For Immediate Release
Chicago, IL – August 06, 2014– Zacks Equity Research highlights Cognex (CGNX-Free Report) as the Bull of the Day and Potbelly (PBPB-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Dynegy Inc. (DYN-Free Report), SJW Corp. (SJW-Free Report) and Pure Cycle Corporation (PCYO-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Cognex (CGNX-Free Report) has beaten the Zacks Consensus Estimate in three of its last four earnings reports and has not missed since 2009. Today, CGNX is a Zacks Rank #1 (Strong Buy), and it is the Bull of the Day.
Aggressive growth investors appreciate beats. They don't necessarily like meets, but they certainly hate misses. The story with Cogenix is one of beats and meets. The company has not posted a negative earnings surprise since the March 2009 quarter.
Over the more than five years since that miss, the company has posted a total of 3 earnings meets. Meeting expectations with a with high earnings multiple is not something the market likes to see, so you will be penalized for that. The stock was hit for a loss of 7% following the December 2013 earnings meet.
More recently, however, the story has been much more to the liking of aggressive growth investors.
Cognex is a leading supplier of machine vision systems - or computers that can "see". The company claims to have the largest market share of the machine vision market. This up and coming sector of the market will likely be a key player in the "internet of everything" that we hear so much about.
CGNX reported a strong 2Q14 beating the Zacks Consensus Estimate by $0.06 in posting a 26% positive earnings surprise. The company reported revenues of $109M when the street was calling for $103M in the quarter. The $5M top line beat translated into a 5% revenue surprise.
The company does not provide earnings guidance, but did give a range for revenue for the following quarter. Prior to the earnings report, the Wall Street revenue consensus was $142M, but the company really surprised to the upside in guiding $165M - $170M.
This was the second consecutive quarter of the company guiding revenues above consensus. At the end of April, the company guided the most recent quarter to $101M - $105M when the consensus was $99M.
Bear of the Day:
Potbelly (PBPB-Free Report) has seen its stock drop more than 50% so far this year. Earning are expected after the close on August 5, 2014 but I am going out on a limb on this one. PBPB a Zacks Rank #4 (Sell), and it is the Bear of the Day.
Potbelly reports earnings after the close August 5, 2014 and this article is written the day before publication of August 5, 2014.
Why would I write on a stock before it reports? Well PBPB warned a few weeks ago and based on other earnings reports in the Quick Service Restaurant (:QSR) industry, I am not expecting good things.
Potbelly started in 1977 as a small antique store on Lincoln Avenue in Chicago. To boost sales, the original owner began offering warm sandwiches and homemade desserts to customers. ” The Company owns and operates over 300 shops in the United States and the District of Columbia with another 20 shops franchised in the US and Middle East.
One reason I am able to anticipate the numbers for PBPB is that they guided lower on July 9. The company noted on that day they expect sales to be approximately $83.6M when consensus was calling for sale of $86.6M. Further the company noted that EPS was expected to be $0.06 when the Wall Street consensus estimate was calling for $0.12.
3 Utility Stocks to Dump on Regulatory Concerns
Utilities undoubtedly play a major role in the development of a nation. The sector is historically considered to be a less-risky area to bet on given its defensive regulatory nature, which helps the participants deliver steady earnings. The payment of regular dividends also adds to the perceived defensiveness of the sector.
However, the utilities have been under the regulatory scanner for quite some time now as environmentalists clamor about carbon emissions and global warming issues, forcing the authorities to take note. Notably, the power producers have the dubious reputation of contributing one-third of the total greenhouse gas emissions in the U.S.
In Jun 2014, the U.S. Environmental Protection Agency came out with the Clean Power Plan proposal, which aims to lower carbon emission from the power sector by as much as 30% in 2030 from 2005 levels.
If the proposal is accepted without modification, the utility operators will either have to shut down their old fossil fuel units or get new pollution control measures fitted in their generation plants to stay in operation. In any case, regulatory compliance will raise the operating costs of the utilities.
Moreover, regulatory setbacks, weigh upon utility stocks. A delay in rate case decisions or approval of lower-than-requested rates by the Public Service Commissions can potentially impact the modernization and development plans of the regulated utilities. The regulated utilities largely depend on timely and constructive regulatory outcomes for infrastructure development which requires huge capital outlay.
A report from Economic Development Research Group Inc. found an alarming gap between the water infrastructural requirement and actual investments planned for the coming years. The gap is expected to reach $84 billion in 2020 and widen to $144 billion in 2040.
The report also revealed that without proper renewal or replacement, nearly 44% of the existing pipelines will become too poor for operation by 2020. The utility operators have begun to invest in their ageing infrastructure, but it appears the initiatives are too little too late.
So, taking the above factors into consideration, it would be a prudent idea to find the laggards in the utility space and get rid of them. Of course, if these are not in your portfolio, don’t consider a fresh bet.
3 Utility Stocks to Dump Right Now
We have screened utility stocks that are sell rated and thus seeing negative earnings estimate revisions. These stocks have also showed a negative return over the last 30 days.
We set the follow parameters on on Zacks Stock Screener:
• Zacks Rank greater than or equal to #4
• % Change F1 Est. (4 weeks) less than equal to -4.00%
• % Price Change (4 Weeks) less than equal to -1.00%
Here are the 3 stocks that passed through the screen:
Dynegy Inc. (DYN-Free Report) has a Zacks Rank #4 (Sell) and has lost nearly 19% over the last 4 weeks. In addition, the Zacks Consensus Estimate for 2014 has gone down by nearly 15% in the past one month.
Houston, TX based Dynegy Inc. along with its subsidiaries produces and sells energy and ancillary services in the U.S.
SJW Corp. (SJW-Free Report) carries a Zacks Rank #4. The stock lost nearly 2.7% over the last four weeks. In addition, the Zacks Consensus Estimate has gone down by nearly 8% in the last 30 days.
San Jose, CA based SJW Corp. is a water utility operating through its two segments, Water Utility Services and Real Estate Service.
Pure Cycle Corporation (PCYO-Free Report) is another Zacks Rank #4 stock that witnessed almost 1.9% loss over the last four weeks. In addition, consensus estimates for 2014 are down by nearly 14.3% over one month.
Denver, CO based Pure Cycle Corporation operates and maintains water and wastewater systems in the Denver metropolitan area.
Utilities will continue to remain an attraction to risk-averse investors because of the above discussed benefits, but dumping the weak stocks is necessary for maximizing returns from this sector. Particularly, given the heightened regulatory challenges, it is perhaps the right time to take such decision.
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