Zacks Bull and Bear of the Day Highlights: CBOE Holdings, Simpson Manufacturing, CA, Aspen Tech and Progress Software
For Immediate Release
Chicago, IL – May 7, 2013 – Zacks Equity Research highlights CBOE Holdings (CBOE) as the Bull of the Day and Simpson Manufacturing (SSD) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CA Inc. (CA), Aspen Tech Inc. (AZPN) and Progress Software (PRGS).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Although financials continue to lead the market higher, newer segments are taking the reins in Q2. In addition to smaller regional banking institutions, many investors are seeing solid performances out of firms in the exchange business, such as CBOE Holdings (CBOE).
While probably less famous than fellow Chicago-based exchange CME Group, CBOE has been soaring higher for much of 2013 as demand for listed options on securities remains strong. This is especially true in two of the company’s key products; options and futures on the CBOE Volatility Index as well as the S&P 500 Index.
Both of these benchmarks are widely followed by traders and investors alike, and the CBOE’s monopoly position on futures and options trading for these two indexes have been increasingly lucrative. In fact, trading in CBOE index options was up 28% from a year earlier in the recent quarterly release, and these index-based contracts now make up nearly 38% of total trades for the firm.
Given the firm’s nearly unassailable position in these key markets and the high investor demand for the index-based products, good days could continue to be ahead for the company. That is why many analysts have been raising their estimates for CBOE, helping to push the company to a top Zacks Rank of 1 or ‘Strong Buy’.
The current quarter estimate picture has been rising, while investors have also seen analysts bump up their current year and next year forecasts for the company as well. Furthermore, there has actually been total agreement on this front, as all new estimates in the past two months have been up with not a single one going lower.
While the construction market may be coming back to start 2013, not all companies have been able to ride the wave higher. In particular, investors have seen weakness in many names in the miscellaneous building and construction segment, such as Simpson Manufacturing (SSD).
Simpson Manufacturing makes a variety of fasteners, connectors, and adhesives that are key to many construction processes and thus seems like the perfect type of company to participate in a building segment recovery. However, this hasn’t been the case so far in 2013 as SSD has lost about 16% of its value so far this year.
The main catalyst for SSD’s slide has been its sluggish results on both an earnings and a revenue front. In the last quarterly report, revenues slid by over 2.6% from the year ago period while EPS missed the consensus and also represented a slump from the year ago time frame.
Thanks to this and a poor outlook, the analysts covering SSD have begun to drastically lower their expectations for the firm. In fact, all of the new estimates have been lower, with the consensus estimate trending south in all of the time periods that we cover.
Furthermore, the firm has a terrible track record when it reports earnings, as it has missed by a pretty wide margin in all four of the previous releases. In fact, a -10% miss for the 09/12 quarter was actually a ‘good’ one for the firm, as the average of the past four has been a miss of nearly -48%.
Latest Posts on the Zacks Analyst Blog:
CA Sets New 52-Week High
Shares of CA Inc. (CA) reached a new 52-week high of $27.58 on Friday, May 3, 2013 following the acquisition of Layer 7 technologies (Apr 2013).
The closing price of the memory-chip maker on May 3 was $27.73, above its previous 52-week high of $27.58. This marked a decent one-year return of about 15.1% and robust year-to-date return of about 23.2%. Average volume of shares traded over the last 30 days was 3.3 million.
CA delivered positive earnings surprises in the last four quarters with an average beat of 6.9%. This Zacks Rank #3 (Hold) company has a market cap of $12.7 billion and long-term expected earnings growth rate of 10.0%.
3Q13 Earnings Summary
CA Inc.(CA) reported third-quarter 2013 adjusted earnings per share (EPS) of 61 cents, ahead of the Zacks Consensus Estimate of 57 cents. Better cost management and decent Enterprise Business resulted in earnings growth.
CA generated cash flow from continuing operations of $566 million, up 43% on a reported basis. The improvement in cash flow can be attributed to a $178.0 million increase in cash collections, including a single installment payment of $150 million.
Management is positive about the increase in business volume. CA expects growth in non-GAAP earnings per share from continuing operations in the range of 6.0%–10.0%, amounting to $2.36 to $2.44 per share.
Layer 7 Acquistion
The acquisition of the API management company, Layer 7 technologies had positive impact on the business of the company. This has been the second big acquisition in the API management space for CA. This acquisition, would help the company securely enable strategic cloud environment, and would also accelerate service delivery which would in turn increase profitability by generating more revenue from the existing technology assets.
Recovery in Mainframe Business and Margin
CA is expected to benefit from the recovery in the Mainframe segment in fiscal year 2014. Over the years, the growth in the Mainframe market has had a significant impact on CA’s results. Moreover, during the Mainframe renewal process, the company upgrades the customer to a higher value product, thereby generating additional revenue for itself. Moreover, operating margin for the Enterprise Solutions business is expected to be in the range of 20%-plus in the coming year, relative to 8%-12% margins the business segment has produced over the past two-plus years. Moreover, the company is also taking cost reduction measures in the Enterprise Solutions.
Conclusion
We also expect growth in the Enterprise and Mainframe business of the company in the upcoming quarters.
Furthermore, CA has a history of reporting above expectations, with the last four quarters generating an average surprise of 6.87%. Although we do not predict any surprise in the upcoming quarter.
Other Stocks to Consider
Other stocks in the technology industry that are currently performing well and have solid visibility include Aspen Tech Inc. (AZPN) and Progress Software (PRGS) with a Zacks Rank # 1 (Strong Buy).
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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