Smith & Wesson, Actuant, SPDR S&P Insurance ETF, Dow Jones U.S. Insurance Index Fund PowerShares KBW Insurance Portfolio and highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 1, 2013 – Zacks Equity Research highlights Smith & Wesson (SWHC-Free Report) as the Bull of the Day and Actuant (ATU-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the SPDR S&P Insurance ETF (KIE-Free Report), Dow Jones U.S. Insurance Index Fund (IAK-Free Report) and PowerShares KBW Insurance Portfolio (KBWI-Free Report).
Here is a synopsis of all five stocks:
Smith & Wesson (SWHC-Free Report) pre- announced a strong quarter back on June 13, and then beat higher guidance on June 24. It is a Zacks Rank #1 (Strong Buy). It is the Bull of the Day.
Over the last several months, there has been a lot of talk about banning certain types of guns. That raised to a fever pitch after the tragic events of Sandyhook in December of 2012. The following months saw a social outcry to limit gun sales and it also saw people that were on the fence about buying a gun do out a make a purchase.
It seems as though the growth in purchases of new guns is continuing as the company continues to see higher revenue numbers.
SWHC makes and sell guns. From handguns to sporting rifles to handcuffs, Smith & Wesson was founded in 1852 and is based in Springfield MA.
Looking to the earnings history, I see a stock that has beaten the number in each of the last 7 reports. The most recent quarter was a beat of $0.01, which translated into a positive earnings surprise of 2.3%. That was a decrease from the $0.05 beat reported for the January 2013 quarter, a 23.8% positive earnings surprise and a 55% positive earnings surprise posted in the July 2012 quarter.
Actuant (ATU-Free Report) has missed in each of the last three earnings reports and has seen estimate. It is a Zacks Rank #4 (Sell). It is the Bear of the Day.
Sometimes the Zacks Rank can move lower on a company that is actually doing just fine. This could be one of those situations, as Actuant reported a miss, but then guided substantially lower.
The reason for the lowered guidance is the expected sale of the electric equipment business, a move that was announced in early June. The removal of this business has caused estimates to drop precipitously.
Actuant designs and sells industrial products and systems. The industrial segment provides high-force hydraulic tools, heavy lifting solutions, production automation solutions, and concrete stressing products to the general maintenance and repair, industrial, infrastructure, and production automation markets. The company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin.
Looking to the earnings history, we see three straight misses. Two times there was a miss of one cent, and the February 2013 quarter was a two cent miss.
Investors might want to take special notice of this idea. In the session following the earnings report, ATU has fallen in each of the last five quarters. Ironically, the biggest decrease in stock price, 7.6%, came after a $0.01 beat following the May 2012 quarter.
Additional content:
Buy These ETFs for Better “Insurance”
According to a recent report from the Property Casualty Insures of America, U.S. property/casualty insurers’ net income rose to $14.4 billion in Q1 2013 from $10.2 billion in Q1 2012, while their annualized rate of return surged to 9.6% from 7.2%. The improvement was largely driven by $4.6 billion in net gains on underwriting from $0.1 billion in net losses on the prior-year quarter.
Property & Casualty insurers appear poised for a strong top-line growth this year, as premiums have been rising in mid-single digits—a trend that may gain momentum this year. (Read: Forget dividends, focus on buybacks)
The outlook for Life insurers also appears to be brightening now, albeit slowly. Per Fitch Ratings, the sector's strong balance sheet fundamentals and improved liquidity profile help mitigate ongoing concerns over challenging macroeconomic conditions pressuring industry operating fundamentals.
As a result of improved outlook, analysts have been raising estimates for insurance companies. Insurance industry looks very well poised to outperform in the coming months from the Zacks M industry rank (1 out of 63) perspective too.
Below we have analyzed three ETFs that provide a diversified exposure to the insurance sector.
SPDR S&P Insurance ETF (KIE-Free Report)
KIE follows the S&P Insurance Select Industry Index, which is an equal weight index. Launched in August 2005, the product has amassed $322.8 million in assets, which are currently invested in 46 securities.
The product charges a reasonable 35 basis points per year in fees. It currently pays out a decent dividend of 2.01%.
In terms of holdings, about 39% of the assets are invested property and casualty insurance sector while life & health account for another 20% of the asset base. Due to the equal weight methodology, no one security accounts for more than 2.4% of assets.
Dow Jones U.S. Insurance Index Fund (IAK-Free Report)
IAK tracks the Dow Jones U.S. Select Insurance Index, holding 68 stocks in its basket and charging investors 45 basis points a year in fees.
The ETF is a bit top heavy with close to 60% of assets in the top ten securities. From sector perspective, it is tilted towards property and casualty insurance firms, which accounts for about 50% of the asset base while life insurance companies hold about 34%.
In terms of individual holdings, AIG (11.9%) occupies the top spot, followed by MetLife (9.4%) and Prudential Financial (6.5%). The yield is moderate at 1.33% currently.
PowerShares KBW Insurance Portfolio (KBWI-Free Report)
KBWI follows the KBW Insurance index which is comprised of 24 insurance companies. The product charges investors just 35 basis points a year in fees, while the yield is also nice at 1.9%.
Metlife, Travelers, Chubb, Prudential and Aflac are the top five holdings. In terms of sectors, property and casualty insurance companies accounts for about 42% of the asset base while life and health insurance companies hold about 31% of assets.
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