Deutsche Bank, Target, ACE, Moody's and AmTrust Financial Services highlighted as Zacks Bull and Bear of the Day
CHICAGO, Oct. 17, 2013 /PRNewswire/ -- Zacks Equity Research highlights Deutsche Bank (NYSE: DB-Free Report) as the Bull of the Day and Target (NYSE: TGT -Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheACE Limited (NYSE: ACE-Free Report), Moody's Corp. (NYSE: MCO-Free Report) and AmTrust Financial Services, Inc. (Nasdaq: AFSI-Free Report).
Here is a synopsis of all five stocks:
Deutsche Bank (NYSE: DB-Free Report), Zacks Rank #1 (Strong Buy), is a global universal bank. The banking sector has faced the headwinds of regulation, credit retrenchment, and slow global economic growth in recent years, but the environment looks to be improving. Positive change may be in the air. Profit estimates are working higher in the face of inexpensive valuatioin and a friendly technical set up.
Analysts have lifted their outlook for 2013 and 2014 earnings sharply over the past thirty days. The Zacks Earnings per Share Consensus has increased $0.20 to $5.99 for 2013 and $0.31 to $6.91 for 2014.
The graphic displays a changing trend in earnings estimate revisions. Estimates had been declining from the financial crisis period, but now show signs of stabilizing. The stock price has followed the trend in revisions, and the shift upward is coming at a time when the company has had years to adjust to the credit landscape, and European economic growth displays signs of improvement.
The upward revision to earnings estimates has come despite the company warning of lower debt sales and trading revenue for the quarter in a September 25 press release. DB noted that equity sales and trading had performed well and other businesses were operating in line with expectations. Given the earnings estimate revisions, it looks like any weakness in debt sales and trading is being offset by other areas of operation.
Target (NYSE: TGT -Free Report), Zacks Rank #5 (Strong Sell), is one of the premier retailers operating in the U.S. and Canada, but has been tagged with falling earnings estimates in recent months. As a result, this big box retailer may be worth avoiding in front of its November 21st earnings release.
Earnings estimates have fallen:
Earnings estimates for the fiscal years 2014 and 2015 have been reduced materially over the past sixty days. The Zacks Consensus Earnings per Share Estimate has declined $0.43 to $3.88 for 2014 and $0.43 to $5.00 for 2015.
By comparison, Target's peers Wal-Mart - Zacks Rank #4, and Costco - Zacks Rank #3, have seen limited pressure on their earnings estimates. Wal-Mart's fiscal year 2014 EPS forecast has been reduced just $.01 to $5.20 and its 2015 estimate shaved $0.02 to $5.73 in the past sixty days. Likewise, Costco has seen its fiscal year 2014 and fiscal year 2015 Zacks Consensus Earnings per Share Estimates each sliced $.08 to $4.97 and $5.52 respectively.
Although Target's grocery business changes the mix of products toward lower margin items, it has seen its gross margin erode in recent quarters. Gross margin has declined from near 31.0% in 2011 to 30.2% recently. Analysts are projecting further weakness into the quarter ending January 2014.
ACE Ltd Upped to Strong Buy
Why the Upgrade?
ACE Limited has been witnessing rising earnings estimates. The Zacks Consensus estimate for 2013 moved north by 2% to $8.63 as 8 of 14 estimates were raised over the last 60 days.
In mid-September, Tunisian Ministry of Finance approved ACE's plans to establish a reinsurance operation in Tunisia. This go-ahead complements the company's effort to grow its business in the Middle East and North Africa. The company has also been leveraging its solid footprint in Asia and Latin America to capitalize on the opportunities in these markets.
ACE also increased the critical catastrophe limits to $30 million across all its North American retail and wholesale broker-distributed commercial property lines of business.
In September, Moody's Investors Service, a wing of Moody's Corp. (NYSE: MCO -Free Report) affirmed the insurance financial strength (IFS) ratings of ACE Seguradora S.A. (ACE Seguradora), a subsidiary of ACE Limited, at Baa1. Previously A. M. Best Co. assigned a financial strength rating of A (Excellent) and an issuer credit rating of "a" to ACE Seguros S.A. (ACE Seguros).
ACE Limited continues to benefit from improved commercial property & casualty pricing environment.
The company also enjoys a solid track record of paying regular dividends that also exhibits an increasing trend every year. Its dividend of 51 cents per share yields 2.16%
With respect to earnings performance, ACE Limited has a track record of delivering positive earnings surprises for 18 straight quarters. We expect ACE Limited to deliver another positive earnings surprise when it reports its third quarter results on Oct 23. This is because our proven model shows that the property and casualty insurer has the right combination of a positive Earnings ESP and Zacks Rank.
Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +6.05%. The Zacks
Consensus Estimate for the third quarter is pegged at $2.15, representing a year–over-year improvement of 6.9%.
The long-term expected earnings growth rate for this stock is 7.4% on expected sales growth of 7.7%.
Other Stocks to Consider
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