CHICAGO, Sept. 17, 2013 /PRNewswire/ -- Zacks Equity Research highlights Calavo Growers (Nasdaq: CVGW-Free Report) as the Bull of the Day and Ruby Tuesday's (NYSE: RT-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheCarrizo Oil & Gas Inc. (Nasdaq: CRZO-Free Report), Exxon Mobil Corp. (NYSE: XOM-Free Report) and Southwestern Energy Co. (NYSE: SWN-Free Report). Here is a synopsis of all five stocks:
Avocado consumption continues to grow in the U.S. as the food finds its way into more dishes across the country. However, growers and producers of the commodity have been relatively sluggish as of late, best represented by one of the top names in the business, Calavo Growers (Nasdaq: CVGW-Free Report).
Calavo is a small cap based out of California that is involved in a number of farm products. The company has a focus on avocados, and also guacamole, in addition to a small lineup of other perishable commodities like papayas and pineapples.
The firm has a decent long term performance, as the stock is up by more than 41% in the past two years, though recent trading has been choppier. In fact, until a recent earnings report, CVGW was under pressure after a short string of earnings misses sent the stock price reeling. However, the most recent earnings report sent the stock soaring, and gave new hope to investors to close out the year.
In the most recent report, Calavo crushed estimates reporting earnings of 48 cents a share compared to a projection of 37 cents a share. Revenues were also strong—rising by more than 25% (yoy)—while the company appears well positioned to steal share in the avocado segment going forward.
Although the consumer is still relatively strong, the restaurant sector has been pretty mixed lately. Some companies have been able to do quite well in this environment, and see their share prices surge, while others, such as Ruby Tuesday's (NYSE: RT-Free Report), have definitely struggled.
Ruby Tuesday's is best known for its lineup of casual dining restaurants under the Ruby Tuesday brand name. The firm has about 800 restaurants in total, including several dozen international locations as well.
Ruby Tuesday's saw strong growth and was a consumer darling leading up to the financial crisis—thanks in large part to their solid menu and salad bar—but it hasn't really recovered from the Great Recession. The stock is flat over the past five years, while competitors like Dardenor even McDonald'shave seen strong gains.
While the others have adapted to changing consumer tastes and have managed to expand operations, Ruby Tuesday's has stagnated and now its earnings picture is in trouble.
Natural Gas Supplies Continue to Build
The U.S. Energy Department's weekly inventory release showed an in-line rise in natural gas supplies. However, on a bearish note, the storage build was ahead of the benchmark 5-year average gain for the week.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data Stockpiles held in underground storage in the lower 48 states rose by 65 billion cubic feet (Bcf) for the week ended Sep 6, 2013, within the guided range (of 64–68 Bcf gain) as per the analysts surveyed by Platts. But the increase – the twenty-second injection of 2013 –exceeded both last year's build of 27 Bcf and the 5-year (2008–2012) average addition of 62 Bcf for the reported week.
Following past week's build, the current storage level – at 3.253 trillion cubic feet (Tcf) – is now 46 Bcf (1.4%) above the 5-year average. However, supplies are still down 172 Bcf (5.0%) from the last year's level.
Natural gas stocks hit an all-time high of 3.929 Tcf in 2012, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remained robust. In fact, the oversupply of natural gas pushed down prices to a 10-year low of $1.82 per million Btu (MMBtu) during late Apr 2012 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana).
However, things started to look up in 2013. This year, cold winter weather across most parts of the country boosted natural gas demand for space heating by residential/commercial consumers. This, coupled with flat production volumes, meant that the inventory overhang was gone, thereby driving commodity prices to around $4.40 per MMBtu in Apr – the highest in 21 months.
During the last few weeks, though, natural gas demand has gone through a relatively lean period, as mild weather prevailed over the country, leading to tepid electricity draws to run air conditioners. This has led to a slide in the commodity's price. In fact, healthy injections over last few weeks, plus strong production have meant that supplies have overturned the deficit over the five-year average.
Outlook However, with above-normal temperatures expected during the next few weeks, leading to strong power demand, natural gas price may experience another upward curve. This, in turn, is expected to buoy natural gas producers, particularly small ones like Carrizo Oil & Gas Inc. (Nasdaq: CRZO-Free Report).
While big players like
Exxon Mobil Corp.
Southwestern Energy Co.
) – both Zacks Rank #3 (Hold) stocks – would also benefit from the improved fundamentals, they are large-cap, low-beta entities with slow price action.
As such, we advise investors to accumulate Carrizo shares, which sports a Zacks Rank #1 (Strong Buy). With the financial incentive to produce the commodity and the subsequent improvement in the company's ability to generate positive earnings surprises, it has the potential to rise significantly from current levels.
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