For Immediate Release
Chicago, IL – December 30, 2013 – Zacks Equity Research highlights Kansas City Southern ( KSU - Free Report ) as the Bull of the Day and Magellan Health Services ( MGLN - Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Microsoft Corp. ( MSFT- Free Report), Barnes & Noble ( BKS- Free Report) and Interactive Intelligence Group ( ININ- Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
As the economy has come back, many cyclical sectors have seen impressive strength. This is especially true in the transportation industry, as surging demand has greatly helped this key market sector.
While many investors have likely keyed in on companies like Union Pacific or CSX to play this trend, some smaller rail firms might also be interesting plays. One such company is Kansas City Southern ( KSU - Free Report ), a $13 billion railroad operator that has a focus on the Midwest and South.
Beyond its focus on the middle part of the U.S., KSU also has a heavy presence in the Mexican market. In fact, the company has a rail passageway between Mexico City and Laredo, Texas, serving several Mexican industrial cities, as well as a few of Mexico’s important seaports as well. And given how dependent Mexico is on America for trade, the resurgence in the U.S. market has been great news for both Mexican industrial production, and KSU as a shipper of these products.
Add in reports that Mexico is beginning to beat out China in terms of productivity-adjusted wages, and it becomes pretty obvious that industrial production in Mexico is going to continue to grow. Given this, it seems pretty likely that companies with the ability to get these finished goods to other markets, such as Kansas City Southern, will benefit immensely.
Bear of the Day:
Thanks to the Affordable Care Act, 2013 has been a pretty rocky year for the health care market. While some segments, such as biotechnology and drug producers, weathered the storm and appear to be well-positioned heading into the coming year, HMO firms are on shakier ground.
These health providers have also seen strength in their share prices over the course of the year, but could be in trouble as the calendar turns over. That is because intense competition, worries over taxes, and declining margins are starting to hamper the outlook for at least a few firms in this space. While this has been an industry wide trend to an extent, it has been especially apparent in the case of Magellan Health Services ( MGLN - Free Report ).
Magellan manages benefits in three key areas; behavioral health, radiology, and pharmacy, and it has been pretty strong in 2013. The stock has risen by nearly 20% in the YTD time frame, but over the past month, the stock has flat-lined, and could be facing some trouble as we approach 2014.
That is because MGLN recently warned on its guidance for the coming year, slashing profits but keeping revenues in-line with analyst expectations. So, while revenues look to be stable, margins could be tumbling for MGLN, especially if the company is hit by new ACA related taxes, and is unable to pass these costs on to customers.
Now, MGLN expects 2014 earnings to be between $2 and $2.56/share, on revenue of between $3.61 billion- $3.80 billion. This compares to analyst expectations of $3.27/share on revenues of $3.41 billion, implying a pretty drastic cut in expectations by MGLN management.
Microsoft Exec to Face Charges
Recently, the Securities and Exchange Commission (:SEC) charged a senior Microsoft Corp. ( MSFT- Free Report) employee of insider-trading. The executive, Brian Jorgenson and his business partner Sean Stokke have been accused of utilizing confidential information regarding Microsoft’s investment in bookseller Barnes & Noble ( BKS- Free Report).
Insider-trading is considered to be an offense in the U.S. and carries a penalty of up to 20 years of imprisonment and a fine of up to USD 5.0 million. Jorgenson and Stokke are charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, both directly and pursuant to 20(d) of the Exchange Act.
According to U.S. officials, Jorgenson divulged the information that Microsoft intended to invest $300 million in Barnes & Noble`s e-reader business to his friend Stokke ahead of an important public announcement. Soon after the public announcement was made, the stock price of Barnes & Noble jumped 51% on the same day, which, in turn, yielded gains of $185,000 for the duo.
We note that in Jul 2013, they had collaborated to buy options in Microsoft ahead of the company`s earnings announcement.
As per reports, Jorgenson worked in Microsoft as an analyst and his work required him to prepare analytical reports regarding subjects such as the market response to Microsoft’s earnings. Reportedly, Jorgenson passed on the information to Stokke who purchased options and ended up making illicit profits of around $195,000.
Jorgenson’s association with Stokke goes back to the time when they worked as colleagues in an asset management company.
Microsoft Corporation develops, manufactures, licenses, sells and supports software products. The company operates in five segments: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Microsoft reported revenues of $18.53 billion in fiscal first quarter of 2014.
Currently, Microsoft has a Zacks Rank #3 (Hold). Better-ranked stocks in the technology sector include Interactive Intelligence Group ( ININ- Free Report), which carries a Zacks Rank #1 (Strong Buy).
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