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Zacks #1 Stocks on the Move 10/23/2017

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Analyst Blog

Is Celgene (CELG) Poised for a Beat This Earnings Season?

Posted Mon Oct 23, 06:16 pm ET

by Zacks Equity Research

Celgene Corporation CELG is scheduled to report third-quarter 2017 results on Oct 26, before the opening bell.

 

Celgene’s stock has moved up 6.1% year to date compared with the industry’s gain of 11.8%.

Celgene has an excellent track record with the company beating earnings estimates in the last four trailing quarters. Last quarter, the company beat expectations by 2.8%. Overall, the company has delivered an average positive surprise of 3.8%. We expect the company to beat estimates once again on the back of strong performance of key drug Revlimid.

Why a Likely Positive Surprise?

Our proven model shows that Celgene is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Celgene currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Celgene Corporation Price and EPS Surprise

 

Celgene Corporation Price and EPS Surprise | Celgene Corporation Quote

Revlimid to Drive Growth

Concurrent with the second-quarter earnings results, Celgene raised its guidance for 2017. The company anticipates earnings in the range of $7.25-$7.35 per share compared with the previous guidance of $7.15-$7.30 per share. Net product sales are projected at $13-13.4 billion.The Zacks Consensus Estimate for product sales in the third quarter currently stands at $3.4 billion.

Revlimid, an oral immunomodulatory drug, is currently approved for several indications including MM, myelodysplastic syndromes and mantle cell lymphoma. The drug performed well in the first half and combated the challenges of uneven buying patterns and coverage gap. Market share gains in key markets and longer treatment duration are contributing to the drug’s growth.

Meanwhile, Celgene is working on expanding Revlimid’s label further. Revlimid received the FDA’s approval for use as a maintenance treatment in NDMM patients after they receive an autologous stem-cell transplant. NDMM market share continues to grow outside the United States, with a positive uptake both in the EU and Japan.

Continued momentum in the core indication, label expansion and global launches should help the product to keep contributing to the top line. The Zacks Consensus estimate for Revlimid currently stands at $2.1 billion for the third quarter.

Other key products — Pomalyst/Imnovid, Abraxane and Otezla — continue to perform well. Pomalyst/Imnovid is being evaluated in multiple combination studies in relapsed/refractory MM. The drug’s label was updated in the United States and the Europe to include data from a pooled pharmacokinetics analysis of patients with relapsed and/or refractory MM and impaired renal function.  Pomalyst, in combination with Darzalex and dexamethasone for relapsed/refractory myeloma was approved in the United States and should propel sales further.

The approval of Idhifa for the treatment of adult patients with relapsed or refractory AML (R/R AML) will further boost Celgene’s portfolio. The drug was developed in collaboration with Agios Pharmaceuticals AGIO. Otezla achieved the blockbuster status in 2016 driven by solid demand in the United States and trend is expected to continue in 2017. Increased contribution from European countries also impacted sales positively. It is currently being evaluated in phase III studies for Behçet's disease, atopic dermatitis and expanded indications in psoriatic arthritis and plaque psoriasis.

The company is keen to expand its oncology franchise beyond Abraxane. Label and geographical expansion of approved drugs in additional indications will increase their commercial potential further. Abraxane sales are estimated to be around $1 billion. While Pomalyst’s revenues are projected around $1.6 billion, the same for Otezla are estimated around $1.5-1.7 billion.

During third-quarter earnings call investors are expected to remain focused on the company’s performance and label expansion efforts, along with updates on the pipeline front.

Other Stocks Poised to Beat Estimates

Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.

Vertex Pharmaceuticals Inc. VRTX has an Earnings ESP of +7.24% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

GlaxoSmithKline plc GSK has an Earnings ESP of +1.28% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 25.

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What's in the Cards for Milacron (MCRN) in Q3 Earnings?

Posted Mon Oct 23, 06:11 pm ET

by Zacks Equity Research

Milacron Holdings Corp. MCRN is scheduled to report third-quarter 2017 results on Oct 26, before the opening bell.

Last quarter, Milacron surpassed the Zacks Consensus Estimate by 12.2%. The company beat estimates in three of the trailing four quarters, witnessing an average positive earnings surprise of 10.3%.

Let’s see how things are shaping up for this announcement.

Milacron Holdings Corp. Price and EPS Surprise

 

Milacron Holdings Corp. Price and EPS Surprise | Milacron Holdings Corp. Quote

Factors to Consider

Milacron recorded orders of $335 million in second-quarter 2017. About 40% of the orders were shipped within the second quarter and 35% were scheduled  in the third quarter. During the second-quarter conference call, the company stated that it has filled about 70% of backlog for Q3. Based on the current-order rates, Milacron remains confident for Q3’s performance.

According to our latest consensus estimates, Milacron is expected to post net sales of $166 million for the third quarter in its Advanced Plastic Processing Technologies (APPT) segment, reflecting a year over year decline of 1.8%. Further, our consensus estimates indicate that net sales of Melt Delivery and Control Systems will reach $105 million in the quarter and the Zacks Consensus Estimate for Fluid Technologies is pegged at $29.6 million.

However, pricing pressure remains a headwind in the APPT segment due to the combination of the competition, low-growth environment in North America, as well as broader commodity deflationary headwinds. The environment remains somewhat sluggish for equipment spending, and consequently, a significant improvement is not expected anytime soon.

In addition, the company is facing competition in its equipment business in North America, along with a choppy industrial environment. Milacron also witnessed $8-million foreign-currency headwind in the top line in the first half of 2017. The company believes foreign-currency impact will likely hurt its performance in the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively show that Milacron will likely beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Milacron has an Earning ESP of +2.38%. This is because the Most Accurate estimate of 43 cents per share comes above the Zacks Consensus Estimate of 42 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Milacron carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Share Price Performance

Milacron has underperformed the industry over the past year. The company’s shares gained around 21.9% compared with 54.0% growth recorded by the industry.

 

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Barnes Group Inc. B with an Earnings ESP of +0.87% and a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

A. O. Smith Corp. AOS with an Earnings ESP of +0.11% and a Zacks Rank of 2 (Buy).

Caterpillar Inc. CAT with an Earnings ESP of +1.27% and a Zacks Rank of 2.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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Will Soft Unum U.K. Drag Unum Group's (UNM) Q3 Earnings?

Posted Mon Oct 23, 06:08 pm ET

by Zacks Equity Research

Unum Group UNM is slated to report third-quarter 2017 results on Oct 25, after the market closes. The company delivered a positive earnings surprise in the last two quarters. Let’s see what it has in store for this yet-to-be reported quarter.

Unum Group is expected to have witnessed improved operating income at Unum U.S. and Colonial Life segments, driven by higher premiums and favorable risk results. Sales at both the segments likely have improved, thus fueling the company’s total premiums.

The company’s voluntary benefits business likely has performed better.

Continued share buybacks should have boosted the bottom line.

The Unum U.K. is expected to have remained soft at the backdrop of challenging economic environment.

The Zacks Consensus estimate for earnings is pegged at $1.04 on $2.8 billion revenues. While the bottom line reflects a 4.9% increase, the top line translates to a 2.3% increase, both on a year-over-year basis.

Earnings Whispers

Our proven model does not conclusively show that Unum Group is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Unum Group has an Earnings ESP of -0.51%. This is because the Most Accurate estimate of $1.03 is pegged lower than the Zacks Consensus Estimate of $1.04. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Unum Group Price and EPS Surprise

Zacks Rank: Unum Group carries a Zacks Rank #2, which though increases the predictive power of ESP, a company needs to have a positive ESP to be confident about an earnings surprise. Hence, this combination leaves surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement.

Stocks to Consider

Some stocks worth considering from the insurance industry with the right combination of elements to come up with an earnings beat this quarter are as follows:

CNO Financial Group, Inc. CNO has an Earnings ESP of +1.70% and carries a Zacks Rank #3. The company is set to report third-quarter earnings on Oct 25.

Prudential Financial PRU has an Earnings ESP of +0.07% and a Zacks Rank of 2 as well. The company is slated to report third-quarter earnings on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lincoln National Corp. LNC has an Earnings ESP of +0.05%. This Zacks #2 Ranked company is slated to report third-quarter earnings on Nov 1.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.

See This Ticker Free >>

Factors Impacting Columbia Sportswear's (COLM) Q3 Earnings

Posted Mon Oct 23, 06:04 pm ET

by Zacks Equity Research

Columbia Sportswear Company COLM is scheduled to release third-quarter 2017 results on Oct 26, after the markets close. While the company is expected to gain from sturdy performance in its Europe-direct business and prAna brand, results are likely to be hurt by declines across the United Sates, Latin America and Asia Pacific regions. As a result, both top and bottom lines depict a probable year-over-year decline.

Let’s now have a closer look at how things are shaping up prior to this announcement.

Europe-Direct Business and prAna Brand to Continue Growth

Columbia Sportswear has been witnessing stellar performance in its Europe-direct business for some time.  In fact, the wholesale, brick-and-mortar and e-commerce channels across the Europe-direct business have depicted sustained growth during the first-half of 2017.

Owing to this trend, analysts polled by Zacks expect sales from the Europe, Middle East and Africa (EMEA) regions to inch up 2.7% year over year to $75 million. Similarly, net sales from Canada are also expected to grow 1.3% to $76 million owing to strong performance of the company’s core brands.

From a brand perspective, we note that Columbia Sportswear’s prAna brand has been attracting a large consumer base. The current Zacks Consensus Estimate of revenue for prAna brand is $38.1 million, almost in line with the prior-year figure.

Headwinds Impacting Revenue

Analysts polled by Zacks expect net sales from United States and Latin America and Asia Pacific (LAAP) regions to decline 2.5% and 0.9% respectively during the third quarter.

Of late, the company has been facing challenges in the domestic region, especially in the wholesale front, mainly due to store closures, bankruptcies, or plans to restructure or liquidate. This has led to lower-than-expected advance orders for fall 2017 from U.S. wholesale customers.

Revenues in the LAAP region have also witnessed challenges lately, owing to lower sales in Korea. There has been a general shift of consumer preference away from outdoor apparel and accessories in Korea. Also, the consensus estimate of revenues for the SOREL brand is $86 million, reflecting a year-over-year decline of 1.8%.

Owing to such headwinds, analysts polled by Zacks expect total revenues of $734.9 million for the said quarter, down 1.4% from the year-ago period.

These ongoing challenges are also visible in Columbia Sportswear’s share price performance. Shares of the company have underperformed the industry in the past six months. The stock has returned 4.8% compared with the industry’s gain of 10.9%.  

 

Earnings Expectations

The expected decline in revenues across some of its core regions and brands has led to a bleak earnings view. The Zacks Consensus Estimate of $1.15 for the third quarter depicts a decline of 2.7% from the year-ago period.

However, estimated earnings for 2017 of $2.78 per share depict a growth of 2.2% from the year-ago figure and are in line with management’s guidance of $2.74-$2.84. Estimates for both the quarter under review as well as fiscal 2017 have remained stable over the past 30 days.

We note that Columbia Sportswear has delivered an average positive surprise of 12.3% in the trailing four quarters. Notably, the company’s earnings have outpaced the Zacks Consensus Estimate in 18 straight quarters.

Columbia Sportswear Company Price, Consensus and EPS Surprise

What Does the Zacks Model Say?

Our proven model does not conclusively show that Columbia Sportswear is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Columbia Sportswear currently carries a Zacks Rank #3, it has an Earnings ESP of -0.71%. We need to have a positive ESP to be confident about a beat.

Stocks with Favorable Combinations

Here are some companies, which according to our model, have the right combination of elements to post an earnings beat:

PVH Corp. PVH has an Earnings ESP of +0.15% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wynn Resorts Ltd. WYNN has an Earnings ESP of +3.38% and holds a Zacks Rank #2.

Ralph Lauren Corp. RL has an Earnings ESP of +2.63% and carries a Zacks Rank #2.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Will Southwest Airlines (LUV) Disappoint in Q3 Earnings?

Posted Mon Oct 23, 06:00 pm ET

by Zacks Equity Research

Southwest Airlines Co. LUV is scheduled to report third-quarter 2017 results on Oct 26, before the market opens.

In the second quarter of 2017, the carrier’s earnings per share (on an adjusted basis) of $1.24 surpassed the Zacks Consensus Estimate of $1.20. The bottom line also improved 4.2% on a year-over-year basis. Operating revenues of $5,744 million was marginally above the Zacks Consensus Estimate of $5,733.2 million.

However, this Dallas-based low-cost carrier is likely to face turbulence in the to-be-reported quarter. The company’s third-quarter results are expected to be hurt due to the recent hurricanes (Harvey, Irma and Maria) and the earthquake in Mexico. These natural disasters have forced the airline to cancel approximately 5,000 flights. Markedly, the negative sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for third-quarter earnings has moved down 22.3% over the last 90 days.

Consequently, the stock has struggled so far this year underperforming the Zacks Airline industry  over the last six months. Shares of Southwest Airlines have gained 5.1% compared with the industry’s rally of 5.9%.

 

Let's delve deep to find out the factors likely to impact Southwest Airlines’ third-quarter results.

Owing to the multiple flight cancellations, the company expects third-quarter operating revenues are likely to be hurt to the tune of $100 million. Moreover, the carrier expects operating revenue per available seat mile (RASM) in the quarter to be flat to down 1% year over year. The Zacks Consensus Estimate for third-quarter passenger unit revenues is pegged at 12.33 cents, lower than 13.03 cents reported in the second quarter of 2017.

Increased costs (fuel and labor) are expected to hurt the bottom line. Cost per available seat miles, excluding special items, is estimated to increase between 3% and 4%. Fuel price per gallon is anticipated between $2.00 and $2.05 in the quarter. The Zacks Consensus Estimate for third-quarter fuel price is pegged at $2.00 per gallon, higher than $1.93 reported in the second quarter of 2017.

Apart from Southwest Airlines other carriers like American Airlines Group AAL and JetBlue Airways JBLU are also likely to be hurt by the natural calamities.

We are, however, appreciative of the company's efforts to enhance its shareholders‘ wealth through dividends and share buybacks. At its annual meeting of shareholders, Southwest Airlines announced that its board of directors approved a new share repurchase program worth $2 billion. Notably, share repurchases benefit a company’s earnings per share by lowering outstanding share count.

What Does Our Model Say?

Our quantitative model does not conclusively show an earnings beat for Southwest Airlines in this quarter. This is because a stock needs to have combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise. However, this is not the case as highlighted below.

Zacks ESP: Southwest Airlines has an Earnings ESP of -0.61%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Southwest Airlines’ Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Transportation Gem

With Southwest Airlines likely to disappoint, investors interested in the broader transportation sector may consider Norfolk Southern Corporation NSC as our model shows that it possesses the right combination of elements to post an earnings beat in the current reporting cycle.

Norfolk Southern has an Earnings ESP of +0.59% and a Zacks Rank #3. The company is slated to release its third-quarter 2017 results on Oct 25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Duke Realty (DRE) to Post Q3 Earnings: What's in Store?

Posted Mon Oct 23, 05:58 pm ET

by Zacks Equity Research

Duke Realty Corp. DRE is scheduled to release third-quarter 2017 results on Oct 25, after the market closes.

Last quarter, this commercial real estate investment trust (REIT) delivered a positive earnings surprise of 6.7%. Results were backed by improved operational performance from increased occupancy and rental-rate growth.

The company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being nearly 5.9%. The graph below depicts this surprise history:

Duke Realty Corporation Price and EPS Surprise
 

Further, Duke Realty’s shares have climbed 8.6% year to date, outperforming the industry’s gain of 4.8%.


Note: All EPS numbers presented here represent funds from operations (FFO) per share.

Let’s see how things have shaped up for this announcement.

Factors That Might Influence Q3 Results

In recent years, Duke Realty has made strategic efforts to enhance its industrial portfolio. This augurs well because the industrial-asset category has been grabbing attention as it is experiencing high demand, with the economy and job market displaying signs of recovery and the manufacturing environment remaining healthy.

Furthermore, higher demand from e-commerce customers, third-party logistic providers and traditional warehousing customers also resulted in high demand for distribution centers. Given Duke Realty’s solid capacity to offer modern, bulk distribution properties, the company remains well poised to capitalize on this trend in the third quarter as well.

Moreover, Duke Realty is making concerted efforts to lower its suburban office assets and turn into a leading domestic pure-play industrial REIT. Subsequently, in the second quarter, the company generated $2.45 billion in proceeds by selling its medical office building (MOB) portfolio for $2.8 billion. This residual transaction is likely to be reflected in the to-be-reported quarter.

While such streamlining efforts are strategic fit for the long term, the near-term dilutive effect cannot be bypassed. In fact, such short-term impact will likely drag the company’s quarterly results.

Over the past two months, the Zacks Consensus Estimate of funds from operations (FFO) per share for the quarter to be reported remained unchanged at 29 cents, reflecting lack of any solid catalyst.
 
Earnings Whispers

Our proven model does not conclusively show that Duke Realty will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter)

Zacks ESP: The Earnings ESP for Duke Realty is -3.93%.

Zacks Rank: Duke Realty has a Zacks Rank #3. This increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

CoreSite Realty Corporation COR, slated to release third-quarter results on Oct 26, has an Earnings ESP of +1.01% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cousins Properties Inc. CUZ, scheduled to report quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank of 3.

Boston properties, Inc. BXP, slated to release third-quarter earnings on Nov 1, has an Earnings ESP of +0.39% and a Zacks Rank of 3.
 
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Intercontinental Exchange Buys BofA's Income Index Platform

Posted Mon Oct 23, 05:56 pm ET

by Zacks Equity Research

Intercontinental Exchange ICE recently acquired Bank of America Merrill Lynch Global Research division’s fixed income index platform to ramp up its index services. The transaction is not expected to be accretive to 2017 financial results. The acquisition was announced in June of this year.

The indices will be re-branded as ICE BofAML and come under the umbrella of ICE Data Services. The acquisition was announced in June this year.

ICE BofAML Indices are the second-largest fixed income indices by assets under management (AUM) globally. The combination will result in an asset compilation of nearly $1 trillion in the AUM benchmarked combined fixed income index business of Intercontinental Exchange.

With this acquisition, Intercontinental Exchange intends to expand its index offering to enable customers to select from a wide range of third-party benchmark solutions. Moreover, with the addition of the indices, the acquirer will now be able to offer a comprehensive portfolio that comprises more than 5,000 global fixed income, currency and commodity indices. 

ICE BofAML Indices will be offered along with ICE’s existing index offering, which includes the ICE U.S. Treasury indices, introduced in 2015. Further, it is also inclusive of Intercontinental Exchange’s index services, which serve as the basis for ETFs and structured products across fixed income, currencies, equities and commodities.

Intercontinental Exchange’s has solid history of acquisitions. Strategic acquisitions have not only expanded growth of ICE but have also resulted in expense synergies. On July 2017, Intercontinental Exchange completed the acquisition of CE Endex shares from N.V. Nederlandse Gasunie to add capabilities to the acquirer’s European gas and power portfolio. 

Inorganic endeavors reflect the company’s diversifying aims to emerge in rapidly growing markets, while enhancing its capital efficiency, cross-selling and product development opportunities in the long run.

Mergers and acquisitions diversify and add capabilities to a company’s portfolio, thereby accelerating its growth profile. Recently, Nasdaq, Inc. NDAQ completed the buyout of London-based startup Sybenetix, to strengthen and expand its position in the surveillance space. 

Zacks Rank & Share Price Movement

Intercontinental Exchange carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Intercontinental Exchange have underperformed the industry year to date. While Intercontinental shares have returned 17.2%, the industry has gained 19.7%. Nonetheless, we expect the company’s diversified product offerings and strategic acquisitions to further drive its shares in the near term.

 

Stocks to Consider

Some better-ranked stocks from the finance sector are CBOE Holdings CBOE and Marsh & Mc Lennan Companies, Inc. MMC. Each of these stocks carry a Zacks Rank #2 (Buy). 

CBOE holdings operates as an options exchange in the United States. The company delivered positive surprises in the trailing four quarters with an average beat of 5.66%.

Marsh & McLennan Companies, Inc. provides advice and solutions in the areas of risk, strategy and people worldwide. The company delivered positive surprises in three of the last four quarters with an average beat of 3.76%.

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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.

See This Ticker Free >>

Refining Unit to Buoy Marathon Petroleum (MPC) Q3 Earnings?

Posted Mon Oct 23, 05:52 pm ET

by Nilanjan Choudhury

Independent oil refiner and marketer Marathon Petroleum Corp. MPC is scheduled to report its third-quarter earnings on Thursday, Oct 26, before market opens.

In the preceding three-month period, the company delivered a negative earnings surprise of 0.96% on lower gross margins and elevated costs. In particular, operating income from the Refining & Marketing segment – which is the main contributor to Marathon Petroleum earnings – fell to $562 million compared with $1,025 million in the year-ago quarter.

As far as earnings surprises are concerned, the Findlay, OH-based downstream operator has a mixed history. It went past the Zacks Consensus Estimate twice in the last four reports.

Marathon Petroleum Corporation Price and EPS Surprise

 

 

Marathon Petroleum Corporation Price and EPS Surprise | Marathon Petroleum Corporation Quote

However, things do look bright for the company in the quarter under review. In fact, the positive sentiment surrounding the stock can be gauged from the Zacks Consensus Estimate for the third quarter, which moved up 7.4% over the last 7 days.

Moreover, shares of Marathon Petroleum have done better than the peer group so far this year. The stock has been up 14.2%, as against the Zacks Oil Refining & Marketing industry’s gain of just 2.5%.

Let’s delve deep to find out the factors likely to impact Marathon Petroleum’s third-quarter results.

Factors to Consider This Quarter

We expect improving refining outlook to buoy the company’s bottom line in the third quarter of 2017. With margin estimates going up and throughput set to be higher, Marathon Petroleum’s refining and marketing unit is expected to report solid quarterly results.

The Zacks Consensus Estimate for the quarter’s revenues from refining and marketing is pegged at $419 million, 36.9% higher than the reported figure in the third quarter of 2016.

Meanwhile, we expect profitability for the midstream (or pipeline transportation) segment to be $420 million, up from $258 million in the third quarter of 2016. Earnings will be likely driven by solid process and fractionation volumes, along with contribution from investments in new projects.

Amid the encouraging scenario, the impact from Hurricane Harvey is expected to play a minor role in the quarter. We expect a fairly negligible effect on throughput/operations on the combined Galveston Bay/Texas City facilities, while cost increase is also likely to have a small negative effect on Marathon Petroleum’s quarterly results.

Overall, the significant uptick in the refining business will likely offset any negative impact.

What Does Our Model Say?

Our proven model too shows that Marathon Petroleum is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for this company stands at +0.14%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Marathon Petroleum carries a Zacks Rank #3 (Hold) which, when combined with a positive ESP, makes us confident of an earnings beat.

Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. On the other hand, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Which Other Energy Companies Have Positive Surprise in Store?

Marathon Petroleum is not the only energy firms looking up this earnings season. Here are some companies from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter:

Denbury Resources Inc. DNR has an Earnings ESP of +100% and a Zacks Rank #1. The company is likely to release earnings on Nov 7. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suncor Energy Inc. SU has an Earnings ESP of +8.07% and a Zacks Rank #2. The partnership is anticipated to release earnings on Oct 25.

National Oilwell Varco Inc. NOV has an Earnings ESP of +10.91% and a Zacks Rank #3. The company is expected to release earnings results on Oct 26.

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What's in the Cards for Cadence Design (CDNS) in Q3 Earnings?

Posted Mon Oct 23, 05:51 pm ET

by Zacks Equity Research

Cadence Design Systems Inc. CDNS is set to report third-quarter 2017 results on Oct 26. Notably, the company has a mixed record of earnings surprises in the trailing four quarters, with an average surprise of 1.62%. Last quarter, the company posted a positive earnings surprise of 3.03%.

In the second quarter, excluding stock-based compensation, earnings were 34 cents per share, reflecting an increase of 17.2% from the year-ago quarter. Revenues increased 5.7% year over year to $479 million, beating the Zacks Consensus Estimate of $478 million.

Guidance & Estimates

For third-quarter 2017, Cadence expects total revenue to be in the range of $475 million to $485 million and non-GAAP earnings in the range of 33 cents to 35 cents per share.

The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, the mid-point of the guidance range. Revenues are estimated to be $482 million for the quarter.

Notably, Cadence has two revenue reporting segments – Product & Maintenance and Services.

For the third quarter, Product & Maintenance segment revenues are projected to be $452 million, a year-over-year increase of 8.8%. Services revenues are expected to be around $30.9 million, almost flat year over year.

Cadence stock has gained 67.6% year to date, substantially outperforming the 31.3% rally of the industry it belongs to.

 

Key Growth Catalysts

Cadence executed a number of successful projects during the quarter. The company’s Genus Synthesis Solution was used by Toshiba Electronic Devices and Storage Corporation for the tapeout of ASIC designing. Per the company, during the third quarter it unveiled the industry’s first integrated memory design and verification solution named Legato Memory Solution.

The company delivered an IP portfolio for the automotive design of Taiwan Semiconductor Manufacturing Company TSM 16nm FinFET Compact (16FFC) technology. Cadence also collaborated with Taiwan Semiconductor Manufacturing Company (TSMC) for the advancement of design innovation of 7nm FinFET Plus for high-performance computing (HPC) systems.

Notably, the company partnered with Xilinx XLNX and TSMC for the development of Cache Coherent Interconnect for Accelerators (CCIX) based on 7nm FinFET technology scheduled for a 2018 delivery.

Additionally, the company received a number of certifications during the quarter. The company’s Design for Manufacturing (DFM) tools are now compatible with Samsung Electronics’ 28nm FD-SOI/14nm/10nm process technologies. Its full-flow digital and signoff tools and custom/analog tools are Intel 22FFL (FinFET Low-Power) process certified. Also, Cadence’s digital, signoff and custom/analog tools and flows have received v1.0 certification for TSMC’s 12nm FinFET Compact (12FFC) technology.

We believe that all these will positively impact the company’s soon-to-be reported quarter results and further boost customer base going ahead.

Zacks Rank & Key Pick

Cadence currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is Applied Materials, Inc. AMAT sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Applied Materials is projected to be 17.1%.

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Can Admissions Rise Fuel Universal Health (UHS) Q3 Earnings?

Posted Mon Oct 23, 05:46 pm ET

by Zacks Equity Research

Universal Health Services, Inc. UHS is set to report third-quarter 2017 results on Oct 25 after  market close.

Last quarter, the company delivered a negative earnings surprise of 6.3%. Let’s see how things are shaping up for this announcement.

The company’s two segments, Acute Care and Behavioral Health, have been performing strongly over the past many quarters. The segments have been continuously witnessing a rise in admissions, licensed beds as well as patient days that have significantly resulted in higher revenues.  This yet-to-be-reported quarter is also likely to see the same bullish trend.

The Zacks Consensus Estimate for total revenue is pegged at $2.6 billion, reflecting year-over-year growth of 8%.  Our consensus estimates for revenues from Acute Care and Behavioral Health segments are currently pegged at $1.4 billion and $1.2 billion, up 10% and 6.4% respectively, year over year.

Since 2012, the average number of licensed beds in the Acute Care hospitals and Behavioral Health centers kept increasing and the trend is expected to continue in the third quarter.. Our consensus estimates for Average Licensed Beds in Acute Care and Behavioral Health are pegged at 6.1 billion and 23.1 billion, up 3% and 6% year over year, respectively.

The Zacks Consensus Estimate for Admissions in Acute Care and Behavioral Health is pegged at 73.1 billion and 120.7 billion respectively, up 5% and 7% year over year, respectively. This in turn is expected to aid the company’s top line in the third quarter significantly.

Other Factors

Universal Health’s efforts to enhance shareholders’ value through share repurchases might have boosted its bottom line by limiting share count.

Nevertheless, rising costs related to interest payment, reserves for settlements, legal judgments and lawsuits, plus impairments of long-lived assets might have put pressure on margins.

Earnings Whispers

Our proven model does not conclusively show that Universal Healthis likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Universal Health has an Earnings ESP of -1.01%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Universal Health Services, Inc. Price and EPS Surprise

Zacks Rank: Universal Health carries a Zacks Rank #3, which though increases the predictive power of ESP, the company needs to have a positive ESP to be confident about an earnings surprise.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the medical sector that you may want to consider as these stocks have the right combination of elements to come up with an earnings beat this quarter:

Aetna, Inc. AET, which is set to report third-quarter earnings on Oct 31, has an Earnings ESP of +1.20% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Teladoc Inc. TDOC has an Earnings ESP of +0.76% and a Zacks Rank #3. The company is set to report third-quarter earnings on Nov 1.

Humana, Inc. HUM has an Earnings ESP of +1.10% and a Zacks Rank of 3 as well. The company is set to report third-quarter earnings on Nov 8.

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