The Zacks Analyst Blog Highlights: Alcoa, iShares MSCI Brazil Capped ETF, iShares MSCI Germany ETF, Global X FTSE Argentina 20 ETF and iShares MSCI Netherlands ETF
For Immediate Release
Chicago, IL – July 09, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Alcoa (AA-Free Report), iShares MSCI Brazil Capped ETF (EWZ-Free Report), iShares MSCI Germany ETF (EWG-Free Report), Global X FTSE Argentina 20 ETF (ARGT-Free Report) and iShares MSCI Netherlands ETF (EWN-Free Report).
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Here are highlights from Tuesday’s Analyst Blog:
Alcoa Beats Big on Earnings, Sales
For the second straight quarter, aluminum giant Alcoa (AA-Free Report) has wowed investors with a very big earnings beat. Importantly, in the company's fiscal Q2 reported after the bell Tuesday, Alcoa also posted an impressive beat in revenues: $5.84 billion came in for the quarter -- much better than the $5.51 expected -- on earnings of 18 cents per share, topping the Zacks Consensus Estimate of 13 cents for a 38.5% positive surprise.
There is much to like about this report: Alcoa's sales were 7% higher than last quarter, global aluminum demand maintained a 7% growth projection for 2014, and its Engineered Products and Solutions set all-time records in both after-tax operating income ($204M) and recorded adjusted EBITDA margin (23.1%).
As one might expect, Alcoa shares shot up immediately in the after-market, jumping 3% (the stock has tempered a bit since) on a modestly positive regular trading day. This follows what has been an excellent 2014 overall so far: AA shares are up nearly 40% year to date. Alcoa is up a full 90% since this time last year. Not bad for a Dow stalwart unceremoniously booted off the index in September 2013.
Alcoa also recently purchased Firth Rixson for just under $3 billion, and there is some good news here for Alcoa investors, as well: aerospace demand growth guidance is up 8-9% for 2014; it would seem a good time to have aquired a jet engine component maker.
Typically, analyst estimate revisions have been all over the place prior to the earnings release: 4 upward revisions, 2 downward revisions, for Alcoa's Q2 and fiscal 2014. Prior to earnings, Alcoa carried a Zacks Rank #3 (Hold).
Although Alcoa has been known to "kick off" earnings season each quarter, it had been quite awhile since it's been considered a "sexy" stock. But with performances like these of the past two quarters, investors may wish to do a double-take before passing up these shares.
2014 World Cup Semifinals: ETF Edition
We are now nearing the final results of the 2014 FIFA World Cup. The event kicked off on June 12 with the climax slated for July 13. Thanks to its wide global involvement, the event has stepped beyond the gaming arena and peeked into the investing world.
So far, speculation has been rife on whether Brazil – the host nation – can get any boost from this event (read: Can FIFA World Cup Give Brazil ETFs a Kick?) or who will win the championship and monetize the credit in the equity market.
The latest comment from Goldman Sachs, as reported by Bloomberg, was more supportive. Goldman stated that the winning country's stock market beats global markets by an average of 3.5% in the month that follows. But the report also states a 4% decline in next the 12 months for these same stocks, indicating that the boom is temporary.
Whatever the case, such an interesting remark, and the wide number of country-specific exchange-traded products in the market, inspires us to play a mock World Cup semi-final using country ETFs as proxies. There is a high chance that the real tournament will present us with a different champion, but landing up on a country ETF winner on the basis of its potential and past performance is an interesting idea (read: Who Wins the 2014 World Cup of ETFs?).
Semi Finals
By now the world has witnessed winners and losers in the group stage, round of 16 and quarter finals. The final four teams are set to play semi finals on July 8 and 9. Brazil and Germany are slated to fight the July 8 battle while Argentina and Netherlands will have a face-off the following day.
Semi Final – 1
iShares MSCI Brazil Capped ETF (EWZ-Free Report) vs. iShares MSCI Germany ETF (EWG-Free Report)
EWZ – The most popular Latin-American ETF has been saddled with slowing growth, sky-high inflation, dysfunctional economic policies and fear of a cease in cheap dollar inflows in the wake of Fed QE taper for long.
Though some opinion polls indicated that president Dilma Rousseff will not be elected again this year, giving the much-needed boost to the ETF, the basic fundamentals of the economy remains weak (read: Forget the World Cup: The Real Reason Brazil ETFs Are in Focus).
As a result, EWZ carries a Zacks ETF Rank #5 (Strong Sell). EWZ gained 19.28% in the past one year.
EWG – EWG is the largest and most popular ETF tracking the German equity market. Though Euro Zone revisited the growth path last year, deflationary worries resurfaced this year. Amid such tensions, only the German economy lived up to investor expectation in Q1, while Euro Zone’s second and third largest economies – France and Italy – froze unexpectedly.
EWG has a Zacks ETF Rank #2 (Buy). EWG returned investors 34.02% in the past one year.
Verdict: Germany and EWG easily beats its Latin American counterpart thanks to better rank, return and economic efficacy.
Semi Final – 2
Global X FTSE Argentina 20 ETF (ARGT-Free Report) vs. iShares MSCI Netherlands ETF (EWN-Free Report)
ARGT: This Latin American ETF has chances of turning out a laggard. The nation has been crippled by political and economic woes. The recent debt default worries have also come across as another negative for the nation as well as the related ETF. ARGT currently has a Zacks ETF Rank of 5 but surprisingly surged 40.63% in the past one year (read: 3 Latin America ETFs Doing the Samba This World Cup).
EWN: The main way to play the Netherlands in ETF form is via EWN. Though the nation’s GDP shrank 0.60% sequentially in Q1, it advanced in the last two quarters of 2013. Investors should note that the country’s unemployment rate is much lower than the EU average. EWN has a Zacks ETF Rank of 2 and was up 19.28% in the last one year (read: Top Ranked Dutch ETF Unscathed by S&P Downgrade).
Verdict: Though ARGT delivered a stupendous return among the final four, EWN wins over ARGT armed by a better rank, brighter economic potential and fair valuation. After such a steep run-up without any basic economic support, the Argentina ETF might falter in the coming days, and especially so if the country defaults on its debt payments.
Grand Finale
Our ranking system suggests that Germany and the Netherlands will make it to the final. Both the European ETFs have a Buy rating with a Medium risk outlook. Notably, return-wise, EWG outperformed EWN in the last one-year, six-month and three-month periods.
Since the last FIFA World Cup in 2010, EWG gained 57.55% while EWN added 38.41%. Economic-indicator wise, Germany shines more than Netherlands at the current level. So, EWG wins the title, leaving the Netherlands just short once again.
Bottom Line
While we have crowned EWG as the winner, investors should note that this fun game was purely based on financial details and it had nothing to do with soccer. Still, for investors interested in pouring their money into the international arena, the top-rated and relatively-stable Euro Zone ETF – EWG could make for an interesting choice, no matter what happens in the rest of the World Cup.
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