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Zacks #1 Stocks on the Move 08/25/2016

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Analyst Blog

Medtronic (MDT) Beats Q1 Earnings, Revenues Closely In-Line

Posted Thu Aug 25, 05:29 pm ET

by Zacks Equity Research

Medtronic plc MDT reported financial results for first-quarter fiscal 2017. Adjusted earnings per share (EPS) in the reported quarter came in at $1.03, 2 cents ahead of the Zacks Consensus Estimate and up 1% year over year.

Adjustments in the quarter primarily included certain litigation as well as restructuring charges, intangible asset amortization, acquisition-related items and certain tax adjustments.

Without these adjustments, the company reported net income of 66 cents per share, up 15.8% year over year.

 

Total Revenue

Worldwide revenues in the reported quarter grossed $7.166 billion, up more than 5% on a constant currency, constant weeks (CCCW) basis (down 1.5% as reported). The top line remained almost in line with the Zacks Consensus Estimate of $7.175 billion. Foreign currency fluctuation adversely affected Medtronic’s first-quarter revenues by $7 million.

In the quarter under review, U.S. sales (55.8% of total sales) declined 3% year over year to $4.002 billion or increased in the low-single digits at CCCW. Non-U.S. developed market revenues totaled $2.231 billion (31.1% of total sales), a mid-single digit increase at CCCW (up 2% as reported). Emerging market experienced low-double digits revenue growth (flat year over year as reported) to $933 million at CER.

Segment Details

The combined company currently generates revenues from four major groups, viz. Cardiac & Vascular Group (CVG), Minimally Invasive Therapies Group (MITG), Restorative Therapies Group (RTG) and Diabetes Group.

CVG comprises Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic & Peripheral Vascular divisions (APV). MITG includes both the Surgical Solutions division and the Patient Monitoring & Recovery (PMR) division. RTG includes the Spine, Neuromodulation, Surgical Technologies and Neurovascular segments, while the Diabetes Group includes the Intensive Insulin Management, Non-Intensive Diabetes Therapies and Diabetes Services & Solutions divisions.

Revenues from CVG improved in mid-single digits at CCCW basis (or down 2% as reported) to $2.518 billion, driven by strong, balanced growth across all divisions.

 

MEDTRONIC Price, Consensus and EPS Surprise

 

MEDTRONIC Price, Consensus and EPS Surprise | MEDTRONIC Quote

 

CRHF sales outperformed the market with year-over-year growth in mid-single digits on a CCCW basis (down 3% as reported) to $1.334 billion. This came on the back of the strength of Amplia MRI, Compia MRI Quad CRT-D, Evera MRI ICD and Micra TPS pacemaker; mid-thirties growth in AF Solutions andlow-double digits growth in AF Solutions.

CSH revenues grew at mid-single digits on a CCCW basis (down 3% as reported) to $762 million on the back of high-twenties growth in transcatheter valves owing to strong customer adoption of the CoreValveEvolut R. While Coronary remained a drag with mid-single digits revenue decline, drug-eluting stents grew in the mid-single digits outside the U.S. driven by Resolute Onyx in Europe and emerging markets.

APV revenues registered high-single digits growth on CCCW basis(up 2% as reported) to $422 million, driven by high-single digit growth in Aortic.

In MITG, worldwide sales reached $2.424 billion, mid-single digits increase year over year on CCCW basis, on the back of mid-single digits growth in both Surgical Solutions and PMR.

In RTG, worldwide revenues of $1.772 billion were a mid-single-digit increase year over year on CCCW basis (down 2% as reported), owing to strong growth in Brain Therapies and Specialty Therapies, as well as improved results in the U.S. Spine mitigating a decline in Pain Therapies.

Revenues from the Diabetes group went up by high-single digits on CCCW basis (or up 2% as reported) to $452 million on account of strong, broad-based performance across its three divisions.

Margin

Gross margin during the reported quarter expanded 221 basis points (bps) to 68.4% on a 1.8% increase in gross profit to $4.905 billion. Adjusted operating margin expanded 220 bps year over year to 26.3%, with a 0.9% decline in selling, general and administrative expenses (to $2.43 billion); a 0.4% fall in research and development expenses (to $556 million); and a 36.1% slash in Other income to $39 million.

Guidance

Medtronic has maintained its fiscal 2017 revenue outlook and EPS guidance. Management anticipates adjusted diluted EPS in the range of $4.60−$4.70 representing growth of 12%−16% on a CCCW basis. This takes into consideration the estimated negative impact of foreign currency translation, as well as the benefit from the extra selling week in the company`s first-quarter fiscal 2016. This EPS growth guidance remains consistent with the company`s long-term, double digit constant currency EPS growth expectation. The Zacks Consensus Estimate of $4.66 remains above the mid-point of the guided range.

In fiscal 2017, given the current trends, the company once again expects revenues to grow in the range of 5% to 6% on a CCCW basis. This also remains consistent with the company`s long-term, mid-single digit constant currency revenue growth expectation. The Zacks Consensus Estimate for revenues remains at $29.88 billion for fiscal 2017.

Our Take

Medtronic’s first-quarter earnings edged past the Zacks Consensus Estimate while revenues came close to our expectation. The consolidated company demonstrated strong segmental performances at CCCW basis, displaying successful integration and achievement of synergy targets.

All four major business groups contributed to solid top-line growth on CCCW basis which, according to the company, highlighted sustainability across groups and regions. We are also encouraged with the solid growth trend successfully continuing in the U.S. as well as the healthy global acceptance of its advanced therapies. Apart from product innovation, the company is currently focusing on geographical diversification of its businesses.

The company was successful in generating significant free cash flow, which management plans to reinvest in future growth opportunities while also providing strong returns to its shareholders.

Zacks Rank

Currently, Medtronic holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical sector are NuVasive, Inc. NUVA, Quidel Corp. QDEL and GW Pharmaceuticals plc GWPH. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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Scripps Networks Aided by Strong Ad Sales; Risks Remain

Posted Thu Aug 25, 05:28 pm ET

by Zacks Equity Research

We issued an updated research report on the Cincinnati, OH-based Scripps Networks Interactive Inc. SNI on Aug 23.

Strong Advertising Sales in Q2

Scripps Networks reported mixed results in the second quarter of 2016; with earnings beating estimates while revenues missing the same. The bottom line expanded 7.5% on a year-over-year basis. The top line surged 21.9%. Advertising revenues in the US Networks division exceeded the $500 million level for the first time, exhibiting the strength of the advertising market for the company’s lifestyle offerings. US Advertisement revenues climbed nearly 9% in the quarter which was more than the growth displayed by its peers like Time Warner Inc. TWX.

We are impressed by Scripps Networks’ strategy of growth through acquisitions. In a bid for further expansion, the company completed the remaining 35% stake buy in Travel Channel Media from Cox Communications earlier this year. Moreover, to reinforce its position in the European market as well as to enhance its advertising business, Scripps Networks acquired Poland’s popular multi-platform media company, TVN, last year. We are also encouraged by the policy of Scripps Networks to reward its shareholders through dividends.

Headwinds

We are, however, concerned about the high debt levels of the company. Scripps Networks exited the second-quarter 2016 with $185.9 million in cash & cash equivalents and $2,877.5 million of outstanding debt (less current portion). The debt-to-capitalization ratio stood at a high 0.57.

Moreover, mounting programming costs and foreign currency exchange rate risks continue to pose threats for the company.

Zacks Rank and Stocks to Consider

Scripps Networks currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Consumer Discretionary sector include Charter Communications Inc. CHTR and Lincoln Educational Services Corp. LINC. Both the stocks sport a Zacks Ranks #1( Strong Buy).

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LabCorp's Takeover of Sequenom Wins Antitrust Clearance

Posted Thu Aug 25, 05:26 pm ET

by Zacks Equity Research

Laboratory Corporation of America Holdings LH or LabCorp recently got the antitrust review clearance for its previously announced acquisition of Sequenom, Inc. SQNM, a major player in the field of non-invasive prenatal testing (NIPT) for reproductive health. According to the company, the waiting period under the HSR Act (Hart-Scott-Rodino Antitrust Improvements Act of 1976) has just got over fulfilling one of the essential criterias for the completion of this impending buyout.

Notably, following the takeover announcement, LabCorp formed an acquisition subsidiary, Savoy Acquisition Corp. which had commenced a tender offer on Aug 9, 2016 to purchase all outstanding shares of Sequenom for $2.40 per share. This tender offer will expire on Sep 7, 2016 unless extended further.

The deal was inked for an equity value of $302 million representing total enterprise value of $371 million. The acquisition is expected to get completed by the end of 2016 and is still subject to other customary closing conditions.

According to LabCorp, this buyout will be a strategic fit for the company’ business as Sequenom’s NIPT and genetic testing capabilities will further advance LabCorp’s extensive women's health test menu. The inclusion will also increase LabCorp’s geographic reach both domestically and internationally (particularly EU and the Asia-Pacific region).

We take a note that, traditionally, LabCorp has successfully outgrown itself through organic means like acquisitions and alliances. With the momentous buyout of Covance, LabCorp is vigorously trying to expand the company’s range of diagnostic offerings and create a new industry leader in both laboratory testing and CRO spaces. At the same time act as a leading provider of medical testing; besides operating as a premier full-service drug development organization.

Apart from huge buyouts like Covance, LabCorp continues to add complementary capabilities through targeted tuck-in acquisitions, the latest in the league being Sequenom. Besides, in Mar 2016, the company acquired full-service independent women's health laboratory, Pathology, Inc., including the patient service centers used to conduct the latter’s medical testing and services business.

Prior to that, in October, it had bought Safe Foods International Holdings, a food safety laboratory, the inclusion of which extended LabCorp’s size and reach in the fast-growing global food safety market. All these acquisitions are consistent with the company’s effort to reinforce its foothold in the personalized diagnostics testing market.

Zacks Rank

LabCorp currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the sector are Align Technology Inc. ALGN and Derma Sciences Inc. DSCI. Both the stocks carry a Zacks Rank #2 (Buy).

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Big Banks Team Up to Develop Blockchain Settlement System

Posted Thu Aug 25, 05:25 pm ET

by Zacks Equity Research

Wall Street's increasing focus on digital currency technology has been affirmed yet again with the recent teaming up of a group of financial giants for the development of Utility Settlement Coin (USC). It is a digital cash model based on blockchain that aims to facilitate payment and settlement for global institutional financial markets.

Swiss banking giant UBS Group AG UBS and London-based Clearmatics initiated USC last September “to validate the potential benefits of USC for capital efficiency, settlement and systemic risk reduction in global financial markets”.  The successful conclusion of the first phase of this project led to the joining of Deutsche Bank AG DB, The Bank of New York Mellon Corp. BK, Banco Santander, S.A. SAN and brokerage ICAP to develop the concept further. The group also plans to undertake test in a real market environment.

USC is a series of cash assets implemented on distributed ledger technology and is entirely backed by cash assets held at a central bank. With a version for each of the main currencies including USD, EUR, GBP and CHF, USC would be convertible at parity with a bank deposit in the related currency. According to a joint release, spending a USC will be equivalent to spending its real-world currency.

The group of financial institutions will focus on the financial structuring of the USC and its implications in the broader market. Alongside they will remain engaged in discussions with central banks and regulators to ensure a regulation compliant and efficient framework within which the USC can be implemented.

Hyder Jaffrey, Head of Strategic Investment & FinTech Innovation at UBS Investment Bank stated, "Digital cash is a core component of a future financial market fabric based on blockchain technologies.” He further added, "There are several digital cash models being explored across the Street. The Utility Settlement Coin is focused on facilitating a new model for digital central bank cash."

Paul Maley, Managing Director, Institutional Client Group, Deutsche Bank noted, "As today's settlement and clearing is a process involving many institutions, it's vital that we collaborate with our peers to develop viable alternatives to current models, creating new digital capabilities for the financial services industry.”

Blockchain Buzz

Blockchain, the “digital ledger” or the underlying technology behind Bitcoin, has gained attraction for its significant potential to revamp the extensive and complex network of bank payments as well as settlements. While Bitcoin was one of the first cryptographic currencies that drew attention in 2009, several other cryptographic currencies are currently available including Novacoin, Namecoin and Dogecoin.

Last December The Goldman Sachs Group, Inc. GS filed a patent application with the US Patent & Trademark Office for a new cryptocurrency called SETLcoin. While Citigroup Inc. C is currently working on the development of its own digital currency “Citicoin,” JPMorgan Chase & Co. JPM partnered with start-up firm Digital Asset Holdings earlier this year to launch a trial project that utilizes the blockchain technology.

Bottom line

The latest development tied with Blockchain platform crops up as banks are embracing technology and are continuously looking out for ways to restructure daily operations, update back-office functions and making huge investments for auto execution of transactions. While banks and regulators continue to explore prospects and benefits of digital currencies, concerns including security and impact on the broader financial system still lingers.

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Cincinnati Financial Takes Steps to Grow Its Biggest Unit

Posted Thu Aug 25, 05:20 pm ET

by Zacks Equity Research

In an effort to expand and drive greater returns from its Commercial lines business, Cincinnati Financial Corp. CINF has announced personnel changes at the unit.

Per the change, Stephen Fray – currently the senior vice president – will replace Charles (Bud) Stoneburner II.

Stoneburner is the acting senior vice president in charge of the Commercial Lines insurance segment of Cincinnati Financial’s main subsidiary, Cincinnati Insurance Co.

The change in leadership marks the completion of the company’s transition plan announced in Nov 2015.

These changes reflect management’s focus on expanding its Commercial Line insurance segment, which is one of the most profitable units and generates the major portion of the company’s revenues.

In the first half of 2016, the company’s Commercial Lines business produced $1.5 billion in revenues, which constituted more than half of Cincinnati Financial’s total revenue and about triple of the next-biggest category.

Historically, the Commercial Lines segment of the company has been displaying stellar top-line performance, with a three-year CAGR (2012–2015) of 29.2%. This improvement came on the back of several growth initiatives as well as a gradual increase in insurance rates. Further, the company has implemented the use of predictive analytics to boost its pricing precision, while leveraging local relationships with its agents. The gradual improvement in pricing has driven growth and the company anticipates a moderate increase in its top line in the future, as stiff competition will partially offset moderate price increases.

The P&C insurer’s commercial lines segment is not only thriving, but is also highly profitable. The unit generated $76 million in underwriting profit during the first half of the year. In the past, too, underwriting profit increased at a three-year CAGR (2012–2015) of 28.7%, thereby reflecting the company’s profitability.

Effective Jan 1, 2016, Stephen Spray transitioned to the company’s commercial insurance operations. This change established the leadership perpetuation plan for the segment.

Zacks Rank and Stocks to Consider

Currently, Cincinnati Financial holds a Zacks Rank #2 (Buy). Investors interested in other stocks from the same space can consider Allied World Assurance Company Holdings, AG AWH, Argo Group International Holdings, Ltd. AGII and National Interstate Corp. NATL. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>       

Citigroup (C) Ends Legal Battle Over 'ThankYou' Trademark

Posted Thu Aug 25, 05:16 pm ET

by Zacks Equity Research

Citigroup Inc. C and AT&T, Inc. T have put an end to the legal tussle over a trademark infringement.  

Per a filing on Monday with a Manhattan federal court, the companies have dropped allegations against each other with prejudice, which means that the charges cannot be brought again.

Citigroup had alleged that AT&T’s use of the trademarks ‘thanks’ and ‘AT&T thanks’ infringes upon the former’s trademarks including ‘ThankYou’ and ‘Citi ThankYou’. According to the lawsuit filed in June, AT&T announced its new appreciation program ‘AT&T thanks’ for its customers on Jun 2, despite being aware of Citigroup’s use of related trademarks. The banking giant has been using ‘ThankYou’ trademark since 2004 in a customer loyalty program, with approximately 15 million members in the country.

The bank claimed, “For many years, Citigroup has used trademarks consisting of and/or containing the term THANKYOU – including THANKYOU, CITI THANKYOU, CITIBUSINESS THANKYOU, THANKYOU FROM CITI, and THANKYOU YOUR WAY – in connection with a variety of customer loyalty, reward, incentive and redemption programs (collectively, the “THANKYOU Marks”).”

Citigroup also stated that it has a co-branded credit card with AT&T – the AT&T Universal Card – that gives ‘ThankYou’ reward points to its users based on the amount spent. Moreover, AT&T’s trademark designs have similar fonts and word placements. So, AT&T’s new program is bound to confuse costumers. Hence, Citigroup wanted the court order to stop AT&T from using the terms. Apart from this order, Citigroup also sought unspecified damages.

AT&T countered Citigroup’s allegations. The company spokesperson Fletcher Cook had stated in an email, “This may come as a surprise to Citigroup, but the law does not allow one company to own the word ‘thanks.’ We’re going to continue to say thanks to our customers.”

Notably, this case was dismissed after a U.S. Federal judge earlier this month rejected Citigroup’s request to block AT&T from using "AT&T thanks" for its customer loyalty program. Judge Katherine Forrest in Manhattan mentioned that though both the companies use similar words that express a message of gratitude, Citigroup has failed to show that customers would be confused or the bank would suffer irreparable harm if AT&T kept using the phrase “AT&T thanks.”

The termination of this suit certainly helps in maintaining the business relationship between the two companies. While Citigroup spokeswoman Jennifer Bombardier said in a statement, "We have decided not to pursue this matter any further and look forward to continuing to work with AT&T," AT&T spokesman Fletcher Cook stated, "We consider the matter closed."

Currently, both Citigroup and AT&T carry a Zacks Rank #3 (Hold). A couple of better-ranked finance stocks include Enterprise Financial Services Corp. EFSC and Credit Acceptance Corp. CACC, each sporting a Zacks Rank #1 (Strong Buy).

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Allegheny Takes Actions to Improve Financial Performance

Posted Thu Aug 25, 05:01 pm ET

by Zacks Equity Research

Allegheny Technologies Inc. ATI has declared numerous actions to improve its future financial performance, which include the indefinite idling of the Rowley, UT-based titanium sponge production facility and consolidation of certain titanium manufacturing operations in Albany, OR.

The company continuously reviews its operations and facilities from both a strategic and cost competitiveness viewpoint. It considers the future market conditions – both the current and the expected – as well as looks into the forecasted growth in demand for its products from all end markets and makes assessments of global supply and demand dynamics. Based on these, the company takes decisions such that it can deliver sustainable profitable growth, and create value for its customers and shareholders over the long-term.

The actions are expected to improve Allegheny’s annual operating income by about $50 million starting in 2017. They are also expected to generate cash flow of about $50 million from reduced managed working capital, as titanium sponge inventory is reduced over the next several quarters.

The company also anticipates to incur total pre-tax, non-cash impairment charges of roughly $470 million for idled facilities, and pre-tax shutdown and idling costs of about $34 million. Due to these charges, Allegheny will also register about $183 million, or $1.71 per share, in non-cash income tax valuation allowances related to U.S. federal tax benefits. The total charges, including the tax valuation allowance, are forecast to be $4.89 per share, of which $4.83 per share is expected to be incurred in third-quarter 2016, and the balance in fourth-quarter 2016.

Allegheny is taking several actions to improve the profitability of its operations, and increase the competitiveness of its High Performance Materials & Components segment. The company has added considerable global capacity to produce its titanium products. It has also entered into long-term, cost competitive supply agreements with a number of leading global producers of premium-grade and standard-grade titanium sponge to provide a reliable supply of high quality and cost effective titanium sponge.

Allegheny expects to see continued profitable growth in High Performance Materials & Components  unit over the next several years. The actions are expected to improve its operating earnings by roughly $50 million starting in 2017.

Allegheny currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials sector include ArcelorMittal MT, Schnitzer Steel Industries, Inc. SCHN and Angang Steel Company Ltd. ANGGY. While ArcelorMittal and Schnitzer Steel sport a Zacks Rank #1 (Strong Buy), Angang Steel carries a Zacks Rank #2 (Buy).

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Patterson Companies (PDCO) Q1 Earnings Meet Estimates

Posted Thu Aug 25, 03:55 pm ET

by Zacks Equity Research

Patterson Companies Inc. PDCO reported first-quarter fiscal 2017 adjusted earnings of 51 cents per share from continuing operations, which were in line with the Zacks Consensus Estimate. The figure also improved 8.5% year over year on higher sales.

Quarter Details

Net sales from continuing operations increased 16.6% (23.3% at constant exchange rate or CER) year over year to $1.33 billion, which beat the Zacks Consensus Estimate of $1.32 billion. The year-over-year improvement reflected robust performance by the Animal Health platform.

Coming to the Animal Health platform, sales at Patterson Companies’ this segment (57% of total sales) surged almost 36.8% on a year-over-year basis to $762.6 million on the back of a 38.3% increase in consumable products sales. Sales of equipment and software of this platform climbed 2.6% year over year. However, the other services and products on this platform witnessed a year-over-year decline of 9.1% in sales.

The year-over-year upside in this platform was driven by strong performance delivered by Patterson’s production animal business and the U.S. companion animal business. Livestock end markets also contributed to this platform’s growth in the reported quarter.

Sales in Patterson Companies’ Dental platform (43% of total sales) decreased 3.5% to $555 million approximately. However, sales grew 2.1% at CER. Consumable sales at the dental platform dropped 7% to $332.9 million on a year-over-year basis, while sales from other services and products decreased 3%. However, sales from dental equipment and software rose 5%..

Within the dental platform, management witnessed strong growth in equipment sales volumes as well as strong demand for technology adoption. Further, to address a transformation observed in the purchasing patterns of this platform’s customers, the company adopted the ‘go-to-market’ strategy. .

PATTERSON COS Price, Consensus and EPS Surprise

 

PATTERSON COS Price, Consensus and EPS Surprise | PATTERSON COS Quote

Margin Details

Gross margin contracted 140 basis points (bps) to 23.8% in the reported quarter.

Adjusted operating expenses, as a percentage of revenues, decreased 90 bps to 18.9%. However, adjusted operating margin contracted 50 bps to 4.9%.

Outlook

Patterson Companies reaffirmed its adjusted earnings for fiscal 2017 in the range of $2.60--$2.70 per share, including $25 million incremental operating expenses related to the ERP implementation. The company expects North American and international markets to remain stable through fiscal 2017. The current Zacks Consensus Estimate for fiscal 2017 stands at $2.65, in line with the mid-point of the company provided guidance.

Zacks Rank & Key Picks

Patterson Companies currently has a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector are Halyard Health HYH, Masimo Corp. MASI and IDEXX Laboratories Inc IDXX. Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).

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Dollar General (DG) Lags Q2 Earnings & Sales; Stock Falls

Posted Thu Aug 25, 03:52 pm ET

by Zacks Equity Research

Dollar General Corporation DG succumbed to negative earnings surprise in the second-quarter of fiscal 2016, after beating the Zacks Consensus Estimate in the trailing four quarters. The company posted quarterly earnings of $1.08 per share that missed the Zacks Consensus Estimate by a penny but was up 13.7% from the year-ago period.

Net sales came in at $5,391.9 million that was an increase of 5.8% from the prior-year quarter. However, net sales came below the Zacks Consensus Estimate of $5,491 million, thus marking the 12th straight quarter of revenue miss. Following, the results, the company’s shares are down nearly 8% during pre-market trading session.

Increase in average transaction value led to 0.7% growth in comparable-store sales. While strength was witnessed in the consumables category, comparable store sales in the seasonal category were flat year over year, but it declined in apparel and home categories.

Sales in the Consumables category jumped 6.4% to $4,116.5 million, while the Seasonal category witnessed a 4.9% rise in sales to $674 million. Home products sales increased 3.7% to $315.6 million and Apparel category sales grew 1.6% to $285.9 million.

Gross profit increased 5.9% to $1,681.8 million, while gross margin expanded 2 basis points to 31.2% due to rise in initial inventory markups and decline in transportation costs on account of lower fuel rates partially offset by increase in sales of consumables category, which carries lower gross profit rate compared with non-consumables category higher inventory shrinkage, and increased markdowns.

Operating profit grew 7% to $509.1 million, whereas operating margin increased 10 basis points to 9.4%.

DOLLAR GENERAL Price, Consensus and EPS Surprise

DOLLAR GENERAL Price, Consensus and EPS Surprise | DOLLAR GENERAL Quote

Other Financial Details

Dollar General ended the quarter with cash and cash equivalents of $185 million, long-term obligations of $2,556.5 million and shareholders’ equity of $5,413.4 million. During the first half of fiscal 2016, the company incurred capital expenditures of $268 million.

The company bought back 2.5 million shares during the second quarter of fiscal 2016. Since the commencement of the share repurchase program in Dec 2011, the company has bought back 67.3 million shares aggregating $4.0 billion. On Aug 24, 2016, the company announced an additional share repurchase program of $1 billion, thereby increasing the share repurchases authorization to nearly $1.4 billion.

Store Update

Dollar General opened 510 new outlets and remodeled/relocated 594 outlets during the first half of fiscal 2016. As per the company’s long term growth model provided on Mar 10, 2016, the company plans to open about 900 new stores, and relocate or remodel around 875 stores during fiscal 2016. During fiscal 2017, the company plans to open about 1,000 stores and remodel or relocate approximately 900 stores. As of Aug 13, 2016, Dollar General operated 13,000 stores across 43 states.

Outlook

Dollar General Corporation offers a sound investment opportunity and looks firmly set with regard to its financial growth model. The company repeated its long term growth model which was provided on Mar 10, 2016. The company’s goal is to enhance shareholder returns – via earnings per share growth and dividend yield – by 11–17%.

Dollar General’s model includes earnings per share annual growth target of 10–15% and net sales increase of 7–10%, including square footage growth of 6–8% and comparable-store sales growth of 2–4%. Operating profit is expected to improve 7–11%. Management anticipates cash from operations to be 7–8% of sales. It also estimates capital expenditures to be 2–3% of sales.

However, the company updated its capital expenditure guidance. The company expects capital expenditure in the range of $580 million to $630 million – up from the previous guidance of $550 million to $600 million. Increase in capital expenditure was due to purchase of 42 Walmart Express stores.

Zacks Rank

Dollar General currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Burlington Stores, Inc. BURL and The Children's Place, Inc. PLCE, both sporting a Zacks Rank #1 (Strong Buy). Ross Stores Inc. ROST holds a Zacks Rank #2 (Buy).

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Google's Daydream VR Promotion to Feature YouTube Stars

Posted Thu Aug 25, 03:49 pm ET

by Zacks Equity Research

As per some media reports, it is being rumored that Alphabet Inc. GOOG owned search engine giant Google is set to launch “Daydream,” a mobile virtual reality (VR) technology by the fall of 2016. For the same, the company has increased its spending on VR platform development and is also hiring YouTube stars for its promotion.

Daydream Ready

The fact that the Daydream VR technology works on videos, games and apps has made Google approach smartphone manufacturers such as Samsung, HTC, LG, Asus and ZTE among others to make their handsets Daydream VR compatible to which they have consented.

In the meantime, Google is also working to make its Android OS Daydream VR compatible. Google wants Daydream VR to be widely adopted and hence is doing whatever it takes to reach the masses.

How It Works

While VR headsets currently available in the market are an extension of video-game consoles such as PlayStation, Google’s Daydream VR is mobile centric. This means that only a smartphone can fit into the visor or headset that will allow the user to stream videos, play games or access apps.

Although Google is manufacturing the headset meant for Daydream VR, it is also encouraging other headset manufacturers to use its controllers to make them compatible.   

Promotion Strategy

Google wants its Daydream VR technology to be a huge hit and has hired YouTube stars such as iJustine and the Dolan twins to make 360 degree promotional videos. Additionally, the company is collaborating with filmmakers to produce mobile VR optimized content.
 

Zacks Rank

At present, Alphabet has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Facebook, Inc. FB and LinkedIn Corp. LNKD, sporting a Zacks Rank #1 (Strong Buy), and Blucora, Inc. BCOR, carrying a Zacks Rank #2 (Buy).

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