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The Zacks Analyst Blog Highlights: Dexcom, Fortinet and Agnico Eagle

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For Immediate Release

Chicago, IL –November 12, 2019 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Dexcom (DXCM - Free Report) , Fortinet (FTNT - Free Report) and Agnico Eagle Mines (AEM - Free Report) .

Here are highlights from Monday’s Analyst Blog:

A Struggle to Find Revenue Growth: Global Week Ahead

In the Global Week Ahead, a nearly final set of 15 S&P 500 members report Q3 results.

The week’s docket has Wal-Mart, Cisco and Nvidia.

447 S&P 500 members (about 90%) reported results as of Friday, Nov. 8. 72.5% have beaten EPS estimates. Only 57.9% beat revenue estimates.

A low Q3 revenue beat number (57.8%) is worrisome!

Over the last 12 quarters, Zacks Research Director Sheraz Mian says quarterly revenue beats have been as high as 75.4% in Q1-18 and as low as 48.3% in Q3-15.

Total earnings (aggregate net income) for the 447 companies is down -1.5% y/y. This comes with +4.2% higher revenues. The latter amounts to an approximation of trend U.S. macro performance: In other words, +2.2% real GDP growth and +2.0% consumer inflation.

Next are Reuters’ five world market themes for the Global Week Ahead.

(1) Do Risk-Free Rates Stay at Zero Much Longer?

Few people will be brave enough to call the end of the 30-year bond bull run, but the idea that sub-zero borrowing costs may not be around forever is one people are increasingly willing to entertain.

Upbeat economic data, signs of a trade war truce and above all, central banks’ clear reluctance to cut interest rates further have shrunk the global negative-yield bond pool to $12.5 trillion from $17 trillion two months ago.

In Europe, Germany’s long-dated government borrowing costs rose above 0% recently, while 10-year yields are up 50 basis points from early-September lows. Finnish, Belgian and Austrian 10-year yields are also flirting with the zero mark.

But are we just seeing another ‘bond tantrum’ that will soon peter out, like for instance the Bund selloff in April 2015? It’s true that sub-target inflation and deeply negative interest rates in the Eurozone, Japan and elsewhere mean negative yields won’t vanish anytime soon. Above all, some governments, such as Germany, still oppose increasing state spending to boost growth.

So, money managers will be wary of slashing bond exposure. They will be aware, though, that at such low yields, even small moves up will send bond prices crashing, risking big losses on their portfolios. Several countries, from Germany to Japan, will release third-quarter growth data in coming days — a robust set of figures could push yields further toward zero.

(2) Where Is Consumer Price Inflation?

The Fed lowered interest rates a third time on Oct. 30, even with the economy plugging along in OK shape. So what gives? The real concern is inflation — too little, not too much!

The string of quarter-point insurance cuts comes amid concerns about a global slowdown spilling over, and is meant to counter low inflation, which keeps rates down and reduces the Fed’s ability to fight the next downturn. Underneath it all lurks the specter of disinflation, or demand-crushing Japan-style deflation.

Wednesday brings October’s Consumer Price Index (CPI), followed by Fed Chair Jerome Powell’s appearance before the congressional joint economic committee. Core year-on-year CPI is expected at 2.4% and headline at 1.7%. But the Fed’s favorite measure of core personal consumption expenditures is running around 1.6% — hovering mostly below the 2% target since prior to the financial crisis.

The Fed signaled it may wait into 2020 to cut again. Chicago Fed President Charles Evans said rising inflation expectations are key. It looks like an uphill battle given that consumer inflation expectations are declining even though wages are ticking up.

On Friday, October retail sales and industrial production data will shed light on whether the consumer can continue to drive growth in the face of a struggling manufacturing sector and months of trade tensions.

(3) Keep an Eye Out for the Usual Trade Headlines

A raft of global investors at the Reuters 2020 Investment Outlook Summit declared unwavering keenness to stay invested in a market that has done extremely well in 2019 and is expected to do just as well in the coming year.

Adding to that enthusiasm among business and investors are news headlines on gradual progress toward some sort of U.S.-China trade truce. But details remain scarce and, in fact, there isn’t much to cheer in China this month.

Last weekend brought to a close the annual China International Import Expo in Shanghai, where American companies turned out in force.

October is seasonally weak because of the long Chinese National Day holiday, and recent data showed the trade war continues to take a toll on exports and demand. China’s economic growth has slipped to its weakest in three decades, forcing the central bank to make its first rate cut in nearly three years and pump cash into markets.

Key data on lending, investment and inflation are due in coming days. Even as the hubbub over another regional bank run fades, investors expect to see proof that bank lending and social financing deteriorated further, inflation remained high on rising pork prices and investment in factories was depressed.

(4) The 11th BRICS Summit on Tuesday in Brazil

Leaders of Brazil, Russia, India, China and South Africa meet in Brasilia for their 11th summit on Tuesday.

Accounting for a third of world GDP, this bloc has evolved into a political organization, which also has its own development bank.

It’s been a long road since Goldman Sachs’ analyst Jim O’Neill coined the term BRIC in 2001 to describe a grouping of the four biggest emerging markets. The term has evolved from a catchy acronym to an investment concept spawning dozens of funds managing around $25 billion at their peak. Most BRIC funds have since quietly closed, but the countries themselves have adopted the grouping — only it’s BRICS now, with the addition of South Africa.

Times are tough, however. China is mired in a trade war that’s damaging its export-reliant economy and India’s credit rating has been cut by Moody’s on worries about growth and the banking sector. Russia’s economy is semi-stagnant, under U.S. sanctions and locking horns with Turkey for domination of the Middle East. Brazil, just emerging from a brutal recession, is struggling to pass vital reforms. South Africa, with anemic growth, risks losing its investment-grade credit rating, cutting access to precious investment.

The upcoming summit is to focus on “economic growth for an innovative future.” Given all the problems the quintet face, innovation may be key.

(5) Erdogan Will Meet Trump on Wednesday in DC

Turkey’s President Tayyip Erdogan is heading to Washington for a powwow with his U.S. counterpart, Donald Trump, on Wednesday. 

The two have plenty to discuss: Engagement, or disengagement, of Turkish and U.S. forces in northern Syria and related bilateral agreements, as well as Ankara’s purchase of Russia’s S-400 missile defense system, which under U.S. law should trigger sanctions.

Then there is a U.S. court case against state-owned Halkbank over evading sanctions in Iran. Meanwhile, a U.S. House of Representatives’ vote to recognize mass killings of Armenians a century ago as genocide has rankled Ankara.

The two men are said to have a strong bond, according to Turkish sources. The lira — a weathervane for Turkey’s economic outlook but also for the state of its geopolitical relations, especially with Washington — is on track for an 8% tumble in 2019, its seventh straight year in the red.

Those personal ties could prove crucial to Erdogan, who seems adept at managing his relationship with the man at the helm of its largest NATO ally, but may face much more hostility from the U.S. legislative branch.

Zacks #1 Rank Stocks

(A) Dexcom:This is a $198 Medical Instruments stock with an $18B market cap. The stock traded around $150 for months, up to it latest EPS report a few days ago. I see a predictable F for Zacks Value, but an A for Zacks Growth and an A for Zacks Momentum.

San Diego, CA-based DexCom, Inc. is a medical device company focused on the design, development and commercialization of continuous glucose monitoring systems (CGM). These are for ambulatory use by people with diabetes and by healthcare providers for the treatment of diabetic and non-diabetic patients.

(B) Fortinet:This is another stock on a roll after a great Q3 EPS report. I see a $96 a share price tag assisting a $16B market cap. The Zacks Value score is F again, with a B for Zacks Growth. This is a major cloud security provider.

(C) Agnico Eagle Mines:This is a $13.8B market mining stock. It trades at around $58 a share right now. Is it time to buy a gold miner? The stock was $40 a share back in late May. I would say you are late to that first and best party. Now, the bull story is about share price consolidating for another leg up.

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