CHICAGO, May 9, 2014 /PRNewswire/ -- Zacks Equity Research highlights Outerwall (Nasdaq: OUTR-Free Report) as the Bull of the Day and Silicon Labs (Nasdaq: SLAB-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onApple (Nasdaq: AAPL-Free Report), Sanmina (Nasdaq: SANM-Free Report) and Boeing (NYSE: BA-Free Report).
Here is a synopsis of all five stocks:
Physically renting movies hasn't gone the way of the dodo bird just yet. In fact, Outerwall (Nasdaq: OUTR-Free Report), recently reported rising revenue and expanding profit margins at its Redbox segment, which helped to drive a big first quarter earnings beat. It also prompted management to revise its EPS guidance significantly higher for 2014.
Analysts also revised their estimates meaningfully higher, which sent Outerwall to a Zacks Rank #1 (Strong Buy) stock.
Despite strong earnings momentum and solid growth projections, shares of Outerwall trade at less than 10x forward earnings and sport a double-digit free cash flow yield.
You probably know Outerwall best by its two primary segments: Redbox and Coinstar. The Redbox segment consists of more than 44,000 self-service kiosks where consumers can rent or purchase movies and video games. Coinstar consists of 21,000 self-service coin-counting kiosks where consumers can convert their coins to cash or stored value products.
The company also has a 'New Ventures' business segment, which seeks to "identify, evaluate, build or acquire and develop innovative new self-service concepts in the automated retail space," according to the company.
Outerwall reported better-than-expected first quarter results on May 1. Adjusted EPS came in at $1.27, beating the Zacks Consensus Estimate of $0.92. It was a 13% increase over the same quarter last year.
Earnings estimates have fallen sharply for Silicon Labs (Nasdaq: SLAB-Free Report) following the company's Q1 earnings report on April 29. The drop in consensus estimates was enough to place Silicon Labs in the bottom 5% of all companies that Zacks ranks according to earnings momentum. It is a Zacks Rank #5 (Strong Sell) stock.
Although shares of Silicon Labs have sold off following the latest earnings report, the valuation picture still does not look very attractive with the stock still trading above the industry median on multiples of both forward earnings and cash flow.
Silicon Labs develops analog-intensive, mixed-signal integrated circuits used in a wide range of applications such as set-top boxes, televisions, and cell phones. The company was founded in 1996 and has a market cap of $1.9 billion.
Silicon Labs reported its first quarter results on April 29. Adjusted earnings per share came in at 24 cents, missing the Zacks Consensus Estimate by 2 cents.
Revenue for the quarter was $145.7 million, which was actually better than the consensus of $144.0 million. But it was up just 0.2% year-over-year. The sluggish growth was mostly attributable to a 15% drop in revenues in the company's 'Access' segment, which was due to declines in the market for embedded modem ICs.
Gross profit declined from 60.1% to 59.8% of revenue as margin contraction in its Access and Broadcast products more than offset gains in its Broad-based products.
Zacks May Strategy – IT Strong!
Real GDP Growth Gets More Solid in 2014
According the SFO Fed, real GDP grew a solid +2.5% over the four quarters of 2013, despite being held back by less accommodative fiscal policy.
More recently, unusually severe winter weather in many parts of the country account for some but not all of the weakness in spending and employment.
Starting this spring, the SFO Fed anticipates a return to above-trend growth of around +3.0 to +3.5%. Improving financial conditions, increasing credit availability, accommodative monetary policy, and healthier labor and housing markets all support a faster pace of growth.
Apple (Nasdaq: AAPL-Free Report) is helping now, post-buyback. IT earnings growth for Q1 has been poor at +0.8%, but +7.6% is seen for Q2. +5.4% is seen for FY2014 for earnings on +4.5% revenue growth. Zacks Rank #1 IT companies are worth a look.
Zacks Sector/Industry/Company Telescope
May offers a fresh mix of leading sectors. The clear leader is the IT sector, followed by Industrials, Financials, and Energy. These sectors speak to an improved outlook inside and outside the
(1) IT is Very Attractive. The leader, in a big upgrade, is the Semiconductor industry, which is now Very Attractive, along with the Electronics industries. Misc-Tech fell back to Very Unattractive.
(2) Industrials? Attractive. Stay with the Aerospace & Defense. The
(3) Financials are Attractive. The stock market driven leader is Investment Funds at Very Attractive. Insurance remains Attractive.
(4) Energy got to modestly Attractive. Oil Exploration & Productions is the new leader. Alternative Sources stay Attractive. Oil-Misc fell on hard times, with the rise in the oil risk premium. Coal got a surprise upgrade to Attractive.
(5) Some Utilities stay modestly Attractive. A big upgrade to Utilities-Electric Power means that GDP growth in the
(6) Health Care is Market Weight. Drugs went from Unattractive to Market.
(7) Consumer Staples is Market Weight. Surprisingly, Tobacco is the leader here now. Soaps & Cosmetics stayed a Very Unattractive industry. Agri-Business got upgraded to Market.
(8) Consumer Discretionary got downgraded. The sole upgrade was to Home Furnishing-Appliances. Leisure Services fell back to Market, as did Autos-Tires-Trucks. Publishing and Non-Food Retail are the big dogs.
(9) Materials are Unattractive. Paper got an upgrade to Attractive. Chemicals went Unattractive. Metal-Non-Ferrous went down to Very Unattractive. Steel went to Unattractive from Very Unattractive. The goods economy is the
(10) Telcos is a firm Unattractive sector. This defensive is off in May.
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