For Immediate Release
Chicago, IL – July 21, 2014– Zacks Equity Research highlights Intel (INTC-Free Report) as the Bull of the Day and Bob Evans Farms (BOBE-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Everest Re Group Ltd. (RE-Free Report), ACE Limited (ACE-Free Report) and Allied World Assurance Company Holdings, AG (AWH-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
The PC industry isn't dead yet. Intel (INTC-Free Report) recently posted strong second quarter results, driven in part by strong demand in its core server and PC markets.
Following the Q2 report, analysts revised their estimates significantly higher for both 2014 and 2015. This sent the stock to a Zacks Rank #1 (Strong Buy).
Intel is the world's largest supplier of microprocessors with over 75% of worldwide market share among traditional PCs and servers.
Intel delivered strong second quarter results on July 15. Earnings per share came in at 55 cents, beating the Zacks Consensus Estimate of 52 cents. It was a 41% increase over the same quarter last year.
Net revenue grew 8% year-over-year to $13.831 billion, well ahead of the consensus of $13.622 billion. This was driven by solid demand in its core server and PC markets. Intel's Data Center (server) group saw top-line growth of 19% year-over-year, while its PC Client Group saw revenue growth of 6%.
Gross profit as a percentage of total revenue improved greatly. The gross margin rose from 58.3% to 64.5%. Meanwhile, marketing, general and administrative expenses declined 5% and fell from 16.9% to 14.9% of revenue.
These factors led to a whopping 41% surge in operating income as the operating margin expanded 21.2% to 27.8%.
Bear of the Day:
Bob Evans Farms (BOBE-Free Report) reported its fiscal 2014 fourth quarter results on July 8. In the Q4 press release, the company blamed the following factors for negatively impacting its results:
- Severe winter weather
- An "activist" investor
- Supplier disruption issues
- Higher than expected plant startup "inefficiencies", and
- Historically high sow costs.
Management also provided fiscal 2015 guidance well below consensus, prompting analysts to revise their estimates significantly lower for both 2015 and 2016. This sent the stock to a Zacks Rank #5 (Strong Sell).
Bob Evans Farms owns and operates 561 restaurants in 19 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. It also produces and distributes refrigerated and frozen side dishes, convenience food items and pork sausage under the 'Bob Evans' and 'Owens' brands.
Bob Evans delivered results for its fiscal 2014 fourth quarter on July 8. Adjusted earnings per share came in at 61 cents, which actually beat the Zacks Consensus Estimate of 42 cents. However, it was a "messy" quarter with several adjustments to GAAP earnings.
Net sales from continuing operations fell -2% to $326 million, which was below the consensus of $333 million. This was driven by a -4.1% decline in same-store sales. The company estimated that "adverse severe winter weather" had an impact of approximately -3.4% on same-store sales.
The second-quarter earnings season has commenced with speculations rife over earnings beats and or misses in every sector. The mood is quite optimistic in the non-life insurance industry, or the Property and Casualty (P&C) insurance sector, in particular. Along with benign cat environment, effective risk management should have translated into better numbers for the quarter.
Though April and May saw lashing winds and severe hailstorms, the industry escaped material cat losses. Courtesy of a benign cat environment, insurers are likely to have witnessed improved combined ratios – a primary measure of underwriting profitability. Moreover, lesser claim payments should drive earnings and help insurers pump up their reserves.
Market hardening led to improved pricing in the second quarter. This is likely to translate into higher premiums and thus drive margin expansion.
However, a sustained soft interest rate environment is expected to weigh upon the investment results. Though investment results are not expected to come anywhere near their historical highs, a better reinvestment rate might bring some respite.
Nonetheless, insurers are expanding their global footprint thereby infusing more capital into the already well-capitalized industry.
Favorable conditions are helping insurers to impressively deploy capital, as evident from their continued share repurchase activities and dividend hikes.
Moreover, the Zacks Industry Rank for P&C insurance industry is #60, falling in the upper 1/3 tier of Zacks Industry Rank. This clearly points to a positive outlook.
Given this favorable industry trend, it will be a good idea to add a few P&C insurance stocks that are poised to beat estimates in their upcoming release. An earnings beat should immediately propel these stocks.
Picking the Right Stocks?
Picking the right stock for your portfolio could appear a daunting task given the wide range of companies in the Property and Casualty insurance space. One way to narrow down the list of choices is by looking at stocks that have a favorable Zacks Rank and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for determining stocks with the best chance to surprise with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
The combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Earnings ESP is usually an indication of an earnings beat. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
For investors seeking to apply this strategy to their portfolio, we have highlighted three P&C insurance stocks that might stand out with an earnings beat in their likely releases on July 23.
Everest Re Group Ltd. (RE-Free Report)
Bermuda-based, Everest Re Group writes property and casualty reinsurance and insurance in the United States, Bermuda and in international markets. Everest Re virtually underwrites all classes and categories of business in treaty, facultative and specialty lines both through brokers and directly with ceding companies.
An enriched product portfolio will help the company increase its premium writings. The company currently has a Zacks Rank #2 along with an Earning ESP of +6.01%. Everest Re posted an earnings beat of 12.17% on average in the last four quarters.
ACE Limited (ACE-Free Report)
Switzerland-based ACE Limited is one of the world’s largest providers of P&C insurance and reinsurance. It writes marine, medical risk, excess property, environmental and terrorism insurance. ACE Limited provides specialized insurance products such as personal accident, supplemental health and life insurance to individuals in select countries. Its reinsurance operations include both P&C and life companies.
An improved property & casualty pricing environment is expected to drive higher premiums for this company. Its strategic acquisitions will also improve premium writings.
The company currently has a Zacks Rank #3 along with an Earning ESP of +0.89%. ACE Limited generated better-than-expected earnings in the last four quarters with an average beat of 14.5%. Solid underwriting performances aided the outperformance.
Allied World Assurance Company Holdings, AG (AWH-Free Report)
Switzerland-based Allied World Assurance Company is a provider of diversified property and casualty insurance and reinsurance solutions with operations in the U.S., the U.K., Bermuda, Canada, Hong Kong, Labuan, Switzerland and Singapore.
The company is expected to benefit from its service upgrade and global expansion.
The company currently has a Zacks Rank #3 along with an Earning ESP of +3.75%. Allied World posted an earnings beat of 45.63% on average in the last four quarters.
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