For Immediate Release
Chicago, IL – November 07, 2016 – Zacks Equity Research highlights definitely Gibraltar Industries (NASDAQ:(ROCK - Free Report) – Free Report) as the Bull of the Day and Eaton Corporation (NYSE:(ETN - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on News Corporation (NASDAQ:(NWSA - Free Report) – Free Report),Scripps Networks Interactive, Inc. (NASDAQ: –Free Report) and Entercom Communications (NYSE:(ETM - Free Report) – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Gibraltar Industries (NASDAQ:(ROCK - Free Report) – Free Report) is a $1.2 billion manufacturer and distributor of metal building products for the industrial, infrastructure and residential markets.
The stock is part of a fairly strong building and construction sub-industry ranked in the top 40% of all Zacks industries and including Caesar Stone, Masco and Simpson Manufacturing. ROCK is North America’s leading manufacturer of ventilation products, mail storage solutions including mailboxes and package delivery products, bar grating, expansion joints and structural bearings, plus ground mounted solar racking and commercial greenhouses. The company is divided into three reporting segments: Industrial and Infrastructure Products, Residential Products and Solar Mounting and Commercial Greenhouses.
Pedal to the Metal
Gibraltar has had quite a run this year, up around 50% YTD. I first wrote about the stock as a Bull of the Day when it was a Zacks #1 Rank in early December and trading in the mid-$20s. And I chose ROCK for Bull of the Day again in August after I bought shares looking for the next breakout above $39. Here's what I said then... Construction markets are still strong. And how about 3 more earnings beats for the ROCK -- two of them by over 100%! Plus, analysts are still scrambling to raise estimates. In the past 60 days, the full-year 2016 consensus rose from $1.38 to $1.44 and 2017 profit projections rose from $1.54 to $1.65. Also worth noting in Q2, Goldman Sachs added 970,000 shares of ROCK to their portfolios.
What's changed since August?
Another earnings beat and raised guidance, that's what. The Q3 beat reported on October 28 was only 10%, but the company raised its full-year 2016 adjusted earnings within the range of $1.57-$1.61 per share from $1.37-$1.47 per share previously stated. Analysts responded by raising their estimates, thus making ROCK a Zacks #1 Rank again. For the full-year 2016, the EPS consensus jumped from $1.44 to $1.58, representing 45% growth. And 2017 profit projections have moved up twice in the last month from $1.65 to $1.73 and then again to $1.81 in the last week, signaling 14.3% growth. The only disappointment in the quarter was that Gibraltar Industries’ net sales were $272.7 million, down 10.6% year over year. The top line also missed the Zacks Consensus Estimate of $276 million. This lower revenue performance was primarily due to the divestiture of business units in Europe.
Residential Products segment generated revenues of $118 million, down 7% year over year. Segmental sales declined due to lower sale of postal products. Adjusted operating margin was 17.2%, up 270 bps year over year. The improvement was attributable to greater operational efficiency, accomplishment of the centralized mailbox contract and early receivables from the 80/20 simplification plan.
Industrial and Infrastructure Products yielded revenues of $73 million, down 24% year over year. The decline stemmed from the divestiture of the company’s industrial business in Europe, lower volume of orders from energy-related markets, construction postponements for major infrastructure projects and augmented competition in pricing. The segment’s adjusted operating margin was 7%, down 140 bps year over year. The downside was witnessed due to reduced volumes and weaker customer pricing (as cost of raw materials increased). The Renewable Energy & Conservation segment’s revenues came in at $82 million in the quarter under review, flat year over year.
Gibraltar Industries exited the third quarter with cash and cash equivalents of $173.1 million, up from $68.9 million at year-end 2015. Long-term debt was $209 million, up 0.05% from $208.9 million recorded 2015-end. In the quarter under review, Gibraltar Industries generated $101.2 million of cash from operating activities compared with $44.5 million generated in the year-ago comparable period. Capital expenditure was $7.6 million, up from $6.8 million in the year-ago quarter.
Bear of the Day :
Eaton Corporation (NYSE:(ETN - Free Report) – Free Report) has slipped to a Zacks #5 Rank (Strong Sell) after another round of downward EPS estimate revisions. The analyst moves came after a disappointing Q3 report where operating earnings per share of $1.15 were a penny higher than the Zacks consensus but Eaton’s total revenue came in at $4.99 billion, lagging the consensus of $5.05 billion by 1.2%.
On a year-over-year basis, revenues were down nearly 4% due to lower Aerospace (2.9%), Vehicle (12.4%), Electrical Systems and Services (3.4%), and Hydraulics (6.1%) sales.
Unfavorable currency translation and a decline in organic sales were the primary reasons for the revenue decline. Sales took a 1% hit from currency translation, while the drop in organic sales accounted for 3%.
In response, analysts took down this year's full year estimates from $4.27 to $4.21 and 2017 profit projections from $4.56 to $4.36 in the past week.
Cost of products sold in the reported quarter was $3,371 million, down 6.3% from the prior-year period.
Selling and administrative expenses decreased 5.9% to $853 million from $907 million a year ago.
In the third quarter of 2016, the company’s research and development expenses were $146 million, down 6.4% from $156 million in the prior-year quarter.
Interest expenses of $59 million were in line with the prior-year quarter figure.
Eaton is on track with its restructuring program, which is expected to deliver $200 million of incremental profit in 2016 over the 2015 levels.
Media Stocks to Watch for Earnings Monday
The third-quarter earnings season is past the halfway mark now with reports from 73% of the S&P 500 companies already out as of Nov 2 (per the latest Earnings Outlook report). The outcome of the season so far has given a decent growth picture, breaking the five-quarter-long lackluster trend. Clearly, this period is quite significant with both earnings and revenues on the growth trajectory.
Per our latest Earnings Outlook, out of the 364 S&P 500 companies that have come up with their quarterly numbers, approximately 72.3% posted positive earnings surprises, while 54.7% beat top-line expectations. According to the report, earnings for the 364 S&P 500 companies that have reported so far are up 1.6% from the same period last year, while revenues have also increased 1.6%.
Further, the report projects that earnings for the total S&P 500 companies will improve 2.4% from the year-ago period with total revenue rising 1.4%. In second-quarter 2016, earnings for the S&P 500 companies declined 2.8%, whereas revenues were flat.
In the Q3 earnings season, the widely diversified Consumer Discretionary sector has witnessed encouraging earnings.
Per the latest report, nearly 54.3% of the Consumer Discretionary companies have already reported their third-quarter results, out of which 68.4% beat earnings and 47.4% surpassed revenue estimates. Total earnings for these companies climbed 11% while revenues increased 7.9% year over year. Media stocks form part of the Consumer Discretionary sector.
Among Media stocks lined up to report on Nov 7, let’s take a sneak peek at three companies.
News Corporation (NASDAQ:(NWSA - Free Report) – Free Report), the diversified media conglomerate, is slated to report first-quarter fiscal 2017 results. The question lingering in investors’ minds is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, News Corporation underperformed the Zacks Consensus Estimate by an average of 17.5%.
NEWS CORP NEW-A Price, Consensus and EPS Surprise | NEWS CORP NEW-A Quote
News Corporation is in a transitionary phase, looking to diversify its revenue streams through strategic acquisitions and operational enhancement. The company is expanding its digital offerings, along with greater emphasis on real estate businesses. However, foreign currency headwinds and soft print advertising demand continue to weigh upon the company’s performance to an extent.
Advertising, which forms a major part of News Corporation’s total revenue (approximately 44% of fiscal 2016 total revenue), remains highly susceptible to the economic conditions. Advertising revenue fell 5% during final-quarter fiscal 2016 at the News and Information Services segment. Adverse foreign currency fluctuations hurt fourth-quarter total revenue by $54 million.
News Corporation has an Earnings ESP of -100%. The Zacks Consensus Estimate for the quarter is pegged at 2 cents. The company carries Zacks Rank #4 (Sell). (Read more: News Corp. Q1 Earnings: Will the Stock Disappoint? )
Scripps Networks Interactive, Inc. (NASDAQ: – Free Report) is scheduled to release third-quarter 2016 financial numbers, before the opening bell. In second-quarter 2016, Scripps Networks posted a positive earnings surprise of 6.8%. In fact, the company boasts an impressive history with respect to earnings. Scripps Networks outpaced the Zacks Consensus Estimate in each of the last four quarters with an average earnings beat of 21.3%.
We expect the company’s third-quarter results to be hurt by headwinds like foreign exchange woes and escalating costs. We note that Scripps Networks reported lower-than-expected revenues in the second quarter. The unfavorable trend is expected to continue in the third quarter as well with the company’s top line declining in spite of strong advertising revenues. Further, the company’s high debt levels raise concerns. (Read more: Scripps Networks Q3 Earnings: Stock to Disappoint? )
Scripps Networks Interactive carries a Zacks Rank #4 and has an Earnings ESP of 1.08%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
SCRIPPS NETWRKS Price, Consensus and EPS Surprise | SCRIPPS NETWRKS Quote
Entercom Communications (NYSE:(ETM - Free Report) – Free Report), the fourth largest radio broadcasting company in the U.S is scheduled to report third-quarter 2016 earnings on Nov 7. The Zacks Consensus Estimate for the company is currently pegged at 25 cents. Last quarter, it lagged the Zacks Consensus Estimate by 4.2%. The company is unlikely to beat the Zacks Consensus Estimate this quarter too, for it has an unfavorable combination of an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here .
ENTERCOM COMMUN Price, Consensus and EPS Surprise | ENTERCOM COMMUN Quote
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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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