For Immediate Release
Chicago, IL – November 06, 2015 – Zacks Equity Research highlights Sigma Designs (SIGM) as the Bull of the Day and 3D Systems (DDD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Frontline Ltd. (FRO) and Star Bulk Carriers Corp. (SBLK).
Here is a synopsis of all four stocks:
Bull of the Day:
Sigma Designs (SIGM) has seen estimates move dramatically higher over the last 60 days. The Current quarter was slated to show a loss of four cents, but then jumped to a gain of four cents. More recently the estimate ticked higher by another penny. The increases in earnings estimates have helped push the stock to a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.
Sigma Designs is a semi-conductor company that has posted back to back solid beats of the Zacks Consensus Estimate. That is a good thing when the previous four quarters were all misses.
That factor alone won't make a stock the Bull of the Day. Add in the fact that the stock is in the very top industry rank and then you really have something.
Sigma Designs is an integrated semiconductor solutions provider in media platforms for use in the home entertainment and home control markets. The company was founded in 1982 and is headquartered in Milpitas, California.
As noted above, the last two quarters were beats. The April 2015 quarter saw the company post earnings of $0.06 when the Zacks Consensus Estimate was calling for a loss of $0.05. That is a huge swing of 11 cents. That translates to a positive earnings suprise of 220%.
The following quarter again saw a gain when the expectation was calling for a loss. The July 2015 quarter was reported in early September and saw a gain of 10 cents compared to the expectation of a loss of two cents. That 12 cent beat translates to a 600 positive earnings surprise.
Bear of the Day:
3D Systems (DDD) has reported earnings below the Zacks Consensus Estimate in six of the last seven quarters. All those misses don't help things, but what pushed this stock down the lowest Zacks Rank is the fact that earnings estimates for this year and next have been falling. DDD is now a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.
D Systems Corp. is a leading provider of 3-D Modeling, Rapid Prototyping and Manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. These solutions are used for design communication and prototyping well as for production of functional end-use parts: Transform your products.
On November 4, the company reported a loss of four cents when the Zacks Consensus Estimate was calling for a gain of a penny. The five cent miss translates to a - 500% negative earnings surprise. Revenue of $152M was also below expectations and as a result the stock fell 9% in the session following the release.
DDD has an extreme valuation, with a forward PE of 360x compared to a 12x industry average. The company is trading at a 1.0x book multiple whereas the industry trades at 3.3x. The price to sales multiple of 1.9x is right in line with the industry average.
2 Transportation Players to Ride This Earnings Season
The third-quarter 2015 earnings season is in its final stages as far as transportation stocks are concerned, with only a few companies left to unveil their quarterly financial numbers. The story, though not drastically different from the second quarter, does represent an improvement over the second quarter scenario.
While most of the transportation stocks, who have already disclosed their numbers this earnings season, have delivered impressive bottom lines (courtesy low oil prices), revenue weakness still persists. The dollar’s strength has been one of the main culprits on the revenue front this earnings season, as was the case in the second quarter as well. Macro headwinds have also been a spoiler for revenues in the third quarter.
To justify the above commentary, we highlight certain statistics from the third quarter for transportation stocks. With all the S&P 500 members in the transportation space having already announced their third-quarter 2015 earnings, the aggregate earnings beat ratio is an impressive 85.7%. On the other hand, the revenue beat ratio is a measly 28.6%. Average earnings growth is 22.5% while year-over-year top-line growth has treaded into the negative territory and stands at a negative 1.3% (read more: Zacks Earning Trends report). Though not very encouraging, the numbers are however better than their second-quarter 2015 counterparts.
Oil Mayhem Continues Aiding Transportation Stocks
The weakness in oil prices, which has lasted for well over a year, is nothing short of a godsend for stocks in the widely diversified transportation space. The sector, which includes airline companies, truckers, shipping stocks and railroads, has been basking in glory, as oil expenses form one of the major input costs for any transportation company. The gigantic fall can be gauged from the fact that currently oil is hovering around the $50 per barrel mark, having crossed the $100 a barrel mark just over a year ago.
String of Q3 Earnings Beats on Low Oil
The third quarter of 2015 has already seen major transportation companies like Delta Air Lines (DAL) and American Airlines Group (AAL) reporting higher-than-expected earnings. Airline companies have been the major beneficiaries as far as plunging oil prices are concerned, generating massive savings in the wake of the soft oil price scenario. For example, American Airlines Group, which does not hedge fuel costs, expects to generate savings of approximately $5 billion in 2015.
Apart from airline stocks, other transportation players like Ryder System (R), the leader in supply chain management and fleet management services, and J.B. Hunt (JBHT), a leading trucking carrier, have also registered earnings beats in the third quarter. However, railroad operators continue to struggle hurt by coal-related headwinds.
Plunging Oil Prices Favor Shipping Stocks Too
Stocks in the shipping space have also made the most out of soft oil prices. Apart from a positive impact on the demand of oil tankers, the operating costs of ships have also been significantly reduced, courtesy low oil prices. The steep decline in oil prices has also caused a significant year-over-year reduction in bunkering costs for the shipping industry.
Outperformers Still Left in the Bank
With a handful of transportation players yet to release their third-quarter outcomes, the favorable backdrop certainly calls for special attention on stocks in this sector. It won’t be thus a bad idea to bet on some stocks in this space that are likely to report higher-than-expected earnings in the quarter.
However, given the high degree of diversity in the transportation space, it is by no means an easy task to shortlist stocks that have the potential to outperform on the earnings front. It is here that our proprietary methodology comes in handy. It advises investors to look for stocks that have the combination of a favorable Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%. An earnings beat more often than not boosts investor confidence in the stocks, which translates into rapid price appreciation.
Two Likely Superstars
Using the above methodology, we hereby highlight two stocks that are likely to outshine the Zacks Consensus Estimate in the third quarter. With major airline companies having already reported, it is of little surprise that all both our choices belong to the “Trans-Ship” segment, which too is benefiting immensely from weak oil prices as discussed above.
Frontline Ltd. (FRO), based in Hamilton, Bermuda, is a provider of seaborne transportation of crude oil and oil products. This Zacks Rank #1 stock currently has an earnings ESP of +40.00%. The Zacks Consensus Estimate for third-quarter 2015 earnings is pegged at 5 cents. The company is expected to report its third-quarter results on Nov 24.
Star Bulk Carriers Corp. (SBLK) is a provider of seaborne transportation solutions in the dry bulk sector across the globe. Based in Athens, Greece, this Zacks Rank #3 stock currently has an earnings ESP of +12.50%. The company is expected to report its third-quarter results on Nov 17.
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About the Bull and Bear of the Day
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SIGMA DESIGNS (SIGM): Free Stock Analysis Report
3D SYSTEMS CORP (DDD): Free Stock Analysis Report
FRONTLINE LTD (FRO): Free Stock Analysis Report
STAR BULK CARRS (SBLK): Free Stock Analysis Report
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