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The Zacks Analyst Blog Highlights: America Movil, eBay and Cardinal Health

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Zacks Equity Research
·11 min read
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For Immediate Release

Chicago, IL – March 31, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include America Movil SAB AMX, eBay EBAY and Cardinal Health CAH.

Here are highlights from Monday’s Analyst Blog:

Ancient Words for Modern Times: Global Week Ahead

Plaguesplayed a huge role in human affairs in centuries past.

Even now, according to the U.S. Centers for Disease Control and Prevention, there are an average of seven cases of plague each year. These days, the bacteria called “plague” is defeated with antibiotics.

Heeding that, we wait bullishly for better testing, treatment, and eventually a cure for this novel coronavirus.

Unfortunately, COVID-19 is not a bacteria! It isn’t like other viruses we already know about, either. So a fierce global medical research race is on. Scientists are getting to know it. Rapidly.

Viruses are even smaller than bacteria and require living hosts — such as people, plants or animals — to multiply. Otherwise, they can't survive. When a virus enters your body, it invades some of your cells and takes over the cell machinery, redirecting it to produce the virus. Hence, the ‘social distancing’ protocol seen everywhere, in order to impede this invasion.

Many experts see a day soon when all of us need to get tested for this coronavirus.

Modern times are indeed equipped with super computer-generated genetic knowledge, to create better medical tools, to combat a novel virus. That hopefully lifts most of us out of grim health experiences.

Eventually.

Until cutting-edge medical advances emerge, and get successfully distributed, this Global Week Ahead narrative must update another term. Its provenance emerges from ancient times, too: No man’s land.

No man's land is land that is unoccupied or is under dispute between parties; who leave it unoccupied due to fear or uncertainty.

The term was originally used to define a contested territory or a dumping ground for refuse between fiefdoms.

In modern times, it is commonly associated with World War I. The term described the area of land between two enemy trench systems, which neither side wished to cross nor seize, due to fear of being attacked by the enemy in the process.

The Spanish Flu pandemic of 1918, by the way, heavily depended on human-to-human transmission thru tight-packed soldiers fighting in the trenches of WWI.

The term is also used to refer to ambiguity. An anomalous, or indefinite area, in regards to an application, situation, or jurisdiction.

Today, economists everywhere are kind of like sentries, hidden inside various WWI trenches. They survey the same bleak, empty business landscape.

Perhaps we are in need of a modern update? Is “no person’s land” better?

Enough with historical references!

Across this Global Week Ahead, a broad range of macro prints — from U.S. home buying surveys, to more globally-sensitive manufacturing PMI surveys, and Friday’s U.S. nonfarm payroll employment data — view a bleak business scene.

    •    Macro-data will measure how much the first weeks of the coronavirus shutdown hit U.S. and global economies. Remember, this is already priced into stocks.
    •    Regardless of entering data, expect stock market turbulence everywhere to remain high. The VIX options index rested at a high 65 entering the week.

Yet volatile benchmark U.S. stock market index moves last week were to the upside.

The S&P 500, by last Thursday, had soared +20% intraday off its Monday low, before giving back some gains late in Friday trading. Why be long thru exponential growth in a coronavirus weekend? Three days spells a doubling of cases from already big case numbers.

Across last week, the S&P 500 was up +10.3% at 2,541.

“Fair value” on the S&P 500 remains anybody’s guess.

Here are Reuters’ five world market themes, re-ordered for equity traders—

(1) The first quarter of 2020 is over…

Few will regret the end of the first 2020 quarter.

Fears of a U.S.-Iran war gave way to the coronavirus pandemic which JPMorgan reckons will have pushed the world economy into a 12% contraction over January to March. The quarter saw the most brutal global equity collapse since the Great Depression, exacerbated by a -60% oil price slump.

April may not bring much relief, with coronavirus still spreading rapidly and keeping large parts of the global economy shuttered. Banks have rushed to slash Q2 forecasts too, so expect more turbulence on financial markets.

The cavalry has arrived though. G20 governments have promised a $5 trillion revival effort, major central banks have slashed rates and restarted asset purchases. Markets have bounced big and may actually end Q1 on a high.

What we need now is to see infection rates peaking, and that will show whether April falls, or if it’s indeed time for spring.

(2) We get a lousy non-farm payroll number on Friday

Through years of stubbornly low economic growth and inflation, the brightest spot was the U.S. labor market, with unemployment reaching half-century lows.

Coronavirus may have ended that boom.

With infections surging, cities in lockdown, businesses donning shutters and most travel on ice, staff layoffs are likely to mushroom. That showed up in the number of Americans filing unemployment benefit claims last week, which hit a record of more than 3 million. Economists polled by Reuters had forecast claims would rise to 1 million, though some estimates were as high as 4 million.

Now the wait is on for Friday’s non-farm payroll figures that will offer a snapshot of the jobs picture over March. The government’s unprecedented $2 trillion fiscal expansion package includes a $500 billion fund to help hard-hit industries and a comparable amount to fund direct payments of up to $3,000 apiece to U.S. families.

Economists expect the payroll data to show a loss of -293,000 jobs — the largest monthly drop since July 2009. A significant overshoot of that and the $2 trillion stimulus approved by Congress could suddenly start to look inadequate.

(3) China is open for business, while the world is shut down

The world’s factory is re-opening, but the market is closed and the shoppers are gone.

China’s social isolation policies appear to have contained the coronavirus at home, allowing work and travel to resume. But major economic damage may be yet to come. With infections climbing exponentially in the United States, Europe and the other markets China exports to, and with supply chains in disarray, China is getting neither the imported components it needs nor demand for its products.

Already Chinese factories’ Jan-Feb profits have hit their lowest in a decade and upcoming manufacturing surveys will very likely reveal more pain. And just like everywhere else, job losses are mounting up, regardless of how many cheap loans are being offered to businesses.

Expectations are now for the economy to contract this quarter, but many economists reckon 2020 growth will be around 2% — a third of the “around 6%” authorities target.

(4) Thank a European Central Bank bond-buying surge. Now, what of EU leaders?

The European Central Bank (ECB) has done its bit to tackle the virus damage, having massively expanded asset purchases, agreed to more flexibility on the share of bonds it buys from each country and buffered borrowing costs for weaker Eurozone states such as Italy.

Now it’s up to European Union leaders to come together.

So far there is no united front: they’ve failed to agree on the scale of support for economies ravaged by the outbreak. The ECB’s aggressive action gives them some breathing space but, as of now, politicians are wrangling over setting up a credit line worth some 2% of annual output from the Euro-area bailout fund.

Many European governments urge the issuance of a joint debt instrument to face a crisis which Goldman Sachs economists estimate may shrink the euro economy by 9% this year. But Germany and some others oppose that. At stake, says France’s Emmanuel Macron, is the survival of the European project.

The crisis, for sure, is far from over.

(5) Few have any hope for emerging markets in a pandemic

It’s been a tough time for riskier assets in recent weeks, including emerging market stocks, bonds and currencies.

But few have felt the pain as much as frontier markets, a subset of smaller and often riskier emerging economies.

Many of those frontier economies are in Africa, and are suffering from a toxic combination of tumbling oil and commodity prices, the prospect of the global economy tumbling into recession and weakening currencies, which will make servicing external debt ever-more expensive.

Oil-producing countries like Angola, Ghana, Gabon and Nigeria have seen their dollar-denominated debt drop sharply, with yields of some issues shooting above 20%, indicating soaring borrowing costs. Many countries on the continent lack the financial firepower or foreign currency reserves needed to combat the coronavirus and prop up their economies, with healthcare systems already under strain.

The World Bank and International Monetary Fund (IMF) on Wednesday urged official bilateral creditors to provide immediate debt relief to the world’s poorest countries as they grapple with the human and economic consequences of the pandemic.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic,” expressing concern about Africa in particular. Many hope that the acknowledgement of the need to bolster global financial safety nets and national health systems will translate into action.

Top Zacks #1 Rank Stocks

America Movil SAB: This Mexican wireless stock is beaten down to $12 a share. That leaves it with a $40.2B market cap. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of A.

Yes. Emerging markets are toast. This is a value stock for a reason. Someday this will change.

My timing guess: the ‘bend the curve’ consensus will get surprised by something else developing.

eBay:This is a $30 stock. That delivers a $24B market cap. I see a C for Zacks Value, Growth, and Momentum.

Not sure what to make of an Internet-Commerce exchange stock like this in a pandemic. The market drove the share price down to its lows.

From here, we shall see.

Cardinal Health: This is $44 stock with a market cap of $12.9B. They provide Medical-Dental supplies. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of A.  All metrics look stellar. That’s probably too easy.

This stock, likely nearly all U.S. stocks, got beaten down in the March panic. It went from $60 a share in late February to $44.

Where from here? 2020 earnings were supposed to be $5.34 a share, and 2021 earnings were supposed to be $5.57 a share. The EPS numbers offer a stellar 8.3 forward 12M P/E ratio, if you believe there will be no cuts to earnings.

Yes. Earnings estimates will be cut. But bulls do have a case: too-deep pessimism.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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