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Zacks #1 Stocks on the Move 02/24/2017

Company Name Symbol %Change
Applied Opto AAOI
22.71%
Spark Energy SPKE
6.65%
Sina Corpora SINA
4.35%
Internationa ICAGY
4.34%
MercadoLibre MELI
3.99%

Analyst Blog

Keryx (KERX) Q4 Earnings: What's in Store for the Stock?

Posted Fri Feb 24, 05:06 pm ET

by Zacks Equity Research

Keryx Biopharmaceuticals, Inc. KERX is expected to report fourth-quarter 2016 results on Mar 1. Last quarter, the company recorded a negative earnings surprise of 77.27%. Let’s see how things are shaping up for this announcement.

Keryx’s share price has decreased 16.6% year to date, while the Zacks classified Medical - Biomedical and Genetics industry gained 5.9%.

Factors Influencing This Quarter

Apart from license fees, Keryx’s top line comprises revenues generated by its only marketed product, Auryxia (ferric citrate). Auryxia is approved as tablets to control serum phosphorus levels in patients with chronic kidney disease (CKD) on dialysis.

In August 2016, Keryx announced an interruption in the supply of Auryxia, as its contract manufacturer had issues related to the conversion of the API into the finished product, leading to a disruption in the supply of Auryxia. Consequently, the company withdrew its guidance for 2016. However, in Nov 2016, Keryx announced that the FDA has approved a second drug product manufacturer, Patheon Manufacturing Services, for supplying Auryxia as a finished product.

Following the approval, the company has rebuilt supply and expects to make Auryxia available to wholesalers. As a result of this, Aurexia sales is expected to improve in the fourth quarter of 2016.

Keryx is working on expanding ferric citrate's (the compound name for Auryxia in additional indications) label to include the treatment of iron-deficiency anemia (IDA) in patients with stage III–V non-dialysis dependent chronic kidney disease indication (NDD CKD). The company expects to file a supplemental new drug application with the FDA as soon as it receives an agreement from the FDA for its pediatric clinical plan. We expect management to update on these plans at the upcoming earnings conference call.

Surprise History

Keryx’s track record has been disappointing so far. Over the four trailing quarters, the company posted an average negative earnings surprise of 43.03%, reporting in-line earnings only once in the last four quarters, while missing the same on all the other three occasions.

What Our Model Indicates

Our proven model does not conclusively show that Keryx 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) for this to happen. However, 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 the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 27 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Keryx’s has a Zacks Rank #3, which increases the predictive power of ESP. However, 0.00% ESP makes surprise prediction difficult for the quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Keryx Biopharmaceuticals, Inc. Price and EPS Surprise

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.

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.

Exelixis, Inc. EXEL has an Earnings ESP of +200% and a Zacks Rank #2. The company is scheduled to release results on Feb 27.


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Eaton Vance (EV) Stock Up Despite Q1 Earnings, Revenues Lag

Posted Fri Feb 24, 04:52 pm ET

by Zacks Equity Research

Eaton Vance Corp. EV reported first-quarter fiscal 2017 (ended Jan 31) adjusted earnings of 53 cents per share, which lagged the Zacks Consensus Estimate of 58 cents. Also, earnings were 6% above the prior-year quarter.

Despite the earnings miss, shares of Eaton Vance gained nearly 6.2% following the release of its results, before the market opened, because of investors being optimistic on its revenue growth. Quarterly results were hurt by a rise in expenses, partially offset by higher revenues. However, growth in assets under management (AUM) and robust net inflows were the tailwinds.

Net income attributable to shareholders in the reported quarter grew 4% year over year to $60.7 million.

Revenues & Expenses Witness a Rise

Total revenue for the quarter amounted to $355 million, up 7.1% year over year. The rise was mainly driven by higher management, performance, and distribution and service fees. However, the figure surpassed the Zacks Consensus Estimate of $354 million.

Total expenses rose 8.1% year over year to $249.5 million in the reported quarter. The increase was largely due to higher compensation and related costs, and fund-related expenses partially offset by decrease in amortization of deferred sales commissions and other operating expenses.

Total operating income was up 4.8% on a year-over-year basis to $105.4 million.

Liquidity Position Weakens & AUM Improves

As of Jan 31, 2017, Eaton Vance had $320.1 million in cash and cash equivalents compared with $424.2 million as of Oct 31, 2016. Further, the company had no borrowings outstanding against its new $300-million credit facility.

Eaton Vance’s consolidated AUM grew 20.2% year over year to $363.7 billion, reflecting net inflows of $7.8 billion and market price appreciation of $9.6 billion.

Share Repurchase

During the fiscal first quarter, Eaton Vance repurchased nearly 1.3 million shares of its Non-Voting Common Stock for $53.6 million under its existing repurchase authorization.

Our Viewpoint

Eaton Vance’s improving AUM along with revenue growth shall support its growth in the quarters ahead. Also, the acquisition of Calvert Investments shall improve the company’s financials, going forward. However, rising expenses keep us apprehensive.

Eaton Vance Corporation Price, Consensus and EPS Surprise

 

Eaton Vance Corporation Price, Consensus and EPS Surprise | Eaton Vance Corporation Quote

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

Performance of Other Asset Managers

BlackRock, Inc. BLK reported fourth-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.02. Earnings were better than expected primarily due to a decline in total expenses. Also, higher revenues acted as tailwind.

Waddell & Reed Financial Inc. WDR reported fourth-quarter 2016 adjusted earnings of 48 cents per share, easily surpassing the Zacks Consensus Estimate of 41 cents. Better-than-expected results were mainly driven by lower expenses. A decline in revenues and lower AUM were the other undermining factors.

Ameriprise Financial Inc.’s AMP fourth-quarter 2016 operating earnings per share of $2.73 easily surpassed the Zacks Consensus Estimate of $2.43. Results were better than expected primarily due to a decline in expenses. Also, growth in AUM and assets under administration (“AUA”) were on the positive side. However, a fall in top line hurt the results to some extent.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?

Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>

Bank Stock Roundup: Growing Optimism for March Rate Hike; BofA, Citi in Focus

Posted Fri Feb 24, 04:45 pm ET

by Zacks Equity Research

Over the last four trading days, performance of the banking stocks reflected optimism. The growing positive stance in the market for the rate hike in March seems to be the primary reason for upbeat stock performance. Apart from this, Trump administration’s efforts to enact pro-business tax reform measures are working in the favor of banking stock’s price performance.

Given the positive operating backdrop, banks’ financials should strengthen further. Also, banks are expanding their operation by growing inorganically.

Moreover, banks are taking steps to lessen the impact of Brexit on their operations with potential plans to shift certain operations outside the U.K.



(Read: Bank Stock Roundup for the week ending Jan 30, 2017)

Important Developments of the Week

1. Beginning with the 2016 compensation details for Chief Executive Officers (CEOs) of two major banks – Bank of America Corp. BAC and Citigroup Inc. C – reveal contrasting details. BofA’s CEO, Brian T. Moynihan has been awarded with an annual salary of $20 million for his performance in 2016, representing a raise of 25% from his pay package in 2015 (read more: What Led to a 25% Pay Rise for Bank of America CEO?).

On the other hand, Citigroup’s CEO, Michael Corbat received about 6.1% pay cut in his total compensation package. His annual salary has been cut to $15.5 million in 2016 (read more: Is Citigroup CEO's Pay Cut a Result of Tepid Earnings?).

2. The PNC Financial Services Group, Inc. PNC announced a deal to acquire the U.S.-based commercial and vendor finance (U.S. C&V) business of ECN Capital Corp in an all cash transaction. The deal, which will likely close in the second quarter of 2017, is valued at $1.1 billion and includes a portfolio of construction, transportation, industrial, franchise and technology loans and leases (read more: PNC Financial to Buy ECN Capital's US C&V to Boost Portfolio).

3. Amid troubled times for Wells Fargo & Co. WFC, following the bank’s $185-million settlement in Sep 2016 to resolve regulators’ claims of illegally opening millions of unauthorized accounts, the U.S. lender reports retail banking customer activity for Jan 2017. The bank experienced a year-over-year plunge of 31% in new account openings, however, recorded a sequential rise of 18% (read more: Wells Fargo January Account Opening Plunges 31% Y/Y).

4.  Citigroup said that it may move to Frankfurt for its sales and trading in the European Union (EU) as a result of Brexit, ending ongoing rumors. The company is expected to finalize its choice by the first half of 2017. The main reason for the restructuring is the U.K.’s exit from the EU -- which led to the cancellation of “Passporting Rights.” The rights allowed banks to provide services to other member countries of the EU from London.

Currently, the company has its operations in most of the member countries of the EU, which will serve as an advantage. However, it might have to move some jobs from London. The company said that the availability of highly qualified staff and professionalism of regulator Bafin are the main reasons for considering Frankfurt as a plausible option.

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

1.0%

38.6%

BAC

0.2%

60.1%

WFC

0.7%

20.8%

C

0.7%

30.4%

COF

1.7%

35.8%

USB

0.9%

27.5%

PNC

1.0%

49.5%


In the last four trading sessions, Capital One Financial Corp. COF, PNC Financial and JPMorgan Chase & Co. JPM were the major gainers. While Capital One gained 1.7%, both PNC Financial and JPMorgan increased 1%.

BofA and PNC Financial were the best performers in the last six months, with their shares surging 60.1% and 49.5%, respectively. Moreover, JPMorgan’s shares jumped 38.6%.

What’s Next?

In the coming five days, nothing major is likely to occur in the banking space. Unless there is a substantial upheaval in the global markets, the bank stocks will continue to perform in a similar fashion.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>

The Dow notched up a record streak of gains over a holiday shortened week. Markets were closed on Monday to commemorate President’s Day. The index increased on Tuesday after key components posted encouraging earnings results. President Trump’s comments and his possible policy proposals continued to dominate proceedings and were primarily responsible for markets moving higher. Oil prices also moved higher, leading to gains for the energy sector.

Last Week’s Performance

The Dow gained marginally last Friday, increasing by 0.02% thanks to the euphoria surrounding President Donald Trump’s proposed market-friendly policies including the prospects of massive tax cuts and uptick in infrastructure spending. Gains in Kraft Heinz Co. KHC also helped the broader markets gain traction.

Shares of Kraft Heinz soared 10.7% after the company said it would continue to pursue a $143 billion bid for Unilever plc UL. Meanwhile, the Dow eked out gains to extend its record-setting winning streak into a seventh session.

For the week, the Dow advanced 1.8%. Optimism over President Trump’s proposed market-friendly policies including tax cuts, financial de-regulation and increase in infrastructure spending boosted all the three key indexes over the week.

The Dow This Week

Markets were closed on Monday to commemorate President’s Day. The index advanced 0.6% on Tuesday thanks to upbeat earnings reports from Wal-Mart Stores Inc.’s WMT and The Home Depot Inc. HD. The Dow logged its eighth straight session of closing records, its longest winning streak since Jul 20, 2016

President Donald Trump’s appointment of Lt. Gen. H.R. McMaster to be his national security adviser also boosted investors’ sentiment. Many consider McMaster to be the smartest and most capable army officer of his generation, someone who has led the troops in the 1991 Gulf War and the Iraq War.

The index gained 0.2% to close at an all-time high for the ninth straight session on Wednesday. The blue-chip index logged its best record setting streak in three decades. But, the broader market struggled after minutes from the Fed’s last meeting showed that the central bank is comfortable in hiking rates “fairly soon.” A pullback in the price of oil adversely affected energy companies.

The Dow closed about 30 points higher on Wednesday, with E I Du Pont De Nemours and Co DD contributing most of the gains. The company is poised to win an antitrust approval from European Union regulators for its $130 billion merger with Dow Chemical Co DOW. The regulator won’t seek third parties' views to the changes, a clear indication that it will approve the deal.

The index increased 0.2% on Thursday, gaining for the 10th consecutive session in a row despite concerns about unreasonable valuations and Trump’s likely fiscal stimulus measures. The Dow was boosted by healthcare majors Johnson & Johnson Inc. JNJ and Pfizer Inc. PFE, which gained 1.8% and 1.4%, respectively.

A surge in oil prices helped to lift the energy sector. Crude prices received a boost from fresh data which showed that inventories had increased by a smaller amount than was expected, by 600,000 barrels during the week ended Feb 17. As a result, Dow component Exxon Mobil Corp. XOM gained 1.1%.

Components Moving the Index

Wal-Mart’s fourth-quarter adjusted earnings of $1.30 per share beat the Zacks Consensus Estimate of $1.29 by 0.8% on higher comps. Total revenue of the retailer came in at $130.9 billion (including membership and other income). The figure beat the Zacks Consensus Estimate of $130.6 billion by 0.23% and increased 1.0% year over year.

Adjusted earnings in fiscal 2017 were $4.32 per share, which beat the Zacks Consensus Estimate of $4.31 by 0.23%. Total revenue came in at $485.9 billion (including membership and other income). The figure beat the Zacks Consensus Estimate of $485.1 billion by 0.16% and increased 0.8% year over year.

Zacks Rank #4 (Sell)-rated Wal-Mart expects earnings in the range of 90 cents to $1.00 per share for the 13-week period ending Apr 28. For fiscal 2018, the company expects adjusted earnings in the range of $4.20−$4.40 per share, assuming full-year effective tax rate around 32%. (Read: Wal-Mart (WMT) Q4 Earnings, Revenues Beat on Strong Comps)

In a separate development, Wal-Mart announced a 2% hike in its annual cash dividend to $2.04 per share. The annualized dividend now amounts to a dividend yield of 3.5%, based on Wal-Mart’s closing price of $71.45 as of Feb 21, 2017. (Read: Wal-Mart (WMT) Hikes Dividend, Boosts Shareholder Value)

Home Depot posted fiscal fourth-quarter earnings of $1.44 per share, which escalated 23.1% from $1.17 in the year-ago quarter and beat the Zacks Consensus Estimate of $1.33. Net sales advanced 5.8% to $22,207 million from $20,980 million in the year-ago quarter. However, the top line fell short of the Zacks Consensus Estimate of $21,806 million.

Zacks Rank #3 (Hold) rated Home Depot’s adjusted earnings for fiscal 2016 came in at $6.45 per share, up 18.1% year over year and ahead of the Zacks Consensus Estimate of $6.34. Net sales for the fiscal jumped 6.9% year over year to $94,595 million and cruised ahead of the Zacks Consensus Estimate of $94,161 million.

Following the robust fiscal 2016 performance, Home Depot initiated guidance for fiscal 2017. The company project both sales and comps to grow about 4.6%. Diluted earnings per share are expected to increase 10.5% to $7.13, including share repurchases worth nearly $5 billion. (Read: Home Depot (HD) Tops Q4 Earnings, Updates Capital Strategy)

Verizon Communications VZ has announced it will be acquiring Yahoo’s YHOO core internet business at a discount of $350 million for $4.48 billion. The discount is $50 million greater than initially expected.

The newly negotiated deal, expected to close in the second quarter of this year, is due to two irreversible data breaches Yahoo announced in the latter half of 2016. Over one billion users have been impacted, making the breaches the largest ever discovered on the internet.

Yahoo is currently facing multiple law suits on the account of negligence. In virtue of the deal taking place, Yahoo and Zacks Rank #3 rated Verizon will split the respective legal costs while Yahoo is arguably facing the biggest penalty in taking a $350 million hit in being acquired. (Read: Verizon Trims $350 Million Off of Yahoo Merger)

The Boeing Company BA has received an order for five 787-9 Dreamliners from Juneyao Airlines, a major private carrier based in Shanghai, China. Value of the airplanes at current list prices comes to nearly $1.32 billion. However, it goes without saying that the carrier will surely enjoy a substantial discount on this amount.

The order marks the airline's first order of Boeing’s planes and also the first wide-body airplane order. Juneyao Airlines also has options to buy five more 787-9s, as per the terms of agreement. The stock has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Technologies Corp. UTX operating unit Carrier recently collaborated with AT&T to incorporate the latter’s wireless connectivity on commercial HVAC (Heating, ventilation and air conditioning) equipment in its Smart Service solution.  

The Carrier SMART Service is a dynamic, proactive strategy for enhanced equipment and system management. The inclusion of Zacks Rank #3 rated AT&T’s network will help collect and analyze chiller operating performance for delivering pro-active service solutions. (Read: UTX's Affiliate Collaborates with AT&T to Boost Portfolio)

Apple Inc.’s AAPL smartphone unit sales outpaced that of Samsung in the fourth quarter of 2016, according to reports. According to data released by Gartner, Zacks Rank #3 rated Apple unit sales outnumbered Samsung by 256,000.

The global smartphone market share of the iPhone maker is 17.9%, just 0.1% higher than Samsung. The report further adds that the last time Apple recorded the highest unit sales was in the fourth quarter of 2014. (Read: Apple (AAPL) Becomes Highest Smartphone Seller after 8 Quarters)

Pfizer Inc. announced that its Biologics License Application (BLA) for leukemia candidate inotuzumab ozogamicin has been accepted for priority review by the FDA.

Inotuzumab ozogamicin is being evaluated for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia (ALL). With the FDA granting priority review, a response should be out by Aug 2017. (Read: (Read: Pfizer's Leukemia Candidate Gets Priority Review in U.S.)

Performance of the Top 10 Dow Companies

The table given below shows the price movements of the 10 largest components of the Dow, which is a price weighted index, over the last five days and during the last six months. Over the last five trading days, the Dow has gained 0.9%.

Ticker

Last 5 Day’s Performance

6-Month Performance

MMM

+3%

+4.3%

GS

+0.6%

+52%

IBM

NA

+14.2%

HD

+1.7%

+7.1%

BA

+4.4%

+32.7%

UNH

-0.9%

+16.3%

MCD

+1.8%

+11.7%

TRV

+1.1%

+4.5%

JNJ

+3.4%

+2.5%

AAPL

+0.6%

+26.4%

Next Week’s Outlook

The blue-chip index last registered 10 consecutive record closes in 1987. In case record finishes are not considered, the last time the index gained over 10 successive sessions was in Mar 2013. It is quite likely that stocks may enter a short cooling off period after such a long stretch of gains. At the same time, such a hiatus is likely to be brief, given that investors continue to have faith in the new administration’s policies. In such a situation, catalysts with a more fundamental nature, such as data on durable orders, housing and GDP will play an important role in determining market movement in the week ahead.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank.  See the 2017 Top 10 right now>>

What to Expect from SeaWorld (SEAS) This Earnings Season?

Posted Fri Feb 24, 04:34 pm ET

by Zacks Equity Research

SeaWorld Entertainment, Inc. SEAS is set to report fourth-quarter and full-year 2016 results on Feb 28, before the market opens.

Last quarter, it posted a negative earnings surprise of 27.36%. In fact, this Florida-based theme park and entertainment company missed earnings in three of the last four quarters with an average miss of 9.85%.

SeaWorld Entertainment, Inc. Price and EPS Surprise

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

Factors to Consider

SeaWorld has been witnessing a decline in total revenue per capita mostly due to lower attendance. Negative publicity, associated with captive whales and prolonged scrutiny of employee safety practices could continue to hurt revenues in the to-be-reported quarter as well.

Even promotional offerings have not been able to arrest the decline in traffic trends. Also, costs related to marketing and reputation campaigns could eat into profits in the fourth quarter.

Last year, the company announced that it has stopped breeding killer whales. While this move might salvage its reputation among activists and receive positive feedback from people, it will have a negative impact on the company’s revenues, especially from international visitors.

Nevertheless, SeaWorld is making every possible effort to regain customer confidence. The company continues to organize consumer events to drive attendance. Moreover, management is undertaking new initiatives to stabilize and deliver improved results in California, Texas and Florida markets. Capital investments in new rides and attractions, extended hours at SeaWorld Parks and more such strategies should offset the negatives to some extent and attract customers, thereby improving attendance.

Also, the company is undertaking sincere efforts to control costs without harming efficiency, which should help in improving margins in the to-be-reported quarter.

Earnings Whispers

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

Zacks ESP: SeaWorld has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SeaWorld has a Zacks Rank #5 (Strong Sell).
 
As it is 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.

Stocks to Consider

Here are some companies in the leisure & recreational services sector to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Extended Stay America, Inc. STAY has an Earnings ESP of +21.43% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tribune Media Company TRCO has an Earnings ESP of +4.44% and a Zacks Rank #3.

Red Rock Resorts, Inc. RRR has an Earnings ESP of +3.03% and a Zacks Rank #3.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?

Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>

AutoZone (AZO) to Post Q2 Earnings: What's in the Cards?

Posted Fri Feb 24, 04:28 pm ET

by Zacks Equity Research

AutoZone, Inc. AZO is slated to report second-quarter fiscal 2017 (ended Feb 11, 2017) results on Feb 28, before the opening bell. In the last quarter, the company’s earnings were in line with expectations. The company has posted a positive average earnings surprise of 0.76% over the trailing four quarters.

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

AutoZone, Inc. Price and EPS Surprise

AutoZone, Inc. Price and EPS Surprise | AutoZone, Inc. Quote

Factors Influencing This Quarter

AutoZone’s earnings per share have grown in double digits for 41 consecutive quarters. The company generates significant cash flows, which it utilizes to open new stores every year. The company has opened 16 stores in the U.S. and five stores in Mexico in first-quarter fiscal 2017 which should support revenues in the second quarter. The company aims to open 150 new domestic stores in fiscal 2017.

However, the company has been facing significant currency headwinds related to the Mexican peso and Brazilian real. Management expects this pressure to continue from the Mexican business.

Also, AutoZone expects its capital and operating expenses to rise over the next three years, backed by its plans to open two to three new distribution centers over this time frame. Further, the company is increasing the frequency of deliveries to its stores to three or five times a week from just once a week. This will lead to gross margin headwinds of around 15–20 basis points every quarter until the completion of the rollout.

Earnings Whispers

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

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. AutoZone’s Earnings ESP is -0.37%. This is because the Most Accurate estimate is pegged at $8.18 while the Zacks Consensus Estimate stands at $8.21. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AutoZone carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

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

Price Performance

In the last three months, share price of AutoZone decreased 8.9% while the Zacks categorized Automotive - Retail and Wholesale – Parts industry saw a 2.1% decline. Currency headwinds and pressure on the gross margin related to elevated supply chain costs weigh on the company’s performance.

Stocks to Consider

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

Spark Energy, Inc. SPKE has an Earnings ESP of +14.43% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Extended Stay America, Inc. STAY has an Earnings ESP of +21.43% and carries a Zacks Rank #2.

Platform Specialty Products Corp. PAH has an Earnings ESP of +13.33% and a Zacks Rank #3.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?

Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>

Will Morgan Stanley's Plan to Move 300 U.K Jobs Materialize?

Posted Fri Feb 24, 04:27 pm ET

by Zacks Equity Research

Morgan Stanley MS, which currently employs nearly 6,000 people in the United Kingdom, is contemplating moving around 300 jobs initially out of London, post Britain’s exit from the European Union. This action is needed to keep its position secured in the EU and retain its “passporting rights.” The news was first reported by Bloomberg.

According to the report, three people familiar with the matter said that the U.S. banking giant is considering either Dublin or Frankfurt as its hub and is already looking for office space there, in order to create a larger EU market.

Hugh Fraser, one of the spokesperson for the U.S. lender said, "Our focus is on ensuring that we can continue to service our clients whatever the Brexit outcome." He also added, "Our strong franchise and material presence in Europe gives us many options, and we will adapt as the details of Brexit become clear. Given all of this, no decisions have yet been made."

Recently, many global banks have started taking similar steps to move operations out of London after Prime Minister Theresa May confirmed that Britain will also be leaving the European single market.

This is because many of the companies which operate within the EU, use “passporting rights” in relation to the UK in some way or the other and their passport status is highly dependent on if Britain remains a part of the single market or not. As a result, any Brexit-related deal will lead these companies to lose their “passporting rights” and hence they will have to go through the costly and complicated process of being regulated in each market within the EU where they operate.

Apart from Morgan Stanley, other banks like JPMorgan Chase & Co. JPM, Citigroup Inc. C and Goldman Sachs Group, Inc. GS also are planning to move their operations out of London.

Of the available options, Dublin and Frankfurt have been the choice of most of these banks for various reasons. Dublin is a preferred option because Ireland is currently being projected as the only country in Europe that uses English as their language and therefore, can help banks near London to continue their operations. Also, its labor laws are flexible and have good transportation links to the U.S.

On the other hand, Frankfurt has an excellent transport network with an airport serving as a super-connector terminal for flights between America and Asia. Moreover, per the data provided by Knight Frank Estate Agents, letting office space in this German financial hub would be cheaper compared to London.

Notably, in the past one year, shares of Morgan Stanley gained nearly 89.1%, outperforming the Zacks categorized Investment Brokers industry’s gain of 66.9%. The stock 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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M&T Bank (MTB) Hikes Dividend: Should You Buy the Stock?

Posted Fri Feb 24, 04:21 pm ET

by Zacks Equity Research

Earlier this week, M&T Bank Corporation MTB announced a quarterly cash dividend of 75 cents per share on its common stock. This represents a 7% increase for the first time since its initiation of 70 cents quarterly dividend in Sep 2007.

Does this dividend hike make the stock attractive?   

Considering an annualized dividend of $3, the annual yield comes to around 1.8%. While this yield doesn’t look too attractive, it enhances the potential returns from the stock given its underlying strength.

Here are the key factors that spell the stock’s Growth prospects:

Improving Net Interest Income: The company’s net interest income has grown at a CAGR of nearly 7.7% over the last six years.
 
Earnings Strength: In the past 3–5 years, MTB has witnessed earnings per share (EPS) growth of 11.4% compared to 9.9% for the Industry. Also, the company’s EPS is projected to grow by 8.19% in 2017.

Low Leverage: The debt-to-equity ratio of MTB is 0.62 compared to the industry average of 0.86, indicating a favorable capital structure.

Growing Cash Flow: The company has seen historical cash flow growth of 5.5% compared to 5.45% for the industry. The current cash flow growth looks much impressive when compared with the industry. The company’s current cash flow growth rate is 24.4% versus the industry’s negative 1.7%.

Impressive Price Performance: Shares of M&T Bank have jumped 18.1% in the last three months, outperforming the 12.1% gain for the Zacks categorized Major Regional Banks industry. Currently, this stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Some other stocks worth considering in the same industry include Bank of America, Fifth Third Bancorp and U.S. Bancorp. All these stocks carry the same rank as M&T Bank.  

Bank of America BAC witnessed an upward earnings estimate revision of 6% for 2017, over the past 60 days. Also, its share price has increased 99.5% in the last one year.

Fifth Third Bancorp FITB also recorded an upward earnings estimate revision of 4% for 2017, over the same time frame.  Its share price is up 79.54% over the last one year.

U.S. Bancorp USB earnings estimates have been revised upward by nearly 2.4%, over the past two months. Its share price rallied 41.54% in the last one year.

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SeaDrill (SDRL) Q4 Earnings: Is Positive Surprise in Store?

Posted Fri Feb 24, 04:21 pm ET

by Nilanjan Choudhury

We expect leading contract driller SeaDrill Ltd. SDRL to beat expectations when it reports fourth-quarter 2016 results on Tuesday, Feb 28.

In the preceding three-month period, the company delivered a positive earnings surprise of 40.00% due to lower operating expenses.

In terms of earnings surprise history, SeaDrill has a good record. It beat estimates in three of the last four quarters.

Seadrill Limited Price and EPS Surprise

Seadrill Limited Price and EPS Surprise | Seadrill Limited Quote

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

Why a Likely Positive Surprise?

Our proven model shows that SeaDrill – whose drilling fleet is one of the youngest and most advanced when compared to that of major contractors engaged in offshore drilling – is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for this company stands at +7.69%. This is because the Most Accurate estimate stands at 14 cents, whereas the Zacks Consensus Estimate is pegged lower at 13 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

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

What's Driving the Better-Than-Expected Earnings?

SeaDrill is one of the leading offshore drilling contractors in the world with one of the youngest but most advanced fleets. The company has a strong backlog of $3 billion, which not only reflects steady demand from its customers but also offers an unmatched level of earnings and cash flow visibility. Moreover, SeaDrill has high economic utilization for its floaters, which is expected to help it maintain a steady flow of income.

With an aggressive cost reduction program, SeaDrill is looking to shore up its operational performance even in this weak oil and gas pricing environment. As part of this strategy, the company has embarked on a policy to optimize overhead and rig operating expenses.

Other Stocks to Consider

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

W&T Offshore Inc. WTI has an Earnings ESP of +66.67% and a Zacks Rank #2. The company is expected to release earnings results on Mar 1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cheniere Energy Inc. LNG has an Earnings ESP of +3.23% and a Zacks Rank #2. The company is anticipated to release earnings on Feb 28.

Eclipse Resources Corp. ECR has an Earnings ESP of +14.29% and a Zacks Rank #2. The company is likely to release earnings on Feb 28.

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YPF S.A. (YPF) Signs Vaca Muerta Shale Agreement with Shell

Posted Fri Feb 24, 04:16 pm ET

by Zacks Equity Research

Argentina’s state-controlled energy company YPF S.A. YPF recently signed a preliminary agreement with the Anglo Dutch oil giant Royal Dutch Shell PLC RDS.A. The move aims to ramp up the development of Vaca Muerta Shale’s oil and gas assets.

A pilot project has been planned in Bajada de Añelo area of Vaca Muerta Shale. The project will be equally owned by Shell and YPF. Shell will invest $300 million, in two phases, in the project. The deal is subject to approval of provincial authorities.

The preliminary deal was announced a month after the President of Argentina, Mauricio Macri,signed an agreement with the oil companies aiming to boost investment in Vaca Muerta Shale. The deal is likely to reduce imports of costly gas and lower the nation’s energy deficit.

A total of $5 billion investment has been made to tap energy sources in Vaca Muerta shale by oil companies like Chevron Corp. CVX, BP plc BP and Total S.A. along with YPF and Shell.

YPF intends to invest $2.3 billion in Vaca Muerta Shale this year. Shell would be investing $300 million every year til 2020 in Argentina for exploration, refining, distribution and marketing of oil and gas. It is expected that that this deal will boost Shell’s strong and diversified portfolio of global energy by providing ample growth opportunities.

YPF is a vertically integrated company, engaged in the production, exploration, refining and marketing of gas and petroleum products. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Over the last three months, the Zacks categorized Oil and Gas Integrated - International  industry has recorded growth of 1.88%. However, shares of YPF have significantly outperformed the industry by registering growth rate of around 28%.

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