American Airlines, Stone Energy, GlaxoSmithKline, Merck and NewLink Genetics highlighted as Zacks Bull and Bear of the Day
CHICAGO, Dec. 1, 2014 /PRNewswire/ -- Zacks Equity Research highlights American Airlines (Nasdaq:AAL-Free Report) as the Bull of the Day and Stone Energy (NYSE:SGY-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on GlaxoSmithKline (NYSE:GSK-Free Report), Merck (NYSE:MRK-Free Report) and NewLink Genetics Corporation (Nasdaq:NLNK-Free Report).
Here is a synopsis of all five stocks:
Despite winter storm worries, the airline sector has been flying pretty high as of late and for good reason too. The segment is experiencing one of its most profitable and in-demand stretches in years, and many believe the run could continue into 2015 too.
After all, with the rash of mergers over the past few years, airline competition is relatively low giving many airlines pricing power in a number of key routes. Strong consumer demand hasn't hurt matters either as a more willing-to-spend traveler seems ready to pony up for higher fares, while a more certain job situation is acting as a catalyst for more vacations as well.
And while Ebola worries might have temporarily derailed the sector, the space has fought back quickly and is riding high thanks to one of their highest input costs; oil. Crude oil prices—and thus jet fuel prices—have come down significantly in recent weeks, boosting profits for airlines across the sector, and setting up the space for a stellar start to the New Year.
For these reasons, it is easy to see why the airline industry is in the top 20% of all industries that we cover. And while any number of stocks in this space could be solid in this great environment, a look towards American Airlines (Nasdaq:AAL-Free Report) in particular could be an exceptional idea right now.
American Airlines is by some measures the largest airline in the world, serving customers across the globe with more than 6,700 daily flights in 56 nations. The company is the result of a merger between AMR (American Airlines' parent group) and US Airways, continuing the recent trend of consolidation in the industry.
Speaking of trends, American Airlines has, just like its peers, been able to soar in recent times and put up solid profitability numbers as well. Yet even with an 80% surge YTD, there is plenty of reason to hope for more gains heading into 2015 too. This is especially true when investors look to recent earnings estimate revisions for AAL, which definitely suggest more strength ahead for the company.
Crude oil prices have been on an incredible downward slide over the past few months. Prices are now in the range of multi-year lows and there is little near term hope for an upswing. After all, there are some significant forces at play in the oil market, making it difficult to see a move higher in 2015.
The stronger dollar has definitely had an impact, as oil is traded in dollars around the globe. So, when translated into foreign currencies, international producers need less to receive the same domestic value for each oil barrel sold.
Speaking of foreign markets, demand has also been pretty weak in a number of these segments, an area that was an important source of demand growth in the near term. And though many nations are resorting to more stimulus in an attempt to boost economies (and thus oil demand), many have had little impact so far, keeping a lid on oil prices in the process.
If that wasn't enough, we have a huge oversupply situation back in the U.S. thanks to improving fracking technologies. This is further putting pressure on oil prices, making for a terrible situation for those long in crude oil in the near term.
With this backdrop, investors shouldn't be too surprised to note that energy stocks have been at the bottom of the industry list, and have been seeing slumping earnings estimates as of late. One such stock that is a great example of this trend is undoubtedly Stone Energy (NYSE:SGY-Free Report), a company that is in the exploration and production segment of the energy industry.
Additional content:
Glaxo's Ebola Candidate Well-Tolerated in Early Study
Initial results from a small phase I study revealed that GlaxoSmithKline's (NYSE:GSK-Free Report) Ebola vaccine candidate was well-tolerated in 20 adult volunteers in the U.S. The results were published in the New England Journal of Medicine.
Results further showed that the candidate produced an immunological response in all of the volunteers who received the vaccine. Glaxo is collaborating with the U.S. National Institutes of Health (NIH) to develop this vaccine.
Glaxo intends to share results from additional phase I studies (running in the U.S., UK, Mali and Switzerland) on the Ebola candidate in the coming weeks. Results from a phase I study being conducted in Mali will be mostly awaited. The study is evaluating the safety and immune response of the candidate in patients from West Africa, the region most affected in the latest outbreak of this deadly virus.
Depending on the positive outcome from these phase I studies, Glaxo plans to initiate phase III studies on the candidate early next year. The company's phase III studies will involve the vaccination of thousands of health care workers from Sierra Leone and Liberia. The company also has plans to conduct additional safety studies in West African countries.
Our Take
Glaxo's Ebola candidate is one of the promising in clinical trials right now. We expect investors focus to stay on the candidate's future updates. Other big players are also in the race for the successful development of an Ebola vaccine.
Earlier in the week we have seen Merck (NYSE:MRK-Free Report) buying rights to an Ebola vaccine candidate, rVSV-EBOV, from NewLink Genetics Corporation (Nasdaq:NLNK-Free Report) for around $50 million (read more: Merck Buys Rights to Ebola Vaccine Candidate from NewLink).
The NIH intends to start a large randomized, controlled phase III study in early 2015 on Glaxo's Ebola vaccine candidate and rVSV-EBOV.
We have seen investors keenly following Ebola related news over the last several months. This year has seen the worst ever outbreak of the deadly virus with no approved treatment so far.
Glaxo is currently a Zacks Rank #5 (Strong Sell) stock.
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