Greenbrier, Baker Hughes, Time Warner, Best Buy and L Brands highlighted as Zacks Bull and Bear of the Day
CHICAGO, Nov. 4, 2014 /PRNewswire/ -- Zacks Equity Research highlights Greenbrier Companies (NYSE:GBX-Free Report) as the Bull of the Day and Baker Hughes (NYSE:BHI-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Time Warner Inc. (NYSE:TWX-Free Report), Best Buy Co., Inc. (NYSE:BBY-Free Report)and L Brands, Inc. (NYSE:LB-Free Report).
Here is a synopsis of all five stocks:
The price of oil and other commodities may be lower, but it sure doesn't mean that the US is moving any less of the stuff across the country on the rails. And for that, you need a continuous supply of industrial-strength freight cars that meet the latest government safety standards.
That's why Greenbrier Companies (NYSE:GBX-Free Report) has seen its business grow by leaps and bounds in the past few years, especially after high-profile accidents involving extra-flammable Bakken crude and other hazardous materials.
In fact, the Pipeline and Hazardous Materials Safety Administration (PHMSA) wing of the Department of Transportation is expected to rule this month on the implementation timetable of stricter rail car construction and "retro-fitting" requirements.
Greenbrier, located in Lake Oswego, Oregon, is a $1.7 billion leading supplier of transportation equipment and services to the railroad industry with four integrated business segments: 1) Design and manufacture of conventional, inter-modal, and petroleum freight cars in four plants in the U.S. and Mexico; 2) Repairs and reconditioning of wheel sets at 9 locations throughout the US; 3) Leasing and financing; and 4) Fleet asset management services. They even have a marine barge unit.
The company's rail asset management platforms include proprietary software tools that address the ownership, use and maintenance of approximately 216,000 freight railcars. They help customers design customized solutions and then assist with tools and support, or deploy a team to run fleet management for them.
The big drop in crude oil prices since August has made big waves in multiple industries within the Energy sector. Beyond the Exploration & Production companies, the next group to feel the impact of cutbacks in production is the oilfield services.
Baker Hughes (NYSE:BHI-Free Report), Halliburton and Schlumberger are the "big 3" in this industry and the guys who bring the equipment and run the drilling or fracking rigs for the E&Ps who either own or lease the land.
Earnings estimates had to come down for all three recently. Here was a note from FBR Capital Markets analysts in late October explaining their moves...
"As anticipated, we are lowering estimates for SLB, BHI, and HAL on the (1) step-down in oil price ranges, which our energy team believes signifies that the next secular era has drawn much closer, if not dawned (that of oil abundance or a return to cyclicality); (2) geopolitical and/or macro challenges in Russia, Libya, Iraq, and China; and (3) slowdown in deepwater E&P spending."
Baker Hughes is also known in the industry from providing regular updates on their rig operating capacity. Energy investors and oil sector traders watch these "rig counts" for clues about the pace and direction of exploration and production. From FBR again...
"Underpinning our onshore NAM cuts, we are reducing our average BHI U.S. land rig count forecast for 2015 by 45 rigs from 1,880 to 1,835. So, off our average 2014 projection of 1,804, the count is now expected to grow by just 2%, down from 4% previously. In effect, we are removing the first layer of vulnerable 2015 drilling programs, those most threatened, if not already uneconomic, at sub-$90 WTI."
The analysts summarized in their report that they were decreasing EPS estimates for the "Big Three" by an average of 14%, "which is significant but not nearly as bad as what the stocks are still discounting."
They were not alone in cutting earnings estimates for BHI with about 70% of the 18 covering analysts dropping this year's consensus EPS projection to $4.03 from $4.19 within the past 30 days.
Additional content:
Will Time Warner Beat or Miss on Earnings This Quarter?
Time Warner Inc. (NYSE:TWX-Free Report) is slated to report its third-quarter 2014 results on Nov 5, before the opening bell. In the last quarter, the company had delivered a positive earnings surprise of 16.7%. Let's see how things are shaping up for this announcement.
Factors Influencing This Quarter
Time Warner's efforts such as foraying into new markets, divestment activities and digital endeavors augur well for its operating performance. This is also well evident from its better-than-expected last quarter results.
Further, the company's investments in programming, production and marketing, coupled with its focus on operating and capital efficiencies bode well for its performance. However, Time Warner might face the unfavorable impact of the soft advertising environment and the risk of failure to renew affiliate contracts.
Earnings Whispers?
Our proven model does not conclusively show that Time Warner is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -1.06%. This is because the Most Accurate estimate of 93 cents stands below the Zacks Consensus Estimate of 94 cents.
Zacks Rank: Time Warner's Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Best Buy Co., Inc. (NYSE:BBY-Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy).
L Brands, Inc. (NYSE:LB-Free Report) has an Earnings ESP of +6.25% and a Zacks Rank #2.
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