Methode Electronics, McDonald's, TriQuint Semiconductor, Monroe Capital and Neustar highlighted as Zacks Bull and Bear of the Day
CHICAGO, Sept. 12, 2014 /PRNewswire/ -- Zacks Equity Research highlights Methode Electronics (NYSE:MEI-Free Report) as the Bull of the Day and McDonald's (NYSE:MCD-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onTriQuint Semiconductor Inc. (Nasdaq:TQNT-Free Report), Monroe Capital Corp. (Nasdaq:MRCC-Free Report) and Neustar Inc. (NYSE:NSR-Free Report).
Here is a synopsis of all five stocks:
Looking for companies benefiting from the strength in auto sales? Look no further than Methode Electronics (NYSE:MEI-Free Report) which just posted top and bottom line beats and raised full-year guidance.
Methode manufactures component devices world-wide for Original Equipment Manufacturers of information processing and networking equipment, voice and data communications systems, consumer electronics, automobiles, aerospace vehicles and industrial equipment. Products employ electrical, electronic and optical technologies as sensors, interconnections and controls.
On September 4, Methode reported EPS of $0.55 vs. $0.36 one year ago (+53%), beating the consensus estimate of $0.40 by 37.5%. They also raised full-year guidance by $0.20-0.25 (nearly a dime more than the Q1 beat) to $2.10-2.20, well above the prior consensus of $1.97. This upside came primarily from a 30% revenue increase, largely due to better than expected demand from their automotive industry customers.
Expected revenue for FY15 is now $870M–$885M, up from a prior range of $835M–$860M. This is mainly due to better expectations around the company's automotive program mix. The company raised EPS guidance from $1.85–$2.00 to $2.10–$2.20, mainly due to higher operating leverage and margin upside within its automotive sector.
Well, it finally happened. McDonald's (NYSE:MCD-Free Report) slipped to a Zacks #5 Rank Strong Sell. This is not surprising if you've been following the earnings estimate revisions (EER) for the past year where annual EPS projections have fallen roughly 15% for both this year and next.
In fact, during this steady decline in profit estimates by the three dozen Wall Street analysts covering the iconic fast-food behemoth, the stock has consistently been a Zacks #4 Rank Sell for the past two years since it was last a #5.
We don't need to know the exact inner workings of McDonald's operations to understand the profit evaporation. The beauty of the Zacks Rank as a quantitative tool is that it uses the collective calculations of the analysts who are all tweaking their models and estimates.
And from that collective modeling we get a clear earnings trend not just every quarter, but every time an analyst makes a tweak.
Additional content:
Time to Worry About Complacency?
August payroll reports are in. It was lousy. Do the math on annual additions before you cringe. 2014 jobs are +10% ahead of 2013. The U.S. jobs landscape rests on sound footing.
Now is a good time to update subscribers on fall equity markets. "Raging" bulls like us at Zacks use $133.80 in earnings for 2015. Do the math by multiplying by a 15 forward Price/Earnings ratio. That says the S&P 500 index at 2010 (+/- 10) is fair value in early fall 2014 trading.
The S&P 500 index at 2070 would be a +15% year.
2H-14 should keep U.S. GDP growth healthy. If the probability of a U.S. recession stays remote, a stretch well above S&P 500 2000 can stick with utter confidence.
Investor Complacency?
The San Fran Fed macro writer this month took up investor complacency:
"Investor complacency could result in abrupt reversals of financial asset prices and spikes in volatility in response to unexpected developments. However, [this Fed writer] believes that such changes in asset prices would not substantially tighten overall financial conditions and therefore should have only limited effects on the economy.
"The reason is that, overall, the financial system appears to be on solid footing. For example, banks' capital ratios have improved, the degree of leverage in the financial sector is relatively low, and there is ample liquidity available in the system."
Zacks September Sector/Industry/Company Telescope
September is a "Back to School" month. Vacations are behind us. 2015 is in front of us. The U.S. economy remains strong. The strongest S&P 500 sectors are IT and Financials.
This month, signs of analyst upgrades showed up in the Consumer Discretionary space, particularly in Consumer Electronics.
(1) Info Tech is the Most Attractive sector. Look at Semiconductors, Miscellaneous Tech, and Computer Software-Services.
Company to look at:TriQuint Semiconductor Inc. (Nasdaq:TQNT-Free Report). Triquint Semiconductor products target the wireless handset segment, infrastructure networks, and defense markets.
(2) Financials are Attractive. Look into Investment Banking & Brokering, Finance, and Real Estate.
Company to look at: Monroe Capital Corp. (Nasdaq:MRCC-Free Report). This is a closed-end management investment company focused primarily on lower middle-market companies in the U.S. and Canada.
(3) Telcos are upgraded to Attractive. The reason? Verizon is in Telco Services. Otherwise, don't bother here.
Company to look at: Neustar Inc. (NYSE:NSR-Free Report). The company is a provider of essential clearinghouse services to the North American communications and Internet service providers around the world.
(4) Consumer Discretionary is a Market performer. Take a look at the Consumer Electronics and Media industries. Home Furnishing - Appliance remains a dog.
(5) Energy is a Market performer. A big upgrade came in for Coal this month. All other industries look to be middle-of-the-road stock performers.
(6) Health Care is a Market performer. The leader is Medical Care now.
(7) Industrials are a Market performer. The leaders here are Business Products and Aerospace & Defense. Airlines are now at market weight.
(8) Consumer Staples are an Unattractive sector. Stay away from Food, Agri-business and Soaps & Cosmetics industries.
(9) Materials are Unattractive. Stay away from Building Products, Chemicals and Paper. Containers & Glass is the best you can do.
(10) Utilities are Unattractive. The best area is Natural Gas Distribution.
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