For Immediate Release
Chicago, IL – September 23, 2016 – Zacks Equity Research highlights American Eagle Outfitters (AEO - Analyst Report) as the Bull of the Day and Deutsche Bank (DB - Analyst Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis Apple (AAPL - Analyst Report) .
Here is a synopsis of all three stocks:
Bull of the Day :
Based in Pittsburgh, PA, American Eagle Outfitters (AEO - Analyst Report) is a specialty retailer of casual apparel, accessories and footwear. Their target consumers are 15–25 years old men and women. They currently operate under the AE Brand, Aerie by American Eagle and an online retailing channel – AEO Direct.
The company operates more than 1,000 stores in the US, Canada, Mexico, China, Hong Kong and the UK. Some of their merchandise is also available at international stores operated by licensees in 22 countries.
Solid Quarterly Results and Strong Guidance
The company reported excellent results for the second quarter. Quarterly earnings of $0.23 per share surged 35.3% from the same quarter last year and surpassed the Zacks Consensus Estimate of $0.21 per share.
Revenues increased 3.2% year over year to $822.6 million, also beating the Zacks Consensus Estimate of $818.7 million. Same store sales grew 3% during the quarter—the sixth consecutive quarter of growth—but below 6% growth recorded in the previous quarter. Performance of Aerie brand was particularly strong, where sales surged 24%.
Jay Schottenstein, the CEO said: ”For the past few years, we have worked hard to lift our brands through merchandise leadership and innovation, strengthen our customer focus and invest in technology. Our efforts around these priorities are clearly paying off, as again evidenced by our strong earnings growth in the second quarter.”
The management expressed optimism about back-to-school sales, which should support Q3 results.
Analysts have been raising their estimates for the company after robust results and better-than-expected guidance. Zacks Consensus Estimates for the current and next year are now $1.31 per share and $1.43 per share, up from $1.27 and $1.36, before the results. Rising estimates sent the stock back to a Zacks Rank #1 (Strong Buy).
The company has an excellent track record of beating estimates, with not a single miss in the last twenty quarters.
Bear of the Day:
Headquartered in Frankfurt, Deutsche Bank ( DB) is the largest bank in Germany and one of the largest financial institutions in Europe and the world, with assets totaling €1.74 trillion as of Mar 31, 2016. It offers a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.
$14 Billion Penalty for Mortgage Practices
Last week, it was reported that the US Department of Justice had proposed a $14 billion settlement to resolve claims related to the German bank’s dealings in mortgage-backed securities prior to the financial crisis.
While the bank confirmed the report, they said “the Bank has no intent to settle these potential civil claims anywhere near the number cited”, according to a WSJ report. While it is unclear as of now as to how much fine will eventually be paid by the bank, analysts say even a settlement half the proposed amount would strain the bank’s capital cushion.
The bank has a litigation reserve of only about $6.2 billion and may be forced to raise fresh capital. Shares plunged more than 8% after the report.
Disappointing Second Quarter Results
Deutsche Bank reported net income of €20 million ($22.6 million) for Q2, while income before income taxes was €408 million ($460.7 million), down 66.8% year over year.
Lower revenues and higher provisions hurt the results, partly offset by the reduction in non-interest expenses.
Germany’s flagship bank has seen a sharp plunge in earnings estimates as a result of weak performance and continued woes.
Zacks Consensus Estimates for the current and next year EPS are now $0.40 and $2.03 respectively down from $1.38 and $2.21, just 60 days ago.
What Is McLaren and Why Is Apple Thinking of Buying It?
Yesterday news broke that Apple (AAPL - Analyst Report) may be interested in acquiring hyper car manufacturer and Formula One team McLaren. When Apple bought Beats Headphones it made sense. But Apple looking at McLaren? On the surface it’s a bit of a head-scratcher. Let’s dig in a little bit to explore why on Earth Apple would want to do this.
First, a little about McLaren. Founder Bruce McLaren was a race car driver and engineer who developed his own Formula One car in May 1966. It wasn’t until 1993 that McLaren made its first road car, the iconic McLaren F1. In 2004 the McLaren Technology Center was built in Surrey, England and since then the company has gone on to build some of the fastest, most beautiful super cars in the world, beginning with the MP4-12C in 2009.
They also happen to be one of the most successful marques in Formula One racing history. McLaren knows how to build cars. Their engineers have found unique ways to put mind-boggling capabilities in the hands of regular car owners while saving them from killing themselves. Try giving a suburban dentist 616 hp and setting him loose on the street without driver assists like traction and stability control. It’d be like watching mustangs leave car shows.
Then there’s the McLaren factory itself. It’s less an auto plant and more a biotech manufacturing facility. You’d think they were making surgical grade implants there. Every room is set to a precise 21 degrees Celsius and every screw is vertical so the heads won’t collect dust. It’s a white-glove, sterile, automated operation with advanced technologies found nowhere else in the world. J
ust listen to how McLaren describes its own factory. “Conventional architecture was unable to find an elegant solution capable of supporting the MTC’s magnificent glass façade.” That’s a pickup line right there if I ever heard one. Girl, conventional fashion was unable to find an elegant solution capable of supporting that...As for the potential deal with Apple there are plenty of synergies, both business-wise and culturally.
The automation, the engineering, not to mention a potential tax advantage for Apple with McLaren being headquartered overseas. The company makes phones and tablets. Creating a car is an entirely different animal. By acquiring a company like McLaren Apple could solidify itself as a major player in the autonomous car space.
Better move fast as self-driving vehicles are already being tested on the streets of Pittsburg. So is the iMacLaren right around the corner? Apple is sitting on $200 billion in cash while McLaren is valued at around $2 billion. Meaning Apple has enough money to buy McLaren 100 times over right now. The deal makes sense, just as long as Apple doesn’t change the special sauce at McLaren.
They’ve got to do something to find growth. We’ve got them as a Zacks Rank #3 (Hold) right now because analysts haven’t been able to make up their minds. Nine analysts have upped their estimates for how much money they think Apple is going to make this year, while six analysts have dropped their numbers. The result is our Zacks Consensus Estimate for the current year is the same as it was 60 days ago, stuck on $8.28.
The stock’s been on a run along with the rest of the market though. Today it’s trading near $115 after dipping to the low $90s during the summer. The huge move in early September broke out through resistance at $112.
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