The Zacks Analyst Blog Highlights: Delta Air Lines, Banco Bradesco, CVR Refining, CVR Energy and Diamond Foods
For Immediate Release
Chicago, IL – June 04, 2014 – 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 the Delta Air Lines Inc. (DAL-Free Report), Banco Bradesco S.A. (BBD-Free Report), CVR Refining, LP (CVRR-Free Report), CVR Energy, Inc. (CVI-Free Report) and Diamond Foods, Inc. (DMND-Free Report).
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Here are highlights from Tuesday’s Analyst Blog:
‘Sell in May’ Flops: 3 Value Plays for June
The saying ‘Sell in May and Go Away’ was not applicable this year. In May, benchmarks recorded their best monthly gains since February. The S&P 500 hit new highs on certain occasions, proving investors’ reluctance to follow the age-old adage of selling in May.
The summer looks a bright one so far, providing handsome returns to investors who decided not to follow the cliché. The S&P 500 gained 2.1% in May. It also hit a high on the last trading day of the month, the fourteenth time it notched an all-time high this year. The Dow and the Nasdaq gained 0.8% and 3.1%, respectively. The Dow too closed at a record high on May 30.
For investors who may have missed the bandwagon, or who may be apprehensive to enter the markets at such highs, we have 3 value stocks that are most likely to provide handsome returns.
Positives Outweigh Negatives in May
Benchmarks finished mostly lower for the first two weeks, dragged down by intense selling pressure in Internet and small-cap stocks. Also, selloffs in utilities and energy sectors had a negative impact on the benchmarks.
From May 1 to May 16, the S&P 500 had lost 0.3%. However, things reversed in the second half as S&P 500 scored gains of 2.04% from May 19 to May 30.
Among the positives, gains in small-cap and high-growth stocks drove benchmarks higher for the month. Additionally, gains in consumer discretionary and energy stocks helped benchmarks finish in the green. The Nasdaq was boosted primarily by gains in biotech stocks.
Separately, Federal Open Market Committee’s (:FOMC) indication that central bank will remain flexible when it comes to raising short term interest rates was a positive. Fed Chairwoman Janet Yellen’s indication to keep the key lending rates low, Russian President Vladimir Putin’s willingness to discuss measures to ease the Ukrainian crisis and dovish comments from ECB President Mario Draghi were also cheered.
Additionally, an upward revision of March’s retail sales data, encouraging small-business sentiment, upbeat services sector data, increase in ISM Services Index and better-than-expected initial claims numbers helped the benchmarks move north.
Outlook for June
Most reports released last month indicate that growth will soon pick up, reversing this month’s decline. According to some estimates GDP growth in the second quarter could be at 4% or even higher. However, consensus estimates indicate growth of at least 3% or more. The pace of growth is expected to accelerate over the second half of the year and this trend is expected to continue. Benchmarks’ progress into record territory reflects this inherent optimism of the U.S. economic outlook.
3 Value Picks for June
The opportunity is not lost yet for investors to benefit from the bullish trend. Investors were in no mood to sell in May and there are some promising stocks that investors can buy in June. These stocks are great value picks, as despite decent year-to-date return and Zacks Rank #1 (Strong Buy), their Price/Book is below 3 and has Price/Earnings ratio lower than 15. They also have current return on equity above 15%.
Delta Air Lines Inc. (DAL-Free Report) is the second largest U.S. airline and provides scheduled air transportation for passengers and cargo throughout the U.S., and around the world. Delta has also established a large Latin American presence in this decade. For 2014, Delta is committed to improve operational performance, improve margins and make balanced capital deployment to increase shareholder returns. The company lowered its net debt to $9.1 billion at the end of first quarter 2014, and is planning to lower it further to $7 billion in the next two years.
Price/Book = 2.91
Price/Earnings = 13.46
Return on Equity = 52.08%
Year-to-Date Return = 45.3%
Banco Bradesco S.A. (BBD-Free Report) is a Brazil-based bank offering a wide range of financial products and services targeted at individuals as well as corporate customers. Its range of operations includes investment and international banking. The bank operates within the country as well as in foreign nations and has several subsidiary companies. The company reported earnings surprise of 8.82% in the latest reported quarter and has current year growth estimate of 20.7%.
Price/Book = 1.87
Price/Earnings = 9.55
Return on Equity = 17.71%
Year-to-Date Return = 11.3%
CVR Refining, LP (CVRR-Free Report) is engaged in the refining of petroleum primarily in the United States. It has refining and related logistics assets that operate in the mid-continent region. It is a subsidiary of CVR Energy, Inc. (CVI-Free Report). This security in the petroleum refining space is seeing solid earnings estimate revision activity as well. Over the past month, current quarter estimates have risen from $1.00 per share to $1.17 per share, while current year estimates have risen from $3.40 per share to $4.49 per share.
Price/Book = 2.30
Price/Earnings = 5.96
Return on Equity = 35.01%
Year-to-Date Return = 18.4%
Is Diamond Foods (DMND) Expected to Miss?
Diamond Foods, Inc. (DMND-Free Report), a specialty food company focused on processing, marketing and distribution of snack products and culinary, ingredient and in-shell nuts, is slated to report its third-quarter fiscal 2014 results on Jun 5, 2014. In the last quarter, it posted a positive surprise of 12.5%. Let’s see how things are shaping up for this announcement.
Factors Influencing the Quarter
Diamond Foods is progressing well with its planned cost containment endeavors and operational initiatives, which has helped it to post better-than-expected second-quarter fiscal 2014 bottom-line results. Moreover, we expect the company’s future results to exhibit more sustained growth of its brands due to product innovation and differentiation as well as an improved cost structure. However, we cannot ignore the near-term headwinds such as challenges related to procuring walnut supplies and mending ties with growers. Furthermore, we remain skeptical about the company’s performance going forward due to its highly leveraged balance sheet.
Earnings Whispers?
Our proven model does not conclusively show that Diamond Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 to surpass earnings estimates. However, this is not the case here, as you will see below:
Zero Zacks ESP: ESP (Expected Surprise Prediction) for Diamond Foods is 0.00%. This is because the Most Accurate estimate stands at 16 cents per share, which is in line with the Zacks Consensus Estimate.
Zacks Rank #4 (Sell): Diamond Foods’ Zacks Rank #4 when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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