The Zacks Analyst Blog Highlights: American Realty Capital, Realty Income, Simon Property Group, Raven Industries and Google
CHICAGO, March 18, 2014 /PRNewswire/ -- Zacks.com 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 the American Realty Capital (Nasdaq:ARCP-Free Report), Realty Income Corp (NYSE:O-Free Report), Simon Property Group (NYSE:SPG-Free Report), Raven Industries Inc. (Nasdaq:RAVN-Free Report) and Google Inc. (Nasdaq:GOOG-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Reviewing Recent REIT Activity
American Realty Capital (Nasdaq:ARCP-Free Report) quickly rose from relative anonymity to being one of the largest publicly traded REITs, becoming a huge player in the double and triple-net lease space. Much of the growth came from the parent company buying up its own public non-traded REIT offerings over the course of the last several years. Investors in the non-traded REITs were handsomely rewarded as many of the offerings reached full cycle liquidity within one year of the offering closing to new investors at premiums upwards of 20%. The acquisitions didn't stop with ARCP offerings. ARCP swallowed up rival Cole in a deal that helped catapult ARCP and CEO Nick Schorsch into the spotlight. After the Cole merger ARCP owned nearly 3,710 double and triple-net lease assets across 48 states.
With its triple-net lease offerings tabled for the time being, ARCPs strategy shifted to incorporate multi-tenant shopping centers that are anchored by investment grade tenants. It's this multi-tenant retail portfolio that ARCP is now planning to spin-off into another publicly traded entity, ARCcenters under the proposed ticker ARCM. The spin-off is expected to increase run rate AFFO for ARCP by $1.20 per share on a combined basis.
The technical picture for ARCP is rather encouraging as well. Since the start of the year the stock has been in an uptrend, peaking in mid-January then pulling back to the 25x5 SMA. The last run up to $15 has presented us with a similar technical situation to what we saw two months ago. ARCP is within ear shot of moving average support and has stochastics just about neutral with a slight overbought bias. A day or two of strength in this name could provide a buy signal and propel the stock higher above $15.
ARCP currently carries a Zacks Rank #3 (Hold) but if analysts revise their earnings estimates to account for the spin off, ARCP could quickly change rank in the coming weeks. In addition to earnings estimate revision, ARCP could potentially increase its dividend from the $1.00 it pays now giving a yield of 6.9%.
Compare this yield to Zacks Rank #3 (Hold)Realty Income Corp (NYSE:O-Free Report). Realty Income pays 5.17% and has a portfolio that consists mostly of single tenant triple net leases similar to what the new incarnation of ARCP will be post spin off. Realty Income's technical picture is similar to the story we see with ARCP. Keep in mind that these REITs have sensitivity to the 10 Yr Treasury and rising rates are seen as a risk to prices. Still, Realty Income has pulled back off its high, reached support at its 25x5 SMA and could be heading higher from here.
If you're intrigued by ARCP's spin off ARCM, you have a few publicly traded options to look at. Simon Property Group (NYSE:SPG-Free Report) has a Zacks Rank #2 (Buy) and a yield of 3.1%. Simon's portfolio consists mostly of income-producing properties such as regional malls and community shopping centers. Earnings are expected to grow from $9.57 a share this year to $10.34 next year. Eleven analysts have revised earnings to the upside for the current year in the last 60 days.
SPG stock is less volatile that ARCP. So far this year the stock has traded between $150 and $165. Consistent with the other REITs we looked at in the space, SPG trades above its 25x5 SMA, indicating a solid uptrend.
Raven Outlines Growth Strategies
Industrial manufacturer offering a variety of products for agricultural, industrial, construction and aerospace markets, Raven Industries Inc. (Nasdaq:RAVN-Free Report) divulged its growth drivers for fiscal 2015 during its fourth-quarter fiscal 2014 conference call. Raven's President and Chief Executive Officer, Dan Rykhus stated that fiscal 2014 was a "year of progress" as the company has focused on areas that will set the stage for long-term growth.
Raven has been shifting its focus to more proprietary product lines from its lower-margin, low-growth contract manufacturing business. The company also invested heavily in research and development and capital expenditures to support its product and growth strategy. Though this had an impact on the company's performance during fiscal 2014, it will reap benefits in the long term.
Rykhus divulged that for 2015, the company's priorities are growing revenues from its situational awareness and lighter-than-air product lines in Aerostar, driving Applied Technology through international market expansion, new products and broadening original equipment manufacturer (OEM) relationships, and bringing high-value plastic film applications to each of its Engineered Films markets.
To elaborate, at the segment level, in order to deliver growth in the Engineered Films segment, Rykhus stated that the company will look for opportunities in its existing markets, including Barrier Films for Agriculture, multi-layer environmental solutions and industrial bulk packaging. Raven continues to develop pioneering high-value solutions and explore possible opportunities in alternative energy. The company also strives to maintain its focus on operational excellence and pricing in order to improve operating margin.
In the Applied Technology segment, Raven continues to focus on developing and strengthening relationships with its OEM partners, expanding market share and extending its innovative technology to a wider range of customers. Rykhus particularly pointed out a budding interest in big data analytics in agriculture. This will be an eventual growth driver as it will continue to provide opportunities since Raven focuses on data collection and tools to execute agricultural decisions in the field.
In Applied Technology, Raven's new harvesting and planting products and international expansion will be growth catalysts. Raven has strengthened its presence in
The Aerostar segment will continue to focus on expanding its proprietary technology opportunities, including advanced radar systems, high altitude balloons and aerostats into international markets in fiscal 2015. These three market segments present strong growth potential, according to Rykhus.
Raven stands to benefit from the success of Project Loon, which it began in collaboration with Google Inc. (Nasdaq:GOOG-Free Report), to provide high-speed wireless Internet accessibility in rural, remote areas of the world by utilizing high-tech balloons. Even though Raven anticipates modest revenues from the project in the first half of fiscal 2015, the project has great potential to deliver substantial growth going forward.
Raven's chosen markets for growth - agriculture, situational awareness and natural resource protection - will continue to provide profitable opportunities. The company is expected to deliver improved profit in fiscal 2015 on the back of renewed growth in Applied Technology, realization of Aerostar's growth drivers and stronger operational performance in Engineered Films.
Raven currently carries a Zacks Rank #3 (Hold).
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