For Immediate Release
Chicago, IL – October 10, 2017 – Zacks Equity Research SYNNEX Corporation (NYSE:SNX – Free Report) as the Bull of the Day, Jack in the Box (NASDAQ:JACK – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tencent (OTCMKTS:TCEHY– Free Report), Royal Bank of Canada (NYSE:RY – Free Report) and Rio Tinto PLC (NYSE:RIO – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
SYNNEX Corporation (NYSE:SNX – Free Report) recently reported record revenue and profit. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this fiscal year.
SYNNEX provides distribution, logistics and integration services for the tech industry, including outsourced services. It's wholly-owned subsidiary, Concentrix, offers a host of strategic solutions including process optimization, technology innovation and front and back-office automation.
It operates across the globe.
Another Beat in the Fiscal Third Quarter
On Sept 25, SYNNEX reported its fiscal third quarter results and beat the Zacks Consensus by 17 cents. Earnings were $2.16 versus the consensus of $1.99.
Beating the estimate has become commonplace with SYNNEX.
It has only missed once in the last five years.
Revenue rose 16.5% to $4.3 billion from $3.7 billion in the year ago period.
Technology Solutions, its largest segment, saw revenue rise 15.8% to $3.8 billion while Concentrix revenue jumped 21.9% to $496 million, year-over-year.
It generated about $65 million in cash in the quarter.
Guides Higher for the Fiscal Fourth Quarter
SYNNEX continues to be bullish heading into its final quarter of the year.
Its fourth quarter earnings guidance was in the range of $2.63 to $2.73, well above the Zacks Consensus of $2.52.
As a result, 2 analysts raised quarterly and full year earnings estimates.
The fiscal 2017 Zacks Consensus Estimate jumped to $8.79 from $8.44 in the past month. That's earnings growth of 25% as the company only earned $7.04 in fiscal 2016.
2018 earnings estimates have also been on the rise, moving up to $9.56 from $8.92 over the last month. That's another 8.7% earnings growth.
Bear of the Day:
Jack in the Box (Nasdaq:JACK – Free Report) is still trying to exit the Mexican food business, as it continues to seek a buyer for its QDOBA brand. However, this Zacks Rank #5 (Strong Sell) isn't seeing great sales on the burger side either.
Jack in the Box operates two restaurant franchises: Jack in the Box, one of the largest hamburger chains in the United States with 2,200 restaurants in 21 states and Guam and QDOBA Mexican Eats, with 700 restaurants in 47 states, the District of Columbia and Canada.
A Miss in the Third Quarter
On Aug 9, Jack in the Box reported its fiscal third quarter results and missed on the Zacks Consensus by 6 cents.
Earnings were $0.99 versus the consensus of $1.05.
During the quarter, the company took over 31 franchised Jack in the Box restaurants from an under performing franchisee. This caused it to incur costs of $4.4 million, or about $0.10 per share, which likely resulted in the earnings miss.
Jack in the Box system same-store sales fell 0.2% which lagged the QSR sandwich segment by 1.9%. QDOBA's actually rose 0.5% system-wide.
Company same-store-sales fell 1.6% at Jack in the Box and 1.1% at QDOBA, however. Company sales saw a 2.8% decrease in transactions.
Jack in the Box also got hit by higher labor as well as repair and maintenance costs. Additionally it saw the return of commodity inflation.
The company is operating a Jack in the Box refranchising initiative. It sold 58 restaurants in the third quarter and has now sold 118 year-to-date.
As of the end of the third quarter, it also had non-binding letters of intent with franchisees to sell 63 additional restaurants.
The Sale of QDOBA?
Jack in the Box let it be known earlier in the year that it had hired Morgan Stanley to assist the Board in finding alternatives for QDOBA to enhance shareholder value.
The company hasn't made it a secret that it wants to return to its roots and focus solely on burgers.
There's no timetable for the possible sale, however. This is still just hanging over the company.
Once again, Jack in the Box provided disappointing guidance which led to the analysts cutting estimates.
Same store sales in the fiscal fourth quarter are expected to be flat to down 2% at Jack in the Box and at QDOBA. Both saw increases a year ago.
Similarly, for the year, Jack is expected to increase just 0.5% while QDOBA is projected to be down 2-2.5%.
As a result, the Zacks Consensus Estimate for 2017 has fallen to $4.06 from $4.23 in the last 90 days with 7 analysts cutting and none raising for the year.
That's earnings growth of just 5% versus fiscal 2016.
Shares Down on the Year
The restaurants are a tough industry right now. Many are struggling to attract consumers in a crowded market place.
Jack in the Box shares are down 10% year-to-date but they're not exactly a value.
A Dark Horse Winner for Traders' Attention
In the Global Week Ahead, be aware of a dignified monetary policy conference held in Manhattan. It’s the dark horse winner in gaining institutional traders’ attention.
The conference title is “Globalization Dynamics—E.U. & U.S. perspectives.”
Low and stable long-term bond rates (those are major ingredients) steady the stock market marches to higher valuations — the world over — right now.
Global fixed income market accommodation hinges, in turn, on the Eurozone’s European Central Bank-led monthly bond buying for the rest of 2017 and 2018.
Known by the French language acronym SUERF, the European Money and Finance Forum (when translated to English) is the sponsor. The European Central Bank (the ECB) and the Swiss-based Bank for International Settlements (called the BIS) are key multi-lateral members in SUERF, as are 21 or so European central banks.
According to their website, SUERF is an independent, non-profit network association of central banks, supervisors, financial institutions, academic institutions and financial sector practitioners.
Their meeting provides a unique NYC-based financial market forum for a timely global debate. While the conference is fairly wide-ranging in topics it addresses, a significant theme will be the way out of “QE” balance sheets across major global central banks.
Notably, on Wednesday, ECB Executive Board Member Peter Praet speaks on “European Exit Strategies.” The NY Fed’s Simon Potter will deliver another session on “American Exit Strategies.”
Do exits — from huge multi-trillion dollar central bank balance sheets — merit attention?
Yes. That should be on your front burner, as a lowly retail stock investor. If these coordinated bond market exits go awry, you will lose big.
On Tuesday, eyes in Spain and abroad will be cast towards Catalonia’s regional legislature, and Catalan President Charles Puidgemont.
Economic pressure on the pro-independence camp there is rising. On Monday, three more major companies expect to discuss moving offices out of Catalonia, sources have told Reuters. Major lenders Caixabank and Sabadell have already announced they would be moving offices out of the region.
The scope for tensions to flare is high in the face of a united front against the Catalan separatists, including the central Spanish government and the King of Spain himself. Demonstrations for and against independence happened all weekend.
The EU also made it clear it is unwilling to acknowledge the Oct. 1st referendum. On Monday, European Affairs Minister Nathalie Loiseau said the Catalan crisis had to be resolved through dialogue with Spain.
Also out this week: latest import and export trade figures for India and China.
Traders and investor alike will read these international trade reports closely. They seek fresh global clues on where the manufacturing and commodities markets might go next.
Top Zacks #1 Rank (STRONG BUY) Stocks—
Tencent(OTCMKTS:TCEHY – Free Report): This is a $230 billion market cap Tech monster in Mainland China. There is a momentum run for Chinese Internet stocks going on.
Royal Bank of Canada(NYSE:RY – Free Report): Foreign banks are worth paying attention to, given the role of global bond market accommodation keeping interest rates low.
But more importantly, realize the bank stock game shows the collateral damage that can be done if central bank balance sheet exits go awry. This stock is a long-term Zacks Rank of F, based on a D in the stock’s valuation score.
Rio Tinto PLC(NYSE:RIO – Free Report): This big Australian iron ore mining giant is both a Zacks Rank #1 (Strong Buy) and a long-term Zacks VGM score of A. The stock looks about right for an entry point.
Key Global Macro Data—
Wednesday’s minutes to the FOMC meeting on September 20th come out. This is likely a non-event. Pending October and November data matter more.
Also on Wednesday, a 4th round of NAFTA talk gets underway.
Top Fed officials also speak over the course of the week, including Governor Powell — a candidate for the top job — who speaks on two occasions. Governor Brainard and four regional presidents also speak, including Dallas’s Kaplan (twice), Chicago’s Evans (twice), Minneapolis’s Kashkari and Boston’s Rosengren.
On Friday, a U.S. retail sales report hits. This will include auto sales.
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
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Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
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Synnex Corporation (SNX) : Free Stock Analysis Report
Rio Tinto PLC (RIO) : Free Stock Analysis Report
Jack In The Box Inc. (JACK) : Free Stock Analysis Report
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