For Immediate Release
Chicago, IL – April 9, 2018 – Zacks Equity Research highlights General Motors (GM - Free Report) as the Bull of the Day and Deutsche Bank (DB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Micron (MU - Free Report) , Schneider Electric SE and WestRock Company (WRK - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Detroit, MI, General Motors is one of the largest automakers in the world with more than 180,000 employees and 12,450 dealers in 125 countries.
The automaker has three operating segments, General Motors North America (76.5% of total revenues in 2017), General Motors International Operations (15.1%) and GM Financial (8.3%).
GM has eight distinctive automotive brands under its corporate umbrella: Chevrolet, Buick, GMC, Cadillac, Holden, Baojun, Wuling and Jiefang.
Strong Quarterly Results
GM reported Q4 2017 adjusted earnings of $1.65 per share, up 21.3% year-over-year and significantly ahead of the Zacks Consensus Estimate of $1.34.
Revenues also beat our estimate. Strong demand for pickup trucks and SUVs, particularly in North America boosted the results.
“Improvements in all operating segments and an intense focus on cost reductions generated a record quarter and another record year. We plan to build on this momentum in 2018 and beyond as we focus on growth opportunities across many parts of our business,” said the CFO.
Bear of the Day:
Headquartered in Frankfurt, Germany, Deutsche Bank is the largest bank in Germany and one of the largest financial institutions in Europe and the world, with assets totaling €1.48 trillion as of Dec 31, 2017.
It offers a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.
The bank has following operating segments: Corporate & Investment Bank, Private & Commercial Bank, and Deutsche Asset Management.
Disappointing Fourth Quarter Results
The bank reported net loss of €2.2 billion ($2.6 billion) for Q4 2017 compared with net loss of €1.9 billion ($2.3 billion) in the same quarter a year-ago.
In addition to non-cash charge of €1.4 billion resulting from a valuation adjustment on its deferred tax assets due to the tax reform, results were impacted by double-digit revenue declines in all three of its business units.
They attributed low volatility and decline in client activity as the main reasons for revenue decline.
Germany’s flagship bank has seen a plunge in earnings estimates as a result of weak performance and continued woes.
Zacks Consensus Estimates for the current and next year EPS are now $1.30 and $1.64 respectively down from $1.41 and $1.86, just 60 days ago.
The following chart shows negative earnings and price momentum:
Deutsche Bank Aktiengesellschaft Price, Consensus and EPS Surprise | Deutsche Bank Aktiengesellschaft Quote
The Bottom Line
After strict regulatory norms imposed on big banks, they have been finding it difficult to generate profits in their investment banking and trading businesses.
Shares of this bank are down more than 28% year-to-date, but with looming CEO succesion and other uncertainties, the overall outlook for the bank remains very cloudy and it is safer to avoid the stock for the time being.
Time for Political Theater: Zacks April Market Strategy
April has arrived.
A potential for a major trade war with China weighs heavily upon the market’s mind.
I supply you with more background on how this might play out. The global narrative the market is listening to offers a chaotic mix of contradictions, with positives and negatives.
There are 60 days to go before major China tariffs are to be imposed. Until then, watch the China-U.S. trade negotiations undertaken by the U.S. Treasury.
It won’t be the only political theater available. This is just the most hopeful one.
Zacks April Global Outlook
For a Global Outlook I make Five Points in April. Unfortunately, they contradict each other.
(1) Trade War now the Biggest “Tail Risk” to the Stock Market…
(2) However, Rotation to Global Growth Sectors Must Be Favored, Based on EPS Outlooks.
- The estimated earnings growth rate for the S&P 500 for Q1 2018 is 17.0%.
– For companies that generate more than 50% of sales inside the U.S., the earnings growth rate is 16.1%.
– For companies that generate less than 50% of sales inside the U.S., the earnings growth rate is 19.3%.
- Global Exposure Double Sales Growth!
– The estimated sales growth rate for the S&P 500 for Q1 2018 is 7.2%.
– For companies that generate more than 50% of sales inside the U.S., the sales growth rate is 5.8%.
– For companies that generate less than 50% of sales inside the U.S., the sales growth rate is 11.4%. This is the best reason to stick with global growth stocks.
(3) What Sectors Drive the Expected Outperformance of S&P 500 Companies with Higher Global Revenue Exposure?
• At the sector level, the Info Tech, Energy, and Materials sectors are projected to be the largest contributors to earnings and revenue growth in Q1-2018 for S&P 500 companies with more global exposure.
• At the sector level, Info Tech (60%),Health Care (58%), and Energy (57%) sectors also have the highest percentages of Buy ratings, from covering analysts.
• Take Energy off the list. With close to 990 Horizontal Fracking rigs up and running in N. America, the oil price outlook is not favorable (basically flat to $2 a barrel down)
(4) “Canary in the Coal Mine”
The Trade War issue is a big problem for Japan right now. The Yen is being used as a safe haven, in a U.S. political environment that has ratcheted up worry over a trade war. 106 on the Yen is safe haven driven. Keep your eyes on the Yen as the proxy for Trade War uncertainty.
(5) The Current Monthly Pace of European Central Bank Bond Buying: €30 billion.
It is intended to run to the end of Sept. 2018, or beyond, if necessary. Keep this stimulus in mind.
Zacks April Sector/Industry/Company Telescope
April Zacks Industry Ranks shows EPS upside leaders to be international revenue growth related.
The three sector leaders were the most exposed internationally: Info Tech, Industrials, & Materials specifically.
The fourth strong sector was Consumer Discretionary. Such sector strength says there remain internal cyclical domestic drivers within a profitable, earnings-driven, late stage economy. The low 4.0% U.S. unemployment rate must matter.
A number of sectors fell back to a Market Weight in April: Financials, Energy, Health Care, and Consumer Staples. That happens when earnings season reporting is not underway.
Utilities rose in April. So did Telcos. But the sector defensives remain at the back.
1) Info Tech stays HOT and Very Attractive. Misc. Tech is the new leader, although Semiconductors stay as a top niche again in April. Electronics is another hot Tech industry to watch.
Zacks #1 Rank (STRONG BUY) Stock: Micron
(2) Industrials stay Very Attractive. The leaders in order: Machinery, Aerospace & Defense, Pollution Control, and Metal Fabricating.
Zacks #1 Rank (STRONG BUY) Stock: Schneider Electric SE
(3) Materials stay Very Attractive. The 2 leaders are Paper and Containers & Glass.
Zacks #1 Rank (STRONG BUY) Stock: WestRock Company
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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