The Zacks Analyst Blog Highlights: Baidu, Noah Holdings, SouFun Holdings, JinkoSolar Holding and Heartware International
For Immediate Release
Chicago, IL – March 19, 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 Baidu, Inc. (BIDU-Free Report), Noah Holdings (NOAH-Free Report), SouFun Holdings (SFUN-Free Report), JinkoSolar Holding Co., Ltd. (JKS-Free Report) and Heartware International Inc. (HTWR-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
Worried About China? Here Are 3 Safe Bets
Chinese stocks trading in the U.S. plunged to a five-week low last Thursday, with Baidu, Inc. (BIDU-Free Report) leading the pack. The country’s largest Internet search engine fell to its lowest point in a month. The Bloomberg China-US Equity Index lost 2.7%, falling to 96.49. The Ukrainian crisis and disappointing economic data were blamed as the major reasons for this slump.
Dismal Economic Data
According to figures released this month, the official Purchasing Managers’ Index declined to its lowest level in eight months in February. At 50.2, the figure was lower than January’s reading of 50.5.
Figures released last week were in keeping with this downward trend. Combined industrial output for January and February increased 8.6% on a yearly basis. This is the lowest start to a year in five years. Meanwhile, retail sales for the same period increased 11.8%. This is the most sluggish pace in nearly a decade.
Currency Reform
Tensions regarding the Ukraine crisis subsided after a weekend vote in Crimea ended peacefully. Moreover, ‘modest’ economic sanctions on some Russian and Ukraine officials did not affect investor sentiment. Consequently, investors pulled out of the Yen, which is viewed as a safe haven. This was also in keeping with the weak Chinese economic data released recently.
But the extent of its decline, a fall to an 11-month low was also a result of the epochal broadening of the currency’s daily trading band. Last Saturday, the People's Bank of China expanded the daily trading band for the Yen from 1% to 2%.
This is being viewed as a move to discourage speculation, a result of a continuous appreciation against the U.S. dollar. This will also go a long way to liberalize the country’s current account and increase international exposure.
Pangs of Change
In fact, this is one of a series of reforms being carried out by the Chinese government to reduce structural problems. These include widespread pollution, corruption and vice. Other measures are aimed at reducing local governmental debt and dubious banking practices.
However, these measures have also reduced consumption, and affected sectors such as cement and steel. Meanwhile, the government has fixed its growth target at 7.5% for the year, considerably lower than the double digit figures achieved over the last thirty years. However, Chinese Premier Li Keqiang has said job growth and environmental issues will take precedence over headline growth going forward.
Slowdown, Not a Recession
Several analysts have suggested that given the economy’s inherent strengths such as large new private savings, low inflation and massive foreign reserves, it is unlikely that soft data suggests anything more than a moderation of growth. This allows the government enough room for further intervention if required.
Below we present three China stocks which possess the potential to grow appreciably, each of which also has a good Zacks rank.
Noah Holdings Ltd.
Noah Holdings (NOAH-Free Report) operates in the wealth management space, catering specifically to high net worth individuals in China. Noah Holding conducts its operations via Shanghai Noah Rongyao Investment Consulting Co., Ltd which handles the bulk of its business. The company’s insurance brokerage operations are carried out by Shanghai Noah Investment Management Co., Ltd.
Noah Holdings Limited holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 115.90%. The forward price-to-earnings Ratios (P/E) for the current financial year (F1) is 12.87.
SouFun Holdings Ltd.
SouFun Holdings (SFUN-Free Report) owns and operates real estate, home furnishing and home improvement websites in China. These websites offer ecommerce, listing, marketing and other real estate related services in China. The company has around 100 offices catering to local customers. Its primary website www.soufun.com offers information on real estate for over 320 Chinese cities.
Currently, the company holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 66.70%. It has a P/E (F1) of 19.57.
JinkoSolar Holding Co., Ltd.
Our third choice is JinkoSolar Holding Co., Ltd. (JKS-Free Report). The company manufactures products related to solar power. These products span the complete value chain, from recovered silicon materials to solar modules. JinkoSolar caters to both domestic and foreign markets. Its major products are solar modules and cells as well as silicon wafers.
Apart from a Zacks Rank #2 (Buy), JinkoSolar has expected earnings growth of 110.70 %. It has a P/E (F1) of 9.14.
Though the near term outlook may seem far from optimistic, China remains an attractive investment destination. These three stocks can leverage the country’s strong fundamentals and would make good additions to your portfolios.
Heartware Int’l Downgraded to Sell
On Mar 18, Zacks Investment Research downgraded Heartware International Inc. (HTWR-Free Report) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
For fiscal 2014, seven estimates moved down in the past 30 days, with just one upward revision in the same time frame, causing the Zacks Consensus Estimate to drop by 22.5% to a loss of $2.72 per share. The company reported negative earnings surprises in 2 of the last 4 quarters with the last reported quarter clocking a negative surprise of 15.0%.
Further, the long-term expected earnings growth for this stock stands at 15.0%, lower than the industry growth of 17.3%.
Heartware continues to make losses due to higher costs and expenses. For the fourth quarter of 2013, the company reported a loss of $15.3 million or 92 cents per share, which is broader than the Zacks Consensus Estimate of 80 cents. Following the earnings release on Feb 27, 2014, shares of Heartware dropped 5.6% till the last closing date.
Heartware’s cost and operating expenses continue to rise, which may be attributable to inefficient cost management. For full year 2013, cost of revenues surged 49.9% to $76.5 million whereas the total operating expenses increased by 30.2% to $179.0 million in the year.
As of Dec 31, 2013, inventories stood at $40.9 million, up from $38.4 million as of Dec 31, 2012 and $32.0 million as of Dec 31, 2011. Current liabilities increased 56.2% to $53.2 million as of Dec 31, 2013 from $34.0 million as of Dec 31, 2012.
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