Zacks Bull and Bear of the Day Highlights: Mohawk Industries, Aruba Networks, Bayer, United Therapeutics and Actelion
CHICAGO, May 24, 2013 /PRNewswire/ -- Zacks Equity Research highlights Mohawk Industries, Inc. (NYSE: MHK)as the Bull of the Day and Aruba Networks, Inc. (Nasdaq: ARUN) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bayer (OTC:BAYRY), United Therapeutics Corporation (Nasdaq: UTHR) and Actelion Ltd. (OTC:ALIOF).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Mohawk Industries, Inc. (NYSE: MHK) recently delivered a solid first quarter earnings beat thanks to an improving U.S. housing market and expanding profit margins.
Analysts revised their estimates significantly higher for both 2013 and 2014 off the Q1 beat, sending the stock to a Zacks Rank #1 (Strong Buy). Based on current consensus estimates, analysts expect excellent growth from Mohawk over the next couple of years. With valuation still at reasonable levels, shares of Mohawk offers strong upside potential.
Mohawk Industries is a global flooring manufacturer focused on the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Its brands include American Olean, Bigelow, Dal-Tile, Durkan, Karastan, Lees, Marazzi, Mohawk, Pergo, Unilin and Quick-Step.
Mohawk Industries delivered solid first quarter results on May 2. Adjusted earnings per share jumped 50% to 87 cents, beating the Zacks Consensus Estimate of 84 cents.
Net sales rose 6% to $1.487 billion, driven by strong gains in the Dal-Tile and Unilin segments. The gross profit margin did decline slightly from 25.5% to 25.4% of net sales.
However, the adjusted operating profit margin expanded 140 basis points to 6.5% of net sales as the company leveraged its selling, general and administrative expenses. This led to a stellar 34% increase in adjusted operating income.
Wireless-network equipment maker Aruba Networks, Inc. (Nasdaq: ARUN) has taken it on the chin recently. The company delivered disappointing third quarter results and warned of increased competition from its "largest competitor" (i.e., Cisco).
This prompted analysts to revise their estimates significantly lower for both 2013 and 2014, sending the stock to a Zacks Rank #5 (Strong Sell). Despite the big selloff, shares still trade at a significant premium to the industry on a forward P/E basis. Investors should consider avoiding Aruba Networks at least until its earnings momentum turns around.
Aruba Networks is a wireless-network equipment maker. It was founded in 2002 and has a market cap of $1.5 billion.
Aruba reported disappointing results for its fiscal 2013 third quarter on May 16. Earnings per share came in at a loss of 9 cents, well below the Zacks Consensus Estimate, which called for a loss of 1 cent.
Revenue climbed 12% to $147.1 million, which was also below the consensus of $152.0 million. Its gross profit margin actually improved slightly to 70.1% of total revenue. However, total operating expenses as a percentage of revenue increased 422 points to 71.8%.
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Positive Data on Bayer Candidate
The HealthCare segment of Bayer (OTC:BAYRY) recently announced positive results from an interim analysis of the phase III PATENT-2 trial on its pipeline candidate riociguat. PATENT-2, the long-term extension phase III study of PATENT-1, evaluated patients suffering from pulmonary arterial hypertension (PAH).
Results from the interim analysis revealed that riociguat was generally well tolerated along with a good long-term safety profile in patients (both treatment-naïve and pre-treated) with PAH. Moreover, improvements were also observed in the six minute walking distance (6MWD) with riociguat treatment.
In Feb 2013, Bayer filed for regulatory approval of riociguat, both in the US and the EU, for the treatment of patients suffering from PAH. The candidate enjoys priority review in the US. A final decision from the US regulatory body is expected by Oct 2013.
The submission was supported by positive results from the PATENT-1 STUDY. Bayer enrolled patients suffering from naïve symptomatic PAH as well as those pre-treated with endothelin receptor antagonists (ERAs) or non-intravenous prostanoid monotherapy, for the study. The study showed a statistically significant improvement in the six-minute walk test from base line after 12 weeks compared to placebo.
We believe riociguat's approval will strengthen Bayer's cardiovascular portfolio. Riociguat is expected to face stiff competition in the PAH market on approval. The market already has players like United Therapeutics Corporation (Nasdaq: UTHR) and Actelion Ltd. (OTC:ALIOF).
Moreover, Bayer is seeking US approval of riociguat for the treatment of chronic thromboembolic pulmonary hypertension (CTEPH). The candidate is under priority review for the indication in the US. Bayer is seeking approval of the candidate in the EU and Japan as well for the same indication.
Bayer presently carries a Zacks Rank #4 (Sell).
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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