For Immediate Release
Chicago, IL – August 28, 2018 – Zacks Equity Research highlights j2 Global, Inc. JCOM as the Bull of the Day, J.C. Penney Company, Inc. JCP asthe Bear of the Day. In addition, Zacks Equity Research provides analysis onEcopetrol S.A. EC and Eclipse Resources Corp. ECR.
Here is a synopsis of all four stocks:
Bull of the Day:
j2 Global, Inc. is in a hot area of the market with cloud services and digital media. This Zacks Rank #1 (Strong Buy) is a rare mid-cap value stock with double digit earnings growth.
j2 Global is a mid-cap technology company with a market cap of $4.1 billion. It has two business segments: Cloud Services and Digital Media.
Cloud Services is its legacy business and offers Internet fax, virtual phone, hosted email, email marketing and online backup among other services.
The Digital Media end of the business offers technology, gaming, lifestyle and healthcare content through a range of digital properties including PCMag, IGN, Offers.com, Everyday Health and others.
It reaches 180 million people per month across its brands.
A Record Second Quarter
On Aug 9, j2 Global reported its second quarter results and beat the Zacks Consensus by 8 cents. Earnings were $1.50 versus the consensus of $1.42.
It was the second consecutive earnings beat in a row.
Revenue jumped 5.4% to a second quarter record of $287.9 million, up from $273.2 million in the second quarter of 2017.
Cloud was up 3.9% while Digital Media gained 7.1%.
One negative was that the company did see softness in advertising, especially in display and video advertising. This is a very competitive category with Google and Facebook as the main competitors.
Raised Full Year EPS Guidance
j2 Global reaffirmed its revenue outlook for 2018 of between $1.2 billion and $1.25 billion which was a positive given that advertising was soft. Clearly the company sees that situation as a one-time event.
It did raise earnings guidance, however, due to the continued review of the income tax benefits relating to the 2017 Tax Act.
The new range is between $6.16 and $6.46 from $5.95 and $6.25.
As a result, the analysts adjusted their earnings outlook accordingly.
3 estimates moved higher in the last 30 days pushing the Zacks Consensus up to $6.23 from $6.07. That's a gain of 10.5% versus 2017.
2019 is looking up as well. While the analysts are mixed, with one raising and 2 cutting estimates over the last month, analysts still see earnings growth of another 6.9%.
Another Dividend Increase
It's rare to find a mid-cap value stock that also pays a decent dividend.
j2 Global raised its dividend 2.4% for the next quarter to $0.4250 per share. That's the 28th consecutive quarterly dividend increase since it first offered the dividend in September 2011.
It's currently yielding 2.1%.
It has great cash flow. As of the end of the second quarter, it had $428 million in cash and cash equivalents. It spent $44 million in the second quarter on the dividend and acquisitions.
A Buying Opportunity?
Shares weakened after the earnings report and are down 3.3% over the last month.
However, they're still up 11.4% year-to-date.
Bear of the Day:
J.C. Penney Company, Inc.has lost all the momentum it built for its turnaround over the last several years. This Zacks Rank #5 (Strong Sell) is once again seeing declining earnings.
J.C. Penney is an apparel and home retailer with over 860 stores in the United States and Puerto Rico.
It also sells online at jcp.com.
A Big Miss in the Second Quarter
After putting together a string of beats and meets, J.C. Penney finally came apart, missing the Zacks Consensus Estimate by a whopping 30 cents. Earnings were a loss of $0.38 versus the Consensus of a loss of just $0.08.
Comparable store sales managed to finish in the green, rising 0.3%. The top performing categories were Children's, Jewelry, Sephora, Women's Apparel and Salon.
Lowered Full Year Guidance
Despite some positive categories, and a strong May and July in the second quarter, the company lowered its full year targets.
Comparables are now expected to be flat with earnings now seen as a loss of $1.00 to a loss of $0.80.
The analysts reacted by cutting their estimates sharply.
The Zacks Consensus Estimate went from earnings of $0.02 to a loss of $0.71 since the report. That's a decline in earnings of 422% as the company made $0.22 in 2017.
Earnings are still expected to be challenged in fiscal 2019 as well, with the Zacks Consensus looking for a loss of $0.20.
J.C. Penney was already lagging the rest of the retail industry going into the earnings report and the disappointing report just sealed their fate.
Shares are down 51% year-to-date and are now at new multi-year lows.
I know what you're thinking. You see that shares are under $2 and you think: is this a buying opportunity for value investors?
I was once a fan of J.C. Penney a few years ago. I thought it could turn it around. But the CEO left a few months ago and the Board hasn't picked a replacement.
How does a company recover from the darkness if it has no leader to get them there?
There's too much risk. A second turnaround plan doesn't even exist yet.
Here's Why Oil Prices Could Be Even More Volatile Ahead
A bumpier ride ahead is expected for the ever-volatile oil prices, given the United States’ impending sanctions on Iran, upcoming new emission standards by the shipping regulatory body that are applicable worldwide and a significant drop in U.S. commercial crude oil inventories.
While a supply disruption due to the ongoing geopolitical tensions in the Middle East could push crude oil prices higher, the ongoing U.S.-China trade war and a stronger U.S. dollar threaten to drag oil prices down.
Since oil is denominated in U.S. dollar, lessor affordability of weaker-currency countries will reduce demand and consequently price. Moreover, the trade war will weaken the economy of China, reducing the demand from the largest importer of crude oil in the world.
Brent crude, the global benchmark for oil, closed at $75.82 on Aug 24 after U.S. crude oil inventory data was published in the federal government’s Energy Information Administration (EIA) report. However, the commodity remained volatile since the beginning of this month. While Brent crude oil grew for five days in a row beginning Aug 15, it moved down to close at $74.73 on Aug 23, following the second round of tariffs imposed by the United States and China on each other’s goods.
Here are the key factors that might influence oil prices in the future:
U.S. Sanctions on Iranian Oil to Push Prices Higher
U.S. sanctions on Iran’s oil, which will take effect on Nov 5, are bound to tighten oil supplies and sway crude oil prices. The United States pulled out of the 2015 Iran nuclear deal in May and has imposed sanctions on the latter in an effort to negotiate a fresh nuclear agreement with the Islamic Republic.
The earlier sanctions that came into effect in the second week of August were aimed at the country’s currency and crucial industries. But the upcoming oil sanctions are vital, as revenues generated from oil exports is Iran’s major income and the lifeline for that country’s economic activity.
The United States has warned other nations to stop importing Iranian oil by Nov 4 or face sanctions. While French oil giant Total has stopped importing Iran’s crude, fearing Washington’s penalties, China remained firm on its oil trade with the Islamic nation.
Iran is the third-largest exporter ($40.1 billion in 2017) of crude oil in the Middle East, after Saudi Arabia and Iraq. The nation accounted for 4.8% of the world’s total crude oil exports last year.
Insufficient U.S. Crude Oil Inventories to Lift Oil Prices
U.S. crude oil inventory data has been largely volatile for the past two weeks, as stockpiles decreased by 5.8 million barrels for the week ended Aug 17 after a rise of 6.8 million barrels from the week ended Aug 10. Crude oil stockpiles were 408.4 million barrels as of Aug 17, according to a report released by the EIA.
The sharp drop of 5.8 million barrels versus analysts’ expectation of a 1.5 million barrel decline drove oil prices higher. If crude oil inventories fail to move up for the week ended Aug 24, oil prices could move further up.
Shares of energy companies Ecopetrol S.A. (EC) and Eclipse Resources Corp. (ECR) have gained 6.9% and 7.7%, respectively, in the past one month. Both the companies sport a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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