For Immediate Release
Chicago, IL – April 21, 2014– Zacks Equity Research highlights Smith & Wesson (SWHC-Free Report) as the Bull of the Day and H&R Block (HRB-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Netflix, Inc. (NFLX-Free Report), Amazon (AMZN-Free Report) and Comcast (CMCSA-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Stocks in the firearm industry were extremely hot in 2013 as worries over new laws spurred many to buy up guns and ammo before fresh regulations could come into effect. However, any big changes to nationwide gun legislation haven’t really taken place, cooling demand for many firearms across the country.
Yet even with the lack of legislative impetus, many stocks in the firearm industry remain well-positioned for further gains, and are actually looking quite promising for 2014 as well. This is particularly true when investors take a closer look at one of the most famous names in the industry, Smith & Wesson (SWHC-Free Report).
The Springfield, Massachusetts-based arms maker is probably best known for its pistols and revolvers, but the firm is also involved in a variety of rifles and firearm-related products as well. The company is over 150 years old, and it has stood the test of time selling its defense products to individuals, police, military and federal workers.
While the fear of increased gun legislation has certainly boosted volatility in SWHC over the past few years, the stock has moved significantly higher regardless of these worries, and even as these concerns have cooled in recent months, SWHC has remained a top performer. In fact, the stock has added over 80% in the past two years, while it is sporting a 27% gain in the past six months compared to a roughly 7.5% move higher for the S&P 500 in the same time frame.
Bear of the Day:
With tax season finally over, one company is probably still fresh in Americans’ minds; H&R Block (HRB-Free Report). This Kansas City-based tax preparation company offers up tax advice, do-it-yourself tax return preparation, and advances on tax refunds across the country.
And though while many Americans certainly used their services this past tax season, competitive pressures are certainly building for this company. This is largely thanks to the advent and popularity of Intuit’s TurboTax software which is eating away at HRB’s core market.
Thanks in part to this pressure, HRB stock has been struggling as of late, as it has underperformed some of its key peers in the past year. Plus, it hasn’t helped that HRB has seen sluggish results in international markets too, as this has forced the company to post pretty horrendous results at earnings season, suggesting that HRB has great trouble in meeting expectations.
In fact, over the last four quarters, HRB has missed the Zacks Consensus Estimate every time, with an average surprise of -226%. The company’s ‘best’ miss did come in the key tax season quarter though, but even then the firm missed by nearly 2% when compared to the Zacks Consensus Estimate.
With this recent weakness in mind and some serious competitive pressures building on its lofty stock, it shouldn’t be too surprising to note that many earnings estimates have been falling for HRB as of late. In the past 30 days, not a single estimate has gone higher for HRB’s earnings outlook, while several have gone lower.
Will Netflix (NFLX) Beat Earnings Estimates?
Netflix, Inc. (NFLX-Free Report) is set to report first quarter 2014 results on Apr 21. Last quarter, it posted a 21.5% positive surprise. We note that Netflix has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 30.4%.
Let’s see how things are shaping up for this quarter.
Netflix is facing intensifying competition from the likes of Amazon (AMZN-Free Report), Hulu Plus and HBO. This could lead to lower subscriber growth. Moreover, increasing content costs remain a significant headwind.
Netflix’s agreement with Comcast (CMCSA-Free Report) to pay a fee to improve streaming quality is also expected to increase its operating cost. The additional burden may compel Netflix to increase subscription pricing, which can negatively impact subscriber growth.
Nevertheless, the company’s growing subscriber base will continue to be a major growth factor in the near term. Further, the company’s partnerships with cable television providers Virgin Media (in the U.K.) and Com Hem (in Sweden) will boost international subscriber base, going forward.
Our proven model does not conclusively show that Netflix is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Most Accurate estimate stands at 83 cents, which is coincides with the Zacks Consensus Estimate. Hence, the difference is of 0.0%.
Zacks Rank: Netflix’s Zacks Rank #1 (Strong Buy) when combined with a 0.0% ESP makes surprise prediction difficult.
We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
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About the Bull and Bear of the Day
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