Gilead Sciences, Craft Brew Alliance, Capital One Financial, HSBC Holdings and Encore Capital Group highlighted as Zacks Bull and Bear of the Day
CHICAGO, Sept. 6, 2013 /PRNewswire/ -- Zacks Equity Research highlights Gilead Sciences (Nasdaq: GILD-Free Report) as the Bull of the Day and Craft Brew Alliance (Nasdaq: BREW-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheCapital One Financial Corp. (NYSE: COF-Free Report), HSBC Holdings plc (NYSE: HBC-Free Report) and Encore Capital Group, Inc. (Nasdaq: ECPG-Free Report).
Here is a synopsis of all five stocks:
With the market facing some choppiness as of late, many investors are taking another look at some of the strong sectors that have been leading the market for much of 2013. One such segment is undoubtedly biotechnology, as this key corner of the healthcare world has been a star performer for much of the year.
After all, many biotechnology ETFs have added more than 35% so far this year—compared to a gain of close to 15% for the S&P 500—and remain well positioned for further gains to close out 2013 as well.
Yet while a broad sector approach may be one way to target this impressive corner of the market, looking solely at some of the large caps in the space may also be an interesting play. That is because these large biotech firms have actually beaten out their broader ETF counterparts by pretty wide margins too, suggesting that these large cap firms are leading the way in the biotechnology world.
One such company that fits this bill is Gilead Sciences (Nasdaq: GILD-Free Report), a massive nearly $100 billion market cap behemoth in the biotech space. The firm has already added more than 60% so far this year, and based on some of GILD's fundamentals, the company could definitely see more gains to close out 2013 as well.
Gilead is a California-based biopharmaceutical company that seeks to develop and commercialize therapies for life threatening diseases. The firm currently has a lineup of products for HIV, liver disease, the flu, respiratory diseases, among others.
Furthermore, unlike a number of big pharma companies, Gilead has a solid product pipeline, as a number of drugs are in Phase III, while several more are in Phase II. Combine this with Gilead's track record of buying out promising small caps, and the firm could have a long term recipe for success.
Craft beer is taking the U.S. by storm. Many beer drinkers are growing tired of brews from giants like Anheuser-Buschor MolsonCoorsand are instead looking at smaller, so-called 'craft brewers' which produce less than six million US beer barrels a year.
This trend has led to huge stock price increases for the few craft brewer stocks out there on the market. In fact, the tiny Craft Brew Alliance (Nasdaq: BREW-Free Report)has seen its price soar by more than 60% so far this year, easily crushing many of its larger counterparts in the process.
While this Oregon-based brewer may be playing on a strong trend, there is plenty of reason to believe that it cannot last and that trouble is ahead for this stock. This is especially apparent when investors consider the recent earnings history of the firm, and its near term estimate outlook.
While the company does look to have strong double digit growth for the current year, analysts have been slashing their estimates for the full year and next year earnings. Estimates for full year earnings have fallen by more than 15% in the past month while a 10% decline has been seen in the same time frame for next year's earnings estimates.
If that wasn't enough, the company also has a horrendous track record when it comes to beating earnings estimates. Three of the last four quarters saw misses of at least 25%, while an average surprise of -115% was seen over these last four reports.
The firm isn't exactly a value at these levels either, as the PE comes in at just under 77, while the PEG is squeaks in below 3.9. These figures suggest that a lot is riding on the company's growth prospects, but with analysts cutting their estimates, it may be tough for BREW to live up to the hype.
Capital One Downgraded to Neutral
On Sep 3, 2013, we downgraded our long-term recommendation on Capital One Financial Corp. (NYSE: COF-Free Report) to Neutral from Outperform due to the persistent increase in operating expenses. Though the company's second-quarter results were positive, we are concerned about limited margin growth, exposure to risky assets, and regulatory pressures.
Why the Downgrade? Increasing operating expenses remain the primary concern for Capital One. Though expense control initiatives have helped the company offset higher credit losses in the past few years, operating expense has still been continuously increasing.
Moreover, any considerable improvement in Capital One's credit quality seems unlikely in the near future, given the still sluggish economic recovery. While the credit performance of the commercial loan portfolio appears to be stabilizing, net charge-offs and nonperforming loans will likely fluctuate in the near term due to the present economic instability and acquisition of HSBC Holdings plc's (NYSE: HBC-Free Report) U.S. credit card business.
Nevertheless, Capital One reported robust second-quarter earnings which came ahead of the Zacks Consensus Estimate. Results were driven by enhanced top line, partially offset by a rise in operating expenses. Moreover, in May 2013, the company increased its dividend by 500% to $0.30 per share.
The Zacks Consensus Estimate for 2013 advanced 4.0% to $6.82 per share over the last 60 days. Further, for 2014, the Zacks Consensus Estimate increased 1.6% to $6.80 per share over the same time period. Capital One currently carries a Zacks Rank #3 (Hold).
Other Stocks Worth Considering
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