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Analyst Blog

Here's Why You Should Add The York Water Company (YORW) Now

Posted Fri Sep 13, 05:36 pm ET

by Zacks Equity Research

The York Water Company YORW is making significant investments to build and improve its communities’ infrastructure. Per its 2018 Annual Report, it has invested nearly $55 million for infrastructure improvements in the past three years.

Estimates for the company have been revised upward in the past 90 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2019 and 2020 earnings per share has moved up 1.8% and 0.8%, respectively, in the said period.

Let’s focus on the factors that make The York Water an attractive stock at the moment.

Zacks Rank & Surprise History

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The York Water’s average four-quarter positive earnings surprise is 0.77%.

Price Appreciation & Growth Estimates

In the past three months, the stock has gained 12.9% compared with the industry’s growth of 5.2%.


 

The Zacks Consensus Estimate for 2019 earnings per share is pegged at $1.13 on $51 million revenues. The bottom and top lines indicate a 8.17% and 5.29% year-over-year increase, respectively.

The consensus mark for 2020 earnings is pegged at $1.17 per share on revenues of $53 million. The bottom line translates to a 4.44% increase and the top line suggests a 3.92% improvement on a year-over-year basis.

Debt/Capital & Return on Equity (ROE)

The company’s current debt to capital ratio is pegged at 42.67%, lower than the industry’s 42.72% and the Zacks S&P 500 composite’s 43.30%.

ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The company’s ROE for the trailing 12 months is 11.06%, higher than the industry’s 9.30%.

Steady Dividend Payment

The Board of Directors declared a quarterly dividend of 17.33 cents payable on Oct 15, 2019 to shareholders as of record on Sep 30, 2019. This is the 595th consecutive dividend payout by the company. It is the oldest publicly-traded company in the nation that never missed a dividend in more than 200 years.

Other Key Picks

Some other top-ranked stocks in the same sector include American States Water Company AWR, Alliant Energy Corp. LNT and IDACORP, Inc. IDA. All the stocks carry a Zacks Rank #2.

Notably, 2019 earnings estimates for American States Water, IDACORP and Alliant Energy have moved up 6%, 0.4% and 0.4% in the past 60 days to $2.11, $4.48 and $1.12 per share, respectively. All the stocks have outperformed the industry in a year’s time.

American States Water and IDACORP have average four-quarter positive earnings surprise of 5.91% and 7.79%, respectively. Alliant Energy’s long-term (three to five years) earnings growth rate is pegged at 5.50%.

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Here's Why You Should Hold On to Schlumberger (SLB) Now

Posted Fri Sep 13, 05:31 pm ET

by Zacks Equity Research

Schlumberger Limited SLB is well poised to grow on the back of attractive reservoir and well technologies. However, conservative spending by explorers and producers, and lower domestic rig count are causes of concern.

Houston, TX-based Schlumberger is a leading oilfield services company that provides services to oil and gas explorers, and producers across the world. Schlumberger helps upstream energy players to locate oil and gas, as well as drill and evaluate hydrocarbon wells. It also supports the explorers to produce optimum volumes of the commodities from the existing wells. 

Estimate Revisions

The Zacks Consensus Estimate for the company’s bottom line for 2019 has been revised downward to $1.50 from $1.54 in the past 60 days. Notably, four analysts have revised their estimates higher, while nine analysts have made downward revisions during this time period.

 

Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

What’s Favoring the Stock?

Schlumberger is the largest oilfield services player, with presence in every energy market across the world. Also, in all the operating business segments, the company is among the top players. Given Schlumberger’s huge size and attractive reservoir and well technologies, the company will likely outperform its peers.

Notably, the company’s greater reliance on lucrative international market is appreciable. Being the leading provider of technology for complex oilfield projects, Schlumberger is better positioned than most of its peers to take up new offshore projects in the shallow water basins outside North America.

The company is expecting to see an improvement in international markets wherein drilling rig count and final investment decision (FID) for clients’ projects are on the rise. The tailwinds are supporting Schlumberger’s projection of 7-8% increase in spending by upstream energy firms in international markets through 2019. Thus, Schlumberger’s oilfield services are likely to record higher demand in international markets served.

The firm has a strong commitment of returning cash to its shareholders through dividend payments and stock repurchases. Over the past five years, Schlumberger’s dividend yield has been mostly higher than the collective yield of the stocks belonging to the industry. Markedly, through the June quarter, 2.5 million stocks were repurchased by the oilfield services player.

Downsides

There are a few factors that are impeding the growth of the stock lately.

Schlumberger stated that explorers and producers are constrained by the reduction in capacity for borrowings and an increase in the cost of capital. Also, the explorers are facing constant pressure from investors for higher returns instead of production growth. These headwinds are likely to lower investments by explorers and producers in the land market of North America by 10% through 2019.

Moreover, decline in rig count in the domestic market can affect Schlumberger’s business. Also, conservative spending by explorers and producers is going to hurt demand for the company’s oilfield services in North America. Thus, Schlumberger has set its 2019 capital budget in the range of $1.5-$1.7 billion, indicating a decrease from last year’s $2.2 billion.

The pipeline bottleneck problem in the Permian Basin has been hurting the company’s operations in U.S. shale plays. Worryingly enough, Schlumberger expects pipeline transportation capacity constraints to last well into 2019. The oilfield service player’s overall business is also getting affected by soft hydraulic fracturing prices in the United States.

To Sum Up

Despite the company’s significant prospects, conservative spending by explorers and producers, as well as lower domestic rig count are concerns. Nevertheless, we believe that systematic and strategic plan of action will drive its long-term growth.

Stocks to Consider

Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV, Dril-Quip, Inc. DRQ and NuStar Energy L.P. NS. All these firms have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

Dril-Quip’s 2019 earnings per share are expected to rise 131.8% year over year.

NuStar Energy’s third-quarter 2019 earnings per share are expected to gain more than 108% year over year.

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Roche's New Perjeta Combo Meets Goal in Breast Cancer Study

Posted Fri Sep 13, 05:27 pm ET

by Zacks Equity Research

Roche Holding AG RHHBY announced that its new investigational fixed-dose combination (FDC) of Perjeta (pertuzumab) and Herceptin (trastuzumab) has met the primary endpoint of non-inferiority in the phase III FeDeriCa study.

In the study, the new FDC, which is administered by subcutaneous (SC) injection in combination with intravenous (IV) chemotherapy, demonstrated non-inferior levels of Perjeta in the blood compared to the standard IV infusion of Perjeta + Herceptin and chemotherapy in patients with HER2-positive early breast cancer (eBC).

This new FDC of Perjeta + Herceptin in combination with chemotherapy is administered under the skin, thus providing a faster treatment option for the given patient population. The FDC of Perjeta and Herceptin is a new SC formulation, which uses Halozyme Therapeutics’ HALO Enhanze drug delivery technology.

Per the company, the SC administration of the new FDC takes around eight minutes for the initial loading dose and approximately five minutes for each subsequent maintenance dose. This is a significant reduction in administration time compared to the infusion of a loading dose of Perjeta and Herceptin using the standard IV formulations that takes approximately 150 minutes and almost 60-150 minutes for the subsequent maintenance dose.

Roche plans to present full data from the above study at an upcoming medical conference. The company also plans to submit the results to the FDA and the EMA for regulatory approvals.

Perjeta in combination with Herceptin and chemotherapy (the Perjeta-based regimen) is already approved by the FDA as an adjuvant (after surgery) treatment of HER2-positive eBC patients, who are at a high risk of recurrence.

We would like to remind investors that Roche has a strong presence in the oncology market. Particularly, it dominates the breast cancer space with solid demand for its HER2 franchise drugs, namely Herceptin, Perjeta and Kadcyla.

However, competition looms large on the HER2-positive breast cancer space. Puma Biotech’s PBYI Nerlynx (neratinib) is also approved for use as an extended adjuvant treatment of HER2-positive early stage breast cancer in adult patients, who were previously treated with Roche’s Herceptin-based adjuvant therapy.

Shares of Roche have increased 9.1% so far this year versus the industry’s decrease of 1.2%.


 

In a separate press release, Roche announced new six-year data from the phase III study on its multiple sclerosis (MS) drug Ocrevus (ocrelizumab). The longer-term data from the OPERA I, OPERA II and ORATORIO extension studies showed that an early and continuous treatment with Ocrevus for six or more years led to a reduced risk of disability progression in patients with relapsing MS (RMS) and primary progressive MS (PPMS).

The results were presented at the 35th Congress of the European Committee for Treatment and Research in Multiple Sclerosis held in Sweden.

Zacks Rank & Another Key Pick

Roche currently carries a Zacks Rank #2 (Buy). Another stock worth considering in the large cap pharma sector is Merck & Co., Inc. MRK, which carries the same Zacks Rank as Roche. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merck’s earnings estimates have been revised 3.2% upward for 2019 and 1.3% for 2020 over the past 60 days. The stock has rallied 9% year to date.

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Equinor Starts Crude Sale from 2 New North Sea Oilfields

Posted Fri Sep 13, 04:42 pm ET

by Zacks Equity Research

Equinor ASA EQNR has commenced selling crude from its two new operated oilfields in the North Sea, namely Mariner in British waters and Johan Sverdrup in the Norwegian territory. The joint production from these oilfields is anticipated to be around 500K barrels per day in 2020.

It is believed that the medium and heavy crude oil grades from the fields with higher sulphur content will compensate the loss of similar grades from the OPEC supply cuts and the U.S. sanctions on Iran and Venezuela.  

The Norwegian company’s production from the Mariner field, which started in August, saw its first crude oil cargo being lifted on Sep 4.

Per Simon James, vice president of crude trading and refinery optimisation at Equinor, the 320,000-barrel Mariner Blend crude was sold at a discounted rate to current Brent prices. Moreover, the production is expected to reach a mark of 70,000 barrels per day (bpd) in the short run while the production on average is estimated to be around 55,000 bpd. Apart from Europe, the crude oil is expected to be sold at the refineries in India and China.

James further added that Equinor is also selling the first two Johan Sverdrup crude cargoes via a tender process. Further, Johan Sverdrup, the Norwegian oil field operated by Equinor is projected to come online ahead of schedule. The field production start-up is likely to commence operations in October, a month earlier than planned.

It is believed, the start-up of Johan Sverdrup’s first phase will help Equinor revive output from its Norwegian fields that witnessed a massive plunge over the past year and a half due to natural decline and technical issues.

Equinor holds a 42.6% stake in the Johan Sverdrup development while Swedish oil producer Lundin Petroleum AB (who discovered the field in 2010) owns 20%. The remaining interests are held by European supermajors TOTAL SA and BP plc. 

 

Zacks Rank & Key Picks

Equinor carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include BP Midstream Partners BPMP, Dril-Quip, Inc. DRQ and World Fuel Services Corp. INT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BP Midstream’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

World Fuel Services earnings beat the Zacks Consensus Estimate in all the last four quarters.

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Here's Why Sprouts Farmers Is Down in the Past Six Months

Posted Fri Sep 13, 04:36 pm ET

by Zacks Equity Research

Shares of Sprouts Farmers Market, Inc. SFM have underperformed the industry in the past six months. We note that shares of this Phoenix, AZ-based company decreased 11.5% in the past six months compared with the industry’s growth of 2.7%.

Dismal second-quarter result contributed to the stock’s bearish run. The company’s earnings beat streak broke in the quarter. The bottom line fell short of consensus mark, after surpassing the same in the preceding three quarters. The top line also came below the estimate.

While net sales continued to rise year over year, earnings slid for the second quarter in a row. This was due to the adoption of the new lease accounting standard and tough sales environment. Definitely, higher cost of sales and increased SG&A expenses also acted as deterrents. Consequently, the company lowered 2019 view.


 

This triggered a downward revision in the Zacks Consensus Estimate. We note that estimates for current and next year have moved south by 2 cents each to $1.10 per share and $1.18 per share, respectively, over the past 30 days. This downward revision is attributable to the company’s soft guidance for 2019.

This Zacks Rank #5 (Strong Sell) company now projects 2019 earnings between $1.05 and $1.09 per share. In the year-ago quarter, it had reported earnings of $1.29 per share. Sprouts Farmers also informed that the lease accounting standard change will result in a net incremental expense of 4 cents a share for the full year. Earlier, the company had projected earnings of $1.18-$1.24 per share.

Management now envisions net sales growth of 7-8% for the full year with comparable store sales expected to remain flat. Management had previously forecasted net sales growth of 9-10.5% and comparable store sales to improve 1.5-3%. The company had registered 12% improvement in net sales during 2018.

Additionally, the company is grappling with strained gross margin. After shrinking 30 basis points in the first quarter of 2019, gross margin again contracted 35 basis points to 32.8% during the second quarter owing to cost inflation, and marginally higher distribution and transportation expenses. Moreover, management envisions full year gross margin to decrease 20-30 basis points year over year.

We note that operating income came at $51.3 million, down 17% from the year-ago period. Also, operating margin shrunk 110 basis points to 3.6%. Thanks to higher SG&A expenses that are negatively impacting the company’s margins.

During the second quarter of 2019, SG&A expenses rose 9% to $383.1 million, while as a percentage of sales the same increased 60 basis points to 27.1%. Excluding the impact of the adoption of the new lease accounting standard, SG&A deleveraged 20 basis points. SG&A expenses rose on account of investments in new outlets, higher interchange fees and increased costs related to the expansion of the home delivery program. Management expects SG&A expenses for the full year to increase roughly 10.5% year over year.

Nevertheless, the company is taking prudent steps to expand its customer base. The launch of Sprouts.com website and mobile app is testimony to the same. Additionally, the company is trying all means to provide ready-to-eat, ready-to-heat, and ready-to-cook items to customers. However, expectation of gross margin pressure and deleverage in SG&A expenses for the full year raise concern.

Key Picks

Conagra Brands CAG currently has long-term earnings per share (EPS) growth rate of 7% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ingles Markets, Inc. IMKTA has a long-term earnings growth rate of 14.5% and sports a Zacks Rank #1.

Hershey HSY presently has a Zacks Rank #2 and long-term EPS growth rate of 8%.

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Can Coty's (COTY) Strong Luxury Unit & E-commerce Pare Woes?

Posted Fri Sep 13, 04:27 pm ET

by vidya Nair

Weak Consumer and Professional Beauty Units are tarnishing Coty Inc.’s COTY image. Nevertheless, this well-known cosmetics company has managed to stay rooted on the back of advancements in the Luxury category and e-commerce. Also, it is progressing well with transformational efforts to streamline overall business. Let’s delve into these factors.

Luxury Segment & Online Sales are Upsides

Coty’s Luxury unit has been performing well for quite some time, primarily backed by solid brand performances, innovations and strong consumer demand. In fact, 35.7% of Coty’s revenues in the fourth quarter of fiscal 2019 were generated from this segment.

The Luxury unit’s performance was driven by growth in ALMEA and Travel Retail as well as advancements in China. Additionally, brands like Burberry, Gucci, Hugo Boss, Marc Jacobs and Calvin Klein performed well. The unit’s gross margin was particularly strong in the quarter. Management continues to be committed toward bolstering performance in this segment, which will likely be a key growth catalyst.

Moreover, the company has been taking significant strides to boost e-commerce sales. This was reflected in Coty’s second- and third-quarter performances, wherein e-commerce sales maintained strong momentum in the Luxury segment. During the fourth quarter, e-commerce sales contributed 10% to revenues in the Luxury segment.

However, it contributed low-teens revenues in the Professional unit. Management also highlighted that e-commerce is picking up pace in the Consumer unit, wherein growth is primarily being witnessed across the United States and Asia. Growth in the e-commerce space is also supporting other beauty companies such as Estee Lauder EL, Ulta Beauty ULTA and Helen of Troy HELE.

Consumer Beauty Unit Is a Pain

Coty’s Consumer Beauty segment has been posting soft organic sales since the past few quarters. The segment continued to be under pressure in the fourth quarter, wherein revenues dropped 15.2% year on year. Results were hurt by persistent sluggishness in Younique, while trends in the core Consumer Beauty segment were stable. Moreover, along with fourth-quarter earnings release, the company announced the decision to end its partnership with Younique on mutual agreement.

Additionally, the company’s Professional Beauty unit has been sluggish thanks to headwinds at Coty’s North American operations, stemming from de-stocking of key accounts. As a result of sluggishness in these categories, the company’s top line fell 8% year over year in the fourth quarter. Thanks to such headwinds, Coty’s shares have plummeted 21.1% in the past three months against the industry’s rise of 6.4%.



 

Can Efforts Aid Revival?

Coty is on track with initiatives to revive the Consumer Beauty business. In this context, the company has implemented concrete plans to stabilize market share in key markets and reduce costs. Further, the company is undertaking prudent media investments. Additionally, this Zacks Rank #3 (Hold) company is striving to build and streamline operations, upgrade systems as well as optimize manufacturing and logistics. We expect such moves to revive the company’s sheen in its business and regain position in investors’ good books.

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

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U.S. Biofuels Policy: Oil & Corn Industries Fight It Out

Posted Fri Sep 13, 03:29 pm ET

by Nilanjan Choudhury

The Trump administration is desperately looking to broker a compromise between the warring corn producers and the oil lobby. As part of efforts to press on and work out the challenges in implementing a biofuel policy, the White House has had meetings with CEOs of some of the largest refining companies while at the same time hearing out lawmakers from the farm states.

The Fight Between Oil Refiners & Ethanol Producers

Farm groups and ethanol organizations are angered by the sharp increase in exemptions provided by the Andrew Wheeler-led Environmental Protection Agency (EPA) to the oil refiners. The concession allows refiners to obtain certain relaxations associated with requirements to purchase and mix ethanol into their gasoline blends or buy credits from others that do.

In August, the regulator granted what is known as the ‘RIN obligation waiver’ for 2018 to 31 refineries. Though lower than the 2017 count of 35, the number of ‘hardship exemptions’ have gone up significantly from the 12-15 handed out till few years back.

In addition to the larger-than-usual number of hardship exemptions, the U.S. corn lobby have been furious with reports that the EPA granted RIN obligation waiver – typically reserved for smaller refineries – to units of large operators like ExxonMobil XOM and Chevron CVX.

Both the companies carry Zacks Rank #3 (Hold).

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

Agriculture Industry Up in Arms

Agriculture industry bodies believe these waivers significantly lower the quantity of fuel to be mixed with ethanol, thereby effectively reducing the demand for biofuels (like ethanol) in U.S. and adversely affecting domestic corn producers. Moreover, these ‘secret handouts’ basically lets the refiners get out of their obligations to blend ethanol fuels and also undermines the market for renewable identification numbers (RINs) -- the tradable biofuel blending credits that refiners otherwise use to meet their obligation.

Finally, the alleged exemption (intended for small, financially weak refiners) granted to profitable energy giants has been condemned as being an unfair and illegal practice, apart from undermining the federal mandate. Under the provisions, smaller refineries producing less than 75,000 barrels per day) may apply for waivers with the agency on grounds of ‘disproportionate economic hardship.’ However, ExxonMobil and Chevron – generating billions of dollars in profits – hardly fits the bill to receive an exemption from the country's biofuel regulations, feels industry observers.

The agricultural groups further believe that the indiscriminate issuance of waivers will negate any gains from the recent changes to EPA’s biofuels policy that included modifications to the RIN market and the year-round availability of E15 ethanol. As it is, corn-based ethanol producers like Green Plains GPRE and Pacific Ethanol PEIX have been on the receiving end of the trade war, losing out on the export sales. In fact, the generous use of waivers for refiners hit the industry so hard that Green Plains, one of the nation’s largest domestic ethanol companies, had to permanently close a production plant.

Refiners Seek Concessions

Most of the above arguments have been dismissed by the refiners who insist that ethanol demand remains unaffected and they are, in fact, the ones who need support in dealing with the rising cost of biofuel blending mandates. Per reports, executives from Valero Energy VLO and Marathon Petroleum MPC – two of the largest U.S. refiners – in their meeting with President Trump, discussed the potential price caps on blending credits that the downstream companies must acquire to comply with the nation’s biofuel law. It is part of the Renewable Fuel Standard (RFS), which requires the mixing of renewable fuels (like corn ethanol or other biofuels) into gasoline and diesel.

Will Trump Bail Out Farmers?

President Trump is finding it tough to strike a balance between the biofuel companies and the oil refiners. The White House officials have proposed a 5% increase in biofuel blending quotas (or by 1 billion gallons over and above the current proposed levels) next year to ramp up ethanol purchases and compensate for the bulk refinery waivers. The expected increase in corn demand for American farmers should benefit the likes of Archer Daniels Midland Company ADM and Bunge Limited BG, who are active in the ethanol business.

However, the powerful agriculture industry has made it clear that they would prefer a structural revision to the policy guaranteeing future protection from refinery exemptions rather than a one-off boost in nationwide blending quotas.   

The situation is particularly tricky considering the importance of the oil and corn lobbies to the 2020 presidential election. These two constituencies propelled Trump to office in 2016 and he hopes to retain their backing in the next edition too.

As it emerges, we have surely not seen the last of the battle over renewable fuel standards. However, government representatives are hoping for a quick solution as any delay will make it difficult for them to follow regulatory protocols required to enact a change to blending mandates in time for implementation next year.

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Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

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ExxonMobil-Led Consortium Wins 3 Brazil Deepwater Blocks

Posted Fri Sep 13, 11:50 am ET

by Zacks Equity Research

An international consortium led by Exxon Mobil Corporation XOM was the main bidder for three ultra-deepwater oil and natural gas units off the coast of Sergipe and Alagoas states during Brazil's first Open Acreage auction.

The units are situated close to the area where the companies, namely ExxonMobil, Murphy Oil Corporation MUR and Brazil’s Enauta Participacoes teamed up to acquire the same at recent offshore bid rounds plus where Brazil’s state-run energy giant Petrobras PBR made several oil discoveries and intends to test the Farfan oil well by this year-end for the long haul.

ExxonMobil will hold 50% operating interest in the blocks with Murphy Oil controlling 20% and Enauta with 30% stakes. These companies agreed to pay $1.9 million for purchasing SEAL-M-505, SEAL-M-575 and SEAL-M-637 blocks in the offshore Sergipe-Alagoas Basin.

Brazil's oil regulator ANP had earlier organized the Open Acreage program with a view to raise its production and recovery rates that have fallen, mainly in the onshore and offshore basins due to Petrobras’ concentration on pre-salt layer. The auction was also aimed at enhancing Brazil’s energy industry outside the nation’s core pre-salt reservoirs located hundreds of miles off the coast.

Of the 273 production and exploration concessions, 33 were went under the hammer with a signing amount of R$15.3 million. Per the auction policies, the companies failing to bid in the interested sector will be required to pay a minimum signing amount for the acreage that the company conveyed interest on prior to the sale.

As Brazil no longer considers onshore concessions in its annual bid rounds, the Open Acreage program is the only medium for oil companies to win growth and advancement privileges for onshore acreage.

Brazil is expected to organize its 16th bid round sale of production and exploration concessions on Oct 10 this year.

Zacks Rank & Key Pick

ExxonMobil carries a Zacks Rank #3 (Hold). A better-ranked player in the energy space is BP Midstream Partners BPMP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BP Midstream’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

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Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>
 

Ardelyx Gets FDA Approval for Ibsrela As IBS-C Treatment

Posted Fri Sep 13, 11:08 am ET

by Zacks Equity Research

Ardelyx, Inc. ARDX announced that it has received FDA approval for Ibsrela (tenapanor) as a treatment for irritable bowel syndrome with constipation (IBS-C) in adults. This marks the first FDA approval for the company for any of its pipeline candidates.

Ibsrela, an NHE3 sodium transport inhibitor, received approval in the United States based on encouraging data from two phase III studies, which evaluated twice-daily, 50 mg dose of the drug in IBS-C patients. Data from the studies demonstrated that Ibsrela achieved a statistically significant reduction in constipation and abdominal pain.

Ardelyx is in discussions to ink a collaboration deal to support the launch of Ibsrela. With no deal, the company’s cash resources may prove to be inadequate for successful commercialization of the drug. Please note that the drug is likely to face stiff competition from Ironwood Pharmaceuticals, Inc. IRWD/Allergan’s AGN, Linzess, which holds a strong position in the IBS-C segment. Bausch Health BHC also has an IBS-C drug, Trulance, in its portfolio.

Shares of Ardelyx however declined 10.5% in pre-market trading on Sep 13, presumably due to the absence of a collaboration partner. However, the company’s shares have surged 250.9% so far this year compared with industry’s increase of 6.7%. The significant year-to-date increase in shares is driven by encouraging progress of Ibsrela in other indications.

 

Apart from IBS-C, Ardelyx is developing tenapanor for treating hyperphosphatemia as monotherapy or in combination with phosphate binders.

Earlier this month, the company announced that the drug met primary and all key secondary endpoints in the pivotal phase III study – AMPLIFY – evaluating its combination regimen for treating hyperphosphatemia. The tenapanor combination regimen achieved a statistically significant reduction in serum phosphorus from baseline after four weeks of treatment. Top-line data from the phase III study – PHREEDOM – evaluating tenapanor monotherapy is expected in the fourth quarter of 2019. The company expects to file regulatory applications following the PHREEDOM data, seeking approval for tenapanor monotherapy and combination therapy.

The company is also developing another pipeline candidate, RDX013, as a treatment for hyperkalemia — a condition of elevated level of potassium in the blood.

Zacks Rank

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

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Vertex Gains Reimbursement for Orkambi & Symkevi in Scotland

Posted Fri Sep 13, 11:08 am ET

by Zacks Equity Research

Vertex Pharmaceuticals Incorporated VRTX announced that it has received a reimbursement approval in Scotland for its cystic fibrosis (CF) medicines Orkambi and Symkevi. Following this, approximately 400 eligible CF patients in Scotland will now get access to both these drugs for their immediate treatment.

Vertex’s CF medicines are reimbursed in 17 countries across the world. However, the company has faced some challenges with respect to commercialization of Orkambi in the ex-U.S. markets due to re-imbursement hurdles.

Though Vertex has reached reimbursement agreements for Orkambi in several European countries including Germany, Ireland, Netherlands, Sweden, Italy, Denmark and now Scotland, its negotiations continue with several other countries on the Continent that represent significant potential markets including the United Kingdom and France. The company has generated limited revenues from Orkambi in these countries due to the ongoing pricing discussions on Orkambi’s reimbursement rate.

Shares of Vertex have increased 4.1% so far this year against the industry’s decrease of 1.3%.

We would like to remind investors that Vertex’s three CF medicines, namely Kalydeco, Orkambi and Symdeko (known as Symkevi in Europe) are collectively approved for treating a good number of CF patients in North America, Europe and Australia. Total CF product revenues in the first half of 2019 were around $1.8 billion, reflecting a rise of 28.6% year over year.

Vertex’s newest CF medicine Symdeko has become the main driver of CF revenues within a short span. Approval of Kalydeco and Orkambi for new patient populations is also driving sales growth.

Symdeko/ Symkevi generated sales of $682 million in the first half of 2019, reflecting a massive surge of more than 200% year over year. Symdeko’s uptake is being driven by new patient starts as well as shifts from Orkambi and Kalydeco.

Meanwhile, last month, the FDA accepted and granted a priority review to Vertex’s new drug application (NDA) for its triple combination regimen comprising VX-445 (elexacaftor), tezacaftor and ivacaftor to treat CF patients aged 12 years and above. The regulatory body has set an action date of Mar 19, 2020.

If approved, the triple combination regimen will help Vertex address a significantly larger CF patient population (almost 90% of patients with CF) in the future.

Even though Vertex enjoys a strong position in the CF market, it is likely to face a tough competition from several companies like AbbVie ABBV, Eloxx Pharmaceuticals, ProQR Therapeutics PRQR and Proteostasis Therapeutics, which are also developing medicines to treat CF.

Zacks Rank & Another Key Pick

Vertex currently has a Zacks Rank #2 (Buy). Another top-ranked stock in the healthcare sector is Amgen Inc. AMGN, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Amgen’s earnings estimates have been revised 2.9% upward for 2019 and 4.3% for 2020 over the past 60 days. The stock has inched up 0.4% year to date.

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