For Immediate Release
Chicago, IL – July 08, 2014– Zacks Equity Research highlights ConocoPhillips (COP-Free Report) as the Bull of the Day and Francesca's Holdings Corporation (FRAN-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on SunTrust Banks, Inc. (STI-Free Report), U.S. Bancorp (USB-Free Report) and JPMorgan Chase & Co. (JPM-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Looking for an energy play? ConocoPhillips (COP-Free Report) is the only Zacks Rank #1 (Strong Buy) among the large E&P companies. It is expected to grow earnings by the double digits this year.
ConocoPhillips is the largest independent exploration and production company in the world. It has operations in 27 countries, including in the oil sands and the Eagle Ford shale region, and has a market cap of $106 billion.
Many people probably confuse it with the large integrated oil companies like Exxon and Chevron but Conoco spun-off its refining and chemical operations in 2012, creating Phillips 66. Currently, it is strictly an exploration company.
On May 1, Conoco reported first quarter earnings which beat the Zacks Consensus Estimate by 15.3%. Earnings were $1.81 compared to the consensus of $1.57.
Conoco hasn't missed on the estimate since 2012.
Of course, with E&P companies the key is production. Investors want to see production growth.
After no production growth in 2012, Conoco has been turning it around. In 2012 it grew production by 2%. It has a stated goal for 2014 production between 3% and 5%.
Bear of the Day:
Bad weather and missed merchandise trends combined to slam Francesca's Holdings Corporation (FRAN-Free Report) in the first half of 2014. This Zacks Rank #5 (Strong Sell) recently lowered guidance as it reconfigured its strategy.
Francesca's operates 513 small stores in 44 states in strip malls, shopping malls and neighborhoods which sell a mix of apparel, jewelry, accessories and gifts in a homey setting. It targets female shoppers aged 18 to 35 and brings in new merchandise every week to keep offerings fresh.
The company also has a website, francescas.com, which accounted for just 2.6% of sales in 2013 but the company has made a commitment to e-commerce for 2014.
Over the next several years it expects e-commerce sales to grow to around 10% of total sales. To capture that market, the company is overhauling its website this year and launching a mobile app.
On June 10, Francesca's reported fiscal first quarter 2014 results and missed on the Zacks Consensus by $0.02. Earnings were $0.20 compared to the consensus of $0.22.
Francesca's blamed the severe winter weather for part of its troubles as in February it closed 360 boutiques either for part of a day or for a full day. But it also saw notable weakness in jewelry.
Comparable store sales, which includes e-commerce, fell 7% compared with the first quarter of 2013.
Major Regional Banks Update
Major banks’ efforts to settle mortgage lawsuits remained the key trend in the last five trading days. The notion of these settlements curtailing further legal costs spread some positivity.
Moreover, the optimism was somewhat supported by the restructuring and streamlining initiatives announced by some major regional banks. These moves should continue to bolster the banks’ financial performance and drive operational efficiencies going forward.
Recap of the Week’s Most Important Happenings:
1. SunTrust Banks, Inc. (STI-Free Report) has announced the resolution of one more mortgage-related probe within 20 days of announcing a settlement pertaining to faulty mortgage servicing as well as lending and foreclosure practices in the pre-crisis period. The latest settlement by SunTrust Mortgage, Inc., the mortgage division of the company, resolves the allegations of misleading customers seeking loan modifications under the Home Affordable Modification Program (HAMP).
SunTrust had revealed that it was under probe for the above-mentioned allegations in Aug 2013. Owing to this settlement, the company will incur a pre-tax charge of $204 million in second-quarter 2014. Also, the company revealed separately in the regulatory filings that following the divestiture of its asset management subsidiary RidgeWorth Capital Management, Inc., it will be recording a pre-tax gain of $105 million. Hence, the bank will incur a charge of 13 cents per share in the second quarter as a result of the combined financial impact of these two transactions.
2. U.S. Bancorp (USB-Free Report) recently finalized a settlement with the U.S. Department of Justice (:DOJ) worth $200 million. The settlement is related to the bank’s misrepresentation of government-backed mortgages originated by it. Notably, prior to the aforementioned settlement agreement with the DOJ, U.S. Bancorp sold 3.0 million shares of the Class B common stock of Visa Inc., which recorded a net pretax gain of $214 million in the second quarter. The sale of Visa Class B shares is expected to neutralize the DOJ settlement charges, thereby not affecting earnings per share in the second quarter. (Read more: U.S. Bancorp Pens $200M Settlement with U.S. DOJ)
3. JPMorgan Chase & Co. (JPM-Free Report), in keeping with its strategy of streamlining operations and focusing on core businesses, has announced the divestiture of yet another unit. The company will be vending off its Corporate Dealing Services business to U.K.-based The Equiniti Group. The deal is expected to be closed by Aug 2014. (Read more: JPMorgan to Divest Corporate Dealing Services Biz)
Also, JPMorgan CEO Jamie Dimon has been diagnosed with throat cancer. The condition is curable, with radiation and chemotherapy commencing soon at New York ’s Memorial Sloan Kettering Hospital . Following the news on Jul 2, shares of JPMorgan declined nearly 1.4% on Wednesday. Although the news release does not convey anything worrying, the serious health issues of the successful CEO made investors skeptical. (Read more: Is JPMorgan CEO's Cancer Diagnosis a Concern?)
The performance of major regional banking stocks was on an upswing with their efforts to minimize legal hassles. Moreover, the actions being undertaken by some major regional banks to deal with fundamental pressure somewhat added fuel to the fire.
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