LyondellBasell, Titan International, Knot Offshore Partners, Nordic American Tankers and GOL Linhas Areas highlighted as Zacks Bull and Bear of the Day
CHICAGO, Aug. 8, 2014 /PRNewswire/ -- Zacks Equity Research highlights LyondellBasell (NYSE:LYB-Free Report) as the Bull of the Day and Titan International (NYSE:TWI-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Knot Offshore Partners LP (NYSE:KNOP-Free Report), Nordic American Tankers Limited (NYSE:NAT-Free Report) and GOL Linhas Areas (NYSE:GOL-Free Report).
Here is a synopsis of all five stocks:
Earnings estimates have been soaring for LyondellBasell (NYSE:LYB-Free Report) following the company's strong Q2 report. It is a Zacks Rank #1 (Strong Buy) stock.
Based on consensus estimates, analysts are projecting solid double-digit EPS growth for LyondellBasell both for this year and next year. Despite this, shares trade at less than 13x forward earnings. While shares have made strong gains so far this year, there seems to be plenty of upside potential left.
LyondellBasell is a global plastics, chemicals and refining company that was incorporated under Dutch law on October 15, 2009. It reports its operations through five segments:
- Olefins and Polyolefins - Americas (26% of total sales in 2013)
- Olefins and Polyolefins - Europe, Asia and International (30%)
- Intermediates & Derivatives (19%)
- Refining (24%)
- Technology (1%)
Its end markets are diverse and include packaging, electronics, automotive parts, home furnishings, medical supplies, construction materials and biofuels. LyondellBasell has a market cap around $56 billion.
The Olefins and Polyolefins - Americas segment has been a major profit growth driver for LYB over the last couple of years as its margins have expanded greatly thanks to lower raw material costs.
Titan International (NYSE:TWI-Free Report), a holding company that owns subsidiaries that supply wheels, tires and undercarriage components for off-the-road equipment used in agricultural, earthmoving/construction and consumer applications, reported weaker-than-expected second quarter results on July 24.
The company is facing headwinds from lower farm income and continued weakness in the mining industry. And this isn't a trend that's likely to reverse anytime soon.
Earnings estimates have plummeted for Titan International over the last couple of weeks, sending the stock to a Zacks Rank #5 (Strong Sell). And with shares trading at a lofty 29x forward earnings, investors should look for a better opportunity elsewhere.
Titan International reported weaker-than-expected second quarter results on July 24. Adjusted earnings per share came in at $0.03, well below the Zacks Consensus Estimate of $0.13. It was down significantly from $0.24 in the same quarter last year.
Net sales fell 12% year-over-year to $523.7 million, well below the consensus of $554.0 million. Sales were down 12% in the Agricultural segment due to decreased demand for large farm equipment as a result of lower farm net income. And sales plunged 21% in the Earthmoving/Construction segment due to decreased demand in the mining industry.
Additional content:
Transportation Speeds Up: 3 Stocks to Beat Earnings
Second-quarter GDP data by the U.S. Bureau of Economic Analysis shows that the economy is currently gaining solid traction and the year should end on a positive note. An expanding economy generally translates to business growth, increased job prospects and higher real income.
It is worth noting that the U.S. economy expanded at an annual rate of 4% in the second quarter of 2014, exceeding the 3% expectation and much ahead of the 2.1% decline registered in the first quarter.
Why is Transportation an Attractive Bet?
The transportation sector had witnessed a modest first quarter on account of a severe winter. However, the second quarter looks more promising. Not only does the current momentum in the macro economy worked in its favor, the sector fundamentals are also looking up.
The railroad companies that have declared earnings so far this quarter have recorded growth in most of the sectors with agriculture and industrial being the front runners. Meanwhile, Intermodal has retained its solid growth momentum. Within the airline space, most of the U.S. based passenger carriers have reported improved traffic figures owing to high demand as the economy continues to expand.
Q2 Earnings So Far
The second-quarter earnings season is about to close. Within the transportation sector, 90.9% of the participants have reported earnings so far. The average earnings and revenue growth came in at 11.7% and 6.7%, respectively. This signals a positive momentum for the remainder of the transportation companies.
With the earnings season still on the roll, one can zero in on a handful of transportation stocks that seem confident of beating earnings estimates in their upcoming announcements. An earnings surprise should help these stocks outperform in the near term.
How to Pick the Right Stocks?
Given the diversity in the transportation domain, selecting stocks that have the potential to beat earnings estimates might appear a daunting task. However, an easy way to narrow down choices is to take a look at stocks with a favorable Zacks Rank – #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for determining stocks that have high chances of surprising with their next earnings announcements. An earnings ESP reflects the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
For investors seeking to benefit by applying this strategy to their portfolio, we present three transportation stocks that have the right combination of elements to beat earnings this quarter.
Knot Offshore Partners LP (NYSE:KNOP-Free Report)
Aberdeen, UK-based Knot Offshore is owned by Knutsen NYK Offshore Tankers AS, which is one of the leading independent operators of shuttle tankers. Knot Offshore owns, acquires and operates shuttle tankers that provide crude oil loading, transportation and storage services. The carrier presently has five shuttle tankers.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 32 cents. Moreover, the company has witnessed a positive estimate revision in the last 60 days. Notably, Knot Offshore has registered a positive average earnings surprise of 166.95% over the trailing 12 months.
The company presently carries a Zacks Rank #1 and has an earnings ESP of +9.38%. Knot Offshore is set to report its second quarter results on Aug 14, before the opening bell.
Nordic American Tankers Limited (NYSE:NAT-Free Report)
Headquartered in Hamilton, Bermuda, Nordic American Tanker is engaged in owning, leasing and chartering double hall Suezmax oil tankers. The company recently took delivery of its 22nd Suezmax vessel and is seeking to improve its earnings and dividend capacity through further expansion.
The Zacks Consensus Estimate for the third quarter is pegged at a loss of 17 cents. Nordic American Tanker has an earnings ESP of +41.18% and retains a Zacks Rank #3. The company is slated to release its second quarter results on Aug 11, before the market opens.
GOL Linhas Areas (NYSE:GOL-Free Report)
GOL is a low-cost Brazilian passenger air carrier and is based in Sao Paolo. The company provides scheduled domestic and international services and operates nearly 910 daily flights to 65 destinations across 10 countries in the South America, the Caribbean and the United States. GOL has reported solid traffic figures during each of the three months of the second quarter with strong international traffic in the month of June driven by the 2014 FIFA World Cup, which was held in Brazil.
Currently, the Zacks Consensus Estimate for GOL's second quarter earnings stands at a loss of 3 cents. The carrier has witnessed couple of positive estimate revisions in the last 30 days.
GOL currently holds a Zacks Rank #3 and has an earnings ESP of +100%. The company is slated to report its second quarter financial results on Aug 13, after the market closes.
What Lies Ahead?
Indications of an economic turn-around are evident in the economy at large. With the transportation sector banking upon substantial improvements in the fundamentals of airline and railroad stocks, we believe this is the right time to invest in the potential winners within the sector.
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