For Immediate Release
Chicago, IL – February 26, 2014– Zacks Equity Research highlights Six Flags Entertainment ( SIX- Free Report) as the Bull of the Day and Whole Foods Market ( WFM- Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on TriQuint Semiconductor, Inc. ( TQNT- Free Report), RF Micro Devices Inc. ( RFMD- Free Report) and Apple Inc. ( AAPL- Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Generally speaking, this winter has been pretty rough for a number of companies in the broad consumer discretionary space. Wild weather and still sluggish job growth, not to mention a variety of other uninspiring economic indicators lately, have kept many names in this sector subdued.
And for theme park operator Six Flags Entertainment ( SIX- Free Report), the fourth quarter is usually one to forget anyway. After all, many of the company’s parks are located in areas where they are only open from late spring to early fall, leaving just a handful of warm-weather parks open during the quarter.
Thanks to this, the quarter usually gives SIX a loss, leaving investors to look for the next quarters in order to give SIX some profits. However, this quarter was a bit different, as revenue increased year-over-year and the firm delivered a strong 15 cent per share profit.
This is particularly incredible as our Zacks Consensus was looking for a loss of about 20 cents a share, implying a huge beat for SIX. This breaks a streak of two straight misses for the company, and it also suggests that the firm might be well-positioned for the 2014 fiscal year as well.
And given that rival Cedar Fair LP was unable to beat estimates for its fourth quarter (though it should be noted that FUN relies more heavily on seasonal parks), there is some reason to believe that SIX is now poised for a solid year ahead.
Bear of the Day:
As many consumers have begun to embrace eating healthier, companies like Trader Joe’s and Whole Foods Market ( WFM- Free Report) have spread across the country, and have captured a decent share of the supermarket space. In fact, the publicly-traded leader in the segment, Whole Foods Market, has grown from a single store in Austin, Texas to a national behemoth with over 360 stores across the nation.
However, as companies like WFM have risen, more traditional grocery stores have begun to take note, while other competitors have cropped up as well. This has made the organic and natural food business far more competitive than it was even a few years ago.
These trends are finally starting to impact WFM stock, which was for many years a high flying growth name. In fact, over the past five years, WFM is up over 700%, though in the past six months, it has seen a flat return. This sluggish trend has now come to a head in the firm’s latest earnings report, as Whole Foods Market both missed estimates, and trimmed guidance as well.
In the most recent report, the company barely missed estimates, reporting earnings of 42 cents a share compared to an estimate of 44 cents a share. This was the first miss for WFM in ages, as the company was riding a streak of four straight beats before this miss.
TriQuint & RFMD: A Merger of Equals?
Redefining market dynamics, leading semiconductor manufacturer TriQuint Semiconductor, Inc. ( TQNT- Free Report) has inked a definitive agreement to merge with rival RF Micro Devices Inc. ( RFMD- Free Report) in an all-stock transaction. The deal, valued at approximately $1.6 billion, is termed as a merger of equals. The combined entity is likely to create a behemoth in the semiconductor manufacturing industry offering vital components to premier mobile companies like Apple Inc. ( AAPL- Free Report) and Samsung Electronics Co. Ltd.
Under the terms of the agreement, TriQuint shareholders will receive 1.675 shares of the combined entity, while RFMD shareholders will receive a single share for every share held. Post-merger, the companies will execute a one-for-four reverse stock split to create approximately 145 million outstanding shares.
Former shareholders of both the companies are likely to own 50% shares each of the combined entity. The transaction, at an implied price of $9.73 for each TriQuint share, represents a 5.4% premium based on its closing price of $9.23 on Feb 21.
With annual revenues of about $2 billion, the combined entity will bring under a common platform all the critical radio frequency ( RF) components that are essential for fabricating mobile devices, thereby creating an undisputed market leader with a diversified product portfolio. These include power amplifiers (PAs), power management integrated circuits (PMICs), antenna control solutions, switch-based products and premium filters.
This in turn will likely offer better bargaining power and make it harder for customers such as Apple and Samsung to push back on pricing. With global smartphone users predicted to triple to 5.6 billion by 2019, the merger provides a huge revenue-generating potential to the new entity.
At the same time, the merger strengthens the combined company's ability to better serve the infrastructure and defense/aerospace industries with advanced gallium nitride (GaN) solutions for additional markets and applications, and foundry services to support radar, next generation base stations, optical communications and the Internet of Things. The newly formed entity is also expected to be a leading player in this sphere with approximately $500 million in annual revenues.
In addition, the merger will offer synergistic benefits and increase the profitability of the new company through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses. The transaction is expected to generate $75 million of cost savings in the first year of its operation, followed by another $75 million in the second year. Post- merger, the deal is also expected to be accretive to non-GAAP earnings in the first full fiscal year of its operation.
With a broad product portfolio and improved operating model, the merger is likely to create new growth opportunities in three large global markets, namely, mobile devices, network infrastructure and aerospace/defense. The merger is expected to benefit the overall industry as well with technological innovations leveraging on a huge talent pool and combined resources. The combination will also offer higher data throughput for the overall benefit of carriers and consumers alike.
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