The Zacks Analyst Blog Highlights:Apollo Commercial Real Estate Finance, Altisource Portfolio Solutions, New Residential Investment, CBS and Viacom

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Sep 02, 2014, 09:30 ET

CHICAGO, Sept. 2, 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 Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI-Free Report), Altisource Portfolio Solutions S.A. (Nasdaq:ASPS-Free Report), New Residential Investment Corp. (NYSE:NRZ-Free Report), CBS Corporation (NYSE:CBS-Free Report) and Viacom, Inc. (Nasdaq:VIAB-Free Report).

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

Here are highlights from Friday's Analyst Blog:

Yellen's Labor Day Gift to These 3 REITs

Speculation about earlier-than-expected interest rate hike had dented investor sentiment before the conference at Jackson Hole, Wyoming. Different views of the Fed members in the FOMC meeting regarding the rate hike intensified concerns.

However, the US Federal Reserve Chairwoman Janet Yellen's speech at Jackson Hole indicated that the rate hike is not possible immediately. This helped investors to shift focus to those instruments that benefit from a low-rate environment.

She said that rate hike may come once the labor market progresses better than expected and inflation shoots up. However, though Yellen acknowledged some progress in the labor market, she also commented: "It speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover."

On rate hike, Yellen said: "Of course, if economic performance turns out to be disappointing and progress toward our goals proceeds more slowly than we expect, then the future path of interest rates likely would be more accommodative than we currently anticipate."

The Jackson Hole speech boosted markets the following trading session. The S&P ended above the 2K mark for the first time on Tuesday.

What is Holding the Fed Back?

In recent times, the major economic indicators showed decent improvement. Among others, the second-quarter GDP number, inflation rate and durable orders advanced. So what's holding Fed to issue a confirmed timing of rate hike?

In July, the unemployment rate was 6.2%, declining almost 4% since 2009. But Yellen had earlier mentioned that broader labor market indicators are also crucial.

Over a considerable time, wage growth remained almost stagnant and has lagged the inflation rate. On the other hand, low-wage jobs were one of the major contributors to the overall job growth. The demand will be pulled back if the wage growth continues to fall behind inflation rate. Subsequently, inflation rate will struggle to achieve Fed's target.

Behind the Headlines: Unemployment Components Still Dismal

Moreover, other components of the unemployment rate such as long-term unemployed, labor force participation rate and employment-population ratio also experienced unfavorable trend. The number of long-term unemployed that accounts for almost 33% of the total unemployed work force has remained almost flat in July at 3.2 million.

The labor force participation rate also remained flat at 62.9% since April. The employment-population ratio has increased only 0.3% over 12 months to reach 59% in July.

Separately, the number of part-time job holders is significantly high in the economy. This indicates either their working hours have been curtailed or they are finding it difficult to get a full-time job. The record low interest rates have also kept the older generation employed, affecting the job opportunities for the younger generation. These data indicate that the job market is still to recover as mentioned by Yellen at Jackson Hole.

The Fed will thus be more patient at least for some time regarding rate hike. Markets speculate that that the hike may come in around second quarter of 2015 as the Fed is expected to complete their bond purchasing program in October.

REITs & Low Interest

In this scenario, investments are likely to shoot up to take advantage of the prevailing low interest rate environment. Real estate investment trust (REIT) companies, especially those which heavily depend on mortgage loans, benefit from a low-rate environment.

According to Inside Mortgage Finance, non-banking companies have provided greater share of the mortgage loans in the first half. The share of the non-banking lenders increased to 23% in the first half of 2014 from the year-ago level of 17%.

3 Mortgage REITs to Buy Now

Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI-Free Report) is a provider of services related to commercial first mortgage loans, commercial mortgage-backed securities (CMBS) and other domestic real estate debt securities. This Zacks Rank #1 (Strong Buy) REIT also provides financial advices to real estate companies.

This mortgage REIT has current year EPS growth estimate of 23.9% and a strong P/E ratio of 10.1. The Zacks Consensus Estimate for the current year has been revised almost 8.5% up over the last two months.

Altisource Portfolio Solutions S.A. (Nasdaq:ASPS-Free Report) is engaged in providing services regarding real estate and mortgage portfolio management. The Zacks Rank #2 (Buy) REIT specializes in technology and knowledge oriented services.

This REIT has strong EPS growth estimate of 60.5% (for the current year?) and an impressive P/E ratio of 11.5. The Zacks Consensus Estimate for the current year has been revised 5.6% up over the last two months.

New Residential Investment Corp. (NYSE:NRZ-Free Report) is involved in real estate related operations. The company focuses on mortgage backed securities, residential mortgage loans and other related securities. The company holds a Zacks Rank #2 (Buy).

This company has solid EPS growth estimate of 43.1% (for the current year?) and a PE ratio of 8.6. The Zacks Consensus Estimate for the current year has been revised about 9% up over the last two months.

Bottom Line

These top-ranked mortgage REITs have strong growth prospect and are looking to gain from this low interest rate environment. Moreover, the increase in share of non-banking lenders in mortgage loans volume will help these companies to expand further.

CBS Expects Strong Second Half on NFL, Advertising

On Aug 28, 2014, we issued an updated research report on CBS Corporation (NYSE:CBS-Free Report) following the company's second-quarter 2014 results.

Adjusted earnings of 78 cents per share grew 4% year over year and was ahead of the Zacks Consensus Estimate of 72 cents. Aggressive share buyback activity cushioned the bottom line. However, absence of the NCAA Division I Men's Basketball Championship had a telling effect on CBS Corp's revenues, which fell 5.4% to $3,188 million. Revenues also came short of the Zacks Consensus Estimate of $3,305 million.

Following the Outdoor Unit's split-off, the company is focusing primarily on the shareholders. In the quarter, the company bought back 7 million shares for $411 million bringing year-to date count to 38.5 million shares at a total cost of $2.4 billion. Also, the company increased its share repurchase authorization by $3 billion to $6 billion and announced a 25% hike in its quarterly dividend to 15 cents. The company's shareholder friendly approach makes it an asset for yield and growth seeking investors.

Going forward, management expects second half of the year to perform better, driven by reverse compensation from affiliates, strong demand of its content, digital distribution, increasing syndication sales and retransmission consent. The company also expects CBS Television Network to be a major growth driver. Moreover, the company expects Subscription video on demand (SVOD) revenues to be considerably up in 2014 compared with 2013.

Further, CBS Corp. expects retransmission fees to hit the $2 billion mark in 2020. Currently, it expects retransmission fees to reach $1 billion by 2017 (announced earlier). Moreover, CBS Corp. expects a good run in advertising in the second half of the year, given increase in political spending and more original programming. Also, an addition of Thursday Night National Football League (NFL) game for eight weeks will increase advertising revenue.

However, the company expects programming costs to rise in the second half due to a new agreement with the NFL and also because of the earlier mentioned addition of Thursday night NFL game for 8 weeks on CBS. Moreover, with operations on a global scale, the company remains exposed to currency fluctuations. Adding to the woes is stiff competition from other media stalwarts such as Viacom, Inc. (Nasdaq:VIAB-Free Report).

Currently, CBS Corp. is a Zacks Rank #3 (Hold) stock.

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

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