IRobot, Pepsico, WPX Energy, Chesapeake Energy and Exxon Mobilhighlighted as Zacks Bull and Bear of the Day
CHICAGO, Aug. 13, 2013 /PRNewswire/ -- Zacks Equity Research highlights iRobot (Nasdaq:IRBT-Free Report) as the Bull of the Day and Pepsico (NYSE:PEP-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis ontheWPX Energy Inc. (NYSE:WPX-Free Report), Chesapeake Energy Corp. (NYSE:CHK-Free Report) and Exxon Mobil Corp. (NYSE:XOM-Free Report).
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Here is a synopsis of all five stocks:
iRobot (Nasdaq:IRBT-Free Report) recently beat estimates in a big way. The stock fell on the lack of a move in forward guidance, but analysts are still moving numbers higher. IRBT is a Zacks Rank #1 (Strong Buy).
The third and fourth quarters are the make it or break it period for retailers. That applies not only to department stores, but the companies that produce the item in those very stores. This year could be a big one for the maker of the Roomba robotic vacuum cleaner.
Part of the reason the analysts keep increasing their revenue estimates for iRobot has been the increased advertising spend. The company has increased its consumer awareness through large scale media buys, especially in TV commercials.
iRobot makes and markets robots for the consumer, government, and industrial markets worldwide. It offers consumer products, including floor vacuuming and washing robots, floor sweeping robots, and pool and gutter cleaning robots. The company also provides defense and security products.
Yes the Roomba is the flagship product right now, but look for the Scooba - a floor washing robot - to get more attention over the next few quarters. Hardwood floors have been all the rage over the last several years, and the Swifer may have capitalized on that market, but having a robot do it for you makes for a compelling argument to switch over.
The company also has a hard surface cleaning robot, one for the pool and even one for the gutter. Those cleaning robots are great, but another segment of the company is the Defense & Security robots.
Since March 2013, estimates have been moving higher and higher. The Zacks Consensus Estimate for IRBT has moved from $0.80 to $0.91 in April to $0.95 in June and presently stands at $1.00.
The same can be said of 2014 estimates. In March they stood at $0.93 and then moved to $1.05 in April. Another jump to $1.08 in June was followed by a final bump to the current estimate of $1.12.
The recent pull back in the stock is making for a wonderful entry point in the stock. Indeed, these are the droids you are looking for.
Pepsico (NYSE:PEP-Free Report) may be riding a string of seven straight positive earnings surprises, but analysts have slashed their estimates. PEP is a Zacks Rank #4 (Sell) stock.
Over the last seven quarters, the stock traded higher only four times in the session following the report. The largest move by the stock was a 4.9% move after the March 2013 quarter was reported in April. The December 2011 quarter saw the stock move lower by 4.2% even after the company beat expectations by $0.02.
There have been rumors that PEP or KO might be looking to buy smaller rival SODA. This idea propelled the stock price for SODA to bubble up to new highs, but not so for the two major players in the market. The CEO of PEP shot down the notion of an acquisition noting that it would be news to her if the deal happened.
Being lowered to a Rank #4 (Sell) implies that earnings estimates have moved down. That is the case recently with PEP estimates for 2013 and 2014. June 2013 saw the Zacks Consensus Estimate at $4.40, right where it had been for much of the year. But analysts dropped their estimates down to $4.35 in July. That is a relatively big move for an estimate that prior to that had a two cent range all year.
Similarly, estimates for 2014 moved from $4.78 in June to $4.74. Again the move is big on a relative basis.
The valuation picture for PEP is a mixed one. The trailing and forward PE show the company trading at a discount to the industry averages. The price to book multiple of 5.7x is rather large on an absolute basis, but below the 7.5x industry average. The real concern comes when you look at growth rates for revenue and earnings and you can see PEP is not quite flat, but nowhere near the industry average. One stat that isn't sweet or refreshing is the net margin comparison. PEP has a 10.1% net margin, while the industry average is 19.5%.
Additional content:
Natural Gas Stocks Above 5-Year Avg
The U.S. Energy Department's weekly inventory release showed a larger-than-expected rise in natural gas supplies on account of weak demand due to cooler-than-normal temperatures. The storage climb has also pushed up natural gas stocks above the five-year average level for the first time since March.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays.
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states rose by 96 billion cubic feet (Bcf) for the week ended Aug 2, 2013, higher than the guided range (of 74–78 Bcf gain) as per the analysts surveyed by Platts. The increase – the seventeenth injection of 2013 – also exceeded both last year's build of 25 Bcf and the 5-year (2008–2012) average addition of 42 Bcf for the reported week.
Following past week's large build, the current storage level – at 2.941 trillion cubic feet (Tcf) – has overturned the deficit over the five-year average, with the current storage being 20 Bcf (0.7%) above the benchmark. In fact, natural gas inventories in underground storage have gone over the five-year average for the first time since late March. However, supplies are still down 297 Bcf (9.2%) from the last year's level.
Natural gas stocks hit an all-time high of 3.929 Tcf last year, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remained robust. In fact, the oversupply of natural gas pushed down prices to a 10-year low of $1.82 per million Btu (MMBtu) during late Apr 2012 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana).
However, things have started to look up in recent times. This year, cold winter weather across most parts of the country boosted natural gas demand for space heating by residential/commercial consumers. This, coupled with flat production volumes, meant that the inventory overhang has now gone, thereby driving commodity prices to around $4.40 per MMBtu in Apr – the highest in 21 months.
Following this, natural gas demand went through a lean period, with the end of the winter heating season and ahead of the peak cooling loads for summer. In this timeframe, the commodity experienced a number of above-average builds, thereby pulling down prices again.
OutlookWith mild weather expected to prevail over the country during the next few weeks, leading to tepid electricity draws to run air conditioners, the commodity's price may experience another slide.
This, in turn, is expected to pull down natural gas producers, particularly small suppliers like WPX Energy Inc. (NYSE:WPX-Free Report). While big players like Chesapeake Energy Corp. (NYSE:CHK-Free Report) and Exxon Mobil Corp. (NYSE:XOM-Free Report) – both Zacks Rank #3 (Hold) stocks – are better equipped than others, we caution investors about WPX Energy, which also sports a Zacks Rank #3 (Hold).
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