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Zacks #1 Stocks on the Move 09/02/2014

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Analyst Blog

Hain Celestial to Gain as Demand for Organic Food Increases

Posted Tue Sep 02, 04:10 pm ET

by Zacks Equity Research

A leader in natural food and personal care product categories with an extensive portfolio of well-known brands and strong fundamentals, The Hain Celestial Group, Inc. (HAIN) is poised to surge as the economy gradually revives and the demand for organic food increases. Over the past one year, the stock has surged 23% and still looks promising. The long-term earnings per share growth rate stands at a healthy 15.1%.

If we look at the company’s earnings surprise history over the last 12 quarters, Hain Celestial has topped the Zacks Consensus Estimate by an average of 3.2%, including an earnings surprise of 1.1% in fourth-quarter fiscal 2014. In the last concluded quarter, the company posted earnings of 90 cents a share that came a penny ahead of the Zacks Consensus Estimate and surged 39% year over year. Management cited that strong top-line growth, integration of acquired businesses and focus on high margin carrying brands led to the bottom-line growth.

For fiscal 2015, management now anticipates sales in the range of $2,725 million to $2,800 million, up 27% to 30% from fiscal 2014. Earnings per share are expected between $3.72 and $3.90, representing a year-over-year increase of 17% to 23%.

Hain Celestial’s strategic investments coupled with continued efforts to contain costs, increase productivity, and enhance cash flows and margins enabled it to deliver healthy results. The company, which competes with General Mills Inc. (GIS), expects to sustain its momentum as it remains well positioned to capitalize on the growing global demand for organic products through acquisitions, which have been crucial in building market share.

Hain Celestial, through strategic opportunities, constantly endeavors to expand its footprint in organic and natural products and in turn, "Change the Way the World Eats". Its latest attempt is the acquisition of Tilda Limited, a renowned name in Basmati rice and Rudi's Organic Bakery, one of the leading organic and gluten-free companies. Recently, it fully acquired Hain Pure Protein Corporation.

Earlier, the company had acquired leading packaged grocery brands – Hartley's, Gale's, Robertson's, Frank Cooper's and Sun-Pat – from Premier Foods plc. The company also acquired Ella's Kitchen Group Limited that offers organic baby food products under approximately 80 brands and in easy to carry pouches.

Going forward, we believe that the company will remain focused on increased productivity and efficient pricing. Moreover, Hain Celestial has undertaken a number of initiatives to improve its performance and positioned itself on the growth trajectory. The company’s Stock Keeping Unit (SKU) rationalization program has helped in eliminating SKUs, which had lower sales volume or weak margins.

Hain Celestial currently holds a Zacks Rank #2 (Buy).

Other Stocks that Warrant a Look

Other stocks worth considering include ConAgra Foods, Inc. (CAG) and J&J Snack Foods Corp. (JJSF), both carrying the Zacks Rank as Hain Celestial.

Cabela's to Boost Ohio Business, Plans Second Store in 2015

Posted Tue Sep 02, 04:00 pm ET

by Zacks Equity Research

Cabela's Inc. (CAB), a leading outfitter of hunting, fishing and outdoor gear, intends to expand its operations in Ohio. The company plans to open an 82,000 square feet store in West Chester. The new store will mark Cabela’s second outlet in Ohio, the other one being the 88,000-square-foot Columbus outlet opened last year in March.

The new outlet will be built on the model of Cabela’s next-generation stores and its construction is likely to commence this fall. The store will generate employment for about 200 full-time and part-time employees when it opens in the fall of 2015.

Cabela’s currently operates 61 outlets across North America and plans to open 18 more stores over the next couple of years.

Strong performance of Cabela’s next-generation stores continues to cushion its top and bottom lines. Moreover, these next-generation stores are outperforming the company’s legacy stores in terms of both sales and profit per square feet. We remain optimistic about this next generation store format as it requires less capital investment, enhances store productivity, and helps to increase sales per square feet.

In the last concluded quarter, Cabela’s opened 7 stores, one each in Greenville, SC; Anchorage, ALK; Christiana, DE; Woodbury, MN; Lubbock, TX; Missoula, MT; and Manning, Alberta. For the rest of 2014, the company has plans to open 6 additional stores, of which, the one in Barrie, Ontario is already operational. Rest of the stores are to open in Acworth, GA; Cheektowaga, NY; Tualatin, OR; Nanaimo, British Colombia; and Bowling Green, KY.

The company’s store expansion drive reflects its initiatives to expand in regions that have considerable growth potential. Moreover, the company looks for opportunities to expand its store base to effectively penetrate into its target markets and generate healthy sales.

Currently, Cabela’s has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN) and Lithia Motors Inc. (LAD) both sporting a Zacks Rank #1 (Strong Buy), as well as Foot Locker, Inc. (FL) carrying a Zacks Rank #2 (Buy).

Baker Hughes US Rig Count Up by 18, Land-Based Rigs Rise

Posted Tue Sep 02, 03:50 pm ET

by Zacks Equity Research

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (BHI) reported a rise in the U.S. rig count (number of rigs searching for oil and gas in the country). This was due to increase in the tally of both oil and gas-directed rigs.

The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 1,914 for the week ended Aug 29, 2014. This was up by 18 from the previous week’s rig count.

The current nationwide rig count is more than double the lowest level reached in recent years (876 in the week ended Jun 12, 2009) and is well above the prior-year level of 1,776. It rose to a 22-year high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep 12.

Rigs engaged in land operations ascended by 16 to 1,838, inland waters activity was flat at 10 rigs, while offshore drilling rose by 2 to 66 units.

Natural Gas Rig Count: The natural gas rig count – which slumped in mid June to its lowest point since May 1993 – increased for the fourth successive week to 338 (a gain of 8 rigs from the previous week). Despite the weekly growth, the number of gas-directed rigs is down by almost 60% from its recent peak of 811, reached in 2012.

In fact, the current natural gas rig count remains 80% below its all-time high of 1,606 reached in late summer 2008. In the year-ago period, there were 380 active natural gas rigs.

Oil Rig Count: The oil rig count was up by 11 to 1,575. The current tally is way above the previous year’s rig count of 1,388. It has recovered strongly from a low of 179 in June 2009, rising almost 8.9 times.

Miscellaneous Rig Count: The miscellaneous rig count (primarily drilling for geothermal energy) at one was down by one from the previous week.

Rig Count by Type: The number of vertical drilling rigs was up by 8 to 374, while the horizontal/directional rig count (encompassing new drilling technology that has the ability to drill and extract gas from dense rock formations, also known as shale formations) was up by 10 to 1,540.

Gulf of Mexico (GoM): The GoM rig count rose by 1 to 63 units.

A Key Barometer of Drilling Activity: An increase or decrease in the Baker Hughes rotary rig count heavily weighs upon the demand for energy services – drilling, completion, production etc. – provided by companies that include large-cap names like Halliburton Co. (HAL) and Schlumberger Ltd. (SLB).

However, our preferred pick in this group is Basic Energy Services Inc. (BAS). The Fort Worth, TX-based firm – carrying a Zacks Rank #2 (Buy) – has a solid secular growth story with the potential to rise from the current level.

ConocoPhillips Gives Up Claims from Green Dragon for $40M

Posted Tue Sep 02, 03:40 pm ET

by Zacks Equity Research

ConocoPhillips (COP) has entered into a settlement with coalbed methane gas producer Green Dragon Gas Ltd. Per the agreement, ConocoPhillips would receive $40 million as the final settlement to renounce all claims from Green Dragon on various proceedings in multiple jurisdictions.

The payment will be made using Green Dragon's existing cash resources. Its appeal hearing scheduled for Nov 2014, has been withdrawn, bringing the matter to a closure.

In Aug 2009, Green Dragon had received $42.6 million from ConocoPhillips under a farm-out agreement. The funds were used for further reserve development and drilling of gas production wells on the Shizhuang South block, and exploration activities within the Shizhuang North and Qinyuan blocks.

ConocoPhillips holds leading positions in both natural gas and heavy crude oil acreages in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions. The Houston, TX-based company thus looks forward to replacing reserves and sustaining production growth over the long term.

ConocoPhillips’ initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and Permian plays. The company is also poised to benefit from a pipeline of projects in the Gulf of Mexico, Malaysia, the liquefied natural gas project in Australia, the U.K., Norway, and the Canadian oil sands, apart from the US Lower 48 liquids-rich plays. Oil sands expansion projects are also on track.

Since Apr 2012, when ConocoPhillips divested its refining operations to Phillips 66 (PSX), it has delivered total shareholder returns of 22%. ConocoPhillips’ complete shift of focus to upstream operations and thus oil and gas prices play a major role in determining its performance. The company plans to expand production by maintaining its growth focus on reserves, through global drilling programs in legacy assets, unconventional assets and major projects.

ConocoPhillips’ margin growth would also be aided by its shift of production mix to higher-value products. The company expects to spend $16 billion on average annually and allocate 95% of its capital to investments that deliver above-average margins. The recent activity targets offshore prospects in Australia, Angola and Senegal, conventional exploration in Norway and Indonesia, and unconventional exploration in North America, Poland and Colombia.

Currently, ConocoPhillips holds a Zacks Rank #3 (Hold). Investors can consider top-ranked stocks in the oil and gas sector such as Weatherford International plc (WFT) and Sunoco Logistics Partners L.P (SXL), all sporting a Zacks Rank #1 (Strong Buy).

Fred's Down to Strong Sell on Poor Q2 Results, Bleak Q3 View

Posted Tue Sep 02, 03:30 pm ET

by Zacks Equity Research

On Aug 29, Zacks Investment Research downgraded Fred's Inc. (FRED) to a Zacks Rank #5 (Strong Sell). A disappointing second-quarter fiscal 2014 and a weak view for the upcoming quarter led to the downgrade.

Why the Downgrade?

On Aug 28, Fred's posted second-quarter fiscal 2014 loss of 19 cents per share which wider than the Zacks Consensus Estimate of a loss of 18 cents per share.. The results compared unfavorably to earnings of 9 cents reported a year ago as well as the company’s expectation of loss of 15 to 20 cents. Lower comps and weak margins resulted in the wider loss.

Although sales of $491.2 million inched past the year-ago results and were in line with the Zacks Consensus Estimate, comps slipped 0.1% as against a gain of 2.2% in the year-ago period. Lower customer confidence resulted in the soft comps during the period.

Gross margin shrank 260 basis points to 25.6% of sales, excluding the impact of the inventory provision. Margins were under pressure due to increased promotional environment and competitive activity in the discount retail industry that increased the cost of sales during the quarter.

Fred’s recently embarked on a new plan to reposition its merchandise assortment to focus on convenience and consumables instead of the discretionary categories where the company has little competitive advantage. Fred’s plans to accelerate its pharmacy acquisition to achieve its target of 65% to 70% penetration rate of stores with a pharmacy. The company also plans to initiate a new marketing plan, directed at driving customer traffic through multiple avenues, including expanded ad circulars and in-store programs. However, we remain concerned about the company’s ability to execute these initiatives in the specified timeframe.

Management expects tough retail conditions to continue across the markets throughout the rest of the fiscal year. In the third quarter, the company expects to incur 5 to 11 cents loss comparing unfavorably to earnings of 9 cents reported a year ago.

This general merchandise retailer witnessed sharp downward estimate revisions post the second-quarter fiscal 2014 results. Most of the estimates for the third quarter declined over the past 7 days and the Zacks Consensus Estimate decreased from earnings of 12 cents to a loss of 8 cents.

Other Stocks to Consider

Some better-ranked stocks to consider in the apparel industry include Crocs, Inc. (CROX), Perry Ellis International Inc. (PERY)and Michael Kors Holding Limited (KORS), all carrying a Zacks Rank #2 (Buy).

PartnerRe (PRE) Hits New 52-Week High Post Q2 Earnings

Posted Tue Sep 02, 03:21 pm ET

by Zacks Equity Research

Shares of PartnerRe Ltd. (PRE) scaled a new 52-week high at $111.11 on Aug 29, riding on a steady growth momentum following solid year-over-year performance in second-quarter 2014. Notably, this multi-line insurer and reinsurer’s shares rose about 12.2% since the beginning of 2014.

Friday’s closing price represents a strong one-year return of about 28.2%, against 22.7% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 320.9K.

Earnings Review

This Zacks Rank #3 (Hold) stock has delivered positive earnings surprises in three of the last four quarters with an impressive average beat of 44.9%.

On Jul 28, PartnerRe reported second quarter operating earnings per share (EPS) of $2.60 that notably missed the Zacks Consensus Estimate of $2.78 by 6.5%. Higher-than-expected expenses primarily led to the estimate miss.

However, the reported figure outpaced the year-ago quarter EPS of 90 cents. The year-over-year upsurge was led by higher premiums, investment income as well as net realized and unrealized investment gains, all of which led to top-line growth of 59.8%.

The positives were partially offset by rise in loss as well as acquisition and policy benefit expenses. Underwriting results and combined ratio also improved from the comparable year-ago numbers, resulting in higher return on equity (ROE) and book value per share.


PartnerRe’s focus on prudent enterprise risk management initiatives are showing results, as reflected in its improved core insurance sales in the past quarters despite catastrophe exposures. These initiatives to hedge market risks are also helping the company to counter the challenges from low interest rates, thereby boosting investment returns and ROE. The upcoming quarters are also likely to benefit from PartnerRe’s disciplined underwriting, improved pricing and healthy renewals.

Going ahead, the company’s diversified business portfolio, robust capital position and its pursuit of new lines of lucrative businesses will continue to accelerate margins and cash flows. These factors support efficient capital deployment as well as instill confidence in investors and ratings agencies.

Moreover, the long-term growth rate for PartnerRe is pegged at 9.5%, higher than the peer group’s average of 8.5%.

Stocks to Consider

Investors interested in insurance stocks could consider AmTrust Financial Services Inc. (AFSI), Global Indemnity plc (GBLI) and Mercury General Corp. (MCY). All these stocks sport a Zacks Rank #1 (Strong Buy).

Boston Scientific WallFlex Biliary RX Stent Study Succeeds

Posted Tue Sep 02, 03:20 pm ET

by Zacks Equity Research

Detailed results of the multinational scientific study conducted by Massachusetts-based medical equipment manufacturer Boston Scientific Corporation (BSX) has been recently published in the August issue of the prominent journal Gastroenterology.

The primary purpose of this study was to examine the effectiveness and safety of fully covered self-expanding metal stents (FCSEMS) in the treatment of biliary obstruction in benign bile duct strictures patients. It also aimed at evaluating the frequency and durability of benign biliary strictures in the long run.

This non-randomized study was conducted at 13 centers in 11 countries across 5 continents, wherein 187 benign bile duct stricture patients were implanted with Boston Scientific's Fully Covered WallFlex Biliary RX Stent. The WallFlex Biliary RX Stent has received CE Mark in Europe for curing biliary strictures produced by malignant neoplasms as well as for benign biliary strictures therapy.

Following extended indwell for up to 12 months, physicians removed these stents to deduce treatment success of bile duct obstruction.

The study results revealed 100% success rate of endoscopic removal of FCSEMS from the 155 patients who received the stents. Overall, the removal success of FCSEMS after extended indwell and stricture resolution was achieved for approximately 75% of patients in this trial.

The stricture resolution rates were 90.1% among patients who underwent scheduled FCSEMS removal. Moreover, the study results reflected the cost effectiveness of the FCSEMS treatment and its ability to potentially reduce the requirement for multiple sequential Endoscopic Retrograde Cholangiopancreatogram (ERCP) stent exchanges.

A follow-up of the patients under this study will be done over five years to determine the long-term durability of stricture resolution after stent removal.

Currently, Boston Scientific is enrolling patients for another multi-center, prospective, randomized study which will compare removable, self-expanding metal stents to plastic stents for the treatment of benign biliary strictures secondary to chronic pancreatitis. 

Currently, Boston Scientific has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical products industry include ICU Medical, Inc. (ICUI), Abaxis, Inc. (ABAX) and Conatus Pharmaceuticals Inc. (CNAT). While ICU Medical sports a Zacks Rank #1 (Strong Buy), Abaxis and Conatus hold a Zacks Rank #2 (Buy) each.

American Airlines, Orbitz End Dispute; Fare List Restored

Posted Tue Sep 02, 03:10 pm ET

by Zacks Equity Research

Just days after American Airlines Group Inc. (AAL) cut its ties with Orbitz Worldwide Inc. (OWW), the premier passenger carrier agreed to restore airfare listings on the online travel company’s website.  

On Aug 26, 2014, American Airlines had pulled out its fare listing from Orbitz and two of the latter’s affiliate websites – and – over a fee dispute. Beginning Sep 1, the carrier was also supposed to drop U.S. Airways’ listings from Orbitz. However, corporate customers could continue to book their tickets through ‘Orbitz for Business’.

However, last Friday, the two parties reached a mutual agreement that will reinstate fare information about American Airlines and U.S. Airways on Orbitz websites. The news pumped up Orbitz’s share price by 3.4% on Friday trade on Nasdaq, while American Airline’s shares closed the day marginally in the red.

Founded in 2000, Orbitz offers online booking of air tickets for American Airlines as well as peers like United Continental Holdings Inc. (UAL), Delta Airlines Inc. (DAL) and JetBlue Airways, among others.

It is worth noting that American Airlines and Orbitz had been caught in a similar dispute in the past, when the former withdrew airfare information from the latter’s website in 2010. Thereafter, in 2011, American Airlines had sued Orbitz claiming that the travel agency had downplayed the carrier’s flights in results reflected against customers’ search queries. That dispute was, however, settled last year.

We believe the possible impact that Orbitz apprehended on its turnover due to the pullout of the nation’s largest carrier from its website, led to the quick settlement of the dispute. It could have considerably dragged down Orbitz’s position vis-à-vis peers like Expedia Inc. and Travelocity.

On the other hand, American Airlines, which might have had a lesser impact on account of the pullout, will now have all major online booking sites offering their tickets, including Orbitz.

American Airlines currently carries a Zacks Rank #3 (Hold).

BioCryst's Ebola Candidate Moving to Efficacy Study Soon

Posted Tue Sep 02, 03:08 pm ET

by Zacks Equity Research

BioCryst Pharmaceuticals (BCRX) announced that it will start evaluating the efficacy of its Ebola candidate BCX4430 in a non-human primate study within a few weeks. Shares of the company reacted positively to the news.

To that end, the company received additional funding worth $2.4 million from the National Institutes of Health’s (NIH) National Institute of Allergy and Infectious Diseases (NIAID). Following NIAID’s decision, the value of the five-year contract on BCX4430, granted in Sep 2013, has risen to $24.4 million. We appreciate the NIAID decision to grant additional funds to BioCryst for furthering Ebola related studies as the disease has assumed epidemic proportions ever since its outbreak in West Africa earlier this year.

With no approved treatment for the dreaded virus, which has been declared as an international public health emergency by the WHO, many other companies such as Tekmira Pharmaceuticals (TKMR) and privately held Mapp Biopharmaceutical are developing treatments to combat the disease. Ebola is characterized by symptoms like high fever and internal bleeding.

Pharmaceutical giant GlaxoSmithKline (GSK) is also striving to come up with a cure for the disease. Glaxo’s anti-Ebola experimental vaccine candidate will be fast-tracked into human studies. Glaxo is developing the vaccine with NIAID.

According to media reports, researchers in Japan have devised a method to detect the presence of the virus in half an hour. We expect investor focus to remain on Ebola related updates going forward.

BioCryst carries a Zacks Rank #4 (Sell). A better-ranked stock in the health care space is Gilead Sciences (GILD), which sports a Zacks Rank #1 (Strong Buy).

Solid Q2 Earnings for FDIC-Insured Banks, Expenses Down

Posted Tue Sep 02, 03:05 pm ET

by Zacks Equity Research

Federal Deposit Insurance Corporation (FDIC)-insured commercial banks and savings institutions reported second-quarter 2014 earnings of $40.2 billion, above the year-ago earnings of $38.2 billion by 5.3%. Notably, community banks constituting 93% of all FDIC-insured institutions, reported net income of $4.9 billion, up 3.5% year over year.

Overall, during the second quarter, the banking industry witnessed a gradual improvement. The number of troubled assets and institutions significantly dipped, which is encouraging.

Further, lower loan loss provisions and improved loan growth was recorded. Moreover, banks’ revenues benefited from lower non-interest expenses and higher net interest income. However, a decline in non-interest income was experienced as trading income subdued and reduced mortgage-related activity was recorded.

Banks with assets worth more than $10 billion contributed a major part of the earnings in the said quarter. Though such banks constitute merely 1.6% of the total number of U.S. banks, these accounted for approximately 82% of industry earnings.

Such major banks include Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC).

Performance in Detail

Banks are striving to reap profits and are consequently bolstering their productivity. Around 57.5% of all institutions insured by the FDIC reported improvement in their quarterly net income, while the remaining recorded a decline in comparison to the prior-year quarter. Moreover, the percentage of institutions reporting net losses for the quarter slumped to 6.8% from 8.4% in the last-year quarter.

The measure for profitability or average return on assets (ROA) rose to 1.07% from 1.06% in the prior-year quarter. The average return on equity (ROE) increased to 9.54% from 9.46%.

Net operating revenue was $169 billion, down 0.9% year over year. The decrease was due to a fall in non-interest income, mostly offset by an increase in net interest income.

Net interest income was recorded at $105.5 billion, up 1.9% year over year. The average net interest margin declined to 3.15%, from 3.25% in the prior-year quarter, depicting the lowest quarterly margin for the industry since the third quarter of 1989. Notably, 9 of the 10 largest banks recorded reduced margins as compared with the prior-year quarter.

Non-interest income declined 5.3% year over year to $63.5 billion for the banks. Notably, income from sale, securitization and servicing of 1-to-4-family home mortgages suffered a fall. Further, trading revenue decreased 10.1% year over year and represented the fourth consecutive quarter of decline.

Total non-interest expenses for the institutions were $104.9 billion in the quarter, down 1.4% on a year-over-year basis. Reduced expenses for goodwill impairment and lower salaries and employee benefits led to the decline. However, litigation expenses were on the downside.

Credit Quality

Overall, credit quality considerably improved in the reported quarter. Net charge-offs fell to $9.9 billion from $14.1 billion in the second quarter of 2013. Notably, all major loan groups recorded a year-over-year decline in charge-offs, except auto loans.

In the quarter, provisions for loan losses for the institutions came in at $6.6 billion, down 22.4% year over year. The reported figure represents the lowest quarterly loan loss provisions since the second quarter of 2006.

The level of non-current loans and leases (those 90 days or more past due or in non-accrual status) declined 24% year over year to $181.8 billion. Moreover, the percentage of non-current loans and leases fell to 2.24%, which was the lowest since the second quarter of 2008 (2.09%).

Balance Sheet

The capital position of the banks was strong. Total deposits continued to rise and were recorded at $11.9 trillion, up 10.2% year over year. Further, total loans and leases came in at $8.1 trillion, up 4.9% year over year.

As of Jun 30, 2014, the Deposit Insurance Fund (DIF) balance increased to $51.1 billion from $48.9 billion as of Mar 31, 2014. Moreover, assessment revenues primarily drove the growth in fund balance.

Bank Failures and Problem Institutions

During the second quarter of 2014, seven insured institutions failed compared with 12 failures in the prior-year quarter. As of Jun 30, 2014, the number of "problem" banks declined from 411 to 354, reflecting the 13th consecutive quarter of decrease. Total assets of the "problem" institutions also fell to $110.2 billion from $126.1 billion.

Our Viewpoint

Though decline in the number of problem institutions is encouraging, the quarter remained challenging with soft trading volumes, sluggish mortgage banking activities and high legal costs. Moreover, top-line growth remains uncertain as pressure on net interest margins from a nagging low rate environment prevails.

However, banks have been gradually easing their lending standards and trending toward higher fees to dodge the pressure on the top line. Then again, continued expense control and stable balance sheets should act as tailwinds in the upcoming quarters. Further, a favorable equity and asset market backdrop, and favorable macroeconomic factors – such as falling unemployment, a progressive housing sector and flexible monetary policy – should pave the way for stability.

With lingering uncertainty in the economy, we do not see this issue-ridden sector returning to its pre-recession peak anytime soon. What encourages us though is that the U.S. banks are getting accustomed to increased legal and regulatory pressure and resorting to safer alternatives for higher earnings. This indicates their ability to better encounter challenges and grow at a moderate pace.

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