For Immediate Release
Chicago, IL – October 04, 2016 – Zacks Equity Research highlights Jabil Circuit (NYSE:(JBL - Free Report) - Free Report) as the Bull of the Day and Oracle (NYSE:(ORCL - Free Report) - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tyson Foods (NYSE:(TSN - Free Report) -Free Report), Netapp (NASDAQ:(NTAP - Free Report) -Free Report) and TDK Corp (OTCMKTS: (TTDKY - Free Report) - Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Jabil Circuit (NYSE:(JBL - Free Report) - Free Report) is a $4 billion global provider of electronic and semiconductor manufacturing services. The company designs and manufactures electronic circuit board assemblies and systems for a variety of end markets including communications, PC, mobile, automotive, aerospace, defense and consumer products industries.
Jabil has sustained trailing 12-month sales of over $18 billion since breaking above that milestone late last year. Major customers include Apple, Cisco, Hewlett-Packard, IBM, NetApp, and Zebra Technologies.
And on September 27, at their headquarters in St. Petersburg, Florida, management gave an Analyst & Investor Day presentation that bolstered confidence about its business on Wall Street. Jabil highlighted its evolution in the last several years from contract manufacturer into an total solution provider involved in various aspects of the design, procurement, and manufacturing of semiconductor components for customers across their spectrum of end-markets.
The outlook offered revenue and EPS growth projections for the next three years, with the top line expected to see CAGR of 4.5% to $20.5 billion, operating profit to grow 8-10%, and adjusted-EPS growth of 16-20%, aided by interest expense reduction and buybacks as well as a lower tax rate. The figures implied annual EPS of $3 in fiscal year 2019.
Estimates Already Headed Up After Strong Q4
Jabil reported stronger-than-expected Q4 fiscal 2016 results with adjusted earnings (including share-based compensation but excluding all one-items) of 28 cents per share that surpassed the Zacks Consensus Estimate of 16 cents. That's a whopping 75% EPS beat.
Revenues of $4.43 billion also beat the Zacks Consensus Estimate of $4.38 billion but were lower than the prior-year quarter’s figure of $4.68 billion.
In response to this performance, analysts were busy raising EPS estimates for this year and next.
The current fiscal year, ending August of 2017, saw profit projections move up from $1.62 to $1.70, representing 8.65% growth.
And next fiscal year saw EPS estimates rise from $1.71 to $1.77, with only one analyst providing an update. More upward revisions from other analysts could be expected as the Analyst & Investor Day projections and restructuring are processed.
Bear of the Day :
Oracle (NYSE:(ORCL - Free Report) - Free Report), the $160 billion giant of software and cloud-based services must be finding it harder to move the growth needle these days.
The stock slipped to a Zacks #5 Rank (Strong Sell) recently as analysts lowered estimates for this year and next.
In the last 30 days, fiscal year 2017 (ending in May) saw profit projections drop from $2.59 to $2.42, which actually put EPS growth slightly into the negative.
Revenues for the same period are seen as growing only 1.35% to $37.56 billion, according to the Zacks consensus.
Next year sees EPS estimates falling from $2.83 to $2.68 for just over 10% growth against this year's flat-line. And revenues are expected to grow only 2.73% to $38.58 billion.
The NetSuite Deal
While these estimate moves could keep ORCL in the lower realms of the Zacks Rank for a month or two at least, investors may be looking out further ahead to how the company is planning more strategic growth initiatives.
Oracle’s planned acquisition of NetSuite remains on track after the U.S. Department of Justice recently approved the deal. The antitrust clearance from the DOJ will now enable Oracle to proceed with the all-cash tender offer for NetSuite, which is set to expire on Oct 6, 2016.
NetSuite, founded in 1998, was a pioneer in the cloud computing market, as it was the first company to offer business applications over the Internet. Per Bloomberg, NetSuite has more than 30,000 customers, the bulk of which are small and mid-size companies.
In late July, Oracle offered to buy NetSuite for $109 a share, which equates to approximately $9.3 billion. The company expects the acquisition to be “immediately accretive” to earnings on a non-GAAP basis in the year after the deal closes. The transaction will now enable Oracle to penetrate the small and medium-sized business market segment, where it does not have a strong footing.
Compared to its peers Oracle is a late entrant in the cloud computing market. The company is striving to boost its cloud computing revenues amid slowing new license revenues for on-premise applications. However, we note that cloud revenues formed only 11.4% of total revenues in the recently concluded first quarter of 2017.
Par for the Course
September’s U.S. Dept. of Labor jobs report hits markets on Friday. As usual, this report is the dominant trading event to this Global Week Ahead. Economists forecast a Sept. gain of +160K jobs and a U.S. unemployment rate of 4.8%.
Each month, jobs remain core to any U.S. macro fundamental update. These particular September job numbers arrive in front of the U.S. presidential election held on Nov. 9th. On top of that, recent U.S. Fed minutes indicated the FOMC could vote short-term rates up 25 basis points on Dec 14th.
That means this: we have one more monthly jobs report (on Nov. 4th) before the presidential election hits, and 2 monthly jobs reports before a data-dependent Fed makes its final call for 2016.
In 9 months of 2016, U.S. jobs readings averaged +182K a month. That’s slower than 2015’s +229K. However, it’s ample. This durably supports readings of +2% real U.S. GDP growth. Below +150K – a level that roughly eats up annual growth in the 160 million U.S. civilian labor force -- is where economists begin to worry out loud.
What other effects come with +182K a month in U.S. job adds?
The 4.9% U.S. unemployment rate goes sideways -- or very slowly ticks down -- at this rate of labor demand. America started 2016 at a 4.9% rate. The healthy 4.9% status of the entire U.S. hiring system has put decent +2.4% annual wage gains into hourly U.S. paychecks in 2016. Finally, a solid number of discouraged U.S. job seekers got drawn back into the workforce.
We have seen single-digit annual stock index returns in this environment. That’s a subdued scene for equities -- in annual terms -- but consistent with modest gains seen in annual payroll reports. Don’t expect more than you can ask for.
If you are a par golfer, and hit a par on the latest hole, then you can safely say you are holding your own. You are also certainly not going to get a surprise phone call to play in the next Ryder Cup.
The same can be said for the U.S. economy and stocks.
Fresh Zacks #1 Rank stocks—
(1) Tyson Foods (NYSE:(TSN - Free Report) -Free Report) is a U.S. poultry producer with a $27 billion market capitalization. The Zacks VGM score is an A too. My colleague Tracey Ryniec featured the stock as a Zacks Bull of the Day on Sept. 27th.
(2) Netapp (NASDAQ:(NTAP - Free Report) -Free Report) is a U.S. provider of innovative data management solutions. These simplify the complexity of storing, managing, protecting, and retaining enterprise data. The stock has a $10 billion market cap. The Zacks VGM score is an A, too.
(3) TDK Corp (OTCMKTS: (TTDKY - Free Report) -Free Report) is back to a Zacks #1 Rank. This Japanese electronic components maker has been consistently making the top Zacks Rank list for some time. TDK technologies can be found in multimedia, video, television, personal computers, mobile communications and semiconductors.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
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Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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