CHICAGO, July 19, 2013 /PRNewswire/ -- Zacks Equity Research highlights Kinder Morgan Management (NYSE: KMR-Free Report) as the Bull of the Day and Mead Johnson (NYSE: MJN-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onthe Google (Nasdaq: GOOG-Free Report), Burger King Worldwide (NYSE: BKW-Free Report) and Berkshire Hathaway, Inc. (NYSE: BRK.B-Free Report).
Here is a synopsis of all five stocks:
Kinder Morgan Management (NYSE: KMR-Free Report), Zacks Rank #1 (Strong Buy), offers investors a way to participate in the North American energy revolution. It manages and controls the affairs of Kinder Morgan Energy Partners, Zacks Rank #3, which operates approximately 46,000 pipelines and 180 terminals dedicated to the transport of energy products.
Over the past four weeks, U.S. oil production rose 18.4% year over year to 7.35 mbd. Production has displayed solid growth in recent years and is up from the 5.0 to 5.5 mbd level in the mid 2000's. In its Annual Energy Outlook and under a favorable scenario analysis, the U.S. Energy Information Agency (EIA) projected that U.S. oil production could reach 10 mbd by 2030. Likewise, U.S. natural gas production could rise from 23.0 trln cubic feet in 2011 to as much as 36.1 trln cubic feet in 2035 with most of the gain occurring between 2011 and 2025.
Three earnings estimates for 2013 and 2014 have been raised in the past 30 days, while the 2013 and 2014 Zacks Consensus Estimate for earnings per share have worked higher over the same period. The 2013 Zacks Consensus EPS Estimate has risen $0.17 to $2.67, while the 2014 Zacks Consensus EPS Estimate has jumped $0.20 to $2.90. The price and consensus chart highlights the recent upswing in earnings estimates.
Mead Johnson, (NYSE: MJN-Free Report) Zacks Rank #5 (Strong Sell), is a maker of pediatric nutrition products. The company is known best for its baby formula products like Enfamil. Mead Johnson's share price performance has been starved by China's move to investigate price fixing in the Chinese baby formula market. The company and its competitors have been accused of breaching anti-monopoly laws.
In reaction to the probe, Mead Johnson has cut the price of its formulas in China by 7% to 15%. The price cuts took effect by July 16th. Its competitors have also reduced prices with Danone and Nestle reducing prices by 20% and 11% respectively. The reduced prices are expected to weigh on margins, and it could take some time for the company to enact productivity measures to offset the price drop.
The result of lower formula prices and margin pressure is a reduction in the earnings outlook. In the last 30 days, six 2013 and seven 2014 earnings per share estimates have been reduced. At the same time, the Zacks Consensus Estimates for 2013 and 2014 have declined $.06 to $3.23 and $0.18 to $3.52 respectively. The graphic showing the price of Mead Johnson and the trend in the consensus earnings estimate is provided below to highlight the downward pressure on earnings estimate revisions.
Google $1000 Will Have to Wait
I guess Google (Nasdaq: GOOG-Free Report) investors will have to wait awhile for that psychologically satisfying (and otherwise) $1000 per share; apparently many GOOG holders tend to like big, round O's. But such will not be the case following the Internet search king's earnings and revenue miss in its 2nd quarter: headline revenues of $14.1 billion in the quarter -- minus traffic acquisition costs (TAC) of roughly $3 billion -- brings total sales in the quarter to $11.1 billion, lower than our expected $11.3 billion.
Similarly, Google posted earnings per share of $9.56, but if you strip out costs related to employee stock options, that figure becomes $7.75 per share -- a clear miss from the Zacks Consensus Estimate of $9.04.
"Cost per click," a closely-watched measure of average ad pricing, was down 6%, and lower for the 7th straight quarter. Paid clicks were up 23%, but this was slightly lower than expected. That said, Google's Motorola Mobility segment made gains of nearly $1 billion in the quarter, and further usage of that company's many patents will likely play out over the coming quarters and years.
In the ongoing Google conference call, CEO Larry Page is giving updates on what's expected from Google in the coming quarters, including Google Glass, Moto X, etc. His testing has led to much excitement, he says (though if you've ever listened to Page on a Google conference call, "excitement" is clearly a relative term).
Burger King Upgraded to Strong Buy
On Jul 17, 2013, Zacks Investment Research upgraded Burger King Worldwide (NYSE: BKW-Free Report) to a Zacks Rank #1 (Strong Buy) on the basis of impressive changes made to its top management and its upbeat outlook for the ensuing quarters driven by innovative initiatives.
Why the Upgrade?
On Jun 7, 2013, Burger King declared the appointment of Daniel Schwartz as its new Chief Executive Officer (CEO). Schwartz took over the baton from the former CEO Bernardo Hees, now employed as the CEO of H.J. Heinz Company. In mid-February, 3G Capital and Warren Buffett's company, Berkshire Hathaway, Inc. (NYSE: BRK.B-Free Report) acquired Heinz.
Schwartz, previously the Chief Financial Officer in Burger Kings, has played a pivotal role in expanding the company's international operations. We believe that these change will speed up the company's growth worldwide, going ahead.
Burger King beat the Zacks Consensus Estimate in the past three out of four quarters and posted an average surprise of 32.48%. In the first quarter, earnings were 17 cents per share, in line with the Zacks Consensus Estimate but up 49% year over year.
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