CHICAGO, Jan. 24, 2014 /PRNewswire/ -- Zacks Equity Research highlights Herbalife (NYSE: HLF-Free Report) as the Bull of the Day and Magellan Health (Nasdaq: MGLN-Free Report)as the Bear of the Day. In addition, Zacks Equity Research provides analysis onBest Buy Co., Inc. (NYSE: BBY-Free Report), Wal-Mart Stores Inc. (NYSE: WMT-Free Report) and Sears Holdings Corp. (Nasdaq: SHLD-Free Report).
Here is a synopsis of all five stocks:
Herbalife (NYSE: HLF-Free Report) dropped more then 7 points or 10.3% yesterday, and just two weeks ago it was the Bull of the Day. Since there are new developments, I thought it would be a good idea to review why the stock holds a Zacks Rank of #1 (Strong Buy) and is again the Bull of the Day today.
Herbalife has topped the Zacks Consensus Estimate in each of the last 29 quarters. Bears will point to guidance being much lower than it should be, but at the end of the day, the analysts decided where they will put their estimates.
There is a similar precedent for this. Apple used to give guidance that was well below what would be expected for a company that continuously beats and then raises guidance. Then, as Tim Cook took over, the company removed that policy and gave a more "realistic" guidance to Wall Street. The shock to the system caused the stock to jump significantly higher.
This is an option for HLF as well.
Herbalife is a network marketing company that sells weight management, nutritional supplements, energy, sports and fitness, and personal care products worldwide. Herbalife offers its products through sales representatives, sales officers, and independent service providers. The company was founded in 1980 and is based in Grand Cayman, the Cayman Islands.
In a late-December 2011 conference, Bill Ackman disclosed that he was short approximately 20 million shares of Herbalife. The total short interest as of the end of December was approximately 37 million shares. Ackman asserts that the company is nothing short of a pyramid scheme and will end up at $0.00. To further substantiate this claim, Ackman needs the FTC to investigate the company and despite recent rumors and Freedom of Information Acts, there has been no such investigation.
Magellan Health (Nasdaq: MGLN-Free Report) has recently seen a big drop in 2014 Earnings Estimates which has pushed the stock to a Zacks Rank #5 (Strong Sell) and that has made it the Bear of the Day.
It is not that usual for a company to be a Zacks Rank #5 (Strong Sell) and have a string of six consecutive beats. Even more perplexing is the most recent beat, which was huge, yet the stock closed lower in the session following that report.
All of this calls for a deeper dive into this stock.
Magellan Health Services is the country ' s leading behavioral managed care organization. Its customers include health plans, corporations and government agencies.
2014 Estimates are just not as good and they have been moving in the other direction. In February, the 2014 Zacks Consensus Estimate was $4.28 and then fell to $3.35 in July and is now $2.57.
As bad as the fall in estimates is, the idea of severely decelerating earnings growth in the coming year is just not what investors want to see. This year over year decrease is a major component in the Zacks Rank algorithm.
Best Buy Down to Strong Sell
On Jan 22, 2014, Zacks Investment Research downgraded Best Buy Co., Inc. (NYSE: BBY-Free Report), the consumer electronics retailer, to a Zacks Rank #5 (Strong Sell). So far, in 2014, the stock has fallen roughly 36%.
Why the Downgrade?
Estimates for Best Buy have shown a downtrend since the company reported its holiday sales results.
Although the company made a remarkable turnaround in 2013 with the stock price rising over four fold, 2014 began on a soft note with the stock crashing 30% in a single day following dismal holiday sales data and the subsequent trimming of guidance, raising concerns over CEO Hubert Joly's ambitious restructuring strategy.
The company's sales dropped 2.6% year over year to $11,451 million for the nine weeks ended Jan 4, 2014, while comparable store sales (comps) dropped 0.8% over the same time frame. As per segments, sales at the domestic segment dipped 1.5% to $9,754 million from the prior-year period while comps fell 0.9%. The International segment's sales waned 8.1% to $1,697 million but comps nudged up 0.1%.
Best Buy held that intense promotional war, which characterized the holiday season, had significantly impacted its margins and thus compelled a downward revision in its operating margin guidance. The company had cut down prices, at the expense of profits, to compete better with peers such as Wal-Mart Stores Inc. (NYSE: WMT-Free Report) and Sears Holdings Corp. (Nasdaq: SHLD-Free Report).
This Minnesota-based retailer now expects the operating margin to shrink 175–185 basis points (bps) year over year during fourth-quarter fiscal 2014. Moreover, tight supply of key products, lower traffic and weakness in the mobile phones category contributed to the lower-than-expected sales.
The trimmed guidance triggered a downtrend in the Zacks Consensus Estimate, as analysts became less constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that plunged 24.8% to $1.85 per share for fiscal 2013 and roughly 20.9% to $2.23 per share for fiscal 2014 in the past 7 days.
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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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