For Immediate Release
Chicago, IL – June 10, 2014– Zacks Equity Research highlights Navigators Group, Inc. (NAVG-Free Report) as the Bull of the Day and Annie's, Inc. (BNNY-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Avago Technologies (AVGO-Free Report), Korea Electric Power (KEP-Free Report) and Canadian Pacific (CP-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
The Navigators Group, Inc. (NAVG-Free Report) recently delivered a huge first quarter beat as results were strong across the board. This prompted analysts to revise their estimates significantly higher for both this year and next, sending the stock to a Zacks Rank #1 (Strong Buy).
While shares of The Navigators Group have made a meaningful move higher following the Q1 beat, the valuation picture still looks attractive with shares trading at just 1.0x tangible book value. This leaves the stock with plenty of upside potential.
The Navigators Group, Inc. is an international specialty insurance company. Its largest product line and most long-standing area of specialization is ocean marine insurance.
Navigators reported strong first quarter results on May 7. Adjusted earnings per share came in at $1.45, crushing the Zacks Consensus Estimate of 97 cents. It was a 93% increase over the same quarter last year.
Gross written premiums increased 7.5% year-over-year while net written premiums rose 15.7%. This was driven in large part by strong growth in the company's Lloyd's division.
Bear of the Day:
Annie's, Inc. (BNNY-Free Report) is currently facing a lot of headwinds. The company recently reported lower-than-expected sales and EPS for its fiscal fourth quarter, due in part to rising input costs. Management provided fiscal 2015 EPS guidance well below consensus, prompting a flurry of negative estimate revisions from analysts. The company disclosed that it had identified a material weakness in its internal control over financial reporting. And its auditor, PricewaterhouseCoopers, recently resigned.
And despite all of these negatives, shares still trade at a lofty 34x forward earnings.
Annie's is a natural and organic packaged food company that offers over 145 products and is present in over 35,000 retail locations across the United States and Canada.
Annie's reported its fiscal 2014 fourth quarter results on May 29. Earnings per share came in at 29 cents, well below the Zacks Consensus Estimate of 35 cents. It was an increase of 7% over the same quarter last year.
Adjusted net sales rose 16% to $59.8 million, but this was also below the consensus of $61.0 million. Sales growth was driven in large part by the "Snacks" segment, which saw top-line growth of 26% thanks to strength in fruit snacks, cookies, and crackers.
Higher-than-expected input costs, particularly for organic wheat, hurt gross margins. Adjusted gross profit as a percentage of net sales fell 410 basis points to 34.6% in Q1.
June Market Strategy: Draghi’s a Bull
In June, Mario Draghi offered global bond markets unprecedented and historic ECB easing. That is keeping long-term interest rates in Europe and the U.S.A. down. In turn, Mario Draghi keeps a put under global stock markets. The bull is winning. The ECB is the major global stimulator now.
Look for Bump in Q2 Real GDP Growth
According to the San Fran Fed, real GDP grew a disappointing -0.1% in Q1-14, according to initial data. Unusually severe weather in many parts of the country slowed residential and business fixed investment activity considerably.
However, despite a slowdown in retail sales, overall growth in personal consumption expenditures remained solid in Q1, propelled by spending on a wide array of services. Moreover, employment growth picked up substantially over the past three months, largely offsetting the winter lull.
The San Fran Fed anticipates economic activity will recover strongly in Q2, with above-trend growth of around +4%, before settling down for 2H.
Three factors justify this optimism: Investment activity is expected to rebound from the effects of severe weather. Accommodative monetary policy has improved access to credit. Greater stability in labor markets will continue to solidify gains in spending.
Zacks Sector/Industry/Company Telescope
Zacks Ranked industries bunched around Market Perform in June.
Leading the way was the Info Tech sector. Resurgent Electric Utilities and Oil E&P look good. On top of that, Railroads and Airlines, and Leisure and Home Furnishings industries are positive stories to note.
(1) Info Tech is a Very Attractive Sector. The leader is Semiconductors, followed by Office Equipment and Software Services.
Company to Take a Look at: Avago Technologies (AVGO-Free Report)
(2) Utilities are a Very Attractive Sector in June. Look at Water Supply and Electric Power.
Company to Take a Look at: Korea Electric Power (KEP-Free Report)
(3) Industrials are near the top of Market Performers. Look into Railroads, Machinery, Airlines and Conglomerates. Stay away from Electrical Machinery.
Company to Take a Look at: Canadian Pacific (CP-Free Report)
(4) Energy is a Market Perform Sector. The leading industries are Coal and Oil Exploration & Production. Losers are the big Integrated Oil Companies.
(5) Consumer Discretionary is a Market Perform Sector. The longstanding winners are found in Leisure Services and Home Furnishing-Appliance industries. The Auto/Tire/Truck business was poorly ranked this time.
(6) Consumer Staples is a Market Perform Sector. The leader is Agri-business and Soaps & Cosmetics. The loser is Food/Drug Retail.
(7) Financials are a Market Perform sector. The cyclical Insurance industry leads again. The losers are Major Banks and Investment Funds.
(8) Telcos moved up to a Market Perform Sector.
(9) Materials stood as a Market Perform Sector. Look at Attractive Containers & Glass and Metals-Non-ferrous, and Steel industries for a bullish global cyclical play.
(10) Health Care is an Unattractive sector now. Medical Care is the most Unattractive.
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