For Immediate Release
Chicago, IL – November 28, 2016 – Zacks Equity Research highlights Sunrun Inc. (NASDAQ:(RUN - Free Report) – Free Report) as the Bull of the Day and Capital Senior Living (NYSE:(CSU - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America Corporation (NYSE:(BAC - Free Report) –Free Report),Wells Fargo & Company (NYSE:(WFC - Free Report) –Free Report) and JPMorgan Chase & Co. (NYSE:(JPM - Free Report) – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
There have been some in the solar community who believed that a Donald Trump presidency would spell doom for the sector, but this concern has begun to fade as of late. It is now perceived that President Trump will not repeal the Federal Solar Investment Tax Credit (ITC), and that the continued job growth in the sector will detour the new president from negatively impacting the industry. These are some of the factors in the decision to make Sunrun Inc. (NASDAQ:(RUN - Free Report) – Free Report) the Zacks Bull of the Day.
This Zacks Ranked #1 (Strong Buy) company owns, manages and sells residential solar energy systems. The Company provides solar service offerings through channels consists of direct-to-consumer channel, solar partner channel and strategic partnership channel. It also develops and sells mounting structures through the installation and distribution operations under the SnapNrack brand. The Company operates primarily in Arizona, California, Delaware, Colorado, Connecticut, Hawaii, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania and South Carolina, as well as the District of Columbia. Sunrun Inc. is headquartered in San Francisco, California.
Recent Earnings Report
On November 11th, management posted Q3 16 results where they crushed the Zacks consensus earnings estimate, and came in just short of the consensus revenue estimate. Specifically, the company posted a +137.2% positive earnings surprise, by beating the -$0.43 estimate with a +$0.16 actual EPS. Highlights of the quarter included; Total deployments of 80 MW (megawatts) an increase of 43% on a year over year basis, Net present value created of $76 million an increase of 53% on a year over year basis, and Creation cost per watt improved by $0.38 up 10% on a year over year basis. Further, during their conference call, management increased guidance for Q4 and FY 2016; management now expects to deploy approximately 80 MW, up from 77 MW in Q4, and for FY 2016 the company expects to deploy approximately 285 MW up from the range of 270-280 MW.
According to Lynn Jurich, CEO, “ We are pleased to deliver Q3 results that beat targets on customer installations, net present value and cost improvements, and to raise guidance slightly for the full year. We have achieved these targets by consistently executing our strategy of delivering the industry’s most valuable and satisfied customer base, aligning our product offerings with customer demand and taking share in attractive markets. We are proud to partner with our growing base of customers to lead a transition to clean energy that will grow for decades to come .”
Bear of the Day :
Uncontrollable outside forces can have huge impacts on a company without much notice, and the subsequent aftershocks can last for longer periods of time than expected. This is the case of our Zacks Bear of the Day: Capital Senior Living (NYSE:(CSU - Free Report) – Free Report), who saw occupancy rates decline, and experienced higher than expected healthcare claims which caused their margins to contract.
This Zacks Rank #5 (Strong Sell) company is one of the largest providers of senior living services in the United States. The Company currently owns interests in and/or operates 33 communities in 17 states with a capacity of approximately 5,000 residents, including 17 communities in which it owns interests, 15 communities that it manages for third parties. The Company also operates one home health care agency.
Recent Earnings Results
On November 1, management released Q3 16 results where they missed both the Zacks consensus earnings and revenue estimates. On the positive, management reported that year over year revenues increase by +6.7%, and the average monthly rent for the company’s consolidated communities rose by $106 per occupied unit, or +3.2%. On the negative, occupancy for the company’s consolidated communities fell by 50 basis points when compared to Q2 16. The reason for the decline was due to a higher attrition rate (9.5%) during the quarter. This -9.5% decline significantly outpaced the +5.4% move in rate. Further, this occupancy decline is expected to spill into the fourth quarter 2016. Lastly, higher healthcare claims expenses were a drag on the company’s margins.
According to Lawrence Cohen, CEO, “ We made steady progress in the third quarter on important operational and corporate objectives related to positioning the Company for sustained solid growth, including the announcement of the pending strategic purchase of four communities we currently lease, as we look to continue to increase our real estate ownership. The Company’s third quarter results were impacted by two non-controllable items, attrition and healthcare claims. We experienced very strong demand at our communities in the third quarter of 2016, with same-community move-ins increasing 5.4% over the third quarter of 2015; however, same-community attrition increased an unusually high 9.5% during the quarter, which impacted our occupancy and revenue. We also experienced an unusual spike in healthcare claims in the third quarter, resulting in a significant increase in the Company’s G&A expense .”
Fannie and Freddie’s Mortgage-Backing Capacity Increases
The Federal Housing Finance Agency (FHFA) announced that the maximum limit for the mortgage loans backed by Fannie Mae and Freddie Mac will be $424,100 for most part of the U.S. in 2017. Further, it said that much higher limits will be in effect in the higher-cost areas.
This figure marks an increase of approximately 1.7% from the baseline loan limit of $417,000, which was established by The Housing and Economic Recovery Act of 2008. Since 2006, this limit had never been increased by FHFA.
Moreover, this first-time change in loan limits comes after the average U.S. home prices witnessed a record high in the third quarter of 2016, as it surpassed its pre-decline level in the third quarter of 2007.
Further, with this change, various first-time homebuyers will find it easier and cheaper to enter the market as credit requirements and down payment for such government-backed mortgages are generally looser than most of the jumbo loans.
Sometimes jumbo mortgages carry interest rates that are higher than government-backed loans. Also, they carry steeper requirements from lenders which include higher credit scores and 15–20% of down payment. However, of late, the trend has changed a bit as banks like Bank of America Corporation (NYSE:(BAC - Free Report) – Free Report), Wells Fargo & Company (NYSE:(WFC - Free Report) – Free Report) and JPMorgan Chase & Co. (NYSE:(JPM - Free Report) – Free Report) planned to relax the prerequisites for jumbo mortgages.
Various first-time homebuyers who have a decent income, are not able to enter the market because they can’t pay more than 3% for a down payment and the houses that they want to purchase are too expensive to be backed by the government, said Phil Ganz, a loan officer with Fairway Mortgage.
He further added, “When you raise the limits, it’s about giving young, successful people the chance to get in the game.”
Ken Fears, director of housing finance and regional economics for the National Association of Realtors said that this increase in the so-called conforming loan limits “reflects that health is finally returning to the market.”
Thus, it can be concluded that this change, which has taken place almost after a decade, will change the definition of jumbo loans.
Of the banks mentioned above, Bank of America carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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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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