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Zacks #1 Stocks on the Move 08/30/2016

Company Name Symbol %Change
HEALTH INSUR HIIQ
2.77%
ACACIA RESEA ACTG
2.37%
US AUTO PART PRTS
2.50%
AEGEAN MARIN ANW
1.50%
TDK CORPORAT TTDKY
1.82%

Analyst Blog

5 High Dividend Stocks to Bet Against a Rate Hike

Posted Wed Aug 31, 11:12 am ET

by Zacks Equity Research

Concerns over declining oil prices, slowdown in the Chinese economy and uncertainty over the Presidential Election have been dominating the stock markets recently. However, improved labor market conditions and an almost desirable inflation rate make it favorable for the Fed to raise interest rates.

Janet Yellen’s much anticipated speech at the recent Jackson Hole symposium signals a possible rate hike in “recent months.” But the fact that rates will not be increased until the Election makes December a strong contender for the month of the hike.

However, a near-term rate hike speculation strengthened the dollar. This, along with galloping crude production in the Middle East, sent oil prices spiraling down on Monday. The oil minister of Iraq remarked that the country would continue to ramp up its output, pushing Brent crude down by 1.32% to settle at $49.26 a barrel, offsetting reports of an inventory drawdown at Cushing, OK.

Moreover, while the domestic economy is showing signs of steady recovery, global growth concerns are yet to alleviate. Sluggish growth in the world’s second-largest economy – China – has become a major drag on global growth. This month, the top 500 Chinese companies reported a combined revenue decline over the past 15 years, with many of them operating in the industries like coal, steel, oil and chemicals, all of which have been reeling under the impact of overcapacity. Meanwhile, European banks are still struggling due to lingering bad loans and low overall profits. On the other hand, as the Brexit episode is slowly taking a toll on the U.S. economy, the Fed plans to cope with this crisis before making an aggressive move such as a rate hike.

Back home, second-quarter GDP data, touted as the biggest economic release of the month, lagged expectations. The "second" estimate by the Bureau of Economic Analysis indicated 1.1% growth in GDP in the second quarter, down a tenth of a percent from the initial projection. Although growth in GDP remains sluggish, it is expected to pick up pace in the second half of the year. For now, investors anxiously await the release of unemployment data this week, as it is a major determinant of the rate hike.

The continuation of a low rate environment will make stable dividend payers more alluring, as investors will turn away from parking their money in safe haven assets such as bonds on account of low interest rates.

REITs offer stable dividends with a good inflation upside protection. REITs’ performance history makes them worthy options for investors looking for stable dividend yields. The FTSE NAREIT All REITs Index averaged a dividend yield of 3.73% in May 2016, compared to S&P 500’s 2.13%. Over longer periods too, the FTSE NAREIT All REITs Index has beaten the S&P 500 in terms of dividend yield over the 2010–2015 period by 1.5–2.2%.

Stocks of utility companies, on the other hand, enjoy a reputation for safety given the regulated nature of their business, which give their revenues a high level of certainty. They also benefit from the domestic orientation of their business, which shields them from foreign currency translation issues that have been a headwind for many other industries lately. These capital-intensive utilities routinely take recourse to the capital markets to arrange for funds needed to upgrade and expand their infrastructure. The prevalent low interest rate scenario helps them to get the much needed funds on favorable conditions. The Dow Jones Utility Average Index had a dividend yield of 3.2% in Jul 2016 as against the S&P 500’s 2.04%.

Here we have selected five such dividend-paying stocks that have a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a dividend yield of over 4%.

5 Stocks to Buy Now

Just Energy Group Inc. JE is engaged in the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price and price-protected contracts. This Zacks Rank #2 stock has a dividend yield of 6.8%.

Spark Energy, Inc. SPKE is an independent retail energy services company. The company is involved in the retail distribution of natural gas and electricity. Spark Energy carries a dividend yield of 5% and a Zacks Rank #1.

Arbor Realty Trust Inc. ABR is a specialized real estate finance company investing in real estate-related bridge and mezzanine loans, preferred equity, mortgage-related securities and other real estate-related assets. It has a dividend yield of 8.3% and a Zacks Rank #2.

Senior Housing Properties Trust SNH is a Maryland real estate investment trust that invests in senior housing income producing real estate, including senior apartments and assisted living, congregate care and nursing home properties. This Zacks Rank #2 stock carries a dividend yield of 7.1%.

Gramercy Property Trust Inc. GPT is a real estate investment trust. It acquires, owns and operates commercial real estate such as warehouse, logistics properties and office buildings. Gramercy has a dividend yield of 4.6% and it carries a Zacks Rank #2.

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After Big Drop, Is it Time to Buy Hershey (HSY) Stock?

Posted Wed Aug 31, 11:06 am ET

by Zacks Equity Research

Shares of The Hershey Company HSY plunged almost 11% since Mondelez International, Inc. MDLZ issued a press release on Aug 29 stating that it is no longer pursuing the probable merger with Hershey.

In June, Mondelez offered to acquire the Pennsylvania-based chocolate maker for about $22.8 billion. Mondelez had offered to pay $107 a share, half in cash and half in stock. Mondelez had expected that the merger of the two food giants would create a global leader in snacking, confectionary and complementary brands. However, Hershey’s board of directors unanimously rejected the offer in June. Reportedly, in a second bid, Mondelez offered to buy Hershey for $25 billion ($115 per share).

Mondelez eventually reached the decision after several discussions and indicated that there was no clear path toward an agreement. Reportedly, The Hershey Trust, which controls the majority of Hershey's shareholder votes, was reluctant about the sale. Moreover, significant transitional changes are underway at Hershey Trust and are anticipated to take time to complete.

The big question now for investors is whether it’s the right time to buy Hershey stock after the big drop.

Hershey’s sales trends have been weak since 2014 due to weak category trends, increased competition from broader snacking category and soft international growth due to macro headwinds.

The U.S. chocolate category is gradually slowing down. A shift in consumer preference toward healthier snacks like nuts and increased competition from the broader snacking category is lowering the demand for chocolate. Moreover, changing shopping habits in the U.S., like channel shifting and e-Commerce, are hurting the chocolate category growth. In fact, the company is witnessing chocolate category softness in key international markets like China as well.

Hershey’s lower-than-expected performance compelled it to lower its sales guidance twice this year.

Had Hershey accepted Mondelez’ offer, it would have been synergistic for the company - giving it the necessary diversification from its chocolates/sugary confectionery products which are gradually seeing lower demand.

As it is Hershey has been trying to shift focus to snack items and more premium products. In this regard, it launched Reese’s Snack Mix and Hershey’s Snack Bites canister this year.

Last year in March, Hershey acquired a Californian producer of premium jerky products, KRAVE Pure to enter the fast growing meat snacks market.

The Apr 2016 acquisition of New York-based barkTHINS premium chocolate snacking brand was also targeted on building the company’s better-for-you snacks portfolio.

However, it’s not all grim for Hershey.

Though sales have been weak, its margins have been better supported by supply chain savings and productivity gains. Moreover, in order to improve sales, Hershey is increasing innovation activity, marketing investments, making strategic acquisitions and diverting focus to snack items.

However, we suggest it is better to remain on the sidelines until these efforts lead to some significant sales and volume improvement.

Stocks to Consider

Hershey carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the consumer staples sector include Ingredion Incorporated INGR and Omega Protein Corporation OME, both sporting a Zacks Rank #1 (Strong Buy).   

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Cimarex Energy (XEC) Scales 52-Week High on Oil Recovery

Posted Wed Aug 31, 11:04 am ET

by Zacks Equity Research

Shares of independent oil & gas exploration and production firm Cimarex Energy Company XEC hit a 52-week high of $135.45 during the Aug 30 trading session. Also, the stock closed the session at $134.24, which reflects a solid return of 56.2% over the past six months. The average trading volume for the last three months was 862,263 shares.

What is Driving Cimarex Energy?

Since the beginning of March, shares of this Zacks Rank #3 (Hold) company have been witnessing an uptrend. Cimarex Energy’s exposure to crude price volatility is resulting in its steady rise. The West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.21 per barrel in February. Now, this commodity is hovering at around $46 per barrel, reflecting a whopping jump of approximately 90%.

Cimarex Energy has established a track of disciplined exploration and production (E&P) capital spending that drove growth in the past. Management’s conservatism can be gauged from the fact that the company does not recognize undeveloped reserves as part of its proven reserves for reporting purposes. We expect the company’s continued focus on drilling activities to remain its primary production growth driver. As a result, its successful projects are boosting volumes and reserves.

 

CIMAREX ENERGY Price and Consensus

CIMAREX ENERGY Price and Consensus | CIMAREX ENERGY Quote

Also, upward estimate revisions over the last 90 days added to Cimarex Energy’s attractiveness. Analysts have turned bullish on the company’s growth prospects and are therefore pushing up estimates. The Zacks Consensus Estimate for 2016 turned to earnings of 64 cents per share from a loss of 29 cents over the last 90 days. The persistent rise in oil price is therefore a major boon to Cimarex Energy.

Cimarex is an independent E&P company. Its primary activities are in the Mid-Continent and Permian Basin areas of the U.S.

Stocks to Consider

Some better-ranked stocks in the same space are Devon Energy Corporation DVN, NGL Energy Partners LP NGL and Enbridge Energy Partners L.P. EEP, each sporting a Zacks Rank #1 (Strong Buy).

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Noble Corp. (NE) Slips to 52-Week Low: What's Pulling it Down?

Posted Wed Aug 31, 11:03 am ET

by Zacks Equity Research

Shares of Noble Corporation NE sank to a new 52-week low of $5.70 on Tuesday before closing the day higher at $5.74.

Noble Corp. provides diversified services for the oil and gas industry. The company offers contract drilling services with a fleet of offshore drilling units. The company renders contract drilling services along with provision of labor contract drilling, engineering and consulting, and project management services. The company offers its services in the United States, the Middle East, India, Mexico, the North Sea, Brazil, and West Africa.

In the current environment, there is a severe dearth of contracts for all drillers; even for those with good rigs. However, Noble Corp.’s strong management skills, farsightedness and superior capability are positives that will help the company to survive this crisis.

Earlier this month the company reported the early termination of its drilling contract for one of its jackup rig with Quadrant Energy. The contract is now expected to conclude during the second half of Sep 2016. As part of the contract, Noble Corp. will receive a demobilization fee as well as 50% of the operating dayrate through the original contract expiration date from the customer. Most underwater drillers continue to trade on oil prices that are still very volatile.
 

NOBLE CORP PLC Price and Consensus

NOBLE CORP PLC Price and Consensus | NOBLE CORP PLC Quote

Also, downward estimate revisions over the last 90 days added to Noble Corp.’s losing value in the market. Analysts have turned bearish on the company’s growth prospects and are therefore pushing down estimates. The Zacks Consensus Estimate for 2016 detriorated to earnings of 2 cents per share from 50 cents per share over the last 90 days.

Noble Corp. currently holds a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are Devon Energy Corporation DVN, NGL Energy Partners LP NGL and Enbridge Energy Partners L.P. EEP, each sporting a Zacks Rank #1 (Strong Buy).

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The most eye-catching update of the otherwise news-thin week came from United Continental Holdings UAL when it announced the appointment of Scott Kirby as President- a newly created position at the carrier. The news of the vastly experienced Kirby moving to United Continental from American Airlines Group AAL led to a surge in the former’s stock price.

Apart from the management change, the Dallas, TX-based Southwest Airlines LUV received good news on the labor front when it inked a tentative pay-related deal with its pilots’ union. Moreover, news pertaining to the engine failure of a Southwest Airlines flight from New Orleans to Orlando, FL also invited attention. Additionally, the past week saw an update regarding the Atlanta, GA-based Delta Air Lines’ DAL modernization plans at the Los Angeles International Airport (LAX).

 (Read the last Airline Stock Roundup for Aug 24, 2016).

Recap of the Past Week’s Most Important Stories

1. United Continental announced that Scott Kirby has joined the carrier as President. Kirby has vast experience in the airlines space and his appointment is a prudent move by United Continental as it seeks to turn around its fortunes. At United Continental, Kirby assumes a wide array of responsibilities ranging from overseeing its activities pertaining to marketing, sales, alliances, and network planning along with revenue management (read more: United Continental Hires Scott Kirby as President, Stock Up).

2. Delta’s lease and license agreement to relocate to terminals 2 and 3 from terminals 5 and 6 at LAX received approval from Los Angeles City Council. The carrier plans to invest $1.9 billion for the upgradation purpose. The agreement aims at expanding Delta’s gates at this key hub (read more: LA City Council OKs Delta's $1.9B LAX Modernization Plans).

3. Southwest Airlines inked a tentative agreement with its pilots. The company and the union representing its pilots, Southwest Airlines Pilots' Association, have agreed “in principle” to the terms of this new contract (read more: Southwest Airlines Pilots Agree on Tentative Contract).

On a separate note, a Southwest Airlines flight (3742) made an emergency landing at Pensacola International Airport after the pilot detected an issue with one of its two engines. According to media reports, there were 99 passengers on the plane and five crew members. Luckily no one was injured (read more: Southwest Airplane Suffers Engine Issue En-route to Florida).

4. In a bid to expand further, low-cost carrier JetBlue Airways JBLU plans to initiate operations from Fort Lauderdale-Hollywood to Aruba – a popular Caribbean destination. The service is slated to start from Jan 4, 2017.

5. According to a report appearing in Reuters, the U.S. Department of Transportation on Friday has fined 4 major US carriers including American Airlines and United Continental for inaccurately informing passengers about compensation. According to the report, American Airlines was fined the maximum amount.

 Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

Company

Past Week

Last 6 months

HA

3.07%

6.55%

UAL

7.35%

-11.96%

GOL

-2.06%

177.27%

DAL

0.49%

-23.46%

JBLU

-0.25%

-28.17%

AAL

2.86%

-10.92%

SAVE

0.81%

-19.95%

LUV

0.82%

-11.35%

VA

-0.32%

84.94%

ALK

-0.07%

-12.57%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that majority of the airline stocks traded in the green over the past week. Consequently, the NYSE ARCA Airline index increased 1.1% to $89.34 over the past 5 trading days.  Shares of United Continental gained the most (7.35%) driven by the appointment of Scott Kirby.

Over the course of six months, the NYSE ARCA Airline index appreciated 3.77% driven by huge gains at GOL Linhas GOL and Virgin America.

What's Next in the Airline Space?

JetBlue’s flight from Fort Lauderdale to Santa Clara, Cuba will mark the resumption of commercial flights connecting the US and Cuba after more than 50 years. We anticipate further updates on the issue in the coming days. Moreover, August traffic reports from the likes of Delta Air Lines and Alaska Air Group ALK are expected over the next few days.

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Will Expected Rate Hike Heal Insurers' Cat Loss Wound?

Posted Wed Aug 31, 10:58 am ET

by Zacks Equity Research

The hawkish statement coming from Fed Chairwoman Janet Yellen at the recent Jackson Hole symposium raised the odds of a rate hike in the near term. Yellen commented on the strength of the economy and in the labor market.

Not only Yellen, other key Fed officials including her deputy, Vice Chairman Stanley Fisher, also sounded bullish on increasing interest rates.

The major factors that signal economic growth – consumer outlays and the job market – are both shaping up strongly. Recent data on these fronts have put to rest the concern of economic weakness hovering in the first half of the year. Data from Labor Department revealed that July’s nonfarm payroll outperformed the analysts’ expectation by 255,000 job additions, following the upwardly revised 292,000 jobs created in June.

Yellen said, “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” This gives a clear signal that the much-awaited rate hike is on its way.

Also Stanley Fischer said that the U.S. central bank was close to hitting its target of 2% inflation and full employment.

Key officials are hinting at a rate hike action in the September meeting. Moreover, if the August jobs’ data reveals 180,000 or more additions, the case for the rate hike will become firmer.

Among others, one of the sectors expected to gain from an interest rate hike is insurance.

Glimmer of Hope for Insurers After Heavy Cat Loss

The Fed’s campaign to boost the economy by keeping interest rates low squeezed profits of insurers. The insurance industry directly stands to gain from high interest rates. Insurers’ top line consists primarily of two components – premium earned from customers and net investment income, which is generated from the float (premium collected which would be used in paying out claims in future), invested by insurance companies. Over the past decade, insurers have witnessed a dent in their top line because of low investment income caused by a decline in investment yield from low interest rates. As the Fed raises the key rate, bonds yields will increase across the board. Insurers can then invest their premium and receive higher yields. More investment income will then be generated, which will boost profits.

In order to fight the low interest rate, companies divested and stopped selling rate sensitive products such as long-term care policies. Some of the companies also divested businesses that were rate sensitive.

Nevertheless, this anticipated rate hike will bring solace to the industry which has suffered high catastrophe loss this year. As per Munich RE, U.S. economic losses caused by natural catastrophes (hail storms in Texas, earthquakes in Japan and Ecuador, floods in Europe and wildfires in Fort McMurray in Canada) in the first half of 2016 were $ 17 billion compared with $12 billion in the same period last year. Of the loss incurred this year, $11 billion was insured compared with $8 billion of insured losses in the first half of 2015. Earnings for a number of players in the industry saw a dent from the high cat loss activity in the first half of 2016. Many of the insurers also have come up with the preliminary estimates for cat loss from for the month of July as well. While the cat losses have drained the bottomline earnings for the sector the rise in interest rate will help top line growth in the form of increased investment income.

3 Stocks to Pick

We have selected four stocks from the insurance space which will emerge as winner and worth investing.  Finding a great value stock can be a tough task. But thanks to our new style score system we have been able to identify a few stocks which have incredible potential in the near term.
Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined a Zacks Rank #1 (Strong Buy) or #2 (Buy) offers the best investment opportunities in the value investing space.

First American Financial Corporation FAF provides Title Insurance and Services, Specialty Insurance, and corporate function. First American Financial has a Zacks Rank #2 and a Value Style Score of ‘A’.
The company has also seen its earnings estimate rise to $2.97 per share from $2.82 over the past 60 days. Its long-term EPS growth rate is 9.25%.

FIRST AMER FINL Price and Consensus

FIRST AMER FINL Price and Consensus | FIRST AMER FINL Quote

Primerica Inc. PRI distributes financial products to middle income households in the United States and Canada. Primerica has a Zacks Rank #2 and a Value Style Score of ‘A’.
The company has also seen its earnings estimate rise to $4.45 per share from $4.28 over the past 60 days. Its long-term EPS growth rate is 16%.

PRIMERICA INC Price and Consensus

PRIMERICA INC Price and Consensus | PRIMERICA INC Quote

Principal Financial group Inc. PFG provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide. It has a Zacks Rank #2 and a Value Style Score of ‘A’.
The company has also seen its earnings estimate rise to $4.38 per share from $4.26 over the past 60 days. Its long-term EPS growth rate is 6.4%.

PRINCIPAL FINL Price and Consensus

PRINCIPAL FINL Price and Consensus | PRINCIPAL FINL Quote

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Forget The Hartford Financial, Buy These 3 Insurance Stocks

Posted Wed Aug 31, 10:57 am ET

by Zacks Equity Research

The Hartford Financial Services Group, Inc. HIG is going through a rough patch. A number of factors like higher prior-year development, underperforming personal auto business, lower net investment income and higher catastrophe losses are acting against it.
   
The related woes were evident in the recently reported second-quarter earnings which missed estimates significantly by 59.74%. The company’s pain can also be ascertained from earnings miss in three out of the past four quarters, with an average negative surprise of 17.6%.

What’s Bothering The Hartford Financial?

The company is facing heightened competition within its commercial lines business. Moreover, unfavorable auto loss cost trends are draining profitability in the personal lines business. Adding to these are company-specific factors and significantly lower interest rates. In commercial lines, competition is becoming more aggressive, especially in national accounts and Middle Market.

As a property and casualty (P&C) insurer, The Hartford is substantially exposed to catastrophic (cat) events that are weighing on its underwriting results. Cat losses increased in the first quarter owing to several storms in Texas. Thus, the unpredictable nature of such weather-related events continues to raise caution for the coming quarters, thereby posing operating risks. The same continued in the second quarter resulting in catastrophe loss of $104 million, $7 million higher than second quarter 2015, which drained the company’s bottom line.

The company has also been suffering due to the prolonged low interest rate environment. Hence, net investment income declined at a four-year CAGR of 27.32% (2011–2015), mainly due to a decrease in income from fixed maturities and limited partnerships. In the first quarter, net investment income declined 16.8% year over year and the same trend was seen in the second quarter when net investment income declined 8%.

Also, the company’s Personal lines business has been incurring loss due to higher auto liability loss costs. Net income decline by $20 million in 2015 and $22 million in 2014. For the first half of 2016, the segment reported net loss of $33 million compared with core earnings of $117  million. Though the company is taking steps (investing in capabilities to better utilize data and analytics, and thereby, refine and manage underwriting and pricing) to gain back profitability since it is a core business for Hartford Financial and its long-term relationship with AARP would provide l benefits over the long term, we do not expect significant improvements in the near term on his front.

HARTFORD FIN SV Price and Consensus

3 Stocks Worth Considering

While The Hartford Financial with a Zacks Rank # 5 (Strong Sell) remains mired in its problems there are other stocks in the same space that are worth investing in.  Here, we have picked three stocks using our style score system. Not only do these stocks have a solid VGM score ('V' for Value, 'G' for Growth and 'M' for Momentum) of ‘ A’ or B’, they also have a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy).

The VGM score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum, across the board.

Argo Group International Holdings, Ltd. AGII underwrites specialty insurance and reinsurance products in the property and casualty market worldwide.
This Zacks Rank #2 (Buy) stock with a VGM score of ‘B’ has seen its current year earnings per share (EPS) estimate move 8.4% higher over the past 60 days. Its long-term EPS growth rate is 7%.

ARGO GROUP INTL Price and Consensus

ARGO GROUP INTL Price and Consensus | ARGO GROUP INTL Quote

First American Financial Corporation FAF operates through Title Insurance and Services, and Specialty Insurance segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services. The Specialty Insurance segment provides property and casualty insurance.
This Zacks Rank #2 stock with a VGM score of ‘A’ has seen its current year earnings per share (EPS) estimate move 5.3% higher over the past 60 days. Its long-term EPS growth rate is 9.25%.

FIRST AMER FINL Price and Consensus

FIRST AMER FINL Price and Consensus | FIRST AMER FINL Quote

National Interstate Corporation NATL operates as a specialty property and casualty insurance company primarily in the United States. It underwrites and sells traditional and alternative property and casualty insurance products primarily to the passenger transportation, trucking and moving, and storage industries; general commercial insurance to small businesses in Hawaii and Alaska; and personal insurance to owners of recreational vehicles.
This Zacks Rank #1 (Strong Buy) stock with a VGM score of ‘B’ has seen its current year earnings per share (EPS) estimate move 7.6% higher over the past 60 days. Its long-term EPS growth rate is 10%.

NATL INTERST CP Price and Consensus

NATL INTERST CP Price and Consensus | NATL INTERST CP Quote

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Harris Corp. (HRS) Scales 52-week High on Dividend Hike

Posted Wed Aug 31, 10:49 am ET

by Zacks Equity Research

Shares of leading communications equipment and service provider Harris Corp. HRS scaled a 52-week high of $92.91 on Aug 30, before settling a tad lower at $92.73. The Melbourne, FL based company has a market capitalization of $11.57 billion. Average volume of shares traded over the last three months is approximately 737.23 K.

6% Dividend Hike Leads to Stock Price Surge

The company raised its quarterly dividend to 53 cents per share ($2.12 per share annualized), representing an increase of 6% over the previous payout of 50 cents per share. The new dividend, which has been approved by the company’s board of directors, is payable on Sep 21 to shareholders of record as of Sep 9, 2016.

We believe that the dividend hike not only highlights Harris Corp.’s commitment to create value for shareholders but also underlines the company’s confidence in its business going forward. It is evident from past records that Harris Corp. has a stable dividend payment history.

Earnings Beat in Q4

The company reported better-than-expected earnings in the fourth quarter of fiscal 2016 (ended Jul 1, 2016). Earnings also improved 9.9% on a year-over-year basis. Performance in the quarter was boosted by the inclusion of Exelis' results. The acquisition of Exelis was completed in late May 2015.

Harris Corp. has an impressive earnings history having outshined the Zacks Consensus Estimate in each of the last four quarters. The average earnings beat was 4.04%.

HARRIS CORP Price and Consensus

 

HARRIS CORP Price and Consensus | HARRIS CORP Quote

Multiple Contract Wins

The company has won multiple contracts of late which should boost its top line. In Jun 2016, the company received a military contract worth $1.7 billion. As a leading government electronics supplier, Harris Corp. is benefiting from the increase in U.S. defense expenditures as well as strong market conditions for RF (radio frequency) communications.

In order to boost operating efficiency through the optimization of its business portfolio, the company sold its Aerostructures business to Albany International Corp. for an enterprise value of $210 million, earlier in the year. As per the agreement, Albany International paid $187 million in cash and the remaining $23 million as capitalized lease.

At present, Harris Corp. has a Zacks Rank #4 (Sell).

Stocks to Consider

Better-ranked stocks in the broader Computer & Technology sector include ARRIS International plc ARRS, Carbonite, Inc. CARB and Facebook, Inc. FB. All 3 stocks carry a Zacks Rank # 1 (Strong Buy).

Confidential from Zacks


Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

Should You Dump Manulife Financial (MFC) Stock Now?

Posted Wed Aug 31, 10:49 am ET

by Zacks Equity Research

On Aug 31, 2016, Zacks Investment Research downgraded Manulife Financial Corporation MFC to a Zacks Rank #4 (Sell).

Why the Downgrade?

Manulife Financial has been witnessing downward estimate revisions after reporting disappointing second-quarter 2016 results. With respect to the surprise trend, the company delivered negative surprises in two of the last four quarters, with an average miss of 2.83%.

The life insurer’s second-quarter core earnings of $643.5 million (C$833 million) declined from the prior-year quarter, primarily due to the absence of core investment gains, higher-than-expected macro hedging costs and lower earnings on surplus assets. Also, the life insurer experienced lower sales at its U.S. and Canada divisions in the second quarter.

Manulife’s soft results from the U.S. division and low interest rates continue to hurt the overall performance. Core earnings at the U.S. division plunged 11% year over year, owing to an unfavorable policyholder experience in JH Long Term Care, the non-recurrence of favorable policy-related items from the year-ago quarter and lower new business gains in Insurance. Given the stiff competition and a continued low interest rate environment, earnings from this division are expected to remain under pressure in the near term.

Also, recent volatile global equity markets and low bond yields have been adversely affecting the company’s capital position.

The Zacks Consensus Estimate for 2016 moved down 3.5% to $1.36 per share over the last 30 days. For 2017, the same moved down 1.9% to $1.57 per share over the same time frame.

MANULIFE FINL Price and Consensus

 

MANULIFE FINL Price and Consensus | MANULIFE FINL Quote

Zacks Rank and Stocks to Consider

Though we prefer to avoid Manulife Financial presently, some better-ranked stocks from the life insurance industry are Health Insurance Innovations, Inc. HIIQ, Genworth Financial, Inc. GNW and Primerica, Inc. PRI. While Health Insurance Innovation sports a Zacks Rank #1 (Strong Buy), both Genworth Financial and Primerica hold a Zacks Rank #2 (Buy).

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NVIDIA and 4 Other Stocks to Buy in Top Ranked Industries

Posted Wed Aug 31, 10:47 am ET

by Zacks Equity Research

Spotting the top-performing stocks among all industries (big and small) is a difficult task. However, the Zacks Industry rank gives investors a clear view of which industries are performing better than the others. Once investors have the requisite information, they can use the Zacks Rank to pick the best stocks available within that particular industry.

NVIDIA Corporation NVDA, widely known for its video gaming chips, is a part of one of the top-ranked industries and is poised to lead the industry in the near future. The company has a Zacks Rank #1 (Strong Buy). The industry (Semiconductor) it falls under has a Zacks Industry rank of 17/265 (Top 6%).

The stock has been witnessing positive estimate revisions over the past 60 days that led the Zacks Consensus Estimate higher by 18.6% to its present level of $1.85 a share for fiscal 2017.

NVIDIA has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software deliver amazing experiences in virtual reality, artificial intelligence and autonomous cars.

Shares of the company continue to rally following the better-than-expected second-quarter fiscal 2017 results and encouraging revenue guidance for the third quarter issued on Aug 11. The stock has gained about 3% since then.

The stock has been clocking solid returns since the beginning of 2016 and has gained approximately 86.9% year to date. The robust performance is mainly attributable to the company’s phenomenal results in back-to-back quarters.

NVIDIA’s foray into the autonomous vehicles and the automotive electronics space has been driving this stock higher since mid-2015. It should be noted that in the last reported quarter, the company witnessed a 68% year-over-year surge in automotive segment revenues mainly driven by premium infotainment and digital cockpit features in mainstream cars.

Notably, during the 2016 CES event, the company unveiled a computer chip called Drive PX 2 to power self-driving cars. Drive PX 2 is considered to be as powerful as 150 MacBook Pros, and has the capacity to power 12 video camera inputs and sensor fusion. The chip, according to NVIDIA, can run about 24 trillion deep learning operations per second, thereby enabling driverless cars to determine the next move in a fraction of a second.

Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. NVIDIA currently trades at a forward P/E of 33.55x compared with the industry group average of 62.00x.

Zacks Industry Rank

A top Zacks Industry Rank signifies that more stocks within that group are likely to see upward earnings estimate revisions, implying a bullish outlook for that industry.

Historically, we have found that the top 50% of Zacks-Ranked Industries outperform the bottom 50% by a factor of more than 2 to 1. So it’s a good idea to leverage the Zacks Industry Rank to shortlist stocks.

The Zacks Industry classification divides the business world into 16 sectors comprising 60 medium or M-level industries and 260 plus or X-level industries. We rank all 260 plus X-level industries based on the earnings outlook for the constituent companies in each industry.

4 Well-Ranked Stocks to Invest In

Apart from NVIDIA, we have picked four other stocks in the top 10% of Zacks-Ranked Industries with the help of the Zacks Screener. Also, each stock carries a Zacks Rank #1 or 2 (Buy) and are in the top 35 Industries.

Now, let’s take a sneak peek into the fundamentals of the chosen four:

Thor Industries Inc. THO, carrying a Zacks Rank #1, designs, manufactures, and sells a wide range of recreational vehicles (RVs) at various manufacturing facilities located in Indiana and Ohio and sold through independent dealers in the U.S. and Canada. The industry to which it belongs has a Zacks Industry rank of 5/265 (Top 2%).

Thor has a market cap of $4.28 billion and a forward PE of 14.74. The company has an expected EPS growth of 10.8%. The stock has a Zacks Value Style Score of “B” and a VGM score of “B”.

Estimates for Thor are on the rise for fiscal 2016. Over the last 60 days, estimates jumped 2 cents from $4.77 to $4.79. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 18.5%. Thor has also gained about 45.1% year to date, which makes investors positive about the stock.

Taiwan Semiconductor Manufacturing Company Limited TSM manufactures semiconductors using its advanced production processes based on its own or third-party proprietary integrated circuit designs. The company offers a range of wafer-fabrication processes, including those required to manufacture complementary metal oxide semiconductor (CMOS) logic, mixed-signal, radio frequency, and embedded memory bipolar CMOS mixed-signal and other semiconductors. The company carries a Zacks Rank #2. The industry to which it belongs has a Zacks Industry rank of 5/265 (Top 2%).

Taiwan Semiconductor has a market cap of $148.84 billion and a forward PE of 15.03. The company has an expected EPS growth rate of 15%. The stock has a Zacks Value Style Score of “B”.

Estimates for Taiwan Semiconductor are rising for fiscal year 2016. Over the last 60 days, estimates were up by 2 cents from $1.89 to $1.91. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 3.7% and gained about 25.8% year-to-date.

Vishay Intertechnology Inc. VSH, a Zacks Rank #1 stock, is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors. The company offers its customers one-stop access to one of the most comprehensive electronic component lines of any manufacturer in the United States or Europe. The industry under which it falls has a Zacks Industry rank of 3/265 (Top 1%).

Vishay has a market cap of $2.08 billion and a forward PE of 15.90. The company has an expected EPS growth rate of 17.6%. The stock has a Zacks Style Score of “A” in Value and a VGM score of “A”.

Estimates for Vishay are rising for fiscal year 2016. Over the last 60 days, estimates moved north by 4 cents from 85 cents to 89 cents. Moreover, in the trailing four quarters, the company has delivered an average positive earnings surprise of 19.3% and gained about 17.8% year to date.

Finally we come to Potlatch Corporation PCH, which carries a Zacks Rank #1. The company is an integrated forest products company with substantial timber resources. It is engaged principally in growing and harvesting of timber and the manufacture and sale of wood products, printing papers and pulp and paper products. Its timberlands and all of its manufacturing facilities are located within continental United States.

Potlatch has a market cap of $1.55 billion and a forward PE of 34.09. The company has an expected EPS growth rate of 5%. The stock sports a Zacks Style Score of “B” in Momentum.

Estimates for Potlatch are rising for fiscal year 2016. Over the last 60 days, estimates were up 12% from $1.00 to $1.12. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 58.9%.  Potlatch has gained about 25.7% year to date, which makes investors positive about the stock.

Looking Ahead

These five stocks have grabbed the spotlight with striking performances on the back of strong fundamentals and solid growth projections. The Zacks Industry Rank and the Zacks Rank itself allow investors to filter through thousands of stocks in order to find the winners. Therefore, at this point of time, investing in a stock belonging to a high performing industry will be the right course of action.

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