Canadian Solar, Extended Stay America, Coca-Cola, PepsiCo and Dr Pepper Snapple Group highlighted as Zacks Bull and Bear of the Day
CHICAGO, Sept. 2, 2014 /PRNewswire/ -- Zacks Equity Research highlights Canadian Solar (Nasdaq:CSIQ-Free Report) as the Bull of the Day and Extended Stay America (NYSE:STAY-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onCoca-Cola Company (NYSE:KO-Free Report), PepsiCo, Inc. (NYSE:PEP-Free Report) and Dr Pepper Snapple Group, Inc. (NYSE:DPS-Free Report).
Here is a synopsis of all five stocks:
Canadian Solar (Nasdaq:CSIQ-Free Report) recently posted a very large beat after disappointing investors over the previous four quarters. Today, CSIQ is a Zacks Rank #1 (Strong Buy), and it is the Bull of the Day.
CSIQ posted earnings of $0.95, topping the Zacks Consensus Estimate by $0.37 for a positive earnings surprise of 55%. That is huge, but I am even more impressed with the revenue of $624M, nearly double the $380M from the year ago levels and $49M ahead of expectations.
Beating on the topline is critical for aggressive growth investors, but we have to see more sales than expected if we are to get the type of earnings growth that will help a stock double in price over the next 12-18 months.
Canadian Solar is one of the top suppliers of photo-voltaic (PV) modules to the solar industry. With headquarters in Canada, they also have a thriving business unit in China that builds and sells large-scale PV projects customized for municipal or corporate energy grid applications.
The company has operations in North America, Europe and Asia that allow them to serve a wide geographic base of customers. In addition to their core businesses in building PV panels and larger projects, they also design and produce specialty solar modules and products such as solar-powered bus stop lighting and solar-powered car battery chargers.
Extended Stay America (NYSE:STAY-Free Report) has missed the Zacks Consensus Estimate in each of the last three quarters. STAY is a Zacks Rank #5 (Strong Sell), and it is the Bear of the Day.
Extended Stay America operates hotels in the United States and Canada. As of December 31, 2013, the company had 684 hotels with approximately 76,200 rooms. It serves customers in the mid-priced extended stay segment. STAY was founded in 1995 and is headquartered in Charlotte, North Carolina.
The most recent report saw STAY come in $0.01 below the Zacks Consensus Estimate. The company reported $332 million vs. the $319 million revenue estimate for a beat of $2M or a 1% positive revenue surprise.
Earnings were another story. The company reported EPS of $0.27 when the Zacks Consensus Estimate was calling for $0.28 so there was a miss of $0.01. Yes, that one penny miss is not a lot, but a miss is still a miss.
That last two reports also get categorized as misses of the Zacks Consensus Estimate. The December 2013 quarter was a miss of $0.19 and the March 2014 quarter was a miss of $0.02.
Yes the misses are actually getting smaller, but investors would be wise to wait until the company starts beating the estimate.
Additional content:
Will the First-Half Fizz of Beverage Giants Go Flat?
Soda giants-- The Coca-Cola Company (NYSE:KO-Free Report), PepsiCo, Inc. (NYSE:PEP-Free Report) and Dr Pepper Snapple Group, Inc. (NYSE:DPS-Free Report) -- outperformed expectations in the first half of this year.
This outperformance was primarily driven by aggressive marketing initiatives, cost containment and productivity improvements. A sequential improvement in beverage volumes in the second quarter at all the three giants did not go unnoticed by investors. The shares of these three bellwethers witnessed a decent run too.
A 1H14 Review of the Giants
Pepsi
Pepsi began 2014 on a solid note delivering positive earnings and revenue surprises in both the quarters. Strong pricing, solid global snacks performance, sales gain in developing/emerging markets and cost reductions and productivity gains aided to this upbeat results.
The food and beverage giant also raised its earnings guidance for the year on the second quarter conference call based on its strong year-to-date performance and an optimistic market outlook for the rest of the year.
Though carbonated soft drinks (CSD) remained weak, Pepsi's American beverage business showed sequential improvements in both the quarters due to better non-carbonated beverage (NCB) volumes.
The share price of this Zacks Rank #2 (Buy) company has risen more than14% year to date.
Dr Pepper
Dr Pepper had an impressive run in the first half delivering strong profits in the both the quarters. This was driven by pricing gains, productivity improvements, lower marketing investments than last year and lower interest expense and taxes.
The company also raised its adjusted earnings per share outlook for the year on the second quarter conference call on the back of stronger–than-expected first half results.
Most impressively, CSD volume grew 2% in the second quarter, much better than the decline seen in the past two quarters, helped by the company's aggressive marketing initiatives. In order to drive sales, Dr Pepper is carrying out well-planned marketing programs which include increasing distribution and availability of its key brands and packages and expanding single-serve availability. These efforts have resulted in improved equity scores of its brands with regard to both relevance and strength.
The share price of this Zacks Rank #2 (Buy) company has soared 33% year to date.
Coca-Cola
Improved volume trends, better pricing and strong international performance helped Coca-Cola to turn around in the first half of 2014 after posting lower-than-expected revenues and profits in 2013.
Coca-Cola's sparkling beverage (CSD) volumes grew 2% in the second quarter, much better than the 1% decline in the first quarter due to increased media investments during the FIFA World Cup and the successful "Share a Coke" campaign. Most importantly, the Coca-Cola brand grew 1% in North America — a sequential improvement helped by the shift to smaller sized packages and improved pricing strategy.
The improved sparkling beverage performance is indeed a pat in the back to management's strategic priority of accelerating sparkling beverage growth led by the namesake Coca-Cola brand. Other priorities – as laid down at the beginning of the year – include expanding the still beverage portfolio, increasing brand investments by maximizing productivity and winning at the point of sale. Coca-Cola has executed these priorities quite well in the first half of 2014.
The share price of this Zacks Rank #3 (Hold) company rose 4% year to date.
What's in Store for 2H?
We believe that Pepsi should continue the momentum in the second half of the year as well helped by a strong snacks business, robust international growth, and aggressive cost savings and marketing efforts. Moreover, lower calorie, naturally sweetened non-cola products are expected to be launched in the U.S. later this year which should provide a boost to volumes.
For Dr Pepper, price mix and productivity gains and lower input and marketing costs are expected to drive earnings in the second half, offsetting weaker volumes and higher transportation and people costs.
Coca-Cola's aggressive marketing investments, innovation, product development, infrastructure, distribution and an overall improved execution should result in further improvement in volume trends in the second half. An expanded launch of Coca-Cola Life, a naturally sweetened mid-calorie cola, in newer markets should boost the top line. Coca-Cola Life was launched in Argentina and Chile this year.
What Are the Challenges Ahead?
What concerns us in the second half is a possible gradual slowdown in NCB volumes at these soft drink makers.
Dr Pepper's NCB volume dipped 3% in the first half and is expected to decline in the low single digits for the full year. Coca-Cola's global NCB volume growth moderated to 5% in the second quarter from 8% in the first quarter. Pepsi's NCB volume in North America also slowed down to 1% in the second quarter from 2% in the first.
Though we are encouraged by the overall growth of these beverage makers in the first half, sustaining the momentum through the rest of the year will significantly depend on how they deal with the soft consumer spending environment, increasing business volatility in emerging markets due to currency fluctuations and other structural issues, and a rising commodity cost environment.
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