The Zacks Analyst Blog Highlights: American Capital, Foster Wheeler, Aecom Technology, FLIR Systems and Quanta Services

Feb 28, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 28, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include American Capital, Ltd. (Nasdaq: ACAS), Foster Wheeler AG (Nasdaq: FWLT), Aecom Technology Corp. (NYSE: ACM), FLIR Systems Inc. (Nasdaq: FLIR) and Quanta Services Inc. (NYSE: PWR).


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Here are highlights from Wednesday's Analyst Blog:

American Capital Upped to Strong Buy

On Feb 26, Zacks Investment Research upgraded American Capital, Ltd. (Nasdaq: ACAS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade? American Capital has been witnessing rising earnings estimates on the back of strong fourth-quarter 2012 results. Moreover, this well-known private equity and venture capital firm delivered average earnings surprise of 37.4% in the last four quarters.

American Capital reported fourth-quarter results on Feb 11. Earnings per share came in at 26 cents, beating the Zacks Consensus Estimate by a penny but significantly lower than the prior-year quarter's earnings of 67 cents.

Better-than-expected results were attributable to top-line growth, followed by decreased operating expenses reflecting prudent expense management. Moreover, new investments and reduction of debt acted as positives. Yet, the low interest environment during the quarter was a negative.

As of Dec 31, 2012, non-accrual loans were $177 million, representing 9% of total loans at fair value, down from $252 million of non-accrual loans, indicating 12.5% of total loans at fair value, as of Sep 30, 2012. Moreover, American Capital's asset coverage ratio improved substantially to 801% at the end of 2012 from 465% in the prior year.

The Zacks Consensus Estimate for 2013 increased 3.8% to $1.09 per share as 5 out of 9 estimates were revised higher over the last 30 days. For 2014, 1 of the 6 estimates was revised higher over the same time frame, lifting the Zacks Consensus Estimate by 0.9% to $1.15 per share.

Looking Ahead to Foster Wheeler 4Q

Foster Wheeler AG (Nasdaq: FWLT) is set to report its fourth quarter 2012 results on Mar 1, 2013. Last quarter, it posted a +24.4% surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Foster Wheeler reported a robust third quarter compared to the average quarter of 2011. The company reported a 40% increase in adjusted net income and 57% surge in adjusted earnings per share. The strong performance was primarily driven by a record level of scope new orders in the Global E&C Group.

This segment received three big orders, which were booked and announced in the third quarter itself. Further, the Global E&C Group reported a 31% sequential increase in backlog.

Earnings Whispers?

Our proven model does not conclusively show that Foster Wheeler is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Positive Zacks ESP:  That is because the Most Accurate estimate stands at $0.45 while the Zacks Consensus Estimate is lower at $0.47. That is a difference of -4.26%.

Zacks #3 Rank (Hold): Foster's Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks #3 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

  • Aecom Technology Corp. (NYSE: ACM) with Earnings ESP of 1.92% and Zacks #2 Rank (Buy)
  • FLIR Systems Inc. (Nasdaq: FLIR) with Earnings ESP of 5.88% and Zacks #2 Rank (Buy)
  • Quanta Services Inc. (NYSE: PWR) with Earnings ESP of 3.33% and Zacks #3 Rank (Hold)

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