For Immediate Release
Chicago, IL – April 01, 2014– Zacks Equity Research highlights Chemed Corp (CHE-Free Report) as the Bull of the Day and Infoblox (BLOX-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Office Depot, Inc. (ODP-Free Report), Staples, Inc. (SPLS-Free Report) and Amazon.com Inc. (AMZN-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Chemed Corp (CHE-Free Report) isn't a company that gets a lot of press. Today is April Fool’s Day, and I wanted to work in a joke here, but I just can't. Chemed is a Zacks Rank #1 (Strong Buy) and is the Bull of the Day.
Down the Drain
I have to admit, when I saw the name Chemed, I thought to myself this must be a specialty chemicals company. Instead, I was fascinated to learn that this is the corporate parent of Roto-Router as well as a hospice company.
The synergies didn't make too much sense to me, but I was too excited to write about Roto-Router to take a pass. Plus, I could always make a pun about something or another. The thing that pushed it over the top for me was that it was based on Ohio, and I am, by birth-rite, a Buckeye.
Chemed Corporation provides hospice and palliative care services in the United States. It operates in two segments, VITAS and Roto-Rooter. The company offers its services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers. It also provides plumbing and drain cleaning services to residential and commercial customers. Chemed Corporation was founded in 1970 and is based in Cincinnati, Ohio.
Bear of the Day:
Infoblox (BLOX-Free Report) is a Zacks Rank #5 (Strong Sell) while there 6 other companies that carry higher Zacks Ranks. This is a good reason to take a look at why it is a #5 and the Bear of the Day.
Maybe you have seen some articles about big data and its growing importance to the economy. Seems marketers need all this data to get the best possible ad to you, making the rest of our lives similar to surfing the internet.
The thing that a lot of investors have done is look to the back bone of big data as a spot to invest. While that works in some spots, it doesn't guarantee success.
Infoblox Inc. is in the business of automated network control solutions. Its appliance-based solution combines real-time IP address management with the automation of network control, and network change and configuration management processes in physical and virtual appliances. The company was founded in 1999 and is headquartered in Santa Clara, California.
BLOX has missed the Zacks Consensus Estimate for 2 straight quarters. As I look back further, I see they have missed three of their last five quarters. There was one mega-miss that came in 100% below the Zacks Consensus Estimate, that will end up skewing the average, but the other two misses were large as well. A miss of 20% and 16% are nothing to shake a stick at.
Office Depot in Downward Spiral?
It seems that Office Depot, Inc. (ODP-Free Report) has lost its momentum, as the stock fell nearly 16% ever since the company reported a dismal fourth-quarter 2013 on Feb 25, 2014. Year-to-date, the company has witnessed its market cap erode by 23%.
The slide is a reflection of wary investors as Office Depot continues to disappoint on the earnings front. The company has missed the Zacks Consensus Estimate in the trailing 4 quarters by an average of 122.2%.
In the most recent quarter, earnings fell short of the estimate by 200%. The company posted fourth-quarter 2013 loss of 3 cents per share as against the Zacks Consensus Estimate of earnings of 3 cents. Revenues of $3,486 million also fell short of the Zacks Consensus Estimate.
What is Causing the Dismal Run?
The office supplies industry is currently grappling with secular as well as cyclical headwinds. Improvement in technology has reduced the demand for traditional core office-supply items (paper, toner, ink). Moreover, the decline in business and consumer spending, given the global meltdown and deterioration of credit markets has resulted in sluggish demand for big-ticket items, thereby negatively impacting the top line. The sector’s poor run has had a telling effect on the performance of other retailers including Staples, Inc. (SPLS-Free Report).
Additionally, increasing competition from online giants such as Amazon.com Inc. (AMZN-Free Report) has squeezed out a large share of profits from office supply retailers.
Given the uncertainties, analysts’ have become less constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that tumbled 56% to 11 cents for 2014 and 42% to 33 cents a share for 2015 in the past 60 days.
To bail itself out, Office Depot merged with Office Max. Management was very upbeat on the merger and raised expectations regarding the synergies during the recent fourth quarter conference call.
Management now expects synergies from the merger to exceed more than $600 million by 2016. This excludes any benefit arising from rationalizing the domestic retail store base. Earlier, cost savings in the upper half of $400 million to $600 million were expected to be generated from the merger synergies (purchasing, cost of good sold, supply chain, advertising, headcount and other general & administrative).
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