Group 1 Automotive, Lumber Liquidators, Shire, AbbVie and Allergan highlighted as Zacks Bull and Bear of the Day
CHICAGO, July 15, 2014 /PRNewswire/ -- Zacks Equity Research highlights Group 1 Automotive (NYSE:GPI-Free Report) as the Bull of the Day and Lumber Liquidators (NYSE:LL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onShire (Nasdaq:SHPG-Free Report), AbbVie (NYSE:ABBV-Free Report) and Allergan (NYSE:AGN-Free Report).
Here is a synopsis of all five stocks:
June auto sales surprised most economists by hitting an annualized rate of nearly 17 million units, a new recovery high, with light trucks, SUV's, and cross-overs stealing the show from conventional models.
And if you're looking for earnings growth here outside of the manufacturers, I suggest the auto dealer groups who keep finding ways to streamline their marketing and sales machinery as they win repeat customers with great service.
That's why the Retail/Wholesale-Auto/Truck industry group is #1 in the Zacks Industry Rank, with names like Lithia Motors, AutoNation, Penske, and today's feature Group 1 Automotive (NYSE:GPI-Free Report) consistently receiving the top rank for their earnings momentum.
Here's what I wrote for Zacks Confidential members in late June when I first recommended shares of GPI...
I started looking at the group again in May, waiting for a good entry in Lithia Motors after it made all-time highs above $75. Lithia, which operates 100 stores in the Western US, has consistently been a Zacks #1 or #2 Rank stock for the past two years since it was trading $25.
But my buying opportunity was short-lived. Last Monday Lithia announced they were buying DCH Auto Group, one of the 10 largest dealer groups in the country with 27 stores, for an estimated price of $340 mln in cash and $22.5 mln, or roughly 300,000 shares of Lithia common stock. Lithia shares gapped higher and rallied all week to close above $92.
Investors in hardwood flooring retailer Lumber Liquidators (NYSE:LL-Free Report) got the rug pulled on them last week when the company announced mediocre preliminary Q2 results and lowered its guidance for the year.
Weaker-than-anticipated traffic and macroeconomic headwinds for residential remodeling wreaked havoc on the company's quarterly performance. Traffic was low due to a dip in demand for wood flooring and the company's low inventory level for many key merchandise categories.
Was there any advance warning for such a report and the subsequent 20% drop in shares?
Yes, there was. The Zacks Rank quantitative model uses Wall Street analyst earnings estimate revisions to determine the relative strength or weakness of a company's earnings momentum. On April 30th, LL slipped to a Zacks #4 Rank Sell when the stock closed at $87.16.
Investors got a second and stronger warning on June 17 when further downward estimate revisions dropped the stock to a #5 Rank Strong Sell. Shares were still trading above $78 on that day.
LL may continue to benefit from a strengthening economy and housing market. But until the Zacks Rank turns back up -- and that means when analysts have revised the earnings growth outlook upward -- it's best to find another way to play those trends.
Additional content:
Shire Meets with AbbVie Over Acquisition Offer
Shire (Nasdaq:SHPG-Free Report) announced that it held a meeting with representatives of AbbVie (NYSE:ABBV-Free Report) in connection with the latter's acquisition proposal.
Shire will provide an update on the meeting as and when appropriate. The company once again urged its shareholders not to take any action in relation to the proposal.
We note that last week AbbVie increased its bid to acquire Shire for approximately £51.15 per Shire share (£22.44 in cash and 0.8568 ordinary shares of the merged company for each Shire share). This was the fourth proposal made by AbbVie.
Shire did not reject the offer outright and indicated that its board will meet to consider the revised proposal.
Earlier, Shire's board unanimously rejected the offer three times as it believed that the proposal fundamentally undervalues the company and its prospects.
The acquisition proposal also included a new listed holding company in the U.S. post acquisition with a UK tax domicile. Shire also had reservations about the proposed inversion structure as AbbVie would redomicile in the UK for tax purposes.
We expect investor focus to remain on further updates from the acquisition proposal.
Shire holds a strong position in the attention deficit and hyperactivity disorder (ADHD) market driven by key drugs like Vyvanse, Intuniv and Adderall XR. In a bid to strengthen its portfolio of rare disease drugs, the company acquired erstwhile ViroPharma for approximately $50 per share or $4.2 billion earlier in 2014.
Shire currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Allergan (NYSE:AGN-Free Report), which carries a Zacks Rank #2 (Buy).
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