For Immediate Release
Chicago, IL – October 06, 2016 – Zacks Equity Research highlights definitely Teck Resources (NYSE:(TCK - Snapshot Report) - Free Report) as the Bull of the Day and Sociedad Quimica y Minera (NYSE:(SQM - Snapshot Report) - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Salesforce.com (NYSE:(CRM - Analyst Report) -Free Report), Twitter Inc. (NYSE:(TWTR - Analyst Report) -Free Report) and Walt Disney Co. (NYSE:(DIS - Analyst Report) - Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
With concerns building over the Federal Reserve and their interest rate policy to close out the year, some investors are starting to worry about the health of the materials market. After all, a stronger dollar would hamper commodity prices, and many stocks have begun to see higher volatility levels thanks to these fears.
However, investors shouldn’t throw out all stocks in this industry due to these concerns, as there are still several gems out there. This includes the broader miscellaneous mining segment, which actually has a top 10% industry rank right now and has plenty of promising names that could be solid investments no matter what the Fed does in the next few months.
One to keep an eye on in particular from this group is definitely Teck Resources (NYSE:(TCK - Snapshot Report) - Free Report). This roughly $10 billion Canadian company mines various products such as zinc, gold, copper, and coal and it has been surging for much of 2016. In fact, the company has jumped by over 160% so far in 2016, and with an ‘A’ momentum grade, there is plenty of reason to think it can still march higher. But momentum isn’t the only reason to like TCK these days, as it has several other strong fundamental factors backing up its near term potential.
TCK in Focus
A crucial aspect to consider when evaluating TCK stock is its most recent earnings estimate revisions. Analysts following the stock have been universally raising their earnings estimates for the full year and the next year period, while current quarter estimates are also on the rise.
But it isn’t just the agreement among analysts, as the magnitude of these revisions has also been strong. This is particularly true when you look to the current year and next year consensus estimates, which have seen astounding growth in the past few weeks. The current full year estimate has jumped by over 60% in the past two months, while the following year has surged by over 70% as well.
But before you worry about TCK living up to these juiced-estimates, consider its recent track record in earnings season. The company hasn’t missed estimates in any of its last five quarters, while it has, on average, more than doubled the consensus estimate at earnings season over the past year.
Bear of the Day :
Many materials stocks are on a nice run here in 2016, with strong gains seen in many business segments. Yet, with possible Fed action coming, questions are starting to appear regarding a variety of commodity plays.
This is especially true in the fertilizer and broad commodity markets, as this industry has a rank in the bottom 10% of all that we cover right now. In fact, not a single stock in the group has a rank above ‘hold’, suggesting broad based weakness for this market. Today though, I wanted to take a quick look at one you need to avoid in particular, Sociedad Quimica y Minera (NYSE:(SQM - Snapshot Report) - Free Report), a Santiago, Chile-based giant that may be poised for a drop soon.
Why SQM May Be in Trouble
SQM has been on a tear so far in 2016, as the stock has added close to 50% in the time frame. While the bulk of the gains came in February and March, SQM is actually on a nice run over the past few weeks, and the stock is back at fresh 52 week highs.
This may turn out to be a great time for investors to sell though, as recent trends have actually been moving decidedly against the stock. In particular, the fundamental picture is pretty poor for SQM, as the stock has a VGM score of ‘F’.
This includes some pretty poor grades for its value and growth component scores too. SQM actually has a grade of ‘F’ for value, thanks to its PE of 25 which is higher than the industry average, and a P/S ratio that is double the industry average. Additionally, SQM has a grade of ‘D’ for growth thanks to a projected double digit percentage decline in current cash flow growth, and a ROE that is below the industry average.
But the weak fundamentals aren’t the only reasons to avoid SQM stock, as the company also has been seeing sluggish earnings estimates. In fact, the current consensus is roughly 8.5% lower than it was 60 days ago, while we see a similar negative trend for the following year as well. And even worse for SQM is that the most recent earnings estimates have been even lower, with the Most Accurate Estimate about 4.6% lower than the consensus.
While this is obviously poor news, it also doesn’t help that SQM has a pretty bad track record of living up to earnings expectations. The company has missed estimates in three of the last four quarters and its average miss in the past year is approaching 17%.
Why Did Salesforce (CRM - Analyst Report) Stock Tank Wednesday?
While Salesforce CEO Marc Benioff appears to be very serious about acquiring the struggling social networking company, its investors do not seem to like the idea.
On Wednesday, shares of cloud computing giant Salesforce.com (NYSE:(CRM - Analyst Report) -Free Report) were tumbling, down around 6.5% in afternoon trading after reports tying it more closely to a sale bid for Twitter Inc. (NYSE:(TWTR - Analyst Report) -Free Report) have surfaced.
According to the Wall Street Journal, who cite unnamed sources, Mr. Benioff believes Twitter to be an “unpolished jewel” and has a desire to make it a “great company.”
But this will be harder than it looks. Salesforce has been busy these past few months, spending over $4 billion on acquisitions, so a Twitter buyout could seriously hurt the company’s valuation. According to Business Insider, Mizuho analyst Abhey Lamba estimates that purchasing Twitter could “destroy $12-17 billion (20-25%) of [Salesforce’s] value, which could take 2-3 years to recapture if all goes well,” said in a research note.
Along with depleting up to a quarter of its valuation, Salesforce will have to deal with Twitter’s notoriously jumbled management team, potentially a situation that could cost the company even more money and further strain its growth.
Twitter investors, on the other hand, seem to be happy at the reports. TWTR stock is up around 7% in afternoon trading to $25.17 per share.
Salesforce isn’t the only company seemingly interested in buying Twitter. Media conglomerate Walt Disney Co. (NYSE:(DIS - Analyst Report) - Free Report) has also reportedly shown interest in making a sales bid.
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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.
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