CHICAGO, June 23, 2014 /PRNewswire/ -- Zacks Equity Research highlights Encana (NYSE: ECA-Free Report) as the Bull of the Day and ITT Education Services (NYSE: ESI-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onCorinthian Colleges (Nasdaq: COCO-Free Report), Lincoln Education (Nasdaq: LINC-Free Report), Cohen & Steers Inc. (NYSE: CNS-Free Report), Artisan Partners Asset Management Inc. (NYSE: APAM-Free Report) and Ameriprise Financial, Inc. (NYSE: AMP-Free Report).
Here is a synopsis of all seven stocks:
Due to tensions in Iraq, oil prices have been making an assault on fresh highs for the year. And with rebel groups threatening some key refineries and the Iraqi government seemingly unable to contain the uprising, there are real concerns that at least some of Iraq's production could be taken off line.
While this is obviously a troubling situation, it is forcing many investors to look closer at the North American oil market instead. Companies here do not have to worry about geopolitical risks, and thanks to fracking and other technologies, have seen production levels soar as of late too.
A number of companies have benefited from this trend and have seen their share prices move sharply higher as a result. And should this trend continue we could definitely see more gains out of several companies in this space, such as Encana (NYSE: ECA-Free Report).
Encana in Focus
Encana is a Calgary, Alberta-based oil firm that explores for oil, natural gas, and natural gas liquids in the United States and Canada. The firm's focus is in Western Canada—specifically British Columbia and Alberta—but it also has some exposure to projects in Nova Scotia, and then several states in the U.S. as well.
This has proven to be a pretty great business to be in, as ECA stock has moved sharply higher in the YTD time frame. The stock has actually appreciated by close to 40% so far in 2014 which is a pretty incredible run after its more-or-less flat performance in the preceding six months.
Yet while the stock has certainly moved higher in the past few months, there is plenty of reason to believe that more gains are ahead. This is especially true when you consider that ECA's forward PE is still below 20, it is projected to see triple digit earnings growth this year, and its stock has seen rising earnings estimates.
Earnings Estimates for ECA
Over the last two months, investors have seen earnings estimates for ECA go sharply higher for both this year and next year. In fact, figures have surged from an estimate of $1.15/share 60 days ago to a level of $1.55/share today.
This is thanks to universal analyst agreement about Encana's prospects, as not a single estimate for the current year has gone lower in the past sixty days. And given that we have seen a similar trend in the current quarter and next quarter periods as well, there is plenty of reason to be bullish on Encana in both the near term and the long run.
Given these trends, it should be pretty clear why we have assigned ECA a Zacks Rank #1 (Strong Buy) and are looking for more outperformance from this stock over the next few months.
If these analyst revisions and #1 Rank aren't enough, investors should take comfort in the fact that ECA is in great company from an industry rank perspective as well. Its oil and gas exploration and production peer group is in the top 25% right now, so there are definitely some tailwinds in this space.
This is particularly true when investors consider the broad geopolitical situation hitting the oil market and how this might make for a solid situation if you are a North American producer. Not only does ECA benefit from this trend, but its surging earnings estimates and great growth prospects suggest that even with the run up, there are plenty of gains to be had in this impressive Canadian oil and gas producer.
Although interest in for-profit education has surged over the past decade, it has been very tough for many companies in this corner of the market. Intense competition and severe regulatory risk have hampered stock prices in this segment and could prevent any gains from coming to this beaten down sector.
In particular, worries have hit Corinthian Colleges (Nasdaq: COCO-Free Report) pretty hard lately. The company warned of a possible bankruptcy thanks to a Federal Aid delay, and fears have trickled into other companies in the space too, pulling them down as well. While all have been impacted, one company in particular that is worth keeping an eye on in this regard is definitely ITT Education Services (NYSE: ESI-Free Report).
ESI in Focus
ESI operates technology-oriented degree programs around the country, and is probably best known for its ITT Technical Institute brand name. The firm is headquartered in Indiana, but it has campuses in 39 states and an online presence as well.
But thanks to regulatory worries and cutthroat competition, the stock has been under severe pressure as of late. In fact, the stock is down close to 50% just in 2014, suggesting a pretty bearish trend for ESI in the near term.
Recent Earnings and Outlook
A big reason for the bear run in ESI is undoubtedly their last earnings report. The company missed estimates by a huge margin and foresaw reduced new student enrollment as well. If that wasn't enough, ESI also withdrew its earnings guidance for the year, something that punished the stock by about 20% in a single session.
Earnings Estimates have also been sliding and this isn't great for the longer term picture. Estimates revised lower have outnumbered those moving higher by a nine to one ratio in the past 30 days (for the current year time frame), while all of the revised estimates for the next year period have moved lower in the last 30 days.
The magnitude of these revisions has been pretty bad too, suggesting that the current trend is extremely unfavorable for this stock. The consensus current year estimate for ESI has actually moved from $3.10/share 30 days ago to just $2.50/share today, pushing the year-over-year growth rate down into negative territory.
Given these trends, and the huge regulatory risks hovering over the space, it shouldn't be too surprising to note that ESI currently has a Zacks Rank #5 (Strong Sell). This means that we are looking for more underperformance from this stock, and that pain could definitely be ahead for this security during the summer.
The education segment is obviously a very tough one right now and investors definitely need a strong stomach to put their money to work here. However, in the schools industry, there is one top ranked pick right now, Lincoln Education (Nasdaq: LINC-Free Report).
This security has moved from a Zacks Rank #3 (Hold) to a Zacks Rank #1 (Strong Buy) in just the past week, while it is slowly getting its act together and could see a solid level of profitability next year assuming it stays on this course. This—along with rising earnings estimates—could make LINC a better choice for school stock investors than the troubled ESI, at least for the time being.
Forget Bank Stocks, 3 Asset Managers Offer Better Returns
If you have an investment preference in the finance sector, perhaps the time is ripe to shift your focus from Banks to Asset Managers. This is because banks now look riskier compared to asset managers – at least the string of lawsuits against banks, revenue pressure, and the related damages convey this notion.
Moreover, in terms of stock price, asset managers have shown a better performance than banks in the past few months. This is evident from the Dow Jones U.S. Asset Managers Index's 1.5% gain compared to the Dow Jones U.S. Banks Index's 3.2% loss over the last three months.
The traditional view is that investment in large cap banking stocks provide good returns and to some extent are safe owing to their "too-big-to-fail" status. However, it would be wise to understand the demerits of the sector considering the current happenings.
The Visible Demerits of Banks
Given the competitive environment and the stringent regulatory landscape, banks are facing tough challenges in controlling costs. This is certainly restricting their bottom-line growth. And to make matters worse, a number of major banks are facing legal overhangs in recent times.
Further, due to a prolonged low interest rate environment, several banks are witnessing continuous decline in net interest income and pressure on net interest margin. So a significant turn around seems elusive in the near term.
Also, as banks finance themselves through customers' deposits and borrowings from the market to generate loans or make investments, it leads to balance-sheet risks.
Asset Managers – The Hidden Merits
Asset managers are relatively in a better position in terms of the headwinds that the overall finance sector is facing. Though the growth of asset management business has not been too impressive in recent times owing to investors' skepticism about the economy and the market, not too many asset managers are burdened with significant legal hassles. As a result, asset managers have been enjoying comparative advantage over banks in terms of cost management.
Moreover, asset managers do not invest their own accounts, so the recent market risks can't damage their balance sheet. This is because asset managers act as agents of their clients, i.e., they primarily manage assets on behalf of their clients in exchange of fee. So losses incurred or gains realized solely pertain to clients.
On the regulation front, though the asset management companies have recently drawn regulators' attention owing to less transparency and certain underlying risks, there is no major downside visible in the near term.
Further, asset management stocks are expected to perform well in the upcoming quarters with the rising demand for personalized and alternative investment solutions. Even if the interest rate environment does not exhibit a turnaround, asset managers will not suffer like banks.
Given the underlying strength in the industry, it will be a prudent decision to bet on a few asset management stocks that have been witnessing positive earnings estimate revisions and thus carry a favorable Zacks Rank.
3 Asset Managers to Buy Now
Here we have handpicked 3 stocks in the asset management space that are poised to add return to your portfolio:
Cohen & Steers Inc. (NYSE: CNS-Free Report) is a Zacks Rank #1 (Strong Buy) stock with long term growth rate of 14.95% and dividend yield of 2.32%. The Zacks Consensus Estimate for the current year is $1.83 per share. Over the past 3 months, estimates have moved north 6.4%.
Based in New York, Cohen & Steers is engaged in managing institutional accounts, open-end mutual funds, and closed-end mutual funds and alternative investment strategies as well.
Artisan Partners Asset Management Inc. (NYSE: APAM-Free Report) is a Zacks Rank #2 (Buy) stock with long term growth rate of 14.17% and dividend yield of 3.95%. The Zacks Consensus Estimate for the current year is $3.33 per share. Over the past 3 months, estimates have inched up by 2.1%.
Based in Wisconsin, Artisan Partners is engaged in providing investment management services to institutional clients including pension and profit sharing plans, endowments, foundations, government entities, and private and foreign investment companies.
Ameriprise Financial, Inc. (NYSE: AMP-Free Report) is a Zacks Rank #2 (Buy) stock with long term growth rate of 14.95% and dividend yield of 2.32%. The Zacks Consensus Estimate for the current year is $8.26 per share. Over the past 3 months, estimates have risen by 2.5%.
Headquartered in Minneapolis, Minnesota, Ameriprise Financial offers an array of financial products and services that are customized as solutions for cash and liquidity, asset accumulation, income, protection, and estate and wealth transfer needs. Its client list comprises individuals, businesses and institutions.
The business expansion of asset managers will be restricted if the regulators impose capital and liquidity rules on them similar to what is already there for banks. However, as there is no clear timeline provided by the regulators, these stocks should enjoy the flexibility until the imposition of regulatory restrictions.
So you should not miss the opportunity of capitalizing on the near-term prospects of asset managers.
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