Magellan Midstream Partners, Jos. A. Bank, Triumph Group, United Technologies and Precision Castparts highlighted as Zacks Bull and Bear of the Day
CHICAGO, Aug. 19, 2013 /PRNewswire/ -- Zacks Equity Research highlights Magellan Midstream Partners (NYSE: MMP-Free Report) as the Bull of the Day and Jos. A. Bank (Nasdaq: JOSB-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on theTriumph Group, Inc. (NYSE: TGI-Free Report) United Technologies Corp. (NYSE: UTX-Free Report), Precision Castparts Corp. (NYSE: PCP-Free Report).
Here is a synopsis of all five stocks:
Magellan Midstream Partners (NYSE: MMP-Free Report), Zacks Rank #1 (Strong Buy), is a publically traded partnership which stores, transports, and distributes petroleum products. This stock is worth exploring given the political chaos in the Middle East, the hunt for yield in the face of rising treasury yields, and the North American energy boom. Further, Magellan is showing strong upward earnings revisions momentum.
The social unrest in Egypt and Syria has the chance of spilling into the broader Middle East and supporting a risk premium in the crude oil market. Investing in an energy based asset may help to insult your portfolio against geopolitical risk and higher energy prices. Moreover, the events in the Middle East put a spotlight on the importance of North American energy production and transport. Strong and growing U.S. energy activity is a national security issue.
Magellan has a deep history of distribution growth with 44 quarterly increases and a compounded annual growth rate in distribution of 12% between 2001 and Q1 2013. At the same time, it has an attractive distribution yield just below 4.0%. The company recently raised its fiscal year 2013 distributable cash flow by $50 mln to $630 mln.
Over the last 30 days, the 2013 Zacks Consensus Earnings per Share Estimate has risen 10% to $2.49, while the 2014 Zacks Consensus Earnings per Share Estimate has increased 5.5% to $2.66. In the past 30 days, estimates have been raised nine times for 2013 and ten times for 2014. There have been no estimate reductions. Magellan is worth exploring given its strong growth in earnings, healthy payout, and operation in a business with supportive macro fundamentals. You don't have to travel the earth to find a good investment prospect with Magellan.
Jos. A. Bank (Nasdaq: JOSB-Free Report), Zacks Rank #5 (Strong Sell), is an apparel retailer specializing in menswear. Although their clothes can help make a fashion statement, the stock is not likely to look good in your portfolio. On August 15th, the company guided its Q2 profit outlook lower. Earnings per share were seen somewhere between $0.49 and $0.53 compared to a Zacks Consensus Estimate of $0.66. In the press release, Jos. A. Bank noted that customers did not respond well to promotion and total sales declined 11% in the quarter.
The profit warning comes in the wake of a longer term downtrend in gross margin. Gross margin peaked at 62.93% in the April 2011 quarter and has since fallen to 57.78% in the April 2013 quarter. Margins have compressed to levels last seen in 2004.
Over the last ten quarters, the company has posted four positive earnings surprises and five negative earnings surprises meeting estimates one time. The inconsistent track record is unappealing for investors and highlights execution risk in a competitive industry. Earnings estimates have been steadily declining, and the downtrend is unlikely to stall given the company's recent announcement.
The stock is trading about 13.7 times expected 12 month forward earnings per share. This is about 1.0 above the ten year median. The stock is not cheap at a time when there are questions around the future earnings outlook.
Triumph Group to Buy General Donlee
Triumph Group, Inc. (NYSE: TGI-Free Report) has struck an agreement with General Donlee Canada Inc. (GDI.TO), as per which the former will acquire the latter for $110 million in cash. This amount will be utilized to acquire General Donlee's outstanding equity and retirement of its existing debt.
General Donlee is a leading manufacturer of flight critical complex machined components. The company's primary product lines include engine shafts, thrust links, rotorcraft masts and landing gear applications. The acquisition will improve the product capabilities of Triumph Group. Besides enhancing the relationship with the existing customers, the acquisition will further diversify the customer base.
Post acquisition, the acquired firm will be a part of Triumph Group's Aerospace Systems Group. Subject to customary closing conditions, the transaction is expected to be completed in the third quarter of fiscal year 2014. The company expects the transaction to add $60 million annually to the top line and be accretive to earnings immediately.
Currently, Triumph Group seems to be busy acquiring and adding value to its portfolio. Recently, the company completed the acquisition of the pump and engine control systems business of Goodrich Corporation from United Technologies Corp. (NYSE: UTX-Free Report). Prior to that, it took over Primus Composites from Precision Castparts Corp. (NYSE: PCP-Free Report) for an undisclosed amount.
Triumph Group's organic growth has also been reasonably strong based on the addition of products and services, expansion of operating capacity and marketing of a complete product portfolio. Last month, the company posted encouraging fiscal first quarter 2014, which surpassed the Zacks Consensus Estimate on the back of solid execution and lower costs. Specifically, Aerospace Systems revenue grew 56.2% year over year to $219.5 million.
However, we remain concerned about the uncertainty related to defense budgets as the demand for Triumph Group's military and defense products is largely tied to government defense spending. The company presently retains a short-term Zacks Rank #3 (Hold).
About the Bull and Bear of the Day
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.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on PCP - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.