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SOURCE Zacks Investment Research, Inc.
CHICAGO, Feb. 18, 2014 /PRNewswire/ -- Zacks Equity Research highlights Paragon Shipping (Nasdaq:PRGN-Free Report) as the Bull of the Day and Best Buy (NYSE:BBY-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onCisco Systems (Nasdaq:CSCO-Free Report), Procter & Gamble Company (NYSE:PG-Free Report) and McDonald's Corp. (NYSE:MCD-Free Report).
Here is a synopsis of all five stocks:
I'm a big fan anything that could be viewed as a "Leading indicator." Something that can give me an inside edge that the rest of the market doesn't have. I know this goes against that whole efficient market thesis but I never liked that thing anyway. Here at Zacks our entire life centers around a ranking system we see as a leading indicator. And rightfully so I believe. 26% average annual return for our Zacks Rank #1 (Strong Buy) stocks versus the market's average just under 10%. The proof is in the pudding.
Now when I get to combine that edge with another leading indicator like the Baltic Dry Index and then put technical analysis on top of that, I feel like I'm fishing with dynamite. The Baltic Dry Index calculates the cost to ship raw materials in bulk around the world. Basically it's a daily pulse of the market for shipping and shows us how much dry bulk shippers are getting paid to do business. As a result, it is a leading indicator for the industry.
Quick scrub on our website and you'll find a host of Zacks Rank #1 (Strong Buy) stocks in the dry bulk shipping industry. Today I picked Paragon Shipping (Nasdaq:PRGN-Free Report) as our Bull of the Day. Look at how the Baltic Dry Index has increased since the beginning of 2013. From a low near 700 the index tripled before coming down early this year. PRGN stock has moved in a similar direction, gaining momentum as price rose from $3 to over $7.
How do you recover and turn around your business when your once mighty retail locations have been downgraded to show rooms for your largest competitor? A competitor ran by a genius whose eyeballs play chess against each other while he sleeps. That's the mountain electronic retailer Best Buy (NYSE:BBY-Free Report) is attempting to climb in the face of stiff price competition from the likes of Amazon.
The analysts covering the stock have been lowering the bar quicker than double shots at a speed dating event. Nineteen analysts revised earnings to the downside both for the current year and next year. This helped drop EPS consensus from $2.46 to $1.85 for this year and from $2.82 to $2.23 for next year. Unfortunately for Best Buy this also helped drop the stock down to a Zacks Rank #5 (Strong Sell). A very frustrating sequence of events for a company that worked hard last year to get back on track.
You could argue that last year's positive earnings revisions helped the stock have the great year it did. Now we are seeing the opposite effect. This could kick off another steep downtrend like the one the stock was entrenched in from April 2010 to the end of 2012.
Dow 30 Stock Roundup
Investors refrained from placing big bets on Monday ahead of Federal Reserve Chair Janet Yellen's first testimony before lawmakers. As a result, the Dow closed almost at the same level at which it opened the trading session, adding a meager 0.1%.
Yellen's pledge to keep interest rates low led benchmarks sharply higher on Tuesday. The blue chip soared, gaining 1.2%. The day's gains extended benchmarks' bullish run into their fourth day, the longest one for the year.
The rally ended on Wednesday, with the Dow losing 0.2%. Guidance cuts and lower profits from corporates caused the decline. However, some encouraging corporate results too helped restrict losses. But the blue chip index returned to its winning ways on Thursday. Investors overlooked weak consumer and employment data to focus on strong earnings numbers.
Components that Moved the Index
Cisco Systems (Nasdaq:CSCO-Free Report) reported second-quarter fiscal 2014 earnings of 42 cents a share, beating the Zacks Consensus Estimate by a penny. Revenues decreased 7.8% year over year and 7.4% sequentially to $11.2 billion. For the third quarter of fiscal 2014, Cisco expects revenues to decrease in the range of 6% to 8% on a year-over-year basis, while Zacks Consensus revenue estimate is pegged at $11.3 billion.
Non-GAAP gross margin is expected to be 61%–62% and non-GAAP operating margin is expected to be 26.5%–27.5% of revenues. The company expects a non-GAAP tax rate of 21%, yielding non-GAAP earnings per share of 47 to 49 cents.
The Procter & Gamble Company (NYSE:PG-Free Report) recently reduced its fiscal 2014 sales and earnings forecasts to reflect the impact of higher-than-expected currency headwinds. Core earnings per share are expected to grow in the range of 3%–5% in fiscal 2014 down from 5%–7% to reflect currency rate fluctuations in Venezuela and recent currency devaluations by several other developing countries.
Currency headwinds are now expected to hurt 2014 earnings by 9%, higher than 7% as expected earlier. On a constant currency basis, core earnings are still expected to grow 12%–14%.
McDonald's Corp. (NYSE:MCD-Free Report) posted better-than-expected comparable sales (comps) for the month of Jan 2014. At its fourth quarter earnings call, the company guided flat year over year comps for the month of January. However, comps increased 1.2% in the month. The increase was much better than a decline of 1.9% in the year-ago period.
The improved comps reflect solid performance in the international markets (Europe and Asia/Pacific, Middle East and Africa [APMEA]), partially offset by a poor performance in the U.S.
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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Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
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