CHICAGO, Aug. 28, 2013 /PRNewswire/ -- Zacks Equity Research highlights Biogen Idec (Nasdaq: BIIB-Free Report) as the Bull of the Day and American Eagle (NYSE: AEO-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheWNS (Holdings) Ltd. (NYSE: WNS-Free Report), Nidec Corporation (NYSE: NJ-Free Report) and Advanced Semiconductor Engineering Inc. (NYSE: ASX-Free Report).
Here is a synopsis of all five stocks:
The biotech space is likely to find greater focus in the wake Amgen's purchase of ONXY Pharmaceuticals. Investors looking for strong growth at a reasonable price in the biotech sector may want to buy into the Biogen Idec (Nasdaq: BIIB-Free Report) story. This Zacks Rank #1 (Strong Buy) is experiencing robust upward revisions to earnings estimates and is priced at an attractive valuation.
Within the past 30 days, earnings estimates for each of 2013 and 2014 have been revised up five times, while no earnings estimates have been cut.
The Zacks Earnings per share Consensus Estimates for 2013 and 2014 have been lifted 9.3% to $8.75 and 17.0% to $11.58 respectively over the past 30 days. 2014 profits are expected to rise 32.0% year over year.
Sales growth is strong and expected to rise 24% in 2013 and another 18.7% in 2014.
Biogen Idec is priced with a PEG ratio (earnings per share divided by earnings growth) of 0.95. The PEG ratio is not only below 1.0, but under the ten year median value of 1.38. Investors are not paying a premium for the growth outlook and the stock is trading at a discount to its historical valuation level.
Further, it is trading about 20 times forward 12 month earnings, which is about in line with the ten year median. However, the Zacks Drug sector is trading at 16.6 times forward 12 month earnings compared to its median of 14.7. On a relative 12 month forward PE basis, Biogen Idec looks cheap compared to its pharmacy peers.
American Eagle (NYSE: AEO-Free Report), Zacks Rank #5 (Strong Sell), faces the headwind of a weak profit outlook driven by uncertainty over teen apparel demand, high teenage unemployment, and shifts in purchasing patterns away from apparel into durable items. On August 21st, the company guided its Q3 earnings per share outlook substantially lower to the $0.14 to $0.16 range compared to the then Zacks Consensus Earnings per Share Estimate of $0.36.
American Eagle will have to prove itself to the investment community before buyers come running. FY 2014 and FY 2015 earnings per share estimates have been each cut 14 times over the past 7 days, and the Zacks Consensus Earnings per Share Estimates for FY 2014 and FY 2015 have been reduced by 24.6% to $0.89 and 19.8% to $1.41 respectively.
The trade is expecting a promotional and competitive environment in the near term which could have margins and profitability under pressure.
Even though earnings estimates have been reduced, the stocks is trading at 14.1 expected 12 month forward earnings per share. This is about in line with the 10 year median. Moreover, the PEG ratio is 1.43 compared to a 10 year median of 1.07. American Eagle does not look to be a value.
In FY 2013, the company posted negative free cash flow after dividend payment suggesting a deteriorating financial condition. The weak profit picture may further hinder cash generation and could have some ramifications for the dividend and/or capital spending if the trend continues.
3 Emerging Market Picks that Defy the Narrative
Emerging economies have largely been the beneficiaries of Fed's largesse over the years. Cash pumped in the emerging markets through stimulus programs in the U.S. were primarily utilized to plug funding deficits and used for infrastructure projects to fuel further growth. Cheap capital also facilitated these countries to import more than they could export, leading to a burgeoning current account deficit (CAD).
Despite the inherent risks, investors were attracted by relatively high-yielding assets to leverage cheap loans in developed countries. Booming investor confidence triggered by a highly liquid market and healthy GDP growth in most emerging economies was the cynosure of the market.
However, amid signals of QE3 tapering, the dynamics of several economies were unruffled with a near stampede of foreign investors rushing for the exit. Some of the worst sell-offs of bonds and equities sent the respective market indices nose-diving into newer troughs with a mass exodus and reverse wealth drain from emerging economies to the U.S.
For example, data in Indonesia revealed that foreign investors had dumped $430.5 million worth of stocks within a three-day span from Aug 16 to Aug 20, while Jakarta shares lost nearly 11%. On the other hand, the Indian economy suffered an erosion of about $11.5 billion in stocks and bonds since the end of May.
The Implications With plummeting currencies and heavy outflows of capital, some emerging economies have taken a slew of measures to stem the CAD. Tapering plans are triggering effective monetary tightening and capital controls by respective governments. Central banks have also stepped in to rescue economies with high rates of interest to thwart further erosion in currency value vis-à-vis the U.S. dollar.
Whether such corrective measures are worthy of a gamble to dilute investor panic and impair long-term growth is still debatable. However, there is no doubt that the foundation of emerging economies is being tested currently.
3 Stocks to Buy Now
Despite the Fed taper mayhem, there are certain top emerging economy stocks with attractive valuation metrics backed by a solid Zacks Rank. These include
WNS (Holdings) Ltd.
Advanced Semiconductor Engineering Inc.
). While WNS (Holdings) and Nidec Corporation retain a Zacks Rank #1 (Strong Buy), Advanced Semiconductor Engineering has a Zacks Rank #2 (Buy).
Headquartered in Mumbai, India, WNS (Holdings) provides business process outsourcing services to diverse industries including insurance, travel and leisure, manufacturing, retail and consumer packaged goods, banking and financial services, telecommunication, media and entertainment industry. WNS (Holdings) has a forward P/E and earnings expectation of 17.58x and 15.50%, respectively.
Nidec Corporation has a forward P/E and earnings expectation of 20.03x and 15.16%. Headquartered in Kyoto, Japan, Nidec Corporation manufactures and sells industrial electric equipments such as hard disk drives spindle motors and other small precision motors for optical disk drives, laser printers, copiers, polygon scanners, electronic cooling fans, refrigerators, mobile phones, digital video recorders, automobiles and other applications.
Based in Kaohsiung, Taiwan, Advanced Semiconductor Engineering has a forward P/E and earnings expectation of 11.31x and 20.00%. The company offers semiconductor packaging and testing services for the communications, consumer electronics, industrial and automotive sectors in the U.S, Taiwan, Asia, and Europe.
Such strong fundamentals signify that the beleaguered stocks are down but not out. As such, this is perhaps the most opportune time to own such high-potential stocks at a discount, with overall market sentiments being a tad bearish.
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