For Immediate Release
Chicago, IL – September 19, 2017 – Zacks Equity Research Zions Bancorporation(Nasdaq: (ZION - Free Report) – Free Report) as the Bull of the Day, Francesca's Holdings Corporation(Nasdaq: (FRAN - Free Report) – Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Continental AG (OTCMKTS: (CTTAY - Free Report) – Free Report), Hitachi (OTCMKTS: (HTHIY - Free Report) – Free Report) andArkema SA (OTCMKTS: (ARKAY - Free Report) – Free Report).
Here is a synopsis of all three stocks:
Bull of the Day:
Zions Bancorporation(Nasdaq: (ZION - Free Report) – Free Report) is a regional bank in the right part of the country to cash in on the growing US economy: the west. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in both 2017 and 2018.
Zions Bancorporation is a regional bank headquartered in Salt Lake City, Utah with total assets exceeding $65 billion. It has a market cap of $8.9 billion and operates in 11 states including Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming.
It offers all of the full range of banking services including wealth management and commercial loans.
Another Beat in the Second Quarter
On July 25, Zions reported its second quarter results and beat the Zacks Consensus Estimate by 11 cents. Earnings were $0.73 compared to the consensus of $0.62. It has now beaten 5 quarters in a row.
Net loans and leases rose by $941 million to $43.7 billion from $42.5 billion year-over-year. The gains came from an increase of $647 million in commercial loans and $302 million in 1-4 family residential loans.
It's seeing real improvement in its credit loss provisions. It was just $10 million in the second quarter, down from $18 million in the first quarter. That is also significantly lower than the $31 million credit loss provision in the second quarter of 2016.
Zions saw improvement in its oil and gas-related loan portfolio as non-performing assets fell $37 million in that area year-over-year.
The allowance for credit losses for oil and gas-related loans decreased during the second quarter but still exceeded 8% of the total loan portfolio.
Capital Plan for 2017-2018
The Federal Reserve approved the bank's capital plan for July 1, 2017 to June 30, 2018. That entailed doubling the currently quarterly dividend to $0.24 by the second quarter of 2018 from the current $0.12.
It's current dividend is yielding 1.1% but that will obviously be increasing.
It will also increase its share repurchase for the entire capital plan period to $465 million. In the second quarter, it repurchased $45 million.
Analysts liked what they heard as rough times appear to be waning for Zions.
10 estimates have been revised higher in the last 60 days pushing the Zacks Consensus up to $2.81 from $2.58. That's earnings growth of 41.3% as it made just $1.99 last year.
Analysts are also bullish on 2018 as earnings are expected to rise another 10.7%.
Bear of the Day:
Francesca's Holdings Corporation(Nasdaq: FRAN – Free Report) admitted recently it has gotten the trend wrong, but that's not the only thing impacting this Zacks Rank #5 (Strong Sell). It suffered direct impacts from Hurricane Harvey as well.
Francesca's is a woman's specialty retailer offering apparel, jewelry, gifts and accessories in its boutique stores. As of Sep 6, it had 692 boutiques in 47 states and the District of Columbia.
It also has an ecommerce web site at francescas.com.
A Beat in Q2 But Same Store Sales Fall
On Sep 6, it reported its second quarter results and beat the Zacks Consensus Estimate by a penny. Earnings were $0.20 versus the consensus of $0.19.
It had already previously announced preliminary results but earnings exceeded that preliminary expectations due to better than expected merchandise margins and SG&A expenses.
Same-store-sales, however, came in at the low-end of the expected range, falling 3% year over year. That was due to a decrease in boutique conversion rates. Last year's second quarter same-store-sales were flat.
Unfortunately, it also reported that August sales were soft due to "merchandising missteps." It was trying to get rid of its back-to-school inventory so that it could focus on the lucrative upcoming holiday season.
Hurricane Harvey Strikes a Blow
Francesca's is headquartered in Houston, Texas and it wasn't immune to impacts from Hurricane Harvey.
Its corporate headquarters, ecommerce fulfillment, distribution center, and approximately 40 boutiques were all directly impacted and had to shut down. Many of its employees suffered personal impacts as well.
As of Sep 5, it had re-opened its headquarters and all but one of its impacted boutiques but it expected it take a couple of weeks to normalize.
In addition, Hurricane Irma then followed on Harvey's heals, leading to business disruptions in Florida.
It's unclear how much of an impact it will have on the third quarter though.
Estimates Cut for Fiscal 2017 and Fiscal 2018
It's tough in the apparel retail business right now. One wrong step, like getting the trend of the season wrong, and it sets the company back.
Francesca's had made quite a turnaround in the last few years as it cut inventory and made management changes. It invested heavily in ecommerce, with a new web site and better product distribution.
However, since the earnings report, analysts have been cutting estimates on Francesca's for both this fiscal year and next fiscal year.
Earnings are expected to fall 26% this year to just $0.81. It made $1.09 last year.
Analysts are bearish on next year too. Fiscal 2018's Zacks Consensus Estimate has also fallen to $0.84 from $1.18 in the last month.
Doves Seen Out the Window: Global Week Ahead
In the Global Week Ahead, Wednesday’s FOMC statement hits at 2 pm Eastern Standard Time (EST), closing out a 2-day Washington DC confab.
This latest monetary policy meeting offers traders a full forecast update. Chair Yellen’s press conference goes live a half hour later.
What to Expect—
(1) Don’t expect a Fed policy rate change until December.
(2) Do expect an announcement of reduced reinvestment in U.S. Treasury bond and Mortgage-backed security (MBS) holdings -- with implementation soon.
(3) Recall the Fed’s early balance sheet stabilization plan laid out in July: It set reinvestment caps at $6 billion and $4 billion per month of U.S. Treasuries and MBS/agency product for the first three months. Then, an escalator clause raised these caps every three quarters in equal increments toward $30 billion and $20 billion caps a year.
Less reinvestment means less incremental growth in the Fed balance sheet. This call is NOT for an overall balance sheet reduction, but a stage before that.
(4) ‘Dot plot’ guidance: Expect downward revisions to long-term rate guidance from some FOMC members. A decline -- from a 3.0% long-term ‘neutral’ policy rate by 25 or 50 basis points -- may be in some member’s Tea Leaves.
(5) Lower consumer price inflation (CPI) forecasts are likely. Any FOMC discussion should reveal the extent of uncertainty among members over the drivers behind soft 2017 inflation.
(6) Hurricanes Harvey and Irma: There should be 2017 guidance on negative effects. Positive rebuilding effects into 2018 may be discussed.
These are 6 dovish points. Don’t expect any surprises from this menu. It’s going to be a conservative meeting of advisors, spooked by weak inflation readings.
The longer rates go sideways, the better it is for stocks.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Keep your focus on non-U.S. stocks. That is where the better large-cap stock values can be found these days.
Here are 3 examples…
Continental AG (OTCMKTS: (CTTAY - Free Report) – Free Report):This is a multi-national German tire-producing company. The $49 billion market cap stock gets a long-term Zacks VGM score of B.
Hitachi (OTCMKTS: (HTHIY - Free Report) – Free Report):This is the Japanese company with diversified operations mostly in Asia. The market cap stock at $34 billion has a long-term Zacks VGM score of A.
Arkema SA (OTCMKTS: (ARKAY - Free Report) – Free Report):This $8.6 billion in market cap French chemical company is engaged in the manufacturing and marketing of vinyl products, industrial chemicals and performance products.
Key Global Macro—
Wednesday is the big day, with the FOMC announcement.
On Thursday, the Bank of Japan follows the lead of the FOMC, and issues new rate and quantitative easing (QE) guidance.
Also on Thursday, Argentina’s economy may struggle to produce Q2 GDP growth, after seeing strong Q1 growth. Q1-17 saw the strongest growth (+1.1%) since 1H-2015. Argentina’s 2017 y/y growth rate can get to +2.6%.
On Tuesday, the FOMC starts its 2-day meeting.
The German ZEW indexes come out. Current conditions are at 86.7. Economic sentiment is at 10.0.
U.S. building permits are forecast to be 1.22 million, from 1.23 million before. Starts are forecast to be 1.115 million from 1.16 million before.
Russia’s unemployment rate gets updated. It has been at 5.1%.
On Wednesday, the U.K.’s retail sales (ex-fuel and auto) looks to fall to +0.80 y/y from 1.5% y/y. A monthly print of -0.5% is expected.
The FOMC gives markets their latest interest rate decision. The Fed Funds Rate is supposed to stay at 1.25% until the December meeting. Any discussion of weak inflation causes will be listened to closely.
The Fed’s Chair Yellen holds a press conference.
The South African Reserve Bank (SARB) comes out with its interest rate decision. It has been at 6.75%.
On Thursday, the Bank of Japan (BoJ) issues a new stance on its overnight rate, now at -0.10%. Governor Kuroda holds a press conference.
There is an ECB Council meeting.
There is a Norges Bank interest rate decision and monetary policy report from Norway.
Brazil’s IBGE inflation rate is down to 2.61% y/y.
U.S. initial claims should stay low at 284K.
Argentina’s GDP growth rate should be 2.6% y/y.
On Friday, the Eurozone composite PMI is out. The prior was high at 55.7. Services were 54.7 and Manufacturing was 57.4.
The U.S. manufacturing PMI comes out. It was 52.8.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
4 Surprising Tech Stocks to Keep an Eye On
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector. Zacks has just released a Special Report revealing one thing tech companies literally cannot function without.
More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really take off. See Stocks Now>>
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.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Get the full Report on ZION - FREE
Get the full Report on FRAN - FREE
Get the full Report on CTTAY - FREE
Get the full Report on HTHIY - FREE
Get the full Report on ARKAY - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.