Raytheon, American Capital Agency, Sanofi, Regeneron Pharmaceuticals and Bayer highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 26, 2013 – Zacks Equity Research highlights Raytheon (RTN-Free Report) as the Bull of the Day and American Capital Agency Corp (AGNC-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Sanofi (SNY-Free Report), Regeneron Pharmaceuticals, Inc. (REGN-Free Report) and Bayer (BAYRY-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
With sequester fears far in the rearview mirror, the aerospace and defense industry has been able to outperform for much of 2013. Strength has been seen across the space thanks to solid earnings beats and decent forward guidance in what many thought was going to be a very challenging environment.
While many companies have done well, one stands out for its potential to benefit from the current trends in the market, and could still be a top pick going forward; Raytheon (RTN-Free Report).
Raytheon is one of the largest publically traded defense companies in the U.S. with a market cap approaching $30 billion. The firm operates in a variety of divisions though it is likely best known for its air and missile programs, radar solutions, and spacecraft segments.
The company has been an all-star so far in 2013, adding close to 50% in the time frame. This includes a nearly 10% gain in the past month, as bullish momentum has picked up for the firm.
Yet while some might think that this makes RTN overextended, we believe that more gains could be had based on recent trends in the earnings space which have helped Raytheon to earn itself a top Zacks Rank #1 (Strong Buy).
Bear of the Day:
Mortgage REITs (mREIT for short) have long been favorites of dividend investors, and especially before taper concerns came back into the picture. Securities in this space often pay double digit yields, and with such a sluggish market for income, these were preferred picks by many.
The structure of mREITs also increased their appeal when rates were stable. That is because mREITs generally borrow at short-term rates and then invest in longer term securities. So in this strategy, a big spread between short term and long term rates is key for strength in their business model.
However, as taper talk has resumed the spread has shrunk between these two key figures, while there is a threat of further compression in the weeks and months ahead as well. This has been terrible news for the space and many have jumped out of stocks in this corner of the market as a result. In particular, one to watch for further losses is American Capital Agency Corp (AGNC-Free Report).
The latest earnings report for AGNC was pretty terrible by any estimation. Third quarter results came in at 61 cents a share, falling well short of the consensus estimate of 84 cents a share. Results also represented a decline sequentially too, as last quarter saw 66 cents of earnings, while the year ago period saw 79 cents a share.
Especially concerning from the report was the average yield on its agency security portfolio, which slumped by 33 basis points down to just 2.59%. Meanwhile, its cost of funds which was more or less stable—down just four basis points—to 1.39%. This means that the interest rate spread declined by 29 basis points to just 1.20%, eating into the company’s profits and future prospects as well.
Additional content:
Positive Data on Sanofi/REGN’s Sarilumab
Sanofi (SNY-Free Report) and partner Regeneron Pharmaceuticals, Inc. (REGN-Free Report) announced encouraging data from the 52-week SARIL-RA-MOBILITY phase III trial (n ~1,200) on their pipeline candidate, sarilumab. The study evaluated the safety and efficacy of the candidate in adults suffering from rheumatoid arthritis (:RA) who have not shown adequate response to methotrexate (MTX) therapy.
Sarilumab met all the three co-primary end points and demonstrated significant improvement (measured using the American College of Rheumatology score of 20% improvement/ACR20) over placebo in both dosage groups (200 mg and 150 mg). At 24 weeks, the candidate improved the signs and symptoms of RA by 66% (sarilumab 200mg) and 58% (sarilumab 150 mg) as compared to 33% in the placebo arm.
The candidate also demonstrated improvement in physical function and efficacy in inhibition of progression of structural damage.
We note that Sanofi and Regeneron are conducting a SARIL-RA phase III development program to evaluate the use of sarilumab in the RA indication. The program consists of five trials, namely, SARIL-RA MOBILITY, SARIL-RA TARGET, SARIL-RA COMPARE, SARILRA ASCERTAIN and SARIL-RA EXTEND.
Sanofi carries a Zacks Rank #3 (Hold). The company is looking to combat the generic threat confronting most of its key drugs by signing deals and pursuing acquisitions. We are pleased with Sanofi’s efforts to develop its pipeline. We believe that new products will make significant contributions in the coming quarters.
Some better-ranked pharma stocks include Bayer (BAYRY-Free Report), which carries a Zacks Rank #2 (Buy).
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