Infinera, Axiall, Dow Chemical, LyondellBasell Industries and Celanese highlighted as Zacks Bull and Bear of the Day
CHICAGO, Oct. 21, 2014 /PRNewswire/ -- Zacks Equity Research highlights Infinera Corp (Nasdaq:INFN-Free Report) as the Bull of the Day and Axiall Corp (NYSE:AXLL-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onDow Chemical (NYSE:DOW-Free Report), LyondellBasell Industries NV (NYSE:LYB-Free Report) and Celanese Corp. (NYSE:CE-Free Report).
Here is a synopsis of all five stocks:
Infinera Corp (Nasdaq:INFN-Free Report) has seen its estimates increase due to the Cloud Xpress product launch announced in mid-September, and its metro cloud market transition. These factors, combined with the decreased worry regarding negative European revenues (which accounted for about 15% of total revenue in the first half of 2014), have made Infinera Zacks Bull of the Day.
This Zacks Rank #1 (Strong Buy) stock provides digital optical networking systems to telecommunication carriers, cable operators and other service providers worldwide. Further, Infinera reports Q3 2014 earnings after the bell tomorrow.
It is expected that Infinera's Cloud Xpress will cut power usage by 50% compared to comparable metro cloud solutions. It was announced that Cloud Xpress will begin shipping in December of this year, and that Infinera sees strong and immediate demand for its optical transport solutions.
Axiall Corp (NYSE:AXLL-Free Report) has seen significant estimate downgrades over the past ninety days. This Zacks Rank #5 (Strong Sell) stock has had its stock estimates significantly trimmed for the next two quarters, and for Fiscal Year 2014 & 2015.
Axiall Corp operates as a manufacturer and marketer of two integrated chemical product lines: chlorovinyls, and aromatics. AXLL also manufactures vinyl-based building and home improvement products.
The main driver behind the downgrades is that prices are moving away from the company. First, ethylene prices have increased in August and September, creating margin pressure. Second, PVC prices have been lagging. Third, caustic soda prices are declining (Chlorovinyls segment product). And lastly, ethylene purchase contracts are coming up for renegotiation at the year's end, and it is expected that producers are going to expect higher contract terms. This would create even more pressure on their margins.
Additional content:
Will Dow Chemical Beat Earnings Estimates Again?
Dow Chemical (NYSE:DOW-Free Report) is set to release its third-quarter 2014 results ahead of the bell on Oct 22. Last quarter, the U.S. chemical kingpin delivered a 2.78% positive surprise on higher sales across all segments, marking its third straight earnings beat. It saw gains across most geographic regions in the quarter.
As Dow's products have application in almost every industry, its third-quarter results will shed light on end market scenario and demand trends for chemical products across a wide gamut of industries and provide color on how the chemical industry is faring in the second half.
Dow has beaten the Zacks Consensus Estimate in 3 of the trailing 4 quarters with an average beat of 14.85%. The Zacks Consensus Estimate for Dow for the third quarter has remained unchanged at 67 cents per share over the last 7 days.
Is the company poised for another wining quarter? Let's see how things are shaping up for this announcement.
Factors to Watch For
Healthy momentum is expected to continue across Dow's electronics, coatings and performance plastics businesses in the September quarter. The performance plastic franchise is expected to put up a strong performance in the quarter on the back of healthy demand and favorable pricing.
Moreover, Dow is expected to gain from its productivity and growth actions as well as its aggressive cost-reduction initiatives. The company's performance in fast-growing emerging markets is also expected to remain healthy in the third quarter.
While fundamentals in the agriculture market remain strong, sales in Dow's agricultural sciences unit are expected to decline on a sequential basis in the third quarter due to seasonal factors. In addition, higher spending associated with turnaround activities on a year over year basis may put some pressure on margins in the quarter. Dow's performance materials business also remains exposed to certain industry-specific challenges.
We also expect Dow to provide some insights on its portfolio optimization program in the third quarter call. The company is selectively divesting underperforming assets that are exposed to raw material price swings.
Dow, in late 2013, revealed its plans to exit a major portion of its chlorine business that has been in operation for over 100 years. Commodity chemicals assets that are being identified for separation represents up to $5 billion in revenues. Dow expects to raise $4.5 billion-$6 billion from the disposal of non-core assets by end-2015.
Dow is also expected to provide an update on its U.S. Gulf coast and Middle East (including the Sadara joint venture) investments that are focused on boosting North American feedstock advantage and are expected to help it achieve its overall EBITDA target of over $10 billion. Dow is investing billions of dollars for setting up crackers (produces ethylene from ethane) leveraging the abundant natural gas supply and cost advantage.
Earnings Whispers
Our proven model shows that Dow has the right combination of two key ingredients to beat earnings.
Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction) for Dow is +4.48% -- the difference between the Most Accurate estimate of 70 cents and the Zacks Consensus Estimate of 67 cents. This indicates a likely positive earnings surprise.
Zacks Rank #3 (Hold): Dow's Zacks Rank #3 increases the predictive power of its ESP. Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Stocks That Warrant a Look
Here are some other chemical companies you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
LyondellBasell Industries NV (NYSE:LYB-Free Report) has earnings ESP of +2.21% and holds a Zacks Rank #2 (Buy).
Celanese Corp. (NYSE:CE-Free Report) has earnings ESP of +4.86% and carries a Zacks Rank #3 (Hold).
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