The Zacks Analyst Blog Highlights: Tesla Motors, Facebook, Netflix, Pilgrim's Pride and Sanderson Farms

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May 08, 2014, 09:30 ET

CHICAGO, May 8, 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 Tesla Motors (Nasdaq:TSLA-Free Report), Facebook (Nasdaq:FB-Free Report), Netflix (Nasdaq:NFLX-Free Report), Pilgrim's Pride Corporation (Nasdaq:PPC-Free Report) and Sanderson Farms, Inc. (Nasdaq:SAFM-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Tesla Marks Improvements, Shares Take a Hit

What a difference a quarter makes! In Q4 2013, electric car makerTesla Motors (Nasdaq:TSLA-Free Report) was a Zacks Rank #1 (Strong Buy) stock and destroyed earnings estimates by 250%. Today, when the company reported Q1 earnings after the bell, it missed on the bottom line dreadfully while it wallows at a Zacks Rank #5 (Strong Sell).

Revenues in the quarter were up better than expected: $713 million beat the $709 million we were looking for, and production and delivery numbers were higher than anticipated as well -- 7535 Model S cars were produced and 6457 delivered in the quarter, up from estimates of 7400 and 6400, respectively. Tesla said it is still on pace to make 35K cars for full year 2014.

So why is Tesla stock selling off more than 5% in the after-market? Well, earnings, for one thing. The Zacks Consensus Estimate was looking for a 10-cent per share loss in the quarter, and the company posted -16 cents (including stock-based compensation but accounting for a 24-cent dilution of shares; non-GAAP reported was a loss of 40 cents per share).

So it's tough to justify a $200 price tag and a P/E multiple of +50x earnings... in 2015. Sure, there's a lot CEO Elon Musk has planned to grow Tesla -- particularly in China, which seems to be progressing reasonably well at this stage, but a lot of this stuff was already priced in when the company blew the doors off Q4 expectations.

Gross margins in the quarter were also lower -- a percentage point down from the 28% expected. Everyone knows the costs of expanding are going to take a pretty big bite, too -- and here Tesla has spelled out a 30% sequential increase in research and development costs, and 15% more for SG&A. But if you're planning on making up to 9000 omelets in the quarter, that's going to require breaking quite a few dozen eggs.

Anyway, Tesla is also feeling the impact of the market-wide growth-stock takedown. In fact, Tesla shares didn't get hammered nearly as hard as growth stocks like Facebook (Nasdaq:FB-Free Report), Netflix (Nasdaq:NFLX-Free Report) and so many others did in Q1. Even now with this slightly disappointing earnings report, Tesla's not exactly being taken out behind the woodshed. And don't expect things like a dividend yield or share buyback coming from Tesla anytime soon; this company's still got a lot of work ahead.

Pilgrim's Pride: A Strong Buy

Zacks Investment Research upgraded Pilgrim's Pride Corporation (Nasdaq:PPC-Free Report) to a Zacks Rank #1 (Strong Buy) on May 6, based on its impressive first quarter 2014 results and a strong outlook for the year ahead.

Why the Upgrade?

Pilgrim's Pride reported improved year-over-year results for the first quarter of 2014. Earnings per share came in at 38 cents, improving 81% year over year on the back of lower cost of sales in the quarter. However, reported revenues were $2.02 billion, marginally lower than the prior-year quarter.

The company has been attempting to reduce its costs over the past few quarters. In the recently reported quarter, earnings before interest, taxes, depreciation and amortization (EBITDA) increased roughly 74% year over year to $203.5 million, due to effective cost management.

Subsequent to the results, the Zacks Consensus Estimate for earnings per share increased 15.5% to $1.79 for 2014, while the same for 2015 increased 21.7% to $1.57, over the past seven days. Pilgrim's Pride currently has an Earnings ESP of +7.02% for the second quarter 2014 and +8.94% for full year 2014.

The effective working capital management has helped the company to reduce its debt, diminish the capital cost and increase the free cash flow. The company is expected to be able to reap the benefits of an improving chicken industry in 2014 and thereby enhance the results further.

Other Stocks to Consider

Apart from Pilgrim's Pride, other stocks in the industry having a favorable Zacks Rank include Sanderson Farms, Inc. (Nasdaq:SAFM-Free Report), which also carries a Zacks Rank #1 (Strong Buy).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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