For Immediate Release
Chicago, IL – October 14, 2016 – Zacks Equity Research highlights Broadcom (NASDAQ:AVGO- Free Report) as the Bull of the Day and Corrections Corporation of America (NYSE:CXW- Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Argan Inc. (NYSE:(AGX - Free Report) -Free Report) andItron Inc. (NASDAQ:(ITRI - Free Report) - Free Report).
Here is a synopsis of all the four stocks:
Bull of the Day :
I last covered Broadcom (NASDAQ:AVGO- Free Report) as the Bull of the Day in early March when shares were trading just above $140 and the merger between Avago and Broadcom kept the former's stock symbol and the latter's name for the new combination.
And as AVGO has always done, it's back to a Zacks #1 Rank after fruitful merger synergies and strong guidance in Wired and Wireless divisions.
Not Your Average Chip Maker
Based in Singapore, Broadcom Limited is $67 billion premier designer, developer and global supplier of a broad range of analog semiconductor devices and digital, mixed-signal and optoelectronics components and subsystems.
Broadcom products primarily serve four target markets: Wireless Communications, Wired Infrastructure, Enterprise Storage, and Industrial services and infrastructure, including the build-out of hyper-fast communications and information technology, commonly called the 100 Gibabit Ethernet.
In computer networking, Gigabit Ethernet (GbE or 1 GigE or simply GE sometimes) is a term describing various technologies for transmitting Ethernet frames at a rate of a gigabit per second, or 1,000,000,000 bits per second.
Another Strong Quarter
Broadcom reported Q3 fiscal year 2016 results on September 1, beating the Zacks EPS consensus by 8%. Net revenue was $3.79 billion, an increase of 7% from $3.54 billion in the previous quarter and an increase of 119% from $1.735 billion in the same quarter last year.
Gross margin was $1.78 billion, or 47% of net revenue. This compares with gross margin of $1.046 billion, or 29.5% of net revenue, in the prior quarter, and gross margin of $884 million, or 51% of net revenue, in the same quarter last year.
Given the more powerful lineup of Enterprise Wired and Mobile Wireless products, plus the cost synergies, analysts raised the Zacks EPS consensus for the first full fiscal year of the combined companies (ending October 2017) from $10.96 to $11.40 in the past 60 days.
That 17.7% EPS growth next fiscal year, reflects a sub-15X P/E multiple for a key Apple supplier in mobile and strong broadband network builder for top global enterprises.
And that expected earnings growth is built on sales that are projected to climb from $13.25 billion to $16.25 billion (the current Zacks consensus for 2017), representing nearly 22.8% growth.
Bear of the Day:
Corrections Corporation of America (NYSE:CXW- Free Report) is a real estate investment trust that owns, operates and manages correctional, detention facilities and prisons primarily in the United States.
And its fortunes have fallen on hard times recently since mid-August when the US Department of Justice made a big decision.
The DoJ announced plans to phase out the use of private prisons, effectively killing the federally-funded wing of the private correctional services industry after concluding that the facilities are both less safe and less effective than their government-run counterparts.
In a memo released Thursday, Deputy Attorney General Sally Yates instructed officials to either decline to renew their contracts with private prisons, or “substantially reduce” the contracts’ scope.
“They simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department’s Office of Inspector General, they do not maintain the same level of safety and security,” Yates wrote.
In the past 90 days, Wall Street EPS estimates for CXW's 2017 calendar year have been slashed 22% from $2.68 to $2.60. And the stock was nearly cut in half from $27 to $14.
Revenue projections display a drop of over 13% so far as analysts try to figure out what business CXW may be able to hang on to.
According to a Dow Jones story on October 12 the situation is not as dire as you might think. They quote analysts from SunTrust who say "sentiment is overly negative" on Corrections Corp.
Citing its dividend and management's "consistent track record," the investment bank raised its rating on CXW to buy. According to reporter Patrick Sheridan "SunTrust says 'the firm is well positioned to improve margins as state budget conditions improve.' It also thinks the feds could lease or acquire CXW facilities in an effort to end for-profit relationships."
In addition to providing the fundamental residential services relating to inmates, the company also offers rehabilitation and educational programs, including basic education, religious services, life skills and employment training and substance abuse treatment. Corrections Corporation of America is based in Nashville, Tennessee.
The CXW story has a lot of moving parts right now. But until the business outlook is clearer and turns around, the earnings story is one to stay on the sidelines from. The Zacks Rank will let you know.
This Week’s Hidden Gems
Great investing opportunities exist everywhere in the stock market. But how do you find them?
Tracey Ryniec, Stock Strategist at Zacks Investment Research, discusses two hidden gems that might be worth a closer look at by investors:Argan Inc. (NYSE:(AGX - Free Report) -Free Report) andItron Inc. (NASDAQ:(ITRI - Free Report) - Free Report).
Hidden gems are stocks that are followed only by a handful of Wall Street analysts and which the rest of the stock market doesn’t pay much attention to but they should because their fundamentals are strong.
Argan provides services to the power industry including engineering, procurement and construction of power plants. Revenue jumped 25% in the second quarter.
Earnings are expected to rise over 50% this year. In addition to that growth, it has value fundamentals with a forward P/E of 15.
Itron makes electricity, gas, water and thermal energy measurement devices, otherwise known as smart meters. The analysts who cover the company believe it has groundbreaking technology that could change its industry.
Earnings are expected to grow over 218% this year.
Shares of both have soared in 2016, easily outperforming Facebook shares in the same time period.
But what else should investors take away from these two companies? Watch our short video to learn more about these hidden gems.
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