Steel Dynamics, Alliance Fiber Optic Products, Visa, MasterCard and Apple highlighted as Zacks Bull and Bear of the Day

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Sep 22, 2014, 09:30 ET

CHICAGO, Sept. 22, 2014 /PRNewswire/ -- Zacks Equity Research highlights Steel Dynamics (Nasdaq:STLD-Free Report) as the Bull of the Day and Alliance Fiber Optic Products (Nasdaq:AFOP-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onVisa Inc. (NYSE:V-Free Report), MasterCard Inc. (NYSE:MA-Free Report) and Apple (Nasdaq:AAPL-Free Report).

Here is a synopsis of all five stocks:

Bull of the Day:

Steel Dynamics (Nasdaq:STLD-Free Report) as I write this Bull of the Day, STLD is a Zacks Rank #2 (Buy) and we usually focus on Zacks Rank #1 (Strong Buy) for this article. Why would I do a #2 and not a #1, well the company recently raised guidance and I expect the analysts to boost their numbers yet again. For that reason, STLD is the Bull of the Day today.

Last week, STLD came out and indicated that the third quarter was a very good one. The company released guidance for the recently completed quarter as a range of between $0.42 and $0.46. At the time, the broader market was expecting $0.38.

The higher guidance is likely going to prompt analysts to increase their estimates. Earnings estimate revisions are a key driver of the Zacks Rank. If all the analysts move their numbers higher, then we say there is agreement among the analysts and that is another key component of the Zacks Rank.

Steel Dynamics is a diversified carbon-steel producer, metals recycler and one of the largest American steel companies. The company has 6,600 employees and is headquartered in Fort Wayne, Indiana.

Bear of the Day:

Alliance Fiber Optic Products (Nasdaq:AFOP-Free Report) was profiled back on August 2 of last year, but it was the Bull of the day back then. Now, things have changed and it is the Bear of the Day.

Company Description

AFOP designs and manufactures components, modules, and subsystems that empower dynamic optical network, and facilitates the migration of fiber optics from the long haul through the last mile. That is all industry jargon for they make a fiber optic connection to your business or home a reality.

Earnings Estimates

Back when this was the Bull of the Day, the numbers were moving higher and higher. Now, not so much. The Zacks Consensus Estimate was calling for $1.29 for the 2014 year as late as June of this year, but since then the number has slipped down to $1.23.

The 2015 Zacks Consensus Estimate was as high as $1.37 in June of this year and has slipped down to $1.29.

Additional content:

Visa's Growth to Be Affected by Litigations, Regulations?

On Sep 18, we issued an updated research report on Visa Inc. (NYSE:V-Free Report). Higher competition, stringent regulations and the possibility of adverse outcomes of the ongoing litigations raise both operational and financial risks for the company. Nevertheless, a strong network of merchants and updated technology should drive growth.

Moreover, given the recent verdict in European Union (EU) and stringencies in Russia, Visa and its peer MasterCard Inc. (NYSE:MA-Free Report) will be compelled to offer concessions on cross-border card transactions.

Additionally, the EU's ruling has reinitiated Britain's Competition and Markets Authority's scrutiny for the domestic card payment fees charged by Visa and peers on the retailers who now demand reduction in domestic interbank rates to be at par with the new cross-border card fees. A final decision is expected by Oct 2014, slapping the company with more charges and rebates. Notably, in the first half of fiscal 2014, Visa also shelled out $194 million to settle a lawsuit.

These risks have also been addressed by Visa, which deposited $450 million in its litigation escrow account earlier this month. This could have otherwise been used for exploiting growth opportunities or increasing shareholder value.

The company's top-line growth guidance of high single to low double digits, excluding a 2% reduction due to negative impact of foreign currency and bottom-line growth in high teen range in fiscal 2014, lower than 22% growth recorded in fiscal 2013 also reflect cautiousness.

Mobile Payments an Opportunity

The threat to card security amid the increasing number of cyber hacking cases keeps consumers away from mobile payments, an area of opportunity that the card networks are exploring proactively. In this regard, Visa's latest alliance with Apple (Nasdaq:AAPL-Free Report) Pay, along with the launch of digital token service and improved security measures further elucidate its focus on accentuating the efficiency of cards in electronic payments.

Meanwhile, core growth of Visa has been steady so far in fiscal 2014 despite difficult comps and currency fluctuations. This is reflected in its improved margins, debt-free balance sheet and strong cash flows, which also support efficient capital deployment, thus retaining shareholders' confidence. Given the growth potential of mobile payment industry in the next 3–5 years, we believe it will unlock incremental opportunities for Visa as well.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

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