For Immediate Release
Chicago, IL – June 25, 2013 – Zacks Equity Research highlights Synaptics (SYNA-Free Report) as the Bull of the Day and BHP Billiton (BHP-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Sonic Corp. (SONC-Free Report), McDonald's Corp. (MCD-Free Report) and Dunkin' Brands Group Inc. (DNKN-Free Report).
Here is a synopsis of all five stocks:
How interested would you be in a technology growth company making touch sensor "hover" technology for Samsung phones and dozens of other devices that is trading under 15X next year's estimates? The stock is down over 15% since an early June report that the Korean handset maker was seeing a slowdown in sales of its Galaxy S4 unit. But that's not the whole story.
Synaptics (SYNA-Free Report) is a leading developer of human interface solutions for a wide variety of mobile computing and communications devices and is the leading supplier of TouchPads to the notebook computer market.
Products include the TouchPad input device, TouchStyk pointing stick, Dual Pointing combination input solution, ClearPad touch screen, Spiral pen input solution, and QuickStroke Chinese handwriting software.
Here's how much SYNA shares have been impacted by the Samsung concerns...
Investors need to consider several things when evaluating Synaptics as a buy or a sell. First, Samsung accounts for an estimated 20-30% of overall sales for the company and the Galaxy S4 program, specifically, is only 10% of that.
Second, what is the true extent of the S4 slowdown? The biggest concern was slowing sales to Europe. But from all the analyst reports I've read, it looks like those fears were overblown. The worst downgrade to sale estimates came from the analysts at Needham last week when they lowered their forecast from 100 million units to 80 million for 2013.
"At an estimated average selling price (ASP) for the touch controller of $1.10, the overall impact to revenue is around $30MM in CY13 or $0.30-$0.35 EPS impact."
Base materials, as an investment story, have been a heavy load to bear in the past 2 years since the China recovery story has never really taken hold. And this has been nowhere more evident than in the stocks of big diggers like BHP Billiton (BHP-Free Report).
Slipping back down to a Zacks #4 Rank (Sell) in late March, BHP has fallen from $70 to new four-year lows this week below $58. In fact, since its post-recession peak above $100 in 2011, the stock has consistently held a Zacks Rank of #3 (Hold) #4 (Sell) or #5 (Strong Sell) because of its stagnant or declining earnings estimates.
Here's a look at the shares of this $94 billion mining behemoth, known for its vast reserves of iron ore, coal, copper and other natural resource assets, vs the SelectSector SPDR Materials ETF for the past 4 years...
I mentioned some of the big and common mining products of BHP, but you may be surprise they also have access to silver and diamond mines. What surprised me is that when the company made a big decision last year to diversify into the energy business, it hasn't helped their earnings outlook much at all.
Sonic’s West Coast Expansion Plans
The biggest chain of drive-in restaurants in the U.S., Sonic Corp. (SONC-Free Report) recently inked a deal to set up five new drive-ins in San Diego County and 10 new drive-ins in the greater Los Angeles area in association with present franchise partner, SPG Management. The restaurants will be developed over the next six years.
Oklahoma-based Sonic has a long-standing relationship with SPG Management. The franchise partner boasts superior local market knowledge and a proven track record in the restaurant industry. One of SPG’s principals even served as a CFO for a McDonald's Corp. (MCD-Free Report) contractor and helped build 70 McDonald's restaurants during his tenure.
SPG currently owns and operates five other Sonic Drive-Ins in Southern California. We believe, the latest alliance reflects Sonic’s intent to make California one of the prime markets for expansion considering the state’s potential to generate about $67.4 billion in restaurant sales in 2013, as per the national restaurant association.
Not only Sonic, another restaurateur Dunkin Donuts, a subsidiary of Dunkin' Brands Group Inc. (DNKN-Free Report), is also considering expansion opportunities in the markets of Los Angeles, Riverside, San Diego, San Bernardino, Ventura and Orange counties. Dunkin is planning to open new restaurants in these regions by 2015.
A Zacks Rank #3 (Hold) company, Sonic is gradually moving in a positive direction. The highlights of its second-quarter 2013 earnings, reported in March, were strong comps momentum and margin expansion based on stringent cost control measures. On the developmental front, Sonic is aggressively tapping existing and new markets and is primarily focusing on franchise development.
It also cut a franchise development deal this month for five new drive-ins in the Rochester, NY market over the next four years. As part of its initiative to expand into new markets such as the Northeast, it is teaming up with franchisees to test new drive-in prototypes that cater to market specific needs.
At the end of the second quarter of 2013, this drive-in fast food chain operator had a total of 3,526 drive-in restaurants.
About the Bull and Bear of the Day
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