The Zacks Analyst Blog Highlights:Boeing, Embraer, Meridian Bioscience, Cardica and Eagle Pharmaceuticals
CHICAGO, May 27, 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 Boeing Co. (NYSE:BA-Free Report), Embraer S.A. (NYSE:ERJ-Free Report), Meridian Bioscience, Inc. (Nasdaq:VIVO-Free Report), Cardica Inc. (Nasdaq:CRDC-Free Report) andEagle Pharmaceuticals Inc. (Nasdaq:EGRX-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:
Can 'Made in China' Planes Dominate the Skies?
The global commercial aerospace market is synonymous with The Boeing Co. (NYSE:BA-Free Report) and Airbus. We do have Canada's Bombardier Inc. and Brazil's Embraer S.A. (NYSE:ERJ-Free Report) as well. However, none of them are as big or strong enough to challenge the unquestionable dominance of Boeing and Airbus. In this duopolistic market, Commercial Aircraft Corporation of China, Ltd, alias Comac, announced it is all set to deliver its first airplane to its customers.
The Undaunted New Entrant
Comac is an initiative of the Chinese government to build indigenous commercial aircraft and lower dependence on Boeing and Airbus in the Chinese aviation market. To that end, a project called ARJ21 was launched in 2002 with a target date of 2007 to deliver the first airliner. However, the delivery date was pushed back due to technical reasons and the first ARJ21 is finally ready for delivery to a Chinese carrier, Chengdu Airlines.
Variants and Future Plans
Comac is presently working on two variants of the narrow-body, single-aisle planes – ARJ21-700 and C919.
The ARJ21-700 model, which has a capacity of 78 to 90 passengers depending on its configuration, with a range of 1,300 miles to 2,300 nautical miles (2,225 to 3,700 kms), has secured orders for 252 airplanes.
The C919 is a larger single-aisle jet which can carry 168 passengers and can fly for 2,500 to 3,200 nautical miles (4,000 to 5,100 kms). The plane is scheduled to be ready in 2018 and is expected to challenge the dominance of Boeing and Airbus. Comac has secured orders for 400 airplanes for this model.
Comac also has plans to build a wide-body airplane having signed a memorandum of understanding with Russian counterparts for working on such a project long term.
Commercial Airline Market
Per a study from Boeing, the commercial aerospace market holds enormous potential. The company forecasts demand for 35,280 airplanes for the 2013–2032 period, valued at a staggering $4.8 trillion. 70% of the new deliveries will be in the single-aisle category, with demand escalating worldwide, particularly in China and the booming Asia-Pacific region.
Comac is trying to break into this market, tapping both domestic demand and also demand from other developing Asian economies. Once it achieves this, Comac will set its goals higher, making wide-body variants and also encroaching other markets.
Can Comac Pull it Off?
The commercial airplane market is large enough to accommodate new entrants like Comac, but do they have the so called Chinese gun power to blow away existing, not to say, well established market players? Let's see how this fledgling aircraft manufacturer fares in the global arena.
Boeing needs no introduction with its well-regarded portfolio of commercial aircraft. The company exited first quarter 2014 with a backlog of 5,100 airplanes valued at $374 billion. In comparison, Comac's total backlog of 652 airplanes pales into insignificance. Comac undeniably has a lot of catching up to do.
The prices of Comac's C919 single-aisle airplanes are expected to be cheaper than the comparable models offered by Boeing and Airbus. Even then, we do not expect cheaper prices to translate into bulk orders for Comac. The safety and security of the airplanes play a major issue here.
Though China has progressed by leaps and bounds in all kinds of industrial sectors, the common notion of associating the country with mass volume and average quality is something that they need to break. Boeing and Airbus on the other hand have proven technology and a stellar safety track record.
In addition, Comac will have to make inroads into the customer base of these two majors where brand loyalty is the keyword. Customer satisfaction and their willingness to wait patiently for years for a new airplane will make it very difficult for Comac to win ground or rather a piece of the sky.
Technical know-how and their ability to develop more fuel efficient airplanes will certainty give Boeing and Airbus an edge over new competition.
Will a Willful China Have Its Way?
Historically, industrial products from China have dominated the global market. However, we believe jet planes are not childish toys. So, the Chinese dream of dominance in the airplane manufacturing market is still a far cry. Comac will have to prove the quality and safety of its airplanes to gain the trust of the global aviation market and displace the likes of Boeing and Airbus.
For now, it seems like a distant story. But, as the Chinese saying goes, "if the will is strong there will be a way." And we cannot write off Comac at all though for now it has to be satisfied with a very small portion of the pie.
Meridian Bioscience (VIVO) Down to Strong Sell
On May 23, 2014, Zacks Investment Research downgraded Meridian Bioscience, Inc. (Nasdaq:VIVO-Free Report) by a notch to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
For fiscal 2014, this Ohio-based fully integrated life sciences company saw six downward estimate revisions over the last one month with no upward revision. Consequently, the Zacks Consensus Estimate shrunk 9.3% to 88 cents per share for the year.
Meridian Bioscience reported negative earnings surprises in 2 of the last 4 quarters, with an average miss of 2.1%.
Shares of Meridian Bioscience recorded a drop of approximately 2.4% since reporting its fiscal 2014 second-quarter (ended Mar 31, 2014) results on Apr 24. Both earnings and revenues came in below expectations and management lowered its outlook for fiscal 2014.
Earnings per share for the quarter were flat at 24 cents compared with the year-ago level and missed the Zacks Consensus Estimate by 3 cents. Revenues rose 6.1% year over year to $50.1 million but fell short of the Zacks Consensus Estimate of $52 million.
Revenue growth was driven by an improvement in the company's Life Science business. However, lower gross margins in this segment coupled with higher costs from the company's Diagnostic business led to lower-than-anticipated operating margins during the quarter.
Overall, results for the first half of fiscal 2014 remained weak as Meridian Bioscience witnessed soft food and respiratory sales, seasonal weakness and competitive pressures. For the first six months ended Mar 31, 2014, earnings per share fell 6.7% year over year to 42 cents.
Meridian Bioscience's hospital-associated infection (HAI) category continues to lose momentum due to reduced rates of infection, lower hospital admissions and pricing pressure from increased competition.
Reflecting the lackluster second-quarter results, Meridian Bioscience lowered its fiscal 2014 earnings per share guidance to a range of 0.85 to 0.90 cents from the prior range of 98 cents to $1.03. The Zacks Consensus Estimate of 87 cents lies within the guided range.
Meridian Bioscience also slashed its fiscal 2014 revenue guidance to $190–$195 million from the previous band of $203–$208 million. The current Zacks Consensus Estimate of $194 million lies within the projected range.
Other Stocks to Consider
Some better-ranked medical product stocks includeCardica Inc. (Nasdaq:CRDC-Free Report), Eagle Pharmaceuticals Inc. (Nasdaq:EGRX-Free Report), which retain a Zacks Rank #2 (Buy).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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