Multi-Color, Quidel,S PDR Gold Trust, Agnico Eagle Mines and Pretium Resources Properties highlighted as Zacks Bull and Bear of the Day
CHICAGO, June 26, 2014 /PRNewswire/ -- Zacks Equity Research highlights Multi-Color Corporation (Nasdaq: LABL-Free Report) as the Bull of the Day and Quidel Corporation (Nasdaq: QDEL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onSPDR Gold Trust (AMEX: GLD-Free Report), Agnico Eagle Mines (NYSE: AEM-Free Report) and Pretium Resources (NYSE: PVG-Free Report).
Here is a synopsis of all five stocks:
Multi-Color Corporation (Nasdaq: LABL-Free Report) recently delivered better-than-expected estimates for its fiscal 2014 fourth quarter as both revenue and EPS came in above the Zacks Consensus Estimate.
This prompted analysts to revise their estimates meaningfully higher for both fiscal 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).
While shares of Multi-Color Corporation have risen since the Q4 report, there seems to be plenty of upside potential left given reasonable valuation metrics and strong growth projections.
Multi-Color Corporation provides various labels for brands that make home and personal care, wine and spirit, food and beverage, healthcare and specialty consumer products.
Fourth Quarter Results
Multi-Color Corporation reported better-than-expected results for the fourth quarter of its fiscal 2014 on June 13. Adjusted earnings per share came in at 68 cents, beating the Zacks Consensus Estimate of 60 cents. It was a 21% increase over the same quarter last year.
Net revenues rose 15% year-over-year to $193.5 million, which was ahead of the consensus of $192.0 million. This revenue increase was driven by acquisitions. Organic revenue saw a 3% increase in volume, which was offset by an unfavorable impact of sales mix and pricing, and foreign currency headwinds.
Adjusted gross profit as a percentage of net revenue declined slightly to 20.3%. Adjusted selling, general and administrative expenses increased slightly, from 7.9% to 8.1% of net revenues. The lower gross margin and higher S,G&A expenses led to a 30 basis point decline in the adjusted operating margin to 12.3%; however, adjusted operating income was still up 12% year-over-year.
Following the Q4 earnings beat, analysts revised their estimates meaningfully higher for both fiscal 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
The 2015 Zacks Consensus Estimate is now $2.55, up from $2.35 before the Q4 report. The 2016 consensus is currently $2.85, up from $2.65 over the same period.
These estimates correspond with 19% EPS growth in fiscal 2015 and 12% growth in 2016.
The valuation picture looks reasonable for Multi-Color Corporation. Shares trade around 15x 12-month forward earnings, which is a discount to the industry median of 18x.
The stock also sports a free cash flow yield around 8%.
The Bottom Line
With strong earnings momentum, solid growth projections and reasonable valuation, shares of Multi-Color Corporation offer attractive upside potential.
It is a Zacks Rank #5 (Strong Sell).
Although shares have sold off so far this year, the stock still doesn't like a bargain at more than 50x next year's earnings and 40x cash flow.
Quidel Corporation develops products that aid in the detection and diagnosis of many critical diseases and conditions, including, among others, influenza, respiratory syncytial virus, Strep A, herpes, pregnancy, thyroid disease and fecal occult blood.
First Quarter Results
Quidel reported its first quarter results on April 23. Adjusted earnings per share (which includes stock-based compensation) came in at 4 cents, missing the Zacks Consensus Estimate of 29 cents by a wide margin. It was also down significantly from adjusted EPS of 45 cents reported in the same quarter last year.
Total revenues plunged 25% year-over-year to $46.7 million. This was also well below the consensus of $63.0 million. Infectious disease net product sales, which accounted for 77% of total revenue in the quarter, fell 27%, driven by a decline in QuickVue Influenza product sales. This was partially offset by growth in Sofia Influenza revenue.
Following the big Q1 miss, analysts revised their estimates significantly lower for both 2014 and 2015. This sent the stock to a Zacks Rank #5 (Strong Sell).
You can see the dramatic drop in estimates in the company's "Price & Consensus" chart:
The 2014 Zacks Consensus Estimate is now -$0.11, down from +$0.36 before the Q1 report. The 2015 consensus has fallen from +$0.67 to +$0.42 over the same period.
Shares of Quidel have fallen considerably in 2014 but still doesn't look cheap. The stock trades at 148x 12-month forward earnings and 53x the current 2015 consensus estimate.
Its price to cash flow ratio is a bit more reasonable at 41x but still not anywhere near value territory.
The Bottom Line
With falling estimates and premium valuation, investors should consider avoiding this stock for now.
Gold Stocks To Buy Now
I could probably give you several arguments for why gold is on the move right now. Negative interest rates in the Euro Area. Continued bond purchases by the Fed. Japan's application of Abenomics. The Chinese shadow banking system. Insert theory here. It's fun to sit back and theorize why the base metal is on the move recently, but it's even more fun to sit back and watch your investment account's value go up day after day. So if you're all with me, let's go have some fun.
Gold Futures on the Move
Today, gold futures traded in the $1320s for most of the session. This is a far cry from where we were trading just three short weeks ago right about the $1250s. Looking back to the all-time highs skews your perspective of the move we are in now. I'm not here to make an argument for $1800 an ounce. Being a little more conservative here can still allow us to make some big bucks betting on a much smaller move.
The last time gold approached $1400 was March 2014. That marked the end of a run for gold that began the last day of 2013 with prices below $1200. The run took three short months and gold moved over $200 from the start. Using this crude and somewhat elementary observation and applying it to our current situation that puts gold close to $1500 an ounce by September.
But let's dig a little further into the technical picture. When gold bottomed to end 2013, the price bounced off the same support level where it caught a bid in July 2013. The run to the upside stalled shy of $1400 and then pulled back for three months until it bottomed out the beginning of June 2014. So you have a series of lower highs on this drop down.
But now, coupled with the lower highs we have hit a higher low. The June 2014 support just below $1250 came in $50 higher than the historical support at the 2013 lows. In addition, the bounce came while the stochastic indicator was well oversold and had a bullish crossover. Gold is still riding this bullish crossover higher and now is testing the April 2014 highs. A break of that level puts $1400 in our sights. With gold firmly above the 25 day moving average shifted by 5 days there is an established bullish trend.
There are several ways to play the gold trade. Obviously you could go out and buy gold futures. Another idea is to buy the gold ETF, SPDR Gold Trust (AMEX: GLD-Free Report) which tracks the price of gold. I offer another way, buying gold mining stocks. Gold prices increasing should be good for the gold miners. But which gold miners should you take a look at? How about miners that have had positive earnings estimate revisions and have recently surprised earnings? In other words, use the Zacks Rank to find a few nuggets.
Agnico is a Zacks Rank #1(Strong Buy). Last quarter, the company reported record production of 366,421 ounces of gold with total cash costs of $537 per ounce. This strong Q1 cash flow allowed Agnico to repay $80 million of its revolving credit facility. This year the company expects to exceed the upper end of production guidance range and do better than the lower end of the cash cost guidance range.
Nine analysts have raised their earnings estimates for the current year, causing consensus to rise from 60 cents to $1.17 per share. Next year's picture looks equally as impressive with eight analysts raising their numbers, bringing consensus up from 78 cents to $1.22. The upward revisions come on the heels of a quarter where AEM beat estimates by 35 cents per share, reporting 60 cents versus expectations for 25 cents.
AEM seems to be breakout out after jumping through its 52 week high last week. Since mid-April the stock has run up from under $27 per share to nearly $38. Now the stochastics are in an overbought position as the stock has gapped up to new highs. Waiting for a small pullback may be the way to play AEM as the gap last week may be retested.
British Columbia-based gold miner Pretium has been the subject of takeover rumors recently. The Zacks Rank #2 (Buy) has hit it big with its Brucejack project. Some analysts believe the project could produce over 300,000 ounces of gold per year on average at a cash cost of $508 per ounce. It's this high-grade gold resource that has Pretium in the sites of other miners as a takeover target.
PVG has surprised analyst estimates to the upside three of the last four quarters, albeit by an average of 1 cent per share. Current estimates call for a loss of about 13 cents this year compared to previous estimates of a 16 cent loss. Just in the last week an analyst has come out and raised current year and next year estimates.
While this stock may have been off your radar, it's certainly on someone's map. In late November 2013 PVG reached a low of $2.70. Since then it has nearly tripled to today's price just a shade below $8. It's trading well above its 25 day moving average shifted by 5 days (25x5) which sits down at $7. Breaking out above $7.50 was a key technical milestone and now the August high just over $10 becomes the next line in the sand.
Gold is on the move again and investors looking to cash in on the trend can look to the miners for ideas on how to make money. These two stocks offer up some great upside potential should the base metal continue to run higher. Both have good technical pictures and are in the good graces of our Zacks Rank.
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