For Immediate Release
Chicago, IL – July 24, 2013 – Zacks Equity Research highlights Ruckus Wireless (RKUS-Free Report) as the Bull of the Day and Deere & Co. (DE-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Apple, Inc. (AAPL-Free Report), Netflix (NFLX-Free Report) and Facebook (FB-Free Report).
Here is a synopsis of all five stocks:
Ruckus Wireless (RKUS-Free Report) didn't make enough noise when it came public, and the noise it has created at earnings hasn't exactly been music to investors ears. Still, it is a Zacks Rank #2 (Buy). It is the Bull of the Day.
Recently, analysts are both Deutsche Bank and William Blair noted that the WLAN space was seeing some positive purchasing trends. With the way things are going, investors who are looking at the long term might even see a budget flush at the end of this year. The budget flush happens when a business manager spends all available budget all at once to make sure that next year they get an equal amount of budget or more depending on success.
Ruckus Wireless provides Wi-Fi solutions. The company offers SmartCell Gateway, a platform to support and manage its Smart Wi-Fi access points as well as for the integration of Wi-Fi and other services into service provider network infrastructure. The company was incorporated in 2002 and is headquartered in Sunnyvale, California.
After its recent IPO analysts have had a chance to fine tune their estimates. The 2013 Zacks Consensus has been trimmed from $0.16 to a nickel. At the same time the 2014 Zacks Consensus Estimate has dropped from $0.30 in January of this year to the current level of $0.16.
Analysts often have trouble with a new company that does not have a full year of data available to discern trends. This is likely the case for RKUS, but the new, lower bar means the company has a much better chance of beating the number.
The valuation picture for RKUS is a stiff one. This is often the case for a stock that is fresh off an IPO with only two quarters behind it. With minimal earnings at present the 45x trailing PE doesn't seem to really be a fair comparison to the 12x industry average. Similarly, a 304x forward PE seems to be more of a data error than a basis for an investment decision. At the same time, a 250% growth in earnings from 2013 to 2014 works to level the absurd PE ratios.
This stock doesn't scream a Zacks Rank #2 (Buy). Instead it looks like one of those stocks that got ahead of itself and has later corrected. Taking advantage of the correction is one thing that I suggest investors look into as the stock bottomed in June and is on the rise. I am very positive on the whole telco equipment space after companies like GOOG and MSFT recently missed earnings. The likelihood of a flood of wearable devices coming in 4Q is pretty high, and all of them will need wireless connections... and playing a basket of wireless equipment stocks makes a lot of sense right here.
Over the last few weeks, a few brokerages may lowered their ratings on DE. The most recent was Piper Jaffray, which lowered their rating from Overweight to Neutral during the second week of July. That followed an even bigger call from JP Morgan in late June. The brokerage lowered their rating from Neutral to Underweight on the stock.
Deere makes agriculture and turf equipment, and construction and forestry equipment. Its Agriculture and Turf segment provides agriculture and turf equipment, and related service parts, including tractors; loaders; combines, corn pickers, cotton and sugarcane harvesters. Deere was founded in 1837 and is headquartered in Moline, Illinois.
The company has a relatively good history of beating the number. In each of the last two quarters they were able to post a positive earnings surprise. The two quarters preceding those were another story. Two straight misses, including one with a negative earnings surprise of more than 14% takes the luster off the two recent beats.
Estimates for DE have declined of late. The 2013 estimates are moving lower, but not by that much. Peaking at $8.59 in April they have ticked lower to $8.52. But that is not where the real pessimism is.
The 2014 Zacks Consensus Estimate has moved lower in each month since it reached a high of $8.93 in February. The number dipped to $8.67 in May and is now down to $8.53.
The question becomes when will estimates stop falling?
Apple Sells More iPhones, Beats Estimates
Now that's more like it: Apple, Inc. (AAPL-Free Report) beat estimates in both earnings and revenues after the bell Tuesday on better-than-expected iPhone sales in the company's fiscal 3rd quarter (ended June). The ubiquitous gadget-maker reported $7.47 per share on revenues totaling $35.32 billion in the quarter. The Zacks Consensus Estimates were for $7.31 per share on $34.97 billion in sales.
The Zacks EPS had predicted this exact earnings beat for Apple; its Zacks Rank #3 (Hold) combined with a more-accurate estimate revision up 2.19% nailed it: a 2.19% positive surprise. Not too shabby for Apple, but pretty great for us here at Zacks!
Apple sold 31.2 million iPhones in the last 3 months, more than 4 million more than the company had projected. "Only" 14.6 million iPads were sold in the quarter; 18 million had been expected. The 3.8 million Macs sold during the period was pretty much right in line, and gross margin was toward the high end of its expected range.
Revenue expectations for Q4 are between $34 - 37 billion; the Zacks Consensus before the bell was $36.1 billion. Projected gross margin between 36 - 37% remains consistent with Q3 numbers. The gangbusters days are clearly over near-term for Apple, but it only stands to reason that once everyone already owns your products, your margins are going to temper a bit.
And while it's true the company is posting EPS numbers far lower than a year ago and previous to that, Apple's beat on the top and bottom lines today helped investors breathe a big sigh of relief -- after trading down 1.7% in the regular session Tuesday, AAPL shares are up about 5% in the after-market.
During the (second) Steve Jobs tenure, Apple would absolutely demolish expectations, but that seems a long time ago these days. Modest misses and beats each quarter are pretty much how it's been going lately for the company. But with no new products released in the last couple quarters, stadium-clearing EPS homeruns are no longer so realistic.
It used to be the veritable centerpiece of earnings season each quarter -- Apple, Inc.'s earnings. Now that torch seems to be passed on to companies like Netflix (NFLX-Free Report) which reported yesterday and Facebook (FB-Free Report), whose earnings come out tomorrow. But if earnings and revenue beats like the one today are going to help AAPL shares rally back, I'm sure they'll be OK with it.
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