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Zacks #1 Stocks on the Move 02/27/2017

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Analyst Blog

Adverum (ADVM) to Post Q4 Earnings: What's in the Cards?

Posted Mon Feb 27, 06:23 pm ET

by Zacks Equity Research

Adverum Biotechnologies, Inc ADVM is expected to report fourth-quarter 2016 results on Mar 2. In the last reported quarter, Adverum posted a negative surprise of 20.7%.

Adverum has a dismal track record with the company missing estimates in three of the last four quarters, bringing the average negative earnings surprise to 18.5%.

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

Adverum’s share price movement in the last six months indicates that the stock has underperformed the Zacks classified Medical-Biomedical/Genetics industry. The company’s shares have lost 27.3% during this period, which compares unfavorably with the industry’s 5.1% fall.

Factors Influencing the Quarter

Being a development-stage biotech company, Adverum does not have any approved product in its portfolio. Investors are thus expected to keep an eye on the company’s pipeline development.

Adverum is focused on three lead gene therapy programs for wet AMD, rare diseases alpha 1 antitrypsin (A1AT) deficiency and hereditary angioedema (HAE).  The Annapurna acquisition (May 2016) added a number of early-stage candidates to Adverum’s portfolio including ANN-001 (ADVM-043), ANN-002 and ANN-003 among others.

The company is progressing with the pre-clinical development of new anti-VEGF gene therapy candidates, ADVM-022 and ADVM-032 in the wet AMD space. The company plans to initiate toxicology studies for ADVM-022 and ADVM-032 in the first half of 2017.

Adverum is also advancing ADVM-043 (formerly known as ANN-001) for the treatment of alpha 1 antitrypsin deficiency (A1AT). The company plans to meet with the FDA in the first quarter of 2017 to review its development plan for the candidate and initiate patient enrollment in a phase I/II trial in fourth-quarter 2017.

Adverum is also evaluating ADVM-053 (formerly known as ANN-002) to treat hereditary angioedema (HAE) and plans to initiate toxicology studies for ADVM-053 in the first half of 2017.

Meanwhile, Adverum has a collaboration agreement with Regeneron Pharmaceuticals, Inc. REGN for the joint development of novel candidates based on the former’s Ocular BioFactory platform. These candidates include AVA-311 for the treatment of juvenile X-linked retinoschisi.

It has collaborated with Editas Medicine, Inc. for exploring the delivery of genome editing medicines to treat inherited retinal diseases. These collaborations constitute an important source of funds for Adverum.

What Our Model Indicates

Our proven model does not conclusively show that Adverum is likely to beat 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) to beat estimates. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 25 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Adverum’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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

Adverum Biotechnologies, Inc. Price and EPS Surprise

 

Stocks to Consider

Here are a couple of healthcare companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Pacira Pharmaceuticals, Inc. PCRX is expected to release results on Mar 1. The company has an Earnings ESP of +20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesaro, Inc. TSRO has an Earnings ESP of +0.51% and a Zacks Rank #3. The company is scheduled to release results on Feb 28.

A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Retail REITs Struggle on J.C. Penney's Store Closure News

Posted Mon Feb 27, 06:22 pm ET

by Zacks Equity Research

Shares of retail real estate investment trusts (REITs) took a hit on Feb 24 as J. C. Penney Company, Inc. JCP declared its plan to shut down around 130–140 stores over the next few months. The decision was triggered by the retailer’s plan to “align the company's brick-and-mortar presence with its omnichannel network” and redirect investments in locations, and efforts with high revenue growth potential.

It is quite normal for retailers to optimize their brick-and-mortar presence over time. However, these optimization efforts and the consequent decision to close stores from a number of reputed retailers like Macy’s Inc. M, Sears Holdings Corp. SHLD and JC Penney, in recent months, have sent jitters in the retail real estate market. In fact, investors have been worried about the adverse effects of store closures on mall traffic, sales as well as cash flow of mall landlords.

As such, shares of CBL & Associates Properties, Inc. CBL declined 3.86%, GGP Inc. GGP descended 1.53% and Washington Prime Group Inc. WPG fell 1.17%. In addition, Simon Property Group Inc. SPG edged down 0.38%, while Kimco Realty Corp. KIM dipped 0.41%.

Despite upbeat consumer confidence and an improving economy, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. These have made retailers reconsider their footprint and eventually opt for store closures in recent times.

Further, retailers unable to cope with competition have been filing bankruptcies. This comes as a pressing concern for retail REITs as this trend has been considerably curtailing demand for the retail real estate space.

In fact, over the past one year, Zacks categorized REIT and Equity Trust – Retail industry underperformed the broader market. REIT and Equity Trust – Retail industry logged in a return of 2.6% over this time frame against 21.7% gain of the S&P 500.



However, mall landlords have decided to go to the mattresses. They made efforts to turn their boring retail hubs into swanky entertainment zones, digitizing their malls and making them distribution hubs. And on top of this, they are also coming to the rescue of distressed retailers – a move that can help them avoid bulk store closures – something that liquidation can lead to. This included Simon Property and GGP coming together for the acquisition of teen clothing retailer – Aeropostale – last year.

Retail REITs have also been adapting to the latest technologies, in a bid to offer attractive services to tenants and mall visitors. However, implementation of such measures requires a decent upfront cost. Hence, this is likely to limit any robust growth in profit margins of the retail REITs, moving ahead.

Currently, J.C. Penney, Simon Property, GGP, Kimco carry a Zacks Rank #3 (Hold); while CBL & Associates and Washington Prime Group has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Intrexon (XON): Will the Stock Pull a Surprise in Q4 Earnings?

Posted Mon Feb 27, 06:20 pm ET

by Zacks Equity Research

Intrexon Corporation XON is scheduled to report fourth-quarter 2016 results on Mar 1, after the market closes.

Intrexon’sshare price has decreased 9.9% year to date, while the Zacks classified Medical-Medical Services industry gained 4.3%.

In the last reported quarter, the company reported in line earnings. Let’s see how things have shaped up before the announcement.

Factors to Consider

Being a leader in the synthetic biology, Intrexon applies engineering principles to biological systems that enable the rational, design-based control of cellular function for a specific purpose across five key sectors – health, food, energy, environment and consumer.

Intrexon’s top line comprises mainly of collaboration and license fees, product revenues and service revenues.

Intrexon has been quite active on the acquisition front. Some of the recent acquisitions by the company are Oxitec Ltd. (gaining a portfolio of biological insect control solutions), Okanagan Specialty Fruits, Inc. (an agricultural company with a portfolio that includes Arctic apple, the first non-browning apple without the use of any flavor-altering chemical or antioxidant additives, which will be sold as fresh sliced apples in test markets in the U.S. in 2017). Based on current planting contracts, between 2016 and 2018 the company expects to plant over 870,000 trees that at maturity will produce over 30 million pounds of Arctic apples annually.

Intrexon’s expanding portfolio of technologies has enabled the company to develop a robust pipeline of candidates targeting a broad range of diseases. Intrexon is currently developing a couple of candidates in collaboration with Fibrocell – it completed enrolment in a phase I/II study on FCX-007 for the treatment of recessive dystrophic epidermolysis bullosa. The second gene therapy candidate being developed by Fibrocell is FCX-013 for the treatment of linear scleroderma.

Fibrocell expects to submit an investigational new drug (IND) application for FCX-013 in 2017. Another collaborator, Oragenics is developing a treatment for the prevention and treatment of oral mucositis and expects to file an IND update for a phase II study protocol in early 2017.

Intrexon anticipates having up to eleven IND applications and initiations of clinical studies with the company’s existing ECC partners utilizing its technologies by mid-2017, subject to FDA approval.

The company follows a business model under which it commercializes its technologies through exclusive channel collaborations (ECC), licensing agreements and joint ventures with collaborators that have market and product development expertise, as well as sales and marketing capabilities to bring new and improved products and processes to market.

Such agreements provide the company with funds in the form of technology access fees, and milestones and other payments. Moreover, Intrexon has been very active on striking new ECCs and expanding its partnership with the existing ones.

We expect collaboration revenues to continue contributing significantly to the company’s top line in the fourth quarter.

We expect investors to focus on the company’s performance along with other developmental updates.

Surprise History

Intrexon’s performance has been mostly disappointing, with the company missing estimates in two of the four trailing quarters with an average negative earnings surprise of 7.72%.

What Our Model Indicates

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

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Intrexon has a favorable Zacks Rank #3, its 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

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

Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +20% and a Zacks Rank #2. The company is scheduled to release results on Mar 1. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Syndax Pharmaceuticals, Inc. SNDX has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is scheduled to release results on Mar 2.

Tesaro, Inc. TSRO has an Earnings ESP of +0.51% and a Zacks Rank #3. The company is scheduled to release results on Feb 28.


A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Abercrombie (ANF) Q4 Earnings: What's in Store This Time?

Posted Mon Feb 27, 06:17 pm ET

by Zacks Equity Research

Abercrombie & Fitch Co. ANF, a specialty retailer of premium, high-quality casual apparel, is slated to report fourth-quarter fiscal 2016 results on Mar 2. The question lingering in investors’ minds now is, whether the company will be able to post positive earnings surprise in the to-be-reported quarter.

Abercrombie has underperformed the Zacks Consensus Estimate in three of the past four quarters, with an average miss of 25.9%. Let’s see how things are shaping up prior to this announcement.

Abercrombie forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline marginally by 1.2%, while revenue is projected to improve 4.7%. We observed that the Retail-Wholesale sector has lagged the broader market in the past six months. While the Zacks categorized sector rose 2.8%, the S&P 500 index advanced 8.0%, over the said time frame.

Which Way Are Estimates Treading?

Let’s look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company right before the earnings release. The Zacks Consensus Estimate of 76 cents for the fourth quarter has increased by a penny in the past 7 days, but is still substantially lower than $1.08 reported in the year-ago quarter.

What Does the Zacks Model Unveil?

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

Abercrombie & Fitch Company Price, Consensus and EPS Surprise

Abercrombie & Fitch Company Price, Consensus and EPS Surprise | Abercrombie & Fitch Company Quote

Abercrombie has an Earnings ESP of +1.32% as the Most Accurate estimate stands at 77 cents, while the Zacks Consensus Estimate is pegged at 76 cents. However, the company carries a Zacks Rank #5 (Strong Sell).

It should be noted that 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.

Factors Influencing the Quarter

Abercrombie has exhibited a bearish run in the past one year. While the stock plunged 58.8%, the Zacks categorized Retail – Apparel/Shoe industry declined 17.8%.



Abercrombie has been posting dismal results for a while now, as the company’s business continues to be hurt by currency headwinds, alongside slow traffic trends at its namesake U.S. flagship and tourist stores.

Management had earlier hinted that currency headwind is likely to hurt sales and operating income in the fiscal fourth quarter. Further, comps are also expected to remain challenging compared to the prior period, while the same is anticipated to improve modestly on a sequential basis.

Nevertheless, we remain encouraged by the performance of its Hollister brand. Also, Abercrombie remains optimistic about its prospects, given its disciplined inventory and expense control.

Stocks Poised to Beat Earnings Estimates

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:

Staples, Inc. SPLS has an Earnings ESP of +4.00% and a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. BBY has an Earnings ESP of +1.81% and a Zacks Rank #3.

Costco Wholesale Corp. COST has an Earnings ESP of +0.74% and a Zacks Rank #3.

A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Regency Centers (REG) Gets Nod for Equity One Merger Deal

Posted Mon Feb 27, 06:15 pm ET

by Zacks Equity Research

Retail REIT, Regency Centers Corporation REG has got the nod from shareholders for its proposed merger with Equity One, Inc. EQY, with the former remaining as the surviving public company of the merger. This merger is likely to close on Mar 1, 2017.

The move would create a national portfolio of 429 properties, mainly grocery-anchored, covering over 57 million square feet, including co-investment partnerships, according to an earlier declaration from the company.

Per the merger agreement, each share of Equity One common stock would be converted into 0.45 of a newly issued share of Regency common stock. (Read more: Regency Centers, Equity One's Ratings Affirmed by Moody's)  

Following the deal completion, on a pro forma basis, Regency’s shareholders are estimated to own around 62% of the combined company’s equity; while the prior Equity One shareholders are projected to enjoy about 38% ownership.

Notably, Regency has considerable experience in the retail real estate industry, with 225 shopping centers’ development since 2000, denoting an investment at completion of over $3.5 billion. The company has a solid portfolio of 307 retail properties.

On the other hand, Equity One’s portfolio aggregated 122 properties, including 98 retail properties and five non-retail properties, and its retail occupancy excluding developments and redevelopments was 95.4% and included national, regional and local tenants as of Sep 30, 2016. Their merger would, therefore, aid in creating a prominent grocery-anchored shopping center REIT with enhanced concentration in higher density, in-fill metro areas.

Currently, Regency has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, shares of Regency outperformed the Zacks categorized REIT and Equity Trust – Retail industry over the past three months. During that time frame, the shares of the company gained 6.7%, whereas the industry rose by 2.8%.



Key Picks

Investors interested in the REIT industry may consider stocks like EPR Properties EPR and Urban Edge Properties UE. Both the stocks carry a Zacks Rank #2 (Buy).

EPR Properties, currently, has long-term growth rate of 8.3%. Moreover, the Zacks Consensus Estimate for Urban Edge Properties’ funds from operations (FFO) per share for 2017 of $1.37 reflects growth of 7.9% from the prior year.


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. All EPS numbers presented in this write up represent FFO per share.


A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Agenus (AGEN): What's Ahead for the Stock in Q4 Earnings?

Posted Mon Feb 27, 06:14 pm ET

by Zacks Equity Research

Agenus Inc. AGEN is expected to report fourth-quarter 2016 results during this month. Last quarter, Agenus delivered a negative earnings surprise of 46.88%. Let’s see how things are shaping up for the company this quarter.

Agenus’ share price has decreased 6.5% year to date, while the Zacks classified Medical - Biomedical and Genetics industry gained 6.1%.

Factors at Play

Agenus is an immuno-oncology company focused on the discovery and development of checkpoint modulators, vaccines and adjuvants for the treatment of cancer.The company earns revenues only through fees received under collaboration and license agreements

Currently, the company is evaluating AGEN1884 in a phase I study and INCAGN01876 in a phase I/II study for the treatment of solid tumors.
The company has initiated phase I study for OX40 aganist INCAGN1949 in collaboration with Incyte. Agenus has also started phase I study for PD-1 antagonist AGEN2034 and AutoSynVax. Going ahead, the company plans to initiate studies on its second anti-CTLA-4 antibody, AGEN2041, in 2017. Agenus also expects to begin combination studies on AGEN2034 and AGEN1884 in the second half of 2017.

In its fourth-quarter conference call, investor should remain focus on the company’s update on the initiation of combination studies on these antibodies as well as the advancement of additional checkpoint modulator antibodies and vaccines into the clinic in the coming quarters.

We remind investors that Agenus’ lead candidate and several backup antibodies were selected by Merck & Co., Inc. MRK for an undisclosed checkpoint target. Under the terms of the agreement, Agenus is eligible to receive up to $100 million in milestone payments, in addition to royalties on worldwide product sales.

In January this year, Agenus entered into a clinical trial collaboration with the National Cancer Institute (NCI) to evaluate Prophage (HSPPC-96), in conjunction with Merck’s PD-1 therapy, Keytruda. A phase II study will evaluate the effect of Prophage, in conjunction with Keytruda, on the overall survival rate of patients with newly diagnosed glioblastoma (ndGBM).

Surprise History

Agenus’ track record has been disappointing so far. The company has surpassed estimates in only once in the trailing four quarters and missed the same in all the other occasions, bringing the average negative surprise to 9.02%.

Earnings Whispers

Our proven model does not conclusively show that Agenus is likely to beat estimates this quarter. That 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. Unfortunately, this is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Agenus is 0.00% since the Most Accurate estimate stands in line with the Zacks Consensus Estimate of a loss of 33 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Agenus currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.  

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

Agenus Inc. Price and EPS Surprise

 

Agenus Inc. Price and EPS Surprise | Agenus Inc. Quote

Stocks That Warrants a Look

Here are some health care stocks that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Pacira Pharmaceuticals, Inc. PCRX has an Earnings ESP of +20% and a Zacks Rank #2. The company is scheduled to release results on Mar 1.

Syndax Pharmaceuticals, Inc. SNDX has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is scheduled to release results on Mar 2.

A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Why Herbalife (HLF) Q4 Earnings Failed to Impress Investors

Posted Mon Feb 27, 06:10 pm ET

by Zacks Equity Research

Shares of Herbalife Ltd. HLF fell 4.51% after the nutritional-products company issued a weak 2017 outlook in the extended session on Feb 23. Despite posting better-than-expected earnings in fourth-quarter 2016, sales missed the consensus mark due to currency headwinds and lower volumes.

Quarter in Detail

This weight management and nutritional products company delivered fourth-quarter adjusted earnings of $1.00 per share, which beat the Zacks Consensus Estimate of 98 cents by 2.04%. Earnings touched the higher end of the management’s guided range of 80 cents to $1.00 per share. Adjusted earnings, however, declined 14.5% year over year due to an 11 cents negative impact from currency.

Net sales of $1.045 billion declined 5% from the prior-year period due to currency headwinds and volume declines. This lagged the guided range of down 2.5% to up 1.5%. In the reported quarter the company witnessed a decline in sales, after posting three consecutive quarters of growth in revenues.

Excluding currency headwinds, sales declined 1% year over year, within the company’s guidance range of down 0.5% to up 3.5%. Sales also lagged the Zacks Consensus Estimate of $1.070 billion by 2.3%.

Sales decline was also due to lower volumes. Volume declined 1% to 1.3 billion in the quarter, within the expected range of down 1.5% to up 2.5%. The decline was due to the fall in China and a difficult comparison for India and Indonesia, during the fourth quarter of last year.

Herbalife LTD. Price, Consensus and EPS Surprise

 

Herbalife LTD. Price, Consensus and EPS Surprise | Herbalife LTD. Quote

Regionally, Europe, the Middle East and Africa reported 5% volume growth, while Mexico recorded 7% growth. North America and Asia Pacific each reported volume point growth of 1%. Volume points for the US were up as the market continues to progress through the FTC implementation.

In Asia Pacific, strong performances from Vietnam, Indonesia and India were partially offset by South Korea, which was down 31% year-over-year. Volume in China declined 11% and was lower than expected, while South & Central America volume decreased 16% in the fourth quarter led by continued softness in Brazil.

Gross margins decreased 16 basis points in the quarter due to the unfavorable impact of foreign currency fluctuations partially offset by cost savings through strategic sourcing and self-manufacturing.

Coming to the share price movement, Herbalife’s shares have decreased 10.4% in the past six months, wider than the Zacks categorized Retail-Drug Stores industry’s decline of 4.5%.

2016 Results

In 2016, adjusted earnings of $4.85 per share beat the Zacks Consensus Estimate of $4.80 by 1.04%. Earnings touched the higher end of the management’s guided range of $4.65 to $4.85 per share. Adjusted earnings, however, declined 2.0% year over year due to 95 cents negative impact from currency.

Net sales of $4.488 billion remained flat from the prior-year period as currency headwinds were offset by volume gains of 5%. Net sales lagged the guided range of 1– 2% growth. Excluding currency headwinds, sales increased 6% year over year, below the company’s guidance range of 6.3–7.3% growth. Sales also lagged the Zacks Consensus Estimate of $4.513 billion by 0.55%.

Other Financial Update

Herbalife ended year 2016 with cash and cash equivalents of $844 million, long-term debt of $1,438 million, and total shareholders’ equity of $196.3 million.

During 2016, the company generated cash flow from operations of $367.3 million and incurred capital expenditure of $ 143.4 million. Additionally, the company’s total free cash inflow for the year totaled $223.9 million.

In the quarter, the company has authorized a share buyback of up to $1.5 billion over three years, replacing the prior authorization that had $233 million remaining. The company expects the combination of the new debt deal and the impact of the share repurchase program to be accretive to earnings per share in 2018.

On Feb 15, Herbalife closed its new $1.45 billion senior secured credit facility, which consists of a $150 million revolving credit facility maturing 2022 and a $1.3 billion term loan maturing 2023.

On Feb 23, Herbalife announced to form a joint venture with Tasly Holding Group, a leading Traditional Chinese Medicine (TCM) health products and services corporation. The move aims to develop and commercialize high-quality consumer health products and bring them to a global market through the Herbalife Nutrition distributor network. The proposed joint venture will likely enhance Herbalife Nutrition business to expand globally.

Full-Year 2017 Guidance Lowered

For full-year 2017, management expects adjusted earnings of $3.65−$4.05 per share, down from $4.60−$5.00 per share expected earlier and from the 2016 adjusted earnings of $4.85 per share. This includes currency impact of 50 cents, compared with 15 cents expected earlier. On a currency adjusted basis, earnings are expected in a range of $4.20 to $4.60 per share, compared with $4.75 to $5.15 per share anticipated earlier.

Herbalife now expects sales to grow in a range of 0.3–3.3%, lower from 3.5–6.5% expected earlier. Volumes are expected to increase 2.0–5.0% in 2017. On a currency adjusted basis, sales are expected to increase 3.6–6.6%, compared with 3.9–6.9% growth expected earlier.

Q1 Guidance

Herbalife expects sales to fall in the range of 5% to 9% due to a decline in volume of 1% to 5% in the first quarter. On a currency adjusted basis (excludes the impact of expenses relating to challenges to the company’s business model, the impact of non-cash interest costs associated with the company’s convertible notes, FTC settlement implementation and expenses related to regulatory inquiries), sales are expected to decline 3.2% to 7.2%.

For the first quarter 2017, the company expects adjusted earnings per share to grow in the range of 75 cents to 95 cents per share, which includes an unfavorable currency impact of approximately 10 cents per share. Excluding the currency impact, adjusted earnings are expected in a range of 85 cents to $1.05 per share.

Zacks Rank and Key Picks

Herbalife has a Zacks Rank #4 (Sell).

Some well-positioned stocks in the retail sector are Francesca's Holdings Corp. FRAN, Zumiez, Inc. ZUMZ and Genesco Inc. GCO. All the three stocks carry a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Francesca's Holdings has expected long-term earnings growth of 13.75%, Zumiez and Genesco have expected long-term earnings growth of 15.0% and 9.5%, respectively, for the next three to five years.

A Full-Blown Technological Breakthrough in the Making                                                                   

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>

Deutsche Bank Slashes 2016 Bonus Pool by Almost 80%

Posted Mon Feb 27, 06:04 pm ET

by Zacks Equity Research

Owing to higher legal charges and losses incurred over the last two years, Deutsche Bank AG DB is slashing its bonus pool for 2016 by almost 80%.  This was acknowledged by Mr. Karl Von Rohr, the company’s Chief Administrative Officer in an interview with Frankfurter Allgemeine Sonntagszeitung.

Also, the board unanimously decided to cede bonuses for themselves. Further, the employees with posts of vice-president, director and managing director will not be eligible for individual bonuses.

Nonetheless, they will still receive the group-wide bonus linked to the overall performance of the bank. About 5000 employees working in key positions will be entitled to a long-term incentive. The incentive would be linked to the bank’s performance and would be payable after six years.

This is not the first time that Deutsche Bank has cut its bonus pool. The budget for bonuses had been reduced to almost $3 billion in 2015 from about $5.3 billion in 2010.

The decision was made keeping in mind that no dividends were paid to the shareholders in the last two years. Also, Deutsche Bank’s financials are impacted adversely by a horde of legal costs and restructuring charges.

Apart from this, the prevailing low interest rate in Europe has affected the bank’s profitability. Also, the U.K’s decision to exit the European Union has largely impacted the companies operating in the area.

Deutsche Bank is not the only one that slashed its bonus pool. The Royal Bank of Scotland Group plc RBS reduced its bonus pool by 8% for 2016. Also, Barclays PLC BCS cut the bonus pool for its investment bankers consecutively for the third year. Also, its front office employees faced a 1% cut in incentives.

Our Viewpoint

While Deutsche Bank’s strategic initiatives are likely to aid in the overall growth in the long run, the slow growth being witnessed in the European economy continues to hurt its financials. Also, with the elections to be held in Germany later in this year, we might see some more changes in the pay scale.

Therefore, given these growth concerns, Deutsche Bank’s stock increased 11.3% over the last one year underperforming the 35.6% gain for the Zacks categorized Banks – Foreign industry.

Deutsche Bank currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Another finance stock carrying the same Zacks Rank is FB Financial Corp. FBK. The company witnessed an upward earnings estimate revision of 2.3% for the current year in the past 30 days. Also, its share price is up 55.3%, over the last one year.

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The gambling industry’s focus was on earnings releases last week.

Monarch Casino & Resort Inc. MCRI posted better-than-expected fourth-quarter 2016 results with earnings and revenues beating the Zacks Consensus Estimate. Consequently, shares of the company gained nearly 7% on the day of the release, reflecting positive investors’ sentiments.

Meanwhile, Pinnacle Entertainment, Inc. PNK posted profit in fourth-quarter 2016 that compared favorably with the Zacks Consensus Estimate of a loss. Its top line too outpaced the consensus mark.

On the other hand, Isle of Capri Casinos, Inc. ISLE failed to surpass both top and bottom-line expectations in its third-quarter fiscal 2017 results.

Gaming Industry 5YR % Return

 

Gaming Industry 5YR % Return

Recap of the Week’s Most Important Stories  

1.    Monarch Casino & Resort’s fourth-quarter earnings of 36 cents per share beat the Zacks Consensus Estimate of 31 cents by 16.1% Also, earnings increased 24.1% year over year on the back of higher revenues.

Net revenue of $55.6 million surpassed the consensus mark by over 3.5%. Moreover, revenues rose 8% year over year, reflecting solid growth at both Atlantis and Monarch Casino Black Hawk casinos. This Zacks Rank #3 (Hold) company also witnessed an increase in food and beverage and other revenues. However, hotel revenues declined somewhat for the quarter.

2.    Pinnacle Entertainment posted fourth-quarter 2016 adjusted earnings of 10 cents per share which compared favorably with the Zacks Consensus Estimate of a loss of 8 cents. However, earnings decreased considerably from the year-ago figure of 40 cents.

Net revenue of $637.4 million beat the consensus by over 1% and went up 14.1% year over year, owing to increased contribution from The Meadows Racetrack and Casino and growth in the company's same-store portfolio of businesses. This Zacks Rank #2 (Buy) company experienced an increase in revenues at the Midwest, South and West segments on a year-over-year basis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3.    Isle of Capri Casinos posted third-quarter fiscal 2017 adjusted earnings of 17 cents per share which were in line with the prior-year quarter figure. The reported earnings, however, failed to beat the Zacks Consensus Estimate of 18 cents by 5.6%.

Moreover, net revenues of $193.8 million fell 1.4% year over year and failed to surpass the consensus mark of $203.4 million by 4.7%. An increase in room revenues was more than offset by a decrease in casino and food, beverage, pari-mutuel and other revenues. Meanwhile, adjusted EBITDA increased 5.5% to $43.5 million in the quarter. Isle of Capri Casinos presently has a Zacks Rank #3.

Price Performance

The following table shows the price movement of the major gambling stocks over the past week and the last six months:

Company

Last Week

Last 6 Months

WYNN

-2%

3.9%

LVS

0.2%

2.8%

MGM

-2.1%

11.5%

MPEL

-4.3%

22.6%

MCRI

10.1%

12.5%

CACQ

-1.4%

17.4%

BYD

-2%

-1%

Last week, share price movement of the major gambling stocks was predominantly negative. Melco Crown Entertainment Ltd. MPEL and MGM Resorts International MGM lost the maximum by 4.3% and 2.1%, respectively. Meanwhile, Monarch Casino & Resort recorded a gain of 10.1%.

However, over the last six months, the price performance of gambling stocks was mostly positive. Among the stocks that appreciated the most were Melco Crown and Caesars Acquisition Company CACQ that witnessed an increase of 22.6% and 17.4%, respectively. On the contrary, Boyd Gaming Corp. BYD recorded a decline of 1% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions. Now, with the earnings season about to wind up, investors can expect this volatility to continue in the coming days.

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RenaissanceRe Holdings (RNR) Ups Dividend, Share Repurchase

Posted Mon Feb 27, 05:36 pm ET

by Zacks Equity Research

The board of directors of RenaissanceRe Holdings Ltd. RNR approved a 3.2% hike in the company’s quarterly common stock dividend. The revised quarterly payout now comes in at 32 cents per share. The meatier dividend will be paid on Mar 31, 2017, to shareholders of record as of Mar 15.

This marks the 22st consecutive annual dividend raise by this reinsurer, reflecting its commitment to return value to its shareholders. Prior to this hike, the company had increased its dividend by 3.3% in Feb 2016.

Over the past year, the company outperformed the broader industry. While the company returned 29.23%, the Zacks categorized Insurance- Property and Casualty Title industry gained 26%. The outperformance is reflective of the company’s disciplined underwriting and a niche position in the property catastrophe reinsurance market.

Considering the last day’s closing price of $146.28 per share, the dividend yield is 0.88%, a lot below the industry yield of 3.67%.

Alongside, the company’s share repurchase program was expanded, bringing the total current authorization to $500 million. The company did not repurchase any share in the last reported quarter.

The consistent increase in dividend year after year reflects the company’s commitment toward rewarding its shareholders irrespective of the operating environment.

The recent dividend hike is supported by the company’s strong capital position with modest leverage and efficient access to capital through multiple sources.

During the recently-reported quarter, the company came up with better-than-expected earnings. The quarter’s results benefitted from higher reserve releases, lower catastrophe loss from the hurricane Matthew, and a modest tax benefit.

RenaissanceRe carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the insurance space are Everest Re Group, Ltd. RE, The Progressive Corp. PGR and American Financial Group Inc. AFG. Each of these stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Everest Re posted a positive earnings surprise of 121.86% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters with an average positive surprise of 44%.

American Financial Group posted a positive earnings surprise of 22.2% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters, with the average being 6.45%.

The Progressive Corp. posted a positive earnings surprise of 22% in the fourth quarter. It beat earnings estimates in two out of the last four reported quarters with an average beat of 1.32%.

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