near term until the new product gains hold in the market and the company expands its distribution reach.
Also, low interest rate environment will weigh on the operating results of the company.
With respect to earnings performance, the life insurer delivered positive surprises in 2 of the last 4 quarters with an average beat of 5.8%. This was greatly helped by a 26.7% positive earnings surprise in the last reported quarter. Our proven model shows that Genworth is set to deliver another quarter of positive supervise as it has the right combination of a Zacks Rank #3 (Hold) and an Earnings ESP of +2.78%.
Other Stocks to Consider
Other better-ranked life insurers worth reckoning are Protective Life Corp. (PL), Sun Life Financial Inc. (SLF) and Torchmark Corp. (TMK). All these stocks sport a Zacks Rank #2 (Buy).
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