For Immediate Release
Chicago, IL – September 02, 2015 – Zacks Equity Research highlights Herbalife (HLF) as the Bull of the Day and Eagle Materials (EXP) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ALPS Medical Breakthroughs ETF (SBIO), iShares MSCI Ireland Capped ETF (EIRL) and QuantShares US Market Neutral Momentum Fund (MOM).
Here is a synopsis of two stocks and three ETFs:
Bull of the Day:
Have you noticed that Herbalife (HLF), the network marketer of nutritional and weight loss products that hedge fund manager Bill Ackman said would go to zero, made new 52-week highs above $60 a few weeks ago?
Bears like Ackman did enjoy some gains and the pleasure of being right for a most of 2014 as HLF shares dropped over 60% from $80 to $30. They may not be correct that Herbalife is an pyramid scheme that exploits minorities or low-income consumers in emerging markets, but they nailed the downward trend in sales and profits last year after troubles in China surfaced.
From Q3 '14 to the recent June quarter, revenues fell from a trailing 12-month peak of $5.09 billion to $4.66 billion.
The Zacks proprietary Price & Consensus chart below tells the tale of declining EPS estimates leading the stock price lower all last year...
Then what stands out is the earnings turn-around in 2015 that carried shares to a 100% gain from January into the company's Q2 report in early August where they delivered a 10% upside earnings surprise -- their 3rd in a row -- and raised full-year guidance despite currency headwinds.
That report vaulted shares from $49 to $61 in three days on very strong volume. I bet some bears were still hanging around too long and got hunted down.
Analysts liked the company's quarterly report and guidance so much, they raised EPS estimates for next year too, taking 2016 profit projections from $4.86 to $5.22 per share.
Bear of the Day:
Eagle Materials (EXP) is a $4 billion manufacturer and distributor of building materials including portland cement, gypsum wallboard, recycled paperboard, concrete and aggregates, and oil and gas proppants.
Founded in 1964, they are the nation's fifth largest wallboard producer and the eighth largest cement manufacturer.
Given their place in the housing and construction boom, I was very surprised to see this Dallas-based company fall to a Zacks #5 Rank. So I quickly checked the Zacks Detailed EPS tables and the downward estimate revisions explained everything...
You can see that the majority of covering analysts have taken down 2015 and 2016 full year estimates. And they've been steadily doing so about every month in the past 90 days. The most recent cuts since the company's August 3 report were the biggest, clipping next year's profit projection 5% from $5.56 to $5.28.
And a 15% miss on the bottom line didn't help the outlook either, as wallboard and cement volumes didn't match expectations. Some analysts blamed this on weather, others on competition. Whatever the real reasons, the fact remains that it looks like analysts extrapolated the recent quarter's issues all the way into next year.
While I'm not exactly sure about the fundamental issues at Eagle, just watching the direction of earnings momentum tells me this is a stock I want to be cautious around right now with analyst sentiment sinking like cement. The Zacks Rank will let us know when the floor is solid again.
Exceptional ETFs Up Over 15% Year to Date
This has been a pretty rough year for the global stock market, especially after the turbulence seen last week. Several China-driven offhand events, subdued inflation even in the U.S. and growth worries in global superpowers like Japan and Canada led the global market to hit the dirt last week.
The year started with a seasonal slowdown in the U.S. and global growth worries taking the center stage. However, decent advances in the U.S. economy following Q1 fuelled rising rate speculations. While this resulted in an unprecedented strength in the greenback, easy money policies in most developed nations as well as a few emerging countries made the U.S. dollar the king of currencies for the most part of this year.
This weighed on the large-cap U.S. stocks having considerable foreign exposure. Moreover, protracted slowdown in China, highly volatile oil prices (mostly on steep downward trail) and a nagging Greek debt deal in July kept casting a shadow over global growth.
However, the case for China investing was somewhat weird. As much as the economy had revealed lackluster data points, the case for aggressive monetary easing became stronger. As a result, the Chinese stocks returned phenomenally (a few have gained close to 100%) in the first half of 2015.
Such an ascent without a steady base had to fall at some point of time and the Chinese stocks succumbed to correction in June. In fact, the Chinese stock market underwent heavy panic-induced sell-offs several times in the last three months, with August being the most cruel, mercilessly lashing the global markets.
Behind the bloodbath was the Chinese policy makers’ devaluation of the country’s currency yuan by 2% in mid August, to presumably maintain export competitiveness. While this particular step slaughtered most securities and unnerved investors, a six-and-a-half-year low Chinese manufacturing data for August crushed the global risky assets to pieces.
Things were also muddled in the U.S. as the Fed’s policy tightening seemed to have been pushed back, sparking off a fresh round of global growth concerns. The U.S. and Asian stocks had experienced a three-year low monthly performance in August. Europe saw the most horrible month since the 2011 debt debacle. Commodities crumbled to multi-year lows on demand issues and hit hard all commodity-rich nations.
Though the U.S. markets gained in the latter part of the week, on a year-to-date basis, the S&P 500 and Dow Jones are in red. However, Nasdaq-100 is just up 0.9%. Notably, all three major U.S. indices slipped into a correction territory on this global market chaos.
These may give enough reasons for investors to panic and look for equity survivors this year. For them, we highlight ETFs that have gained over 15% so far this year.
Biotech – ALPS Medical Breakthroughs ETF (SBIO)
Though this soaring space has recently undergone a correction on overvaluation concerns, biotech ETF SBIO is up 36% this year. The fund also returned over 4.7% in the last week (as of August 31, 2015) as correction made this hot investing area more tempting (read: Biotech Boom Over? 3 Health Care ETFs to Invest in Instead).
This Zacks Rank #1 (Strong Buy) Japan Health Care ETF, has gained about 28.3% so far this year and 0.6% in the past week. The fund’s currency-hedged technique gave it an edge as this mitigated negative currency translation this year.
Ireland – iShares MSCI Ireland Capped ETF (EIRL)
Ireland is the first Euro zone nation that came out of the bailout program in December 2013 and is presently one of the fastest growing in the pack. Ireland’s economy is deemed to grow about 5% this year. As a result, EIRL is up 17.1% in the year-to-date frame and advanced 1.9% in the past week. EIRL has a Zacks ETF Rank #2 (Buy) (read: 3 Country ETFs Upgraded to Buy)
U.S. – QuantShares US Market Neutral Momentum Fund (MOM)
Since occasional volatility has stumped the U.S. market sporadically this year, this long/short ETF emerged as the winner. The underlying index of the fund is equal weighted, dollar neutral and sector neutral. The index takes the highest momentum stocks into account as long positions and the lowest momentum stocks as short positions. MOM is up 16.2% this year and gained 0.5% last week (read: Long/Short ETFs to Fight This Stormy Market).
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About the Bull and Bear of the Day
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HERBALIFE LTD (HLF): Free Stock Analysis Report
EAGLE MATERIALS (EXP): Free Stock Analysis Report
ALPS-MED BRKTH (SBIO): ETF Research Reports
ISHARS-MS IRLND (EIRL): ETF Research Reports
QS-US MN MOMNTM (MOM): ETF Research Reports
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