Xoom, Ralph Lauren, Caterpillar, Deere and Joy Global highlighted as Zacks Bull and Bear of the Day
CHICAGO, June 13, 2014 /PRNewswire/ -- Zacks Equity Research highlights Xoom Corporation (Nasdaq: XOOM-Free Report) as the Bull of the Day and Ralph Lauren (NYSE: RL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar Inc. (NYSE: CAT-Free Report), Deere & Company (NYSE: DE-Free Report) and Joy Global Inc. (NYSE: JOY-Free Report).
Here is a synopsis of all five stocks:
Think of companies that changed their industries with disruptive technology. Certainly Apple, Google and Netflix immediately come to mind. And there are hundreds of tech entrepreneurs and their VC backers hoping they are running the next game-changing start-up.
A few smart people believe Xoom Corporation (Nasdaq: XOOM-Free Report) is a classic disrupter in the electronic money transfer business, ready to steal market share from Western Union. Xoom provides payment services which consist of cash pickup, bank deposits and home delivery, sending money online directly to bank accounts and receiving money in local currency or US dollars. The company offers services through xoom.com and walmart.com over the Internet, mobile devices or tablet.
One those smart folks who likes XOOM is Mario Cibelli, founder of the small cap investment firm Marathon Partners. His name has an odd ring to it, doesn't it? In fact, Cibelli, who was featured in the May 26 edition of Barron's, got his start in stock picking after college with Mario Gabelli of Gamco Investors. More on Cibelli in a moment.
Zacks Rank followers know this industry has been full of money with highly ranked stocks like Heartland Payment and Alliance Data Systems delivering doubling returns in the past 18-24 months. The bigger companies like Alliance Data, and Visa of course, have the enterprise business wrapped up where large-scale, robust technology is king.
The steady decline in shares of Ralph Lauren (NYSE: RL-Free Report) has had a single, constant precedent in 2014: steadily declining EPS estimates. Followers of the Zacks Rank know this because the stock has earned either a #4 Sell or #5 Strong Sell Rank consistently all year.
I doubt that RL branded fashion has lost much appeal among its affluent devotees. But maybe some competition from Michael Kors has nibbled away at the franchise. I won't speculate further on the business of RL, suffice to say I have been a KORS investor for over a year now for their global growth opportunities.
Here's a visual on the analyst downward estimate revisions courtesy of the Zacks proprietary Price & Consensus chart. I looked back at the historical Rank from 2013 and there were many months where the stock held the #4 or #5 Rank on either side of its zenith near $190 warning investors that the growth momentum was slowing.
RL may be a value now to some investors at 17.5X next year's $9.92 consensus. But, of course, those estimates are always in danger of coming down further. When they start getting revised higher, the Zacks Rank will tell you. Until then, it's probably best to stay on the sidelines with this gentleman of fashion.
Caterpillar Ups Quarterly Dividend
Staying committed to its focus on delivering incremental returns to shareholders, the board of directors of Caterpillar Inc. (NYSE: CAT-Free Report) has approved a 17% increase in its quarterly dividend, the highest percentage increase since 2010. The hike also reflects its balance sheet strength.
Caterpillar will now pay 70 cents per share to its shareholders every quarter, 10 cents more than the prior dividend of 60 cents per share. The increased dividend will be paid on Aug 20, 2014, to shareholders of record as of Jul 21, 2014. The current dividend hike comes exactly after a year. The last dividend hike of 15% from 52 cents to 60 cents was announced in June 2013.
Caterpillar follows the likes of its competitors Deere & Company (NYSE: DE-Free Report) and Joy Global Inc. (NYSE: JOY-Free Report), both of which had announced dividend hikes in May this year. Deere upped its quarterly dividend by 9 cents or 18% to 60 cents per share, marking the 12th consecutive year of dividend raise for the company. Joy Global had announced a 14% jump in the quarterly dividend rate to 20 cents per share from the previous rate of 17.5 cents.
With the increased dividend, Caterpillar's dividend yield will go up from the current 2.21% to 2.58%, close to Deere's 2.60% and double of Joy Global's 1.30%. At current levels, Caterpillar's 5 year average dividend yield of 2.25%, 5 Year Dividend Growth Rate of 6.70% and Payout Ratio of 38.97% are above the industry average of 1.98%, -4.44% and 14.27% respectively.
Despite weakness in its mining-related sales, Caterpillar returned over $5 billion to shareholders through share repurchases and dividends since 2013 till the first quarter of 2014. In the first quarter, Caterpillar repurchased approximately $1.7 billion of its common stock under an accelerated stock repurchase transaction completing its $7.5 billion repurchase authorization. In Jan 2014, its board approved a new authorization to repurchase up to $10 billion of Caterpillar common stock, which will expire on Dec 31, 2018. Share repurchases will be accretive to earnings in 2014 and provide support to the stock.
Caterpillar also delivered an impressive first quarter with earnings increasing 22% to $1.61 per share despite revenues remaining flat year over year at $13.2 billion. The company's incessant efforts to cut down costs, continued deployment of lean manufacturing initiatives and improvement in the Construction segment helped mitigate the effect of lower mining-related sales on its profits.
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