Alaska Air Group, ArcelorMittal, Visa, MasterCard and Global Payments highlighted as Zacks Bull and Bear of the Day
CHICAGO, April 7, 2014 /PRNewswire/ -- Zacks Equity Research highlights Alaska Air Group (NYSE: ALK-Free Report) as the Bull of the Day and ArcelorMittal (NYSE: MT-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onVisa Inc. (NYSE: V-Free Report), MasterCard Inc. (NYSE: MA-Free Report) and Global Payments Inc (NYSE: GPN-Free Report).
Here is a synopsis of all five stocks:
The airline sector was looking pretty strong thanks to more fuel efficient planes, lower competition, and higher demand for air travel. However, many were worried that the recent batch of bad weather would ground this rally and send airline stocks lower.
This really hasn't been the case though, as many airline stocks have powered through the bad weather and easily beaten out the S&P 500 in the year-to-date time frame. In fact, several companies have put up gains in excess of 20% to kick-off 2014, shaking off the overall market's turbulence effortlessly.
One company sticks out in this continued airline stock rally though, as it has outgained many of its competitors in the time period, while it is generally overlooked as well. This stock, Alaska Air Group (NYSE: ALK-Free Report), has also avoided much of the bad weather thanks to its West Coast focus, and it could actually still be a great pick for investors in the near term.
Alaska Air Group, as you might guess from the name, has a big operation in Alaska, including a hub in Anchorage. The company also has heavy exposure in the Washington/Oregon area as well though, as the firm has hubs in Seattle (where it is actually headquartered) and Portland too.
ALK is also rapidly expanding to other markets as the airline is adding more than a dozen city pairs by the end of the summer. This looks to continue the solid momentum for the company which just reported March traffic figures that represented a 4% increase over last year's numbers, along with a record 88.1% of flights arriving on-time for Alaska Airlines' mainline division.
Even with news of a mini stimulus from China, events haven't been shaping up nicely for the steel industry. Demand for steel from key developed markets in North America and Europe haven't picked back up leading to a glut in production.
And since many steel companies have huge fixed costs, this continued slump in demand has hit the industry pretty hard. Some have looked to make back some profits on volume, but heavy competition has kept a lid on prices, leading to the current rough patch for the industry.
While a number of firms have been impacted by these trends a good barometer of the overall space is ArcelorMittal (NYSE: MT-Free Report) the world's largest steel producer when looking at sales. MT is actually up significantly over the past 52 weeks, but its record in 2014 has been quite poor as it is down about 6% in the year-to-date time frame as concerns have begun to build again over the industry.
MT is based in Luxembourg but it has a global reach, selling steel in more than 150 countries around the world. The firm is broken down into six divisions-- Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; AACIS; Distribution Solutions; and Mining—with a broad focus on producing a variety of finished and semi-finished steel products for customers.
The company, while holding up in the past 52 weeks, still hasn't recovered from the 2008 collapse, as shares are well below the peak set during the beginning of that year. The firm has also been posting horrendous numbers on the earnings front as well, suggesting that it is still working through some turbulence as it attempts to get back to profitability.
Russia Effect: Visa, Mastercard at Stake?
The U.S. sanctions on Russia led to the suspension of purchase payment services by Visa Inc. (NYSE: V-Free Report) and MasterCard Inc. (NYSE: MA-Free Report) in some of the approved banks in that country. While the suspension has been withdrawn, Russia has decided to have its own domestic payment system within six months to become more self-dependent in the future.
The Sanctions & Payment Suspension
Some Russian investors were sanctioned by the U.S. including co-owners of SMP Bank, Boris Rotenberg and Putin's elder brother Arkady Rotenburg over the Crimean issue. Following these sanctions, Visa and MasterCard had terminated the service of credit card purchasing payment for some of the authorized banks in Russia, including Bank Rossiya and SMP Bank. Yuri Kovalchuk, the largest stake holder of Bank Rossiya, also had his name in the list of sanctions.
As a result, clients of these banks faced troubles. However, the cash withdrawal service was not included within the suspensions.
How Russia is Getting Ready?
For a long time, the Russian government had been discussing about introducing an electronic payment card for their citizens to carry on government related transactions like payment of tax, pension, etc. Reportedly, apart from these services, the government now wants to include private purchase payment in this particular card.
How Tough Is the Competition?
Both Visa and MasterCard are the dominating force in the global payment services arena. Visa provides its payment services in more than 200 countries. Almost flawless Internet security service has made Visa a popular choice among consumers, merchants and large number of organizations.
MasterCard has upgraded itself from time to time in order to improve its electronic and Internet secured payment services. This has helped it to acquire a notable portion of global card market.
Recently, both the payment service companies have collaborated to form a new cross-industry group that would emphasize on the EMV chip technology adoption in the U.S. and concentrate on tokenization, point-to-point encryption and other online and mobile channel security-related requirements. This would further enhance their security services.
Is the Backup Plan That Strong?
First of all, Russian citizens traveling outside will face trouble to access the payment system in foreign lands without Visa and MasterCard. It is also a fact that Russians are not active credit card users. As reported by Euromonitor International, in the country which has a population of 143 million, only 30 million credit cards are being circulated. Comparatively, circulation of 192 million debit cards in Russia shows that they prefer debit cards.
Now, these two American card giants hold the lion's share of plastic card market in Russia. So it seems difficult for Russia's planned domestic payment service to compete against these card giants.
The Impact on Visa and MasterCard
Even if Russia succeeds with its plan and curbs the market share of these bellwethers in the country, they should easily offset the loss with the increasing global demand for their plastic cards.
Earnings Prospects of Visa and MasterCard
Although both Visa and MasterCard hold Zacks Rank #3 (Hold) at this moment, they have strong growth estimates. The current year earnings growth estimates for Visa and MasterCard stand at 18.6% and 19.8%, respectively, compared with the expected industry growth rate of 13.7%. Moreover, the long-term growth rates are expected to be 17.2% and 17.7% for Visa and MasterCard, respectively, compared with the expected industry growth rate of 15.4%.
Stock That Warrant a Look
It deals with the electronics transaction services for banks, consumers and other financial institutions, among others. It operates in two sections: North America Merchant Services and International Merchant Services
Currently, Global Payments holds a Zacks Rank #2 (Buy). It has a current year growth estimate of 12.20% compared to industry growth estimate of 13.7%. It also has a strong long-term growth estimate of 11.2%. The company has current year earnings estimate of $4.09.
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