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Applied Material, Treehouse Foods, Sumco, Acushnet Holdings and Great Southern as Zacks Bull and Bear of the Day

Zacks Equity Research
Wall Street finished in the green reversing its five-day negative trend on Thursday following news that United States and China have ramped up their efforts to resolve lingering trade disputes

For Immediate Release

Chicago, IL – January 8, 2018 – Zacks Equity Research highlights Applied Material AMAT as the Bull of the Day and Treehouse Foods THS as the Bear of the Day. In addition, Zacks Equity Research provides analysis onSumco Corp. SUOPY, Acushnet Holdings Corp. GOLF and Great Southern Bancorp. GSBC.

Here is a synopsis of all four stocks:

Bull of the Day:

Founded in 1967 and headquartered in Santa Clara, CA, Applied Material is a leading equipment supplier to the global semiconductor industry. They have been the industry leader for over twenty years. Their equipment is mainly used in the manufacturing of semiconductors, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.

The company operated through the following segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.

Impressive Results and Raised Guidance

The company reported strong results for its fiscal fourth quarter 2017, beating our estimates on both the top and the bottom lines.

Its pro forma earnings per share of 93 cents beat the Zacks Consensus Estimate mark by 2 cents and were toward the higher end of the guided range of 86-94 cents. Earnings were up 40.9% year over year.

Revenues of $3.97 billion also beat the Zacks Consensus Estimate of $40 million and were at the high end of the guided range of $3.85-$4 billion. Revenues were up 20.4% year over year.

“Fiscal 2017 was a record-breaking year for the company. We have great momentum and we’re confident that in 2018 we can deliver strong double-digit growth across our semiconductor, display and service businesses,” said the CEO.

The company has an excellent record of beating estimates. They have missed only once in the past five years.

Surging Estimates

After strong results, analysts have been raising their estimates for the company. The Zacks Consensus Estimates for the company for the current and next year have surged to $4.04 per share and $4.37 per share from $3.68 and $3.89 respectively, before the results. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).

Applied Materials, Inc. Price, Consensus and EPS Surprise | Applied Materials, Inc. Quote

Multiple Growth Drivers

The company continues to gain market share in the semiconductor market. Additionally, in the past few years, the company has successfully diversified its business which is no longer PC demand driven.

Additional demand drivers have emerged in the areas of big data, Internet of Things (IoT), cloud infrastructure, artificial intelligence, virtual reality and self-driving cars.

“This is the most exciting time in the history of the electronics industry. AI will transform entire industries over the coming years, creating trillions of dollars of economic value, and Applied is uniquely positioned to deliver the innovative materials needed to enable next-generation memory and high-performance computing,” according to the CEO.

The Bottom-Line

Shares of this company are up about 67% in the past one year but despite this surge, they are still trading at an attractive valuation of 13.45 times forward earnings. The stock looks pretty good in terms of Industry/Sector Rank too.

Zacks Industry Rank for “Semiconductor Equipment - Wafer Fabrication” is currently 3 out of 265 (top 1%), indicating the likelihood of continued outperformance.

Bear of the Day:

Headquartered in Oak Brook, IL, Treehouse Foods is a manufacturer of packaged foods and beverages with more than 50 manufacturing facilities across the US, Canada and Italy servicing retail grocery, food away from home, and industrial and export customers.

The company manufactures a variety of shelf stable, refrigerated, and fresh products. The product categories include beverages; salad dressings; snacks; beverage enhancers; pickles; Mexican and other sauces; soup and infant feeding; cereals; dry dinners; aseptic products; jams; and other products. The company also offers natural, organic, and preservative-free ingredients in many categories.

Shares Plunge After Weak Results

The company reported dismal third-quarter 2017 results. Adjusted earnings of 67 cents per share were down 4.2% year over year and missed the Zacks Consensus Estimate of 76 cents. Earnings were also below management’s guidance of 75-83 cents.

However, net sales of $1,548.8 million came in slightly ahead of the Zacks Consensus Estimate of $1,527 million. The management also lowered their guidance for FY2017.

"We are disappointed that third quarter results came in below our expectations,” said the CEO. “In the third quarter, continued weakness in our operating earnings was only partially offset by greater expense control, reduced variable incentive compensation, and favorable taxes," per CFO.

Shares plunged more than 30% after the report.

Falling Estimates

Analysts have slashed their estimates for the company after weak results.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $2.73 per share and $2.72 per share from $3.17 and $3.71 respectively, before the results.

Bottom Line

The stock has fallen to a Zacks Rank #5 (Strong Sell) after weak results. Additionally, the “Food - Miscellaneous" industry is currently 196 out 265 Zacks Industries (bottom 26%) suggesting near-term weakness. It’s better to avoid this stock as of now.

Additional content:

Creative Destruction or Trade? Zacks Market Strategy

The following is an excerpt from Zacks Chief Strategist John Blank’s full Jan Market Strategy report. To access the full PDF, click here.

Is it “Creative Destruction” from within? Or International Trade from outside?

In 1942, the economist Joseph Schumpeter wrote, Capitalism, Socialism and Democracy. It is the third most cited book in the social sciences published before 1950, behind Karl Marx's Capital and Adam Smith’s The Wealth of Nations.

His big enduring idea is the process of “creative destruction.”

He terms this the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

Today, his process of creation is all largely done by the Info Tech sector. And it is leading the tech growth stocks up in most investor’s portfolios these days.

I found the list of the USA’s industry losers over the last decade, gratis the Bureau of Labor Statistics, to be very interesting.

What internal job destruction themes do I pick out?

In terms of overall jobs lost, the big losers were in newspapers, professional employment organizations, and savings institutions and other depository credit institutions. The newspaper story is the best known. The effect of super low CD rates on savings institutions is little discussed.

But the Info Tech revolutions underway, those that are automating Human Resource professional employment functions, should be worth an equal amount of press…these days. Think harder about Oracle, SAP, Salesforce.com, etc.

I see the Amazon effect on bookstores and news dealers. Google hits libraries and archives. Netflix drives in on video stores and magnetic video manufacturing. The Apple effects appear on telephone apparatus manufacturing and photofinishing and perhaps sound studios with iTunes. Stationary and office supplies are the victims of the home office, email, and evites.

As for international trade deals, perhaps gone awry?

This is a source of external job destruction -- from without and NOT from within.

That would be hosiery and sock mills, textile and fabric finishing mills, other apparel knitting mills & curtain and linen mills. The job counts do not look as high as people think, though I bet most of the jobs damage was done earlier. The wages lost are lower here (29K, 36K 37K and 45K a year were the average annual wages provided/lost).

The last international quotas protecting the U.S. textile industry were lifted in 2004, in the Bush era, according to the BLS. The 1974 Multi-fiber Arrangement has been phasing them out for some time.

Then, there are other very interesting subtleties. Like the port operations, and less land sub-division, and securities exchanges falling back in employment. That is speaking to something else, in part. But Info Tech is the story with exchanges and the annual salaries are big (201K). We get more urban and more automated, where we can.

Take it all-in together.

I opine the destruction wrought by Info Tech exceeds that of International Trade. Tech-related job losses are, for the most part, higher in annual wages, but not always.

Zacks January Sector/Industry/Company Telescope

January Zacks sector and industry ranks show a New Year entering on strong global tailwinds and see an earnings estimate pickup -- from the Trump corporate and personal tax cuts.

The Very Attractive sectors this month: Info Tech, Consumer Discretionary, and Financials. Info Tech sees the strongest global tailwinds. Rising stock markets help Consumer Discretionary. Financials are the biggest benefactor of lower domestic corporate profit taxes.

The falling sectors: Materials and Consumer Staples. I don’t think the Materials sinking is a 2018 theme to worry about.

Info Tech stayed HOT again. The semis head into the New Year in a strongly upgraded fashion, with fourth quarter earnings season just a few week away.

(1) Info Tech stays HOT, and Very Attractive. Semiconductors stay solidly a top niche again in the New Year. Computer Software-services also stay strong.

Zacks #2 Rank (BUY) Stock: Sumco Corp.

Sumco Corporation manufactures and sells silicon wafers for the semiconductor industry. It offers monocrystalline ingots, polished wafers, annealed wafers, epitaxial wafers, junction isolated wafers, silicon-on-insulator wafers, and reclaimed polished wafers. The company operates primarily in Japan, North America, Asia and Europe. Sumco is headquartered in Tokyo, Japan.

(2) Consumer Discretionary stays Very Attractive again. Leaders are Publishing, Autos/Tires/Trucks, Apparel, and Leisure.

Zacks #1 Rank (STRONG BUY) Stock: Acushnet Holdings Corp.

Acushnet Holdings Corp. designs, develops, manufactures, and distributes golf products. The company's operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear. Acushnet Holdings is headquartered in Fairhaven, Massachusetts.

(3) Financials get to Attractive from Market Weight. The strong spots are Banks & Thrifts, Investment Banking, and Finance, in that order.

Zacks #1 Rank (STRONG BUY) Stock: Great Southern Bancorp.

Great Southern Bancorp, Inc. is a financial holding company, which owns directly all of the stock of Great Southern Bank and other non-banking subsidiaries.

(4) Industrials stay at the Attractive level. The leaders are Pollution Control, Metal Fabricating and Machinery.

(5) Energy remains Attractive. Alternates and Oil & Gas Integrated lead. Surprisingly, Drillers are Attractive now.

(6) Materials fall again, this time to Market Weight from Attractive. The leaders are Chemicals and Metals Non-ferrous again.

(7) Health Care stays a Market Weight. The leader is Medical Products again.

(8) Telco Services is a clean Market Weight, but with no plays.

(9) Consumer Staples fall to Very Unattractive. The sole bright spot is Food/Drug retail.

(10) Utilities stay a modest Unattractive.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

Download it free >>

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.

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Great Southern Bancorp, Inc. (GSBC) : Free Stock Analysis Report
Treehouse Foods, Inc. (THS) : Free Stock Analysis Report
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SUMCO CORP ADR (SUOPY) : Free Stock Analysis Report
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