For Immediate Release
Chicago, IL – November 18, 2016 – Zacks Equity Research highlights New Oriental Education & Technology Group (NYSE:(EDU - Free Report) – Free Report) as the Bull of the Day and BJ’s Restaurants (NASDAQ:(BJRI - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ARIAD Pharmaceuticals Inc. (NASDAQ:(ARIA - Free Report) –Free Report),Incyte Corporation (NASDAQ:(INCY - Free Report) –Free Report) and Exelixis, Inc. (NASDAQ:(EXEL - Free Report) – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
China’s largest private education provider delivered another strong quarter. Analysts have been raising their price and earnings estimates after solid results, sending the stock back to a Zacks rank #1 (Strong Buy).
About the Company
Founded in 1993, New Oriental Education & Technology Group (NYSE:(EDU - Free Report) – Free Report) is the largest provider of private educational services in China with over 26.6 million student enrollments. The company IPO’d on the NYSE in September 2006.
Headquartered in Beijing, New Oriental group currently has a network of 771 schools/learning centers and over 19,700 teachers in 56 cities. Additionally, it has a large online network with over 14.2 million users.
They provide a comprehensive range of educational products for students of all ages, including POP kids programs, summer camps, private schools, after school tutoring, adult English as well as domestic and overseas entrance tests preparation.
Excellent Quarterly Results
The company reported its Q1 FY 2017 (ended August 31) results on October 25. Revenue for the quarter increased 16.5% year-over-year to $534.1 million. Net income increased 9.7% year-over-year to $141.1 million.
Strong growth was mainly attributable to 31.2% increase in total enrollments. Their K-12 all-subjects after-school tutoring business continued to perform well, with revenue up 28% year over year and enrollment up 46% year over year.
The management expects net revenues in the second quarter of fiscal year 2017 (ending November 31, 2016) to be in the range of $324.6 million to $335.1 million, representing year-over-year growth in the range of 17% to 21%.
After strong results, analysts have been raising their estimates for the company. Zacks Consensus Estimates for current and the next fiscal year have gone up to $1.76 per share and $2.29 per share respectively, from $1.75 and $2.18, before the results. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).
Bear of the Day :
Founded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants (NASDAQ:(BJRI - Free Report) – Free Report) owns and operates a chain of 186 high-end casual dining restaurants in 24 states. Their signature menu items include deep dish pizza, craft beer and “pizookie” dessert. They call their positioning “contemporary, high-quality, casual plus”.
The company reported lackluster Q3 results, missing both on the top and bottom lines. Adjusted earnings of $0.30 per share fell short of the Zacks Consensus Estimate of $0.32 by 6.3%.
Revenues increased 1.9% year over year to $233.7 million but were below the Zacks Consensus Estimate of $239 million by 2.2%.
Did the Presidential Election Impact Results?
According to the management, “businesses dependent on consumer discretionary spending were challenged by a variety of macro factors including the timing of the Summer Olympics as well as the current economic uncertainty arising from the political elections.”
The CEO Greg Trojan said the election had created "a nearly unprecedented level of negativity and doubt in the minds of everyday American citizens."
Analysts have slashed their estimates for the company after disappointing results. Zacks Consensus Estimates for the current and the next fiscal year have fallen to $1.75 per share and $1.95 per share respectively, from $1.82 and $2.10, 30 days ago. Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).
3 Biotech Stocks to Add as M&A Hopes Rise
2016 has not been a great year for mergers and acquisitions (M&As) in the pharma and biotech sector although some headline deals like the Pfizer-Medivation and the Teva-Actavis Generics acquisitions were completed this year. While expectations were high that this year too, the pharma and biotech sector would see lots of M&A activity that did not happen, with the focus being mostly on small bolt-on acquisitions and licensing deals and agreements.
Will a Trump Presidency Trigger More M&A Deals for Biotechs?
Although it may be too early to speculate, there is a lot of chatter about a possible increase in M&As in the pharma and biotech sector now that Donald Trump is President-elect.
Basically, the Trump victory is being viewed as a positive for the biotech and pharma sector. There are several reasons for this, the foremost being the drug pricing issue. The general view is that a Hillary Clinton win would have been a negative for pharma and biotech stocks given her stand on rising drug prices and her plans to address the excessive price hikes of treatments that have been available for years and to lower drug prices for all Americans. With Clinton’s frequent rhetoric regarding drug prices, biotech and pharma stocks have been under intense pressure for more than a year.
Trump, on the other hand, has not been so vocal about drug pricing though he did call for price transparency from all healthcare providers and drug re-importation. Not just that, his pro-business stand is also expected to benefit the sector. Major biotech and pharma companies should gain from Trump’s proposed tax plan and proposal to repatriate corporate profits held offshore at a one-time tax rate of 10%.
With focus on drug pricing expected to subside and given the possibility of repatriation of funds, hopes are up that M&A activity will pick up with companies like Pfizer, Merck, Johnson & Johnson expected to take the lead. Big companies with deep pockets often look to replenish and boost their pipelines as well as portfolios by acquiring companies with innovative pipelines and technology.
Here we highlight 3 companies that have often been considered attractive take-over targets and have a Zacks Rank of #1 (Strong Buy) or #2 (Buy).
ARIAD Pharmaceuticals Inc. (NASDAQ:(ARIA - Free Report) – Free Report) : Cambridge, MA-based ARIAD focuses on bringing innovative treatments for rare cancers to market. ARIAD, which already has a marketed product (Iclusig) in its portfolio, could well become a two-product firm as early as 2017 if it gains FDA approval for brigatinib in April. Meanwhile, Iclusig's growth should be driven by new patient starts, extended treatment duration and label expansion. ARIAD’s product portfolio, potential brigatinib approval and its next wave of discovery and development programs such as AP32788 and the immuno-oncology program make it an attractive acquisition target. The Zacks Rank #2 stock has a solid earnings track record having surpassed expectations in each of the last three quarters.
ARIAD PHARMA Price and Consensus
ARIAD PHARMA Price and Consensus | ARIAD PHARMA Quote
Incyte Corporation (NASDAQ:(INCY - Free Report) – Free Report) : Wilmington, DE-based Incyte has two marketed products in its portfolio and a strong pipeline. Flagship product, Jakafi – a JAK1/JAK2 inhibitor – looks well-positioned for growth and is expected to bring in sales of $850 - $855 million in 2016. Moreover, with Gilead presenting mixed results on its experimental JAK inhibitor, momelotinib, the competitive threat for Jakafi seems to have gone down considerably. Incyte, a Zacks Rank #2 stock, has a robust pipeline as well with a focus on the highly sought after immuno-oncology space. Jakafi’s strong performance along with the company’s pipeline makes Incyte an attractive acquisition target.
INCYTE CORP Price and Consensus
INCYTE CORP Price and Consensus | INCYTE CORP Quote
Exelixis, Inc. (NASDAQ:(EXEL - Free Report) – Free Report) : South San Francisco, CA-based Exelixis is also focused on bringing cancer treatments to market. Approved products include Cabometyx (advanced kidney cancer), Cometriq (certain forms of thyroid cancer) and Cotellic (advanced melanoma). Exelixis’ earnings track record is good having surpassed expectations in three of the last four quarters. Cabometyx is experiencing rapid and broad uptake in the market with label expansion opportunities leaving room for upside. The Zacks Rank #2 stock has quite a few pipeline catalysts lined up for the coming quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
EXELIXIS INC Price and Consensus
EXELIXIS INC Price and Consensus | EXELIXIS INC Quote
The three companies discussed above are not the only ones with acquisition potential. Several other companies are often viewed as acquisition targets. The bottom-line is that companies with innovative technologies and pipelines are highly sought after with niche disease areas like nonalcoholic steatohepatitis (NASH), immuno-oncology, multiple sclerosis and hepatitis C virus (HCV) in demand. Treatments for orphan diseases are also in demand.
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