For Immediate Release
Chicago, IL – November 22, 2016 – Zacks Equity Research highlights Simpson Manufacturing (NYSE:(SSD - Free Report) – Free Report) as the Bull of the Day and Acadia Healthcare (Nasdaq:(ACHC - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Hormel Foods Corporation (NYSE:(HRL - Free Report) –Free Report) and Campbell Soup Company (NYSE:(CPB - Free Report) – Free Report).
Here is a synopsis of all four stocks:
Bull of the Day:
Thanks to ongoing speculation over a coming construction and building boom, a number of big name stocks in these markets have been soaring since the election. Double digit percentage moves aren’t uncommon in this sector, and there definitely seems to be potential for more gains here as well.
However, while many investors have focused on the big, brand-name companies in this market, there are several small caps that could be well-positioned too. Take Simpson Manufacturing ((SSD - Free Report) – Free Report) for example. This $2.2 billion maker of construction products has been on the move since the election, and it could be poised for more gains in the near term as well, at least if we look to some recent earnings estimates on the stock.
Analysts have been sharply increasing their expectations for Simpson earnings, including a move in the consensus from 33 cents per share 30 days ago to 40 cents per share today, an increase of over 21%. The full year estimate and the next year estimate have also increased in the past month, moving higher by about 7% each.
Thanks to these moves, the company is now expected to see double digit earnings growth for this year and the next, including a nearly 37% rate of earnings growth for this year. And considering there has been complete agreement among analysts about the short and long term nature of the company—no analysts have reduced their earnings estimates in the past sixty days for any of the periods we study—it is hard not to be a believer in the company right now.
But sometimes, companies seem to have difficulty in living up to lofty expectations like this, as these can be too high for some stocks, leading to poor performances. That really hasn’t been the case for SSD in the past though, as the company clearly knows how to manage earnings expectations.
SSD has seen an average earnings surprise of about 18.8% over the last four quarters, and it hasn’t missed estimates in the last year either. No wonder the stock is a Zacks Rank #1 (Strong Buy), and why we are looking for more outperformance from this company in the near term.
Bear of the Day :
While the surprise election of Donald Trump rocked a number of market sectors, few were hit as hard as the hospital/health facility market. That is largely because a Republican clean sweep this year arguably puts the Affordable Care Act—also known as Obamacare— on the chopping block, something that could undo years of gains for the hospital/health facility market in particular.
Why this area? Well, these companies have benefited tremendously from the ACA, as it has put millions of new insurance-covered customers in their systems, boosting profits in the process. And with this likely taken away in the near future, it could be a very rough period for this space. And while most investors have been focused on HCA Holdings as the poster child for this new world, those looking for a more promising short candidate might want to go beyond the traditional hospital space and investigate Acadia Healthcare ((ACHC - Free Report) – Free Report) instead.
ACHC in Focus
Acadia, an operator of behavioral health services and facilities across the nation (and now with a UK presence as well), saw its share price peak long before the prospect of Trump winning the election was on anyone’s mind, in August of 2015. Since then, shares have been on a sharp downward trajectory, with prices falling by more than 25% in the past three months alone.
And while shares have actually done reasonably well since the election, the outlook for the sector at-large remains poor, while there are still plenty of concerns over ACHC’s health in the near term. As evidence for this, consider some of the recent earnings estimates for ACHC stock.
Analyst opinion of the stock’s earnings potential in recent weeks has gone almost straight down, and now the company is expected to see earnings contract year-over-year for the current quarter. The full year and next figures are arguably even worse, as we have seen seven analyst estimates go lower in the past thirty days for the full year, and then nine estimates go lower for the next year time frame too.
The impact of these analyst revisions has pushed the consensus estimate down by about 20% in the past few months for the current quarter, and then down 8.7% for the full year and down 13.9% for the following full year. Add in a so-so history in recent earnings reports and it becomes a rough outlook for the company in the near term.
But that isn’t all, as the company is actually in an industry that is in the bottom 10% overall, without a single company that is ranked as a ‘buy’ or ‘strong buy’ right now. No wonder shares of ACHC have a Zacks Rank #5 (Strong Sell) and why we are looking for more underperformance from the company in the weeks ahead.
Food Stocks Reporting Earnings Tuesday, Nov. 22nd
The third-quarter earnings season is in its last leg, with 470 S&P 500 companies having already reported results as of Nov 17. We notice that results in the third quarter have improved remarkably from the preceding quarters. In fact, this is expected to be the first quarter to display bottom-line growth after five consecutive seasons of earnings decline for the benchmark index.
Food Stocks: Safe Investment Bets
U.S.-based food stocks are considered to be the safest investment bets at the moment. This is because these stocks are the least impacted by any sort of global macroeconomic turbulence.
Improved job data and robust wage rates have driven demand for edible products in the U.S. Apart from strong domestic demand, food stocks are likely to perform well on the back of new product launches and productive marketing programs.
According to the Zacks Industry classification, food stocks are broadly grouped under Consumer Staples, one of the 16 Zacks sectors.
Here we briefly discuss the broader sectors’ earnings trend so far in the July-September quarter of 2016.
Our latest Earnings Trends article (released on Nov 17, 2016) reveals that roughly 87.5% of the Consumer Staples stocks in the S&P 500 Group that have reported results for the July-September quarter recorded 6.2% rise in earnings on 1.5% increase in revenues, both on a year-over-year basis. We believe that earnings of
Consumer Staples stocks in the S&P 500 Index will increase 6.6% year over year, while revenues are expected to inch up 1.1% from the prior-year period.
What’s in Store for These Two Food Stocks?
Hormel Foods Corporation ((HRL - Free Report) – Free Report) is slated to report fourth-quarter fiscal 2016 (ended Oct 31, 2016) results before the opening bell on Nov 22. The company’s average positive earnings surprise over the trailing four quarters is 9.05%.
Our proven model shows that Hormel Foods is likely beat earnings in the quarter. This is because the stock has the right combination of two key ingredients.
Hormel Foods has an Earnings ESP of +6.52%, as the Most Accurate estimate of 49 cents is above the Zacks Consensus Estimate of 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
HORMEL FOODS CP Price and EPS Surprise | HORMEL FOODS CP Quote
Hormel Foods has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Conversely, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Higher demand for value-added products (in both food service and retail channels) and the company’s strategic marketing programs are expected to drive the better-than-expected earnings in the fiscal fourth quarter. (Read more: Hormel Foods’ Q4 Earnings: What is in the Cards?).
Campbell Soup Company ((CPB - Free Report) – Free Report) is set to report first-quarter fiscal 2017 (ended Oct 31, 2016) results before the opening bell on Nov 22. The company’s average positive earnings surprise over the last four quarters is 4.25%.
Our proven model does not conclusively show that Campbell Soup will beat estimates in the quarter. This is because the company has an Earnings ESP of 0.00% (as the Most Accurate estimate is in line with the Zacks Consensus Estimate of 95 cents), which complicates surprise prediction in spite of the company’s favorable Zacks Rank #3 (Hold).
CAMPBELL SOUP Price and EPS Surprise | CAMPBELL SOUP Quote
Meaningful product portfolio expansion and strategic cost-cutting measures are expected to boost results in the quarter-to-be-reported. However, headwinds like adverse foreign currency translation might limit growth. (Read more: Campbell Q1 Earnings: What's in Store for the Stock? ).
Don’t miss on our full earnings release articles for these two food stocks, as the actual results might hold some surprises!
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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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Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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