For Immediate Release
Chicago, IL – November 14, 2016 – Zacks Equity Research highlights Northrop Grumman (NYSE:(NOC - Free Report) – Free Report) as the Bull of the Day and Realogy Holdings (NYSE:(RLGY - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alibaba (NYSE:(BABA - Free Report) –Free Report),Nike Inc. (NYSE:(NKE - Free Report) –Free Report) and Apple Inc. (NASDAQ:(AAPL - Free Report) – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
With Trump’s stunning victory, investors are quickly reallocating their portfolios to prepare for a Republican president, and a Republican-controlled Congress as well. While there are a number of areas that look to benefit from this political situation, one that may do especially well is the defense market.
This corner of the economy could benefit from a massive surge in defense spending, as some believe that Trump will look to spend somewhere near $500 billion more on defense , pushing total U.S. defense spending near the one trillion dollar mark. As you might be able to guess, this huge increase is being viewed favorably by the defense stocks, and we have seen several of these surge following Trump’s win. Plus, the industry rank here is in the top 20% overall, so there is plenty to like in terms of investment choices.
One that might be worth a closer look by investors though, is Northrop Grumman (NYSE:(NOC - Free Report) – Free Report). This company was recently upgraded into Zacks Rank #1 (strong buy) territory while it could be a prime beneficiary of the Trump defense spending surge.
But beyond Trump, analysts also seem to like NOC’s prospects, as we saw a number of analysts raise their earnings estimates on NOC shares, and that was before the election took place. In fact, analysts were already baking in a year-over-year earnings growth rate of 27% for Northrop, and that is before considering Trump's huge spending surge.
But before worrying about these lofty expectations, investors should consider that NOC does a great job in earnings season, and that it has a great history of beating estimates. This includes four straight beats of at least four percent, and only two misses in the past five years.
Bear of the Day :
In the wake of Trump’s surprising victory, investors have seen incredible volatility in a number of market sectors. One area that has been on the move more than others is the world of real estate.
That is because interest rates are soaring in anticipation of some inflationary policies from Trump (including a burst of new spending), while some think that foreign holders of Treasury bonds may be reducing their positions as well. Either way, this has pushed the 10-year yield to within striking distance of its 52 week high, hurting the appeal of housing and real estate markets in the process.
While this has obviously hit companies in the high dividend area of the real estate world, those in the services side of the market could also be impacted. Lower home sales or a more difficult housing market could definitely impact companies like Realogy Holdings (NYSE:(RLGY - Free Report) – Free Report) and force these companies lower in the process.
RLGY in Focus
RLGY provides real estate and relocation services across the globe. This is done via a number of real estate brands, including pretty well-known ones such as Century 21, Coldwell Banker, and Sotheby’s International Realty to name a few.
The company could be under pressure if the housing market faces turmoil in the near term, while the sector outlook isn’t much better, including a bottom 25% industry rank. But it isn’t just the jarring industry outlook that is a problem for RLGY, as the company’s most recent earnings report also brought up some big questions.
In the latest report, RLGY missed earnings estimates for the second time in a row, posting 74 cents a share in earnings compared to expectations of 76 cents per share. Additionally, the most recent estimates for RLGY earnings have come in below previous expectations, as we have seen two estimates go lower for the current quarter in the past week, and one lower for the full year time frame too.
In fact, if we look at the most accurate estimate and compare it to the consensus from 30 days ago, the current quarter expectations have fallen by over 25%, while the full year and next year periods have also trended lower. Clearly, analysts aren’t big believers in RLGY’s near term potential, and it is hard to blame them considering the macro forces at play as well.
Alibaba’s ‘Singles Day’ Posts Record Sales of $178 Billion
On Friday, China’s e-commerce king Alibaba (NYSE:(BABA - Free Report) – Free Report) held its annual Singles’ Day shopping event, posting record sales of $17.8 billion worth of gross merchandise volume (GMV) and soaring past last year’s results of $14.3 billion. This figure was easily beaten in Chinese Yuan before 3:30pm.
Back in the 1990s, Singles’ Day was first celebrated by young, single Chinese people as a pushback against Valentine’s Day. Now, it’s become one of the country’s biggest shopping events. Alibaba began to capitalize on the “holiday” in 2009, promoting discounts at certain retailers on its various digital platforms; the company uses Singles’ Day as a way to boost its revenues in the typically slow sales period before the Lunar New Year season.
This year, Alibaba said that deals offered by athletic giants Nike Inc. (NYSE:(NKE - Free Report) –Free Report), iPhone makerApple Inc. (NASDAQ:(AAPL - Free Report) – Free Report), industrial automation company Siemens AG and fast fashion retailer Uniqlo. Many international brands have jumped on the holiday over recent years. According to CNBC , 14,000 brands took part of 2016 Singles’ Say, making up roughly 30% of total GMV just half-way into the shopping event. Big Chinese brands like appliance manufacturers Haier and Midea and smartphone maker Meizu also reported strong profits in the event.
Popular celebrities made appearances at the four-hour “countdown event” in Shenzhen this year, including actress Scarlett Johansson, David Beckham and his wife, fashion designer Victoria Beckham, Kobe Bryant, and live music from OneRepublic. Even Alibaba CEO Jack Ma showed up and performed a magic trick on stage, along with promotional spots for the new Alibaba Pictures’ latest film production.
For some perspective on how big of a sale Singles’ Day is, 2015’s Black Friday, the annual day-after-Thanksgiving sale here in the U.S., only reached $4.5 billion in GMV; Cyber Monday, the annual Monday-after-Thanksgiving e-commerce sale event, only saw a record $3 billion last year, or pocket change compared to what Singles’ Day brings in.
"Jack Ma likes to say that they're no longer an e-commerce company. They're sort of transcending that," said Duncan Clark, chairman and MD of the business advisory BDA China, to CNBC's "Squawk Box" on Friday. "It's about data, it's about finance, it's about media." This is very similar to how Amazon has evolved over the years, turning into not just the biggest e-commerce platform in the U.S., but also a top video streaming choice for many consumers through its Prime membership.
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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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